424B4
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Filed pursuant to Rule 424(b)(4)
Registration No. 333-278871

 

PROSPECTUS

LOGO

5,227,780 Shares of Class A Common Stock

Common Warrants to Purchase up to 13,888,890 shares of Class A Common Stock

Pre-Funded Warrants to Purchase up to 8,661,110 shares of Class A Common Stock

Up to 13,888,890 shares of Class A Common Stock underlying the Common Warrants

Up to 8,661,110 shares of Class A Common Stock underlying the Pre-Funded Warrants

 

 

Banzai International, Inc. is offering, on a best efforts basis, 5,227,780 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”), and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 8,661,110 shares of Class A Common Stock, together with common warrants to purchase up to 13,888,890 shares of Class A Common Stock (the “Common Warrants”). Each share of our Class A Common Stock is being sold together with a Common Warrant. The shares of Class A Common Stock and Common Warrants are immediately separable and will be issued separately in this offering but must be purchased together in this offering.

The public offering price per share and accompanying Common Warrant is $0.18 and the public offering price per Pre-Funded Warrant and accompanying Common Warrant is $0.1799. The Common Warrants will be exercisable immediately, have an initial exercise price of $0.18 per share, and will expire five years from the date of issuance.

Each Pre-Funded Warrant is exercisable for one share of our Class A Common Stock and has an exercise price of $0.0001 per share. Each Pre-Funded Warrant is being offered together with a Common Warrant. The Pre-Funded Warrants and Common Warrants are immediately separable and will be issued separately in this offering but must be purchased together in this offering.

Pursuant to this prospectus, we are also offering the shares of Class A Common Stock issuable upon the exercise of Pre-Funded Warrants and Common Warrants offered hereby. These securities are being sold in this offering to certain purchasers under a securities purchase agreement dated May 22, 2024 between us and the purchasers.

We have engaged A.G.P./Alliance Global Partners (whom we refer to herein as “A.G.P.” or the “Placement Agent”) in connection with the securities offered in this prospectus. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of securities but has agreed to use its best efforts to sell the securities offered by this prospectus. We have agreed to pay the Placement Agent a fee based upon the aggregate gross proceeds raised in this offering as set forth in the table below.

The shares of our Class A Common Stock, Pre-Funded Warrants or Common Warrants being offered will be sold in a single closing. The shares issuable upon exercise of the Pre-Funded Warrants or Common Warrants will be issued upon the exercise thereof.

Our Class A Common Stock is listed on The Nasdaq Global Market, under the symbol “BNZI.” On May 21, 2024, the last reported sale price of our Class A Common Stock was $0.26 per share. We do not intend to list the Pre-Funded Warrants or the Common Warrants offered pursuant to this prospectus on any national securities exchange or other nationally recognized trading system.

As of May 10, 2024, our Chief Executive Officer, Chairman and Director, Joseph Davy, held 54.5% of the total outstanding voting power of the outstanding common stock of the Company. Following the completion of this offering, assuming the maximum amount of shares of Class A Common Stock being offered for sale in this offering is subscribed for, Mr. Davy will no longer own a majority of the total outstanding voting power of the outstanding common stock of the Company. As a result, we will no longer be a “controlled company” under the corporate governance rules for Nasdaq-listed companies. We have not elected to avail ourselves of the “controlled company” exemptions from certain corporate governance requirements as permitted under Nasdaq rules and, therefore, will have no additional corporate governance requirements with which to comply upon the loss of our “controlled company” status.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, and, as such, have elected to comply with certain reduced public disclosure requirements for this prospectus and future filings. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.

 

 

See the section entitled “Risk Factors” beginning on page 14 of this prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

     Per Share And
Accompanying

Common
Warrant
     Per Pre-Funded
Warrant and
Accompanying
Common
Warrant
     Total  

Public offering price

   $ 0.18      $ 0.1799      $ 2,499,134  

Placement Agent Fees(1)

   $ 0.0126      $ 0.012593      $ 174,939  

Proceeds to us, before expenses(2)

   $ 0.1674      $ 0.167307      $ 2,324,194  

 

(1)

Upon the closing of this offering, we will pay the Placement Agent a cash placement commission equal to 7.0% of the aggregate gross proceeds to us from the sale of the shares of Class A Common Stock, or Pre-Funded Warrant in lieu thereof, together with the Common Warrants sold in this offering; provided, however, that for certain identified purchasers of shares of Class A Common Stock, or Pre-Funded Warrant in lieu thereof, sold in this offering (each, an “Identified Purchaser”), we will pay the Placement Agent a cash placement commission equal to 3.0% of the aggregate gross proceeds to us from the sale of the shares of Class A Common Stock, or Pre-Funded Warrant in lieu thereof, together with the Common Warrants sold in this offering (collectively, the “Cash Fee”). Notwithstanding the foregoing, the Cash Fee will be reduced by $25,000 to be paid to the Company’s financial advisor in connection with this offering. We have also agreed to reimburse the Placement Agent at closing (i) for legal and other expenses incurred by it in connection with the offering in an aggregate amount of up to $75,000, and (ii) non-accountable expenses payable to the Placement Agent of up to $10,000. We have also agreed to issue to the Placement Agent, or its designees, warrants (the “Placement Agent Warrants”) to purchase 833,333 shares of Class A Common Stock, which number of shares of Class A Common Stock is equal to 6.0% of the aggregate number of shares of Class A Common Stock sold in this offering (including the shares of Class A Common Stock issuable upon the exercise of the Pre-Funded Warrants sold in this offering). See “Plan of Distribution” for a complete description of compensation payable to the Placement Agent.

(2)

The amount of proceeds, before expenses, to us does not give effect to any exercise of the Pre-Funded Warrants or Common Warrants.

Delivery of the shares of our Class A Common Stock, Pre-Funded Warrants and Common Warrants is expected to be made on or about May 28, 2024.

Sole Placement Agent

A.G.P.

 

 

The date of this prospectus is May 22, 2024.


Table of Contents

TABLE OF CONTENTS

 

     Page  

ABOUT THIS PROSPECTUS

     ii  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     iii  

PROSPECTUS SUMMARY

     1  

RISK FACTORS

     14  

USE OF PROCEEDS

     45  

MARKET INFORMATION FOR CLASS A COMMON STOCK AND DIVIDEND POLICY

     46  

CAPITALIZATION

     47  

DILUTION

     49  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     50  

BUSINESS

     78  

MANAGEMENT

     87  

EXECUTIVE AND DIRECTOR COMPENSATION

     94  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     98  

PRINCIPAL SECURITYHOLDERS

     103  

DESCRIPTION OF SECURITIES

     105  

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     122  

PLAN OF DISTRIBUTION

     130  

LEGAL MATTERS

     133  

EXPERTS

     133  

WHERE YOU CAN FIND MORE INFORMATION

     133  

INDEX TO FINANCIAL STATEMENTS

     F-1  

 

 

You should rely only on the information contained in or incorporated by reference in this prospectus or in any free writing prospectus that we may provide to you in connection with this offering. Neither we nor the Placement Agent have authorized anyone to provide you with information different from, or in addition to, that contained in or incorporated by reference in this prospectus or any such free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We can provide no assurance as to the reliability of any other information that others may give you. Neither we nor the placement agent is making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of such free writing prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

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ABOUT THIS PROSPECTUS

Neither we nor the Placement Agent have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Placement Agent take responsibility for, or provide any assurance as to the reliability of, any other information that others may give you. Neither we nor the Placement Agent will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”

On December 14, 2023 (the “Closing Date”), 7GC, our predecessor company, consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger and Reorganization, dated as of December 8, 2022 (the “Original Merger Agreement”), by and among 7GC, Banzai International, Inc. (“Legacy Banzai”), 7GC Merger Sub I, Inc., a Delaware corporation and an indirect wholly owned subsidiary of 7GC (“First Merger Sub”), and 7GC Merger Sub II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of 7GC (“Second Merger Sub”), as amended by the Amendment to Agreement and Plan of Merger, dated as of August 4, 2023 (the “Merger Agreement Amendment” and, together with the Original Merger Agreement, the “Merger Agreement”), by and between 7GC and Legacy Banzai. Pursuant to the terms of the Merger Agreement, a business combination between 7GC and Legacy Banzai was effected through (a) the merger of First Merger Sub with and into Legacy Banzai, with Legacy Banzai surviving as a wholly-owned subsidiary of 7GC (Legacy Banzai, in its capacity as the surviving corporation of the merger, the “Surviving Corporation”) (the “First Merger”) and (b) the subsequent merger of the Surviving Corporation with and into Second Merger Sub, with Second Merger Sub being the surviving entity of the Second Merger, which ultimately resulted in Legacy Banzai becoming a wholly-owned direct subsidiary of 7GC (the “Second Merger” and, together with the First Merger, the “Mergers” and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”). On the Closing Date, and in connection with the closing of the Business Combination (the “Closing”), 7GC changed its name to Banzai International, Inc.

Unless the context indicates otherwise, references in this prospectus to the “Company,” “Banzai,” “we,” “us,” “our” and similar terms refer to Banzai International, Inc. (f/k/a 7GC & Co. Holdings Inc.) and its consolidated subsidiaries (including Legacy Banzai). References to “7GC” refer to our predecessor company prior to the consummation of the Business Combination.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and in documents incorporated herein by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often use words such as “believe,” “may,” “will,” “estimate,” “target,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “propose,” “plan,” “project,” “forecast,” “predict,” “potential,” “seek,” “future,” “outlook,” and similar variations and expressions. Forward-looking statements are those that do not relate strictly to historical or current facts. Examples of forward-looking statements may include, among others, statements regarding the Company’s:

 

   

future financial, business and operating performance and goals;

 

   

annualized recurring revenue and customer retention;

 

   

ongoing, future or ability to maintain or improve its financial position, cash flows, and liquidity and its expected financial needs;

 

   

potential financing and ability to obtain financing;

 

   

acquisition strategy and proposed acquisitions and, if completed, their potential success and financial contributions;

 

   

strategy and strategic goals, including being able to capitalize on opportunities;

 

   

expectations relating to the Company’s industry, outlook and market trends;

 

   

total addressable market and serviceable addressable market and related projections;

 

   

plans, strategies and expectations for retaining existing or acquiring new customers, increasing revenue and executing growth initiatives; and

 

   

product areas of focus and additional products that may be sold in the future.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements. Therefore, investors should not rely on any of these forward-looking statements. Factors that may cause actual results to differ materially include changes in the markets in which the Company operates, customer demand, the financial markets, economic, business and regulatory and other factors, such as the Company’s ability to execute on its strategy. More detailed information about risk factors can be found in this prospectus, the Company’s Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q under the heading “Risk Factors,” and in other reports filed by the Company, including reports on Form 8-K. The Company does not undertake any duty to update forward-looking statements after the date they are made, except as required by law.

 

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PROSPECTUS SUMMARY

This summary highlights selected information appearing in this prospectus. Because it is a summary, it may not contain all of the information that may be important to you. To understand this offering fully, you should read this entire prospectus carefully, including the information set forth in the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and the consolidated financial statements and related notes included elsewhere in this prospectus before making an investment decision.

The Company

Banzai is a marketing technology (“MarTech”) company that produces data-driven marketing and sales solutions for businesses of all sizes. Our mission is to help our customers accomplish their mission—to enable better marketing, sales, and customer engagement outcomes by increasing the value of every customer interaction. We plan to do this by delivering software-as-a-service (“SaaS”) MarTech tools that leverage data, analytics, and artificial intelligence (“AI”) to improve all types of customer interactions and provide powerful benefits to our customers across three key areas of focus: targeting, engagement, and measurement. As part of our acquisition strategy, we also endeavor to acquire companies strategically positioned to enhance our product and service offerings, increasing the value provided to current and prospective customers.

Our platform currently includes three products. The first product we launched was Reach, a SaaS and managed services offering designed to increase registration and attendance of marketing events, followed by the acquisition of Demio Holding, Inc., a Delaware corporation (“Demio”), a SaaS solution for webinars designed for marketing, sales, and customer success teams in 2021. In 2023, we launched Boost, a SaaS solution for social sharing designed to increase attendance for Demio-hosted events by enabling easy social sharing by event registrants.

We sell our products using a recurring subscription license model typical in SaaS businesses, with customer contracts that vary in term length from single months to multiple years. As of December 31, 2023, our customer base included over 2,770 customers operating in over 90 countries, representing a variety of industries, including (among others) healthcare, financial services, e-commerce, technology, media and others. Our customers range in size from solo entrepreneurs and small businesses to Fortune 500 companies. No single customer represents more than 10% of our revenue.

Our Class A Common Stock is currently listed on The Nasdaq Global Market under the symbol “BNZI.” Our warrants, each exercisable for one share of Class A Common Stock at a price of $11.50 per share, originally issued in the IPO (the “Public Warrants”), are currently listed on The Nasdaq Capital Market under the symbol “BNZIW.”

The rights of holders of our Class A Common Stock and Public Warrants are governed by our second amended and restated certificate of incorporation (the “Charter”), our second amended and restated bylaws (the “Bylaws”) and the Delaware General Corporation Law (the “DGCL”), and, in the case of the Public Warrants, the Warrant Agreement, dated December 22, 2020 (the “Warrant Agreement”), between 7GC and the Continental Stock Transfer & Trust Company, as the warrant agent. See the sections entitled “Description of our Securities” and “Certain Relationships and Related Party Transactions.”

Background

Business Combination

We were originally known as 7GC & Co. Holdings Inc. On December 14, 2023, 7GC consummated the Business Combination with Legacy Banzai pursuant to the Merger Agreement. In connection with the Closing of

 

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the Business Combination, 7GC changed its name to Banzai International, Inc. Legacy Banzai was deemed to be the accounting acquirer in the Mergers based on an analysis of the criteria outlined in Accounting Standards Codification 805. While 7GC was the legal acquirer in the Mergers, because Legacy Banzai was deemed the accounting acquirer, the historical financial statements of Legacy Banzai became the historical financial statements of the combined company upon the consummation of the Mergers. The Business Combination is described in further detail in the section titled “Business” beginning on page 78.

Material Agreements in Connection with the IPO and Business Combination

Cohen Engagement Letter

On June 14, 2023, 7GC entered into an engagement, as amended by an amendment to such engagement letter, dated December 12, 2023, and a second amendment, dated December 27, 2023 (as amended, the “Cohen Engagement Letter”) with J.V.B. Financial Group, LLC acting through its Cohen & Company Capital Markets Division (“Cohen”). Pursuant to the Cohen Engagement Letter, Cohen agreed to act as 7GC’s capital markets advisor in connection with seeking extension of the date by which 7GC was required to consummate its initial business combination and in connection with an initial business combination with an unaffiliated third party, as well as to act as placement agent, on a non-exclusive basis, in connection with any private placement of equity, convertible and/or debt securities or other capital or debt raising transaction in connection with an initial business combination, in exchange for the right to receive (x) an advisory fee of approximately 105,000 shares of Class A Common Stock following the Closing, and (y) a transaction fee in an aggregate amount equal to $207,000. On December 27, 2023, Cohen received 105,000 shares of Class A Common Stock pursuant to the terms of the Cohen Engagement Letter.

Non-Redemption Agreements

On June 22, 2023, 7GC and its sponsor, 7GC & Co. Holdings LLC, a Delaware limited liability company (the “Sponsor”), entered into certain non-redemption agreements (the “Non-Redemption Agreements”) with certain unaffiliated third party stockholders of 7GC in exchange for such parties agreeing either not to request redemption, or to reverse any previously submitted redemption demand, with respect to an aggregate of 396,501 shares of 7GC’s Class A common stock, par value $0.0001 (“7GC Class A Common Stock”), sold in the initial public offering (“IPO”) of 7GC in connection with a special meeting called by 7GC to, among other things, approve an amendment to 7GC’s amended and restated certificate of incorporation (the “Extension Amendment”) to extend the date by which the Company was required to (i) consummate an initial business combination, (ii) cease all operations except for the purpose of winding up, and (iii) redeem or repurchase 100% of the 7GC Class A Common Stock included as part of the units sold in the IPO, from June 28, 2023 to December 28, 2023 (the “Extension”). In consideration of the foregoing agreement, immediately prior to, and substantially concurrently with, the Closing, (i) the Sponsor surrendered and forfeited to 7GC for no consideration an aggregate of 396,501 shares of 7GC Class B common stock, par value $0.0001 (“7GC Class B Common Stock and, together with 7GC Class A Common Stock, the “7GC Common Stock”) and (ii) the Company issued to such parties 396,501 shares of Class A Common Stock.

Sponsor Forfeiture Agreement

On August 4, 2023, 7GC, the Sponsor and Legacy Banzai entered into a Sponsor Forfeiture Agreement (the “Sponsor Forfeiture Agreement”), pursuant to which, at the Closing, all 7,350,000 of the Sponsor’s private placement warrants to purchase shares of 7GC Class A Common Stock, exercisable at $11.50 per share (the “Forfeited Private Placement Warrants”) were transferred from the Sponsor to 7GC for cancellation in exchange for no consideration, and 7GC retired and cancelled all of the Forfeited Private Placement Warrants.

 

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7GC Promissory Notes

On December 12, 2023, in connection with the Business Combination, the Sponsor came to a non-binding agreement with 7GC to amend the optional conversion provision of that certain (i) unsecured promissory note, dated as of December 21, 2022 (the “7GC 2022 Promissory Note”), issued by 7GC to the Sponsor, pursuant to which 7GC may borrow up to $2,300,000 from the Sponsor, and (ii) unsecured promissory note, dated as of October 3, 2023 (the “7GC 2023 Promissory Note” and, together with the 7GC 2022 Promissory Note, the “7GC Promissory Notes”), issued by 7GC to the Sponsor, pursuant to which 7GC may borrow up to $500,000 from the Sponsor, to provide that the Sponsor has the right to elect to convert up to the full amount of the principal balance of the 7GC Promissory Notes, in whole or in part, 30 days after the Closing at a conversion price equal to the average daily volume weighted average price (“VWAP”) of the Class A Common Stock for the 30 trading days following the Closing. On February 2, 2024, the Company issued 890,611 shares of Class A Common Stock to the Sponsor pursuant to conversion of the full amount of the principal balance of the 7GC Promissory Notes.

Seaport Fee Agreement

On November 30, 2023, Seaport Global Securities LLC (“Seaport”) and 7GC entered into an engagement letter (the “Seaport Engagement Letter”), pursuant to which Seaport agreed to provide 7GC with certain advisory services in connection with the Business Combination, in exchange for the receipt of 50,000 shares of Class A Common Stock at the Closing. On February 2, 2024, the Sponsor transferred 50,000 shares of Class A Common Stock to Seaport, satisfying the amount of shares to be received by Seaport in accordance with the Seaport Engagement Letter.

Cantor Fee Agreement

On November 8, 2023, Cantor Fitzgerald & Co. (“Cantor” or “CF&CO”) and 7GC entered into a fee reduction agreement, as amended by the amendment to fee reduction agreement, dated December 28, 2023 (as amended, the “Fee Reduction Agreement”), pursuant to which Cantor agreed to forfeit $4,050,000 of the aggregate of $8,050,000 of deferred underwriting fees payable (“Original Deferred Fee”), with the remaining $4,000,000 payable by 7GC to Cantor (the “Reduced Deferred Fee”) following the Closing of the Business Combination. Pursuant to the Fee Reduction Agreement, the Reduced Deferred Fee was payable in the form of 1,113,927 shares of Class A Common Stock (the “Cantor Fee Shares”) and to provide that Cantor is subject to a 12-month lock-up with respect to the Cantor Fee Shares. On December 28, 2023, the Company issued the Cantor Fee Shares to Cantor, covering the Reduced Deferred Fee in accordance with the Fee Reduction Agreement. Pursuant to the Fee Reduction Agreement, the Company also agreed to use its reasonable best efforts to have a registration statement declared effective by the SEC by the 120th calendar day after December 29, 2023, and to maintain the effectiveness of such registration statement until the earliest to occur of (i) the second anniversary of the date of the effectiveness thereof, (ii) the Cantor Fee Shares shall have been sold, transferred, disposed of or exchanged by Cantor, and (iii) the Cantor Fee Shares issued to Cantor may be sold without registration pursuant to Rule 144 under the Securities Act (such obligations, the “Cantor Registration Rights Obligations”).

Roth Agreements

On October 13, 2022, Roth Capital Partners, LLC (“Roth”) and Legacy Banzai entered into an engagement letter (the “Roth Engagement Letter”), pursuant to which Legacy Banzai engaged Roth as a financial advisor in connection with the Business Combination and, on October 14, 2022, MKM Partners, LLC (“MKM”) and 7GC entered into an engagement letter (the “MKM Engagement Letter”), pursuant to which 7GC engaged MKM as a financial advisor in connection with the Business Combination. In February 2023, Roth acquired MKM. Pursuant to that certain addendum to letter agreements (the “Roth Addendum” and, together with the Roth Engagement Letter and the MKM Engagement Letter, the “Roth Agreements”) by and between the Company and Roth,

 

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effective as of February 2, 2024, the Company and Roth agreed that, in lieu of payment in cash of the full amount of any advisory fees or other fees or expenses owed under the Roth Engagement Letter and the MKM Engagement Letter (collectively, the “Roth Fee”), the Company shall (i) issue to Roth 175,000 shares of Class A Common Stock (the “Roth Shares”) and include such Roth Shares in a registration statement and (ii) on or before June 30, 2024, pay to Roth an amount in cash equal to $300,000 or, if the Company determines that such payment should not be made in cash due to the Company’s cash position at such time, issue to Roth a number of shares of Class A Common Stock equal to $300,000 divided by the VWAP for the trading day immediately preceding June 30, 2024 (any such shares, the “Additional Roth Shares”). Additionally, pursuant to the Roth Addendum, the Company was required to include another 600,000 shares of Class A Common Stock (in addition to the Roth Shares) in a registration statement to cover any such issuances of Additional Roth Shares (which may be more or less than 600,000) that may occur pursuant to the Roth Addendum. On February 2, 2024, the Company issued the Roth Shares to Roth.

Material Financing Arrangements

SEPA

On December 14, 2023, the Company entered into that certain standby equity purchase agreement (the “Original SEPA”) with Legacy Banzai and YA II PN, LTD, a Cayman Islands exempt limited partnership managed by Yorkville Advisors Global, LP (“Yorkville”). Pursuant to the Original SEPA, subject to certain conditions, the Company has the option, but not the obligation, to sell to Yorkville, and Yorkville must subscribe for, an aggregate amount of up to $100 million of Class A Common Stock, at the Company’s request (each such request, an “Advance Notice,” and each issuance and sale of shares of Class A Common Stock pursuant to an Advance Notice, an “Advance”) any time during the commitment period terminating on the 36-month anniversary of the Original SEPA; provided that any Advance Notice may only be made if (x) no amount remains outstanding on the promissory notes made by the Company in favor of Yorkville, convertible into shares of Class A Common Stock (each, a “Yorkville Promissory Note” and, collectively, the “Yorkville Promissory Notes”), (y) there is an effective registration statement (any such registration statement, a “Resale Registration Statement”) filed with the U.S. Securities and Exchange Commission (“SEC”) for the resale under the Securities Act of 1933, as amended (the “Securities Act”), of the shares of Class A Common Stock to be issued pursuant to such Advance Notice, and (z) other customary conditions precedent. Additionally, at any time during the commitment period, provided there is a balance remaining outstanding under a Yorkville Promissory Note, Yorkville may deliver a notice to the Company (each such notice, an “Investor Notice”), causing an Advance Notice to be deemed delivered to Yorkville, subject to certain conditions. The price at which we may issue and sell shares pursuant to an Advance under the SEPA (as defined below) may be at either (a) 95% of the average VWAP of the Class A Common Stock for the period commencing on the receipt of the Advance Notice by Yorkville and ending on 4:00 p.m. Eastern Time on the applicable date of the Advance Notice (“Pricing Option 1”) or (b) 96% of the lowest daily VWAP of the Class A Common Stock during the three consecutive trading days commencing on the date of the Advance Notice to Yorkville (“Pricing Option 2”), provided that we are subject to certain caps on the amount of shares of Class A Common Stock that we may sell pursuant to any Advance.

In connection with the execution of the Original SEPA, the Company paid a structuring fee (in cash) to Yorkville in the amount of $35,000. Additionally, (a) Legacy Banzai issued to Yorkville immediately prior to the Closing such number of shares of Legacy Banzai Class A Common Stock such that upon the Closing, Yorkville received 300,000 shares of Class A Common Stock (the “Yorkville Closing Shares”) as a holder of Legacy Banzai Class A Common Stock, and (b) the Company paid a commitment fee of $500,000 to Yorkville on March 14, 2024 in Class A Common Stock through an Advance.

Additionally, Yorkville agreed to advance to the Company the principal amount of $3.5 million, which was subsequently increased pursuant to a supplemental agreement, dated February 5, 2024, by and between the

 

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Company and Yorkville (the “SEPA Supplemental Agreement” and, together with the Original SEPA, the “SEPA”), by $1.0 million to an aggregate principal amount of $4.5 million (the “Pre-Paid Advance”). The first payment of the Pre-Paid Advance in a principal amount of $2.0 million (less a 10% discount) was advanced at the Closing and was evidenced by the issuance by the Company on December 14, 2023 of a Yorkville Promissory Note having a principal amount of $2.0 million, the second payment of the Pre-Paid Advance of $1.0 million (less a 10% discount) was advanced on February 5, 2024 and is evidenced by the issuance by the Company on February 5, 2024 of a Second Yorkville Promissory Note having a principal amount of $1.0 million, and the third payment of the Pre-Paid Advance of $1.5 million (less a 10% discount) was advanced on March 26, 2024 and is evidenced by the issuance by the Company on March 26, 2024 of a Third Yorkville Promissory Note having a principal amount of $1.5 million.

The outstanding Yorkville Promissory Notes were each issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act and are convertible at a conversion price equal to the lower of (i) $2.0766 per share or (ii) 90% of the lowest daily VWAP during the ten consecutive trading days immediately preceding the conversion date (but no lower than the “floor price” then in effect, which is $0.2940, subject to adjustment from time to time in accordance with the terms contained in the Yorkville Promissory Notes).

Also on December 14, 2023, in connection with the Original SEPA, the Company entered into a registration rights agreement with Yorkville, subsequently amended by the SEPA Supplemental Agreement (as amended, the “Yorkville Registration Rights Agreement”), pursuant to which the Company agreed to file a Resale Registration Statement with the SEC for the resale under the Securities Act by Yorkville of an amount of shares of Class A Common Stock that is at least such number as is equal to the quotient of $4.5 million divided by the lowest VWAP over the ten trading days prior to the filing of the first pre-effective amendment to the Resale Registration Statement, multiplied by two. The Company agreed to maintain the effectiveness of such Resale Registration Statement.

On May 22, 2024, we and Yorkville entered into the Debt Repayment Agreement (as defined below). Please see “—Recent Developments” for more information.

Share Transfer Agreements and Alco Promissory Notes

In connection with the Business Combination, Legacy Banzai issued to Alco Investment Company, a related party (“Alco”), a Subordinated Promissory Note on September 13, 2023 (the “September Alco Note”), a Subordinated Promissory Note on November 16, 2023 (the “November Alco Note”), and a Subordinated Promissory Note on December 13, 2023 (the “December Alco Note,” and collectively with the September Alco Note and the November Alco Note, the “Alco Notes”).

On December 13, 2023, in connection with the Business Combination, 7GC and the Sponsor entered into a share transfer agreement (the “December Share Transfer Agreement”) with Alco, pursuant to which for each $10.00 in principal borrowed under the New Alco Note, the Sponsor agreed to forfeit three shares of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive three shares of Class A Common Stock, in each case, at (and contingent upon) the Closing, with such forfeited and issued shares capped at an amount equal to 600,000. On October 3, 2023 and November 16, 2023, 7GC, the Sponsor, and Alco also entered into share transfer agreements, pursuant to which the Sponsor agreed to forfeit an aggregate of 225,000 shares of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive 225,000 shares of Class A Common Stock at (and contingent upon) the Closing (such share transfer agreements together with the December Share Transfer Agreement, the “Share Transfer Agreements”). Alco is subject to a 180-day lock-up period with respect to such shares of Class A Common Stock pursuant to the Share Transfer Agreements, subject to customary exceptions. Additionally, in connection with the December Share Transfer Agreement, (a) Legacy Banzai issued the New Alco Note to Alco in the aggregate principal amount of $2.0 million, which

 

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bears interest at a rate of 8% per annum and will be due and payable on December 31, 2024, and (b) Legacy Banzai, Alco, and CP BF Lending LLC (“CP BF” or our “Lender”) agreed to amend that certain Subordinated Promissory Note issued by Legacy Banzai to Alco on September 13, 2023 in the aggregate principal amount of $1.5 million to extend the maturity date from January 10, 2024 to September 30, 2024. Immediately prior to, and substantially concurrently with, the Closing, (i) the Sponsor surrendered and forfeited to 7GC for no consideration an aggregate of 825,000 shares of the class B common stock of 7GC and (ii) the Company issued to Alco 825,000 shares of Class A Common Stock pursuant to the Share Transfer Agreements.

GEM Agreements

On May 27, 2022, Legacy Banzai entered into a certain share purchase agreement (the “GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, “GEM”), pursuant to which, among other things, upon the terms and subject to the conditions of the GEM Agreement, GEM was to purchase from Legacy Banzai (or its successor per the GEM Agreement) up to the number of duly authorized, validly issued, fully paid and non-assessable shares of common stock having an aggregate value of $100,000,000. Further, on the date of public listing of Legacy Banzai, Legacy Banzai was required to make and execute a warrant granting GEM the right to purchase up to the number of common shares of Legacy Banzai that would be equal to 3% of the total equity interests, calculated on a fully diluted basis, and at an exercise price per share equal to the lesser of (i) the public offering price or closing bid price on the date of public listing or (ii) the quotient obtained by dividing $650 million by the total number of equity interests.

On December 13, 2023, Legacy Banzai and GEM entered into that certain binding term sheet (the “GEM Term Sheet”) and, on December 14, 2023, a letter agreement (the “GEM Letter”), agreeing to terminate in its entirety the GEM Agreement by and between Legacy Banzai and GEM, other than with respect to the Company’s obligation (as the post-combination company in the Business Combination) to issue to GEM a warrant (the “GEM Warrant”) granting the right to purchase Class A Common Stock in an amount equal to 3% of the total number of equity interests outstanding as of the Closing, calculated on a fully diluted basis, at an exercise price on the terms and conditions set forth therein, in exchange for issuance of a $2.0 million convertible debenture with a five-year maturity and 0% coupon, with the documentation of such debenture to be agreed upon and finalized promptly following the Closing.

At Closing, the GEM Warrant automatically became an obligation of the Company, and on December 15, 2023, the Company issued the GEM Warrant granting GEM the right to purchase 828,533 shares at an exercise price of $6.49 per share, which will be adjusted to $0.19 per share, an amount equal to 105% of the per share consideration received in this offering pursuant to anti-dilution price protections contained in those warrants (See “Description of Securities-Warrants-GEM Warrant”). The exercise price will be adjusted to 105% of the then-current exercise price if on the one-year anniversary date of the date of issuance, the GEM Warrant has not been exercised in full and the average closing price per share of Class A Common Stock for the 10 days preceding the anniversary date is less than 90% of the initial exercise price. GEM may exercise the GEM Warrant at any time and from time to time until December 14, 2026. The terms of the GEM Warrant provide that the exercise price of the GEM Warrant, and the number of shares of Class A Common Stock for which the GEM Warrant may be exercised, are subject to adjustment to account for increases or decreases in the number of outstanding shares of Class A Common Stock resulting from stock splits, reverse stock splits, consolidations, combinations and reclassifications. Additionally, the GEM Warrant contains weighted average anti-dilution provisions that provide that if the Company issues shares of Class A Common Stock, or securities convertible into or exercisable or exchange for, shares of Class A Common Stock at a price per share that is less than 90% of the exercise price then in effect or without consideration, then the exercise price of the GEM Warrant upon each such issuance will be adjusted to the price equal to 105% of the consideration per share paid for such Class A Common Stock or other securities. The issuance of shares of Class A Common Stock in this offering may cause such an adjustment in the exercise price of the GEM Warrant.

 

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On February 5, 2024, the Company and GEM entered into a certain settlement agreement (the “GEM Settlement Agreement”), pursuant to which the Company and GEM agreed to settle the Company’s obligations under the GEM Term Sheet to issue the convertible debenture by substituting a cash payment of $1.2 million and issuance of an unsecured promissory note (the “GEM Promissory Note”) in the amount of $1.0 million, payable in monthly installments of $100,000 beginning on March 1, 2024 with the final payment to be made on December 1, 2024. The GEM Promissory Note provides that, in the event the Company fails to make a required monthly payment when due, such monthly payment amount shall convert into the right of GEM to receive, and obligation of the Company to issue, an amount of shares of Class A Common Stock equal to the monthly payment amount divided by the VWAP of the trading day immediately preceding the applicable payment due date. In addition, the Company agreed to register on a registration statement 2,000,000 shares of Class A Common Stock that may be issuable under the terms of the GEM Promissory Note. The number of shares issuable upon conversion of the GEM Promissory Note may be less or more than 2,000,000, depending on the stock price of Class A Common Stock on the applicable calculation date.

Senior Convertible Notes

On February 19, 2021, Legacy Banzai issued a convertible promissory note (the “First Senior Convertible Note”) in an aggregate principal amount of $1,500,000 to CP BF in connection with a loan agreement, dated February 19, 2021, between Legacy Banzai and CP BF (the “Loan Agreement”). On October 10, 2022, the Loan Agreement was amended, whereby CP BF waived payment by Legacy Banzai of four months of cash interest with respect to the term loan under the Loan Agreement in replacement for a convertible promissory note (the “Second Senior Convertible Note” and, together with the First Senior Convertible Note, the “Senior Convertible Notes”) issued by Legacy Banzai in an aggregate principal amount of $321,345. On August 24, 2023, Legacy Banzai and CP BF entered into a forbearance agreement (the “Original Forbearance Agreement”), as amended by the First Amendment to Forbearance Agreement, dated as of December 14, 2023 (the “Forbearance Amendment” and, together with the Original Forbearance Agreement, the “Forbearance Agreement”), in connection with which they agreed to amend and restate the Senior Convertible Notes so that they would not convert at the Closing of the Business Combination as a “Change of Control.”

After Closing, the Senior Convertible Notes became convertible, at CP BF’s option on 5 days’ written notice to the Company, into shares of Class A Common Stock. The Senior Convertible Notes provide that, at all times after a SPAC Transaction (as defined in the Senior Convertible Notes), the conversion price for any such conversion is approximately $4.35 per share (subject to adjustment as set forth therein).

Recent Developments

We intend to use a portion of the proceeds from the sale of our securities in this offering to repay an aggregate amount of $750,000 outstanding under the Yorkville Promissory Notes. In connection with the contemplated repayment, we and Yorkville entered into an Amended and Restated Debt Repayment Agreement on May 22, 2024 (the “Debt Repayment Agreement”), pursuant to which, upon receipt of such payment, Yorkville has agreed to not deliver to us any Investor Notice under the SEPA and to not exercise its right to convert the remainder of the amount outstanding under the Yorkville Promissory Notes for a period commencing on the date of the closing of this offering and ending on the date that is 90 days thereafter; provided that we will seek any consents necessary to allow Yorkville to issue Investor Notices or exercise its right to convert the remainder of the amount outstanding under the Yorkville Promissory Notes after a period of 60 days following the closing of this offering. Under the Debt Repayment Agreement, we and Yorkville also agreed to extend the Maturity Date of the Promissory Notes to the date that is 120 days after the closing of this offering and to satisfy the $75,000 Payment Premium (as defined in the Yorkville Promissory Notes) due in connection with our early redemption through the issuance of an Advance Notice for shares of Class A Common Stock.

 

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Between January 1, 2024 and May 15, 2024, 3,242,543 shares of Class A Common Stock had been issued upon conversion of the Yorkville Promissory Notes and the aggregate principal amount remaining outstanding under the Yorkville Promissory Notes as of May 10, 2024 was $2,700,000.

Risks Associated with Our Business

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. These risks are described more fully in the section entitled “Risk Factors,” immediately following this prospectus summary. These risks include the following, among others:

Risks Related to our Business and Industry

 

   

We have incurred significant operating losses in the past and may never achieve or maintain profitability.

 

   

There is substantial doubt about our ability to continue as a going concern, and holders of our securities could suffer a total loss of their investment. We may need to raise additional capital to continue our operations. Such capital may not be available to us or may not be available at terms we deem acceptable, either of which could reduce our ability to compete and could negatively affect our business.

 

   

We have a limited operating history with our current offerings, which makes it difficult to evaluate our current and future business prospects and increases the risk of your investment.

 

   

Our revenue growth rate depends on existing customers renewing and maintaining or expanding their subscriptions, and if we fail to retain our customers at current or expanded subscriptions, our business will be harmed.

 

   

If the assumptions, analyses, and estimates upon which our forecasts, projections and outlook are based prove to be incorrect or inaccurate, our actual results may differ materially from those forecasted or projected.

 

   

We may not successfully develop or introduce new and enhanced products that achieve market acceptance, or successfully integrate acquired products or services with our existing products, and our business could be harmed and our revenue could suffer as a result.

 

   

Our acquisitions of, and investments in, other businesses, products, or technologies may not yield expected benefits and our inability to successfully integrate acquisitions may negatively impact our business, financial condition, and results of operations.

 

   

Our business, results of operations, and financial condition may fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet any projections that we may provide or the expectations of securities analysts or investors.

 

   

Because we recognize revenue from subscriptions for our product offerings over the terms of the subscriptions, our financial results in any period may not be indicative of our financial health and future performance.

 

   

Covenant restrictions in our existing or future debt instruments may limit our flexibility to operate and grow our business, and if we are not able to comply with such covenants or pay amounts when due, our lenders could accelerate our indebtedness, proceed against certain collateral or exercise other remedies, which could have a material adverse effect on us.

 

   

Cybersecurity and data security breaches and ransomware attacks may create financial liabilities for us, damage our reputation, and harm our business.

 

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Privacy and data security laws and regulations could impose additional costs and reduce demand for our solutions.

 

   

Our ability to use our net operating loss to offset future taxable income may be subject to certain limitations.

 

   

Adverse litigation results could have a material adverse impact on our business.

 

   

Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could harm our business.

 

   

Our use of open source software could adversely affect our ability to offer our solutions and subject us to possible litigation.

Risks Related to Offering and Ownership of Our Securities

 

   

Purchasers in the offering will suffer immediate dilution.

 

   

The Common Warrants are speculative in nature.

 

   

Neither the Pre-Funded Warrants nor the Common Warrants will be listed or quoted on any exchange.

 

   

This is a best efforts offering; no minimum amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business.

 

   

Our management will have broad discretion over the use of the net proceeds from this offering.

 

   

In order to support the growth of our business and repay our indebtedness, we will need to seek capital through new equity or debt financings or incur additional indebtedness under our credit facilities, which sources of additional capital may not be available to us on acceptable terms or at all.

 

   

Future sales of shares of Class A Common Stock may depress their stock price.

 

   

Issuances of shares of our Class A Common Stock pursuant to any Advances under the SEPA and conversion of any amounts under the Yorkville Promissory Notes, exercise of the GEM Warrant and conversion of any amounts under the GEM Promissory Note, and conversion of any amounts under the Senior Convertible Notes (the “Notes”) would result in substantial dilution of our stockholders and may have a negative impact on the market price of our Class A Common Stock.

 

   

The Nasdaq Stock Market LLC (“Nasdaq”) may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

 

   

If our Class A Common Stock ceases to be listed on a national securities exchange it will become subject to the so-called “penny stock” rules that impose restrictive sales practice requirements.

 

   

Our dual class common stock structure has the effect of concentrating voting power with our Chief Executive Officer and Co-Founder, Joseph Davy, which limits an investor’s ability to influence the outcome of important transactions, including a change in control.

 

   

The market price of Class A Common Stock is likely to be highly volatile, and you may lose some or all of your investment. This volatility could also subject us to securities class action litigation.

 

   

If securities or industry analysts do not publish research or reports about us, or publish negative reports, then our stock price and trading volume could decline.

 

   

We have incurred and will continue to incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, results of operations, and financial condition.

 

   

We have identified material weaknesses in our internal control over financial reporting in the past. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses

 

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in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.

 

   

Our executive officers and directors collectively beneficially own approximately 72.62% of the voting power of our outstanding Common Stock and have substantial control over us, which will limit your ability to influence the outcome of important transactions, including a change in control.

 

   

We may issue additional shares of Common Stock or Preferred Stock, including under our equity incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks.

 

   

If certain holders of the Class A Common Stock sell a significant portion of their securities, it may negatively impact the market price of the shares of the Class A Common Stock and such holders still may receive significant proceeds.

 

   

It is not possible to predict the actual number of shares we will sell under the SEPA, or the actual gross proceeds resulting from those sales. Further, we may not have access to any or the full amount available under the SEPA.

Corporate Information

7GC, our predecessor company, was incorporated in the State of Delaware in September 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving 7GC and one or more businesses. 7GC completed its IPO in December 2020. In December 2023, First Merger Sub merged with and into Legacy Banzai, and Legacy Banzai, as the Surviving Corporation, merged with and into Second Merger Sub, with Second Merger Sub being the surviving entity, which ultimately resulted in Legacy Banzai becoming a wholly-owned direct subsidiary of 7GC. In connection with the Mergers, 7GC changed its name to Banzai International, Inc. Our principal executive offices are located at 435 Ericksen Ave NE, Suite 250, Bainbridge Island, WA 98110. Our telephone number is (206) 414-1777. Our website address is www.banzai.io. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We will remain an emerging growth company under the JOBS Act until the earliest of (i) the last day of our first fiscal year (a) following the fifth anniversary of 7GC’s IPO (December 22, 2025), (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates; and (ii) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.

We are also a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

As a result, the information in this prospectus and that we provide to our investors in the future may be different than what you might receive from other public reporting companies.

 

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THE OFFERING

 

Issuer

Banzai International, Inc.

 

Common Stock we are offering

5,227,780 shares of Class A Common Stock.

 

Pre-Funded Warrants we are offering

8,661,110 Pre-Funded Warrants. We are offering to those purchasers whose purchase of Class A Common Stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Class A Common Stock immediately following the closing of this offering, in lieu of purchasing Class A Common Stock, Pre-Funded Warrants to purchase up to an aggregate of shares of our Class A Common Stock. Each Pre-Funded Warrant is exercisable for one share of our Class A Common Stock. The purchase price of each Pre-Funded Warrant is equal to the price at which a share of Class A Common Stock is being sold to the public in this offering, minus $0.0001, and the exercise price of each Pre-Funded Warrant is $0.0001 per share. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. This offering also relates to the shares of Class A Common Stock issuable upon exercise of any Pre-Funded Warrants sold in this offering. For each Pre-Funded Warrant that we sell, the number of shares of Class A Common Stock that we are offering will be reduced on a one-for-one basis.

 

Common Warrants we are offering

Each share of our Class A Common Stock or Pre-Funded Warrant in lieu thereof is being sold together with a Common Warrant. Each Common Warrant will be exercisable immediately for one share of our Class A Common Stock, have an initial exercise price of $0.18 per share and will expire five years from the date of issuance. The shares of Class A Common Stock or Pre-Funded Warrants, respectively, and Common Warrants are immediately separable and will be issued separately in this offering, but must initially be purchased together in this offering.

 

Placement Agent Warrants

We have agreed to issue to the Placement Agent, or its designees, Placement Agent Warrants to purchase 833,333 shares of Class A Common Stock, which is equal to 6.0% of the aggregate number of shares of Class A Common Stock sold in this offering (including the shares of Class A Common Stock issuable upon the exercise of the Pre-Funded Warrants sold in this offering) at an exercise price per share equal to 110.0% of the purchase price per share of Class A Common Stock sold in this offering. Notwithstanding the foregoing, in the event any shares of Class A Common Stock sold in this offering are sold to an Identified Purchaser, we will issue to the Placement Agent, or its designees, Placement Agent Warrants to purchase shares of Class A Common Stock equal to 2.0% of the aggregate number of shares of Class A Common Stock sold in this offering to such Identified Purchasers. The Placement Agent Warrants will be exercisable on the date that is 180 days from the commencement of sales of the securities in this offering and will expire five years from the commencement of sales under this offering. The

 

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registration statement of which this prospectus is a part registers for sale the Placement Agent Warrants and the shares of Class A Common Stock underlying the Placement Agent Warrants.

 

Class A Common Stock outstanding immediately before this offering

19,322,460

 

Class B Common Stock outstanding immediately before this offering

2,311,134

 

Class A Common Stock to be outstanding after this offering

33,211,350 (assuming exercise of the Pre-Funded Warrants, but not of the Common Warrants).

 

Class B Common Stock to be outstanding after this offering

2,311,134

 

Use of proceeds

We estimate that the net proceeds to us from this offering will be approximately $2.1 million, after deducting Placement Agent fees and estimated offering expenses.

 

  We intend to use the net proceeds from the sale of our securities in this offering to pay off a portion of the currently outstanding Yorkville Promissory Notes, and for general corporate purposes, including working capital, operating expenses and capital expenditures. See “Use of Proceeds.”

 

Risk factors

See the section entitled “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing in our securities.

 

Nasdaq Symbol

Our Class A Common Stock is currently traded on The Nasdaq Global Market under the symbol “BNZI.”

Unless otherwise indicated, all information contained in this prospectus assumes the sale of the 5,227,780 shares and 8,661,110 Pre-Funded Warrants offered hereby at the public offering price of $0.18 per share and accompanying Common Warrant and $0.1799 per Pre-Funded Warrant and accompanying Common Warrant, and assumes the exercise of the 8,661,110 Pre-Funded Warrants, and no exercise of any Common Warrants. The number of shares of our Class A Common Stock that are and will be outstanding immediately before and after this offering as shown above is based on 19,322,460 shares of our Class A Common Stock outstanding as of May 10, 2024. The number of shares of Class A Common Stock outstanding as of May 10, 2024, as used throughout this prospectus, unless otherwise indicated, excludes, as of that date:

 

   

11,500,000 shares issuable upon exercise of outstanding Public Warrants with an exercise price of $11.50;

 

   

828,533 shares issuable upon exercise of the GEM Warrant with an exercise price of $6.49 per share, which will be adjusted to $0.19 per share, an amount equal to 105% of the per share consideration received in this offering pursuant to anti-dilution price protections contained within those warrants (See “Description of Securities-Warrants-GEM Warrant”);

 

   

2,142,857 shares issuable for repayment of the GEM Promissory Note based on a VWAP of $0.3267;

 

   

2,145,873 shares issuable upon exercise of outstanding stock options with a weighted average exercise price of $3.95 granted through May 15, 2024;

 

   

892,543 shares issuable upon vesting of outstanding restricted stock units granted through May 15, 2024;

 

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665,388 shares issuable upon conversion of Senior Convertible Notes;

 

   

340,136 shares issued to Yorkville on May 15, 2024 in connection with Yorkville’s delivery of an Investor Notice pursuant to the Yorkville Promissory Notes;

 

   

up to 6,632,653 shares issuable upon conversion of the Yorkville Promissory Notes, after giving effect to the repayment of an aggregate amount of $750,000 outstanding thereunder with proceeds from this offering;

 

   

2,311,134 shares issuable upon conversion of outstanding shares of Class B Common Stock; and

 

   

13,888,890 shares issuable upon exercise of the Common Warrants and 833,333 shares issuable upon exercise of the Placement Agent Warrants to be issued in this offering.

 

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RISK FACTORS

Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

Risks Related to our Business and Industry

We have incurred significant operating losses in the past and may never achieve or maintain profitability.

We have incurred significant operating losses since our inception, including operating losses of $9.8 million, $6.2 million, $3.6 million and $2.4 million in the years ended December 31, 2023, and 2022 and the three months ended March 31, 2024 and 2023, respectively. We expect our costs will increase substantially in the foreseeable future and our losses will continue as we expect to invest significant additional funds towards growing our business and operating as a public company and as we continue to invest in increasing our customer base, expanding our operations, hiring additional sales and other personnel, developing future products, and potentially acquiring complementary technology and businesses. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. We are unable to accurately predict when, or if, we will be able to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. To date, we have financed our operations principally from the sale of our equity, revenue from sales, and the incurrence of indebtedness. Our cash flow from operations was negative for the year ended December 31, 2023 and December 31, 2022 and the three months ended March 31, 2024 and March 31, 2023, respectively, and we may not generate positive cash flow from operations in any given period. If we are not able to achieve or maintain positive cash flow in the long term, we may require additional financing, which may not be available on favorable terms or at all and/or which would be dilutive to our stockholders. If we are unable to successfully address these risks and challenges as we encounter them, our business may be harmed. Our failure to achieve or maintain profitability or positive cash flow could negatively impact the value of our Class A Common Stock.

There is substantial doubt about our ability to continue as a going concern, and holders of our securities could suffer a total loss of their investment. We may need to raise additional capital to continue our operations. Such capital may not be available to us or may not be available at terms we deem acceptable, either of which could reduce our ability to compete and could negatively affect our business.

Management has concluded, and the report of our auditors included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) reflect, that there is substantial doubt about our ability to continue as a going concern within 12 months after the date of the filing of the 2023 Form 10-K. The reaction of investors to the inclusion of a going concern statement by management and our auditors and our potential inability to continue as a going concern may materially adversely affect the price of our publicly traded securities and our ability to raise new capital or enter into partnerships. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or part of their investment. Further, the perception that we may be unable to continue as a going concern may impede our ability to pursue strategic opportunities or operate our business due to concerns regarding our ability to fulfill our contractual obligations. In addition, if there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms, or at all.

There can be no assurance that we will be able to achieve our forecast or to raise additional capital in sufficient amounts or on favorable terms, or at all. If we are unable to meet or exceed our forecast or raise

 

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adequate additional capital when required or in sufficient amounts or on terms acceptable to us, we may have to significantly reduce expenses, sell assets (potentially at a loss), cease operations altogether, pursue an acquisition of our company at a price that may result in up to a total loss on investment for our shareholders, file for bankruptcy or seek other protection from creditors, or liquidate all of our assets.

We have a limited operating history with our current offerings, which makes it difficult to evaluate our current and future business prospects and increases the risk of your investment.

While we served our first customer in 2017 (operating as Legacy Banzai), we have significantly altered our product offerings over the past few years. Our limited operating history with respect to our current product offerings makes it difficult to effectively assess or forecast our future prospects. For example, in 2021, we acquired Demio, a webinar platform startup, and integrated Demio’s platform into our service offerings, and in 2023, we launched Boost, a tool used by Demio customers to enhance participation in their Demio webinars. You should consider our business and prospects in light of the risks and difficulties we encounter or may encounter. These risks and difficulties include our ability to cost-effectively acquire new customers, retain existing customers, and expand the scope of the platform we sell to new and existing customers. Furthermore, in pursuit of our growth strategy, we may enter into new partnerships to further penetrate our targeted markets and adoption of our solutions, but it is uncertain whether these efforts will be successful. If we fail to address the risks and difficulties that we may face, including those associated with the challenges listed above, our business, prospects, financial condition, and operating results may be materially and adversely harmed.

It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. In the event that actual results differ from our estimates or we adjust our estimates in future periods, our operating results and financial position could be materially affected.

Our revenue growth rate depends on existing customers renewing and maintaining or expanding their subscriptions, and if we fail to retain our customers at current or expanded subscriptions, our business will be harmed.

Our customers have no obligation to renew their subscriptions for our product offerings after the expiration of their subscription periods. Our customers may not renew. Our renewal and reactivation rates may decline because of a number of factors, including, among other things, customer dissatisfaction, customers’ spending levels, decreased return on investment, increased competition, or pricing changes. If our customers do not renew their subscriptions or downgrade the products purchased under their subscriptions, our revenue may decline and our business may be harmed. Our future success also depends in part on existing customers expanding their subscriptions. If our efforts to sell upgrades to our customers are not successful, it may decrease our revenue growth rate.

If we are unable to attract new customers on a cost-effective basis, our business will be harmed.

To grow our business, we must continue to grow our customer base in a cost-effective manner. Increasing our customer base and achieving broader market acceptance of our product offerings will depend, to a significant extent, on our ability to effectively expand our sales and marketing activities. We may not be able to recruit qualified personnel, train them to perform, and achieve an acceptable level of sales production from them on a timely basis or at all. In addition, the cost to attract new customers may increase as we market our existing and new products to different market segments. If we are unable to maintain effective sales and marketing activities, our ability to attract new customers could be harmed, our sales and marketing expenses could increase substantially, and our business may be harmed. Further, to the extent there is a sustained general economic downturn and our customers and potential customers experience delays or reductions in general customer engagement technology spending, potential customers may be unwilling to take on the additional cost associated with adopting our product offerings as an alternative to their existing products or service providers, and if they choose to adopt our products, they may not purchase additional products and services in the future due to budget limitations.

 

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If we fail to effectively manage our growth, our business, results of operations, and financial condition would likely be harmed.

We expect to continue to experience growth in our headcount and operations, which will continue to place significant demands on our management and our administrative, operational, and financial reporting resources. Our growth will require hiring additional employees and making significant expenditures, particularly in sales and marketing but also in our technology, professional services, finance, and administration teams. Our ability to effectively manage our growth will require the allocation of management and employee resources along with improvements to operational and financial controls and reporting procedures and systems. Our expenses may increase more than we plan, and we may fail to hire qualified personnel, expand our customer base, enhance our existing products, develop new products, integrate any acquisitions, satisfy the requirements of our existing customers, respond to competitive challenges, or otherwise execute our strategies. If we are unable to effectively manage our growth, our business, results of operations, and financial condition would likely be harmed.

We may be unable to successfully execute on our growth initiatives, business strategies, or operating plans.

We are continually executing on growth initiatives, strategies, and operating plans designed to enhance our business and extend our existing and future offerings to address evolving needs. The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate. Moreover, we may not be able to successfully complete these growth initiatives, strategies, and operating plans and realize all of the benefits, including growth targets and cost savings, that we expect to achieve, or it may be more costly to do so than we anticipate. A variety of risks could cause us not to realize some or all of the expected benefits. These risks include, among others, delays in the anticipated timing of activities related to such growth initiatives, strategies, and operating plans, increased difficulty and cost in implementing these efforts, including difficulties in complying with new regulatory requirements, the incurrence of other unexpected costs associated with operating our business, and lack of acceptance by our customers. Moreover, our continued implementation of these programs may disrupt our operations and performance. As a result, we cannot assure you that we will realize these benefits. If, for any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies, and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, our business may be harmed.

Any forecasts, projections or outlook we may provide are based upon certain assumptions, analyses, and estimates. If these assumptions, analyses, or estimates prove to be incorrect or inaccurate, our actual results may differ materially from those forecasted or projected.

Any forecasts, projections or outlook, including projected annual recurring revenue, revenue growth, cost of goods sold, operating expense, gross margin, and anticipated organic and inorganic growth, are subject to significant uncertainty and are based on certain assumptions, analyses, and estimates, including with reference to third-party forecasts, any or all of which may prove to be incorrect or inaccurate. These may include assumptions, analyses, and estimates about future pricing, and future costs, all of which are subject to a wide variety of business, regulatory, and competitive risks and uncertainties. If these assumptions, analyses, or estimates prove to be incorrect or inaccurate, our actual results may differ materially from those forecasted or projected, and may adversely affect the value of our Class A Common Stock.

If we fail to attract and retain qualified personnel, our business could be harmed.

Our success depends in large part on our ability to attract, integrate, motivate, and retain highly qualified personnel at a reasonable cost on the terms we desire, particularly sales and marketing personnel, software developers, and technical and customer support. Competition for skilled personnel, particularly in the technology industry, is intense and we may not be successful in attracting, motivating, and retaining needed personnel. We also may be unable to attract or integrate into our operations qualified personnel on the schedule we desire. We have from time to time experienced, and we expect to continue to experience, difficulty in attracting, integrating,

 

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motivating, and retaining highly qualified personnel, which could harm our business. In addition, dealing with the loss of the services of our executive officers or other key personnel and the process to replace any of our executive officers or other key personnel may involve significant time and expense, take longer than anticipated, and significantly delay or prevent the achievement of our business objectives, which may harm our business.

Our management team has a limited history working together operating the Company and, as a result, our past results may not be indicative of future operating performance.

We have a limited history working together operating the Company, which makes it difficult to forecast our future results. You should not rely on our past quarterly operating results as indicators of future performance. In addition, you should consider and evaluate our prospects in light of the risks and uncertainties frequently encountered by companies in rapidly evolving markets like ours, as well as the information included in this prospectus.

We may not successfully develop or introduce new and enhanced products that achieve market acceptance, or successfully integrate acquired products or services with our existing products, and our business could be harmed and our revenue could suffer as a result.

Our ability to attract new customers and increase revenue from existing customers will likely depend upon the successful development, introduction, and customer acceptance of new and enhanced versions of our product offerings and on our ability to integrate any products and services that we may acquire, as well as our ability to add new functionality and respond to technological advancements. Moreover, if we are unable to expand our product offerings, our customers could migrate to competitors. Our business could be harmed if we fail to deliver new versions, upgrades, or other enhancements to our existing products to meet customer needs on a timely and cost-effective basis. Unexpected delays in releasing new or enhanced versions of our product offerings, or errors following their release, could result in loss of sales, delay in market acceptance, or customer claims against us, any of which could harm our business. The success of any new product depends on several factors, including timely completion, adequate quality testing, and market acceptance. We may not be able to develop new products successfully or to introduce and gain market acceptance of new solutions in a timely manner, or at all. If we are unable to develop new applications or products that address our customers’ needs, or to enhance and improve our product offerings in a timely manner, we may not be able to maintain or increase customer use of our products.

Our ability to introduce new products and features is dependent on adequate development resources. If we do not adequately fund our development efforts, we may not be able to compete effectively and our business and operating results may be harmed.

To remain competitive, we must continue to develop new product offerings, applications, features, and enhancements to our existing product offerings. Maintaining adequate development personnel and resources to meet the demands of the market is essential. If we are unable to develop our product offerings internally due to certain constraints, such as high employee turnover, lack of management ability, or a lack of other research and development resources, we may miss market opportunities. Further, many of our competitors expend a considerably greater amount of funds on their development programs, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ development programs. Our failure to maintain adequate development resources or to compete effectively with the development programs of our competitors could materially adversely affect our business.

Our acquisitions of, and investments in, other businesses, products, or technologies may not yield expected benefits and our inability to successfully integrate acquisitions may negatively impact our business, financial condition, and results of operations.

In the past, we have pursued acquisitions of technology and expertise to enhance the products and services we offer. For example, in 2021, we acquired webinar platform startup Demio and integrated Demio’s platform

 

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into our service offerings. We anticipate that we will continue to make acquisitions of or investments in businesses, products, and technologies in the future. We may not realize the anticipated benefits, or any benefits, from our past or future acquisitions. In addition, if we finance acquisitions by incurring debt or by issuing equity or convertible or other debt securities, our then-existing stockholders may be diluted or we could face constraints related to the repayment of indebtedness. To the extent that the acquisition consideration is paid in the form of an earnout on future financial results, the success of such an acquisition will not be fully realized by us for a period of time as it is shared with the sellers. Further, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be harmed and the value of your investment may decline. For us to realize the benefits of past and future acquisitions, we must successfully integrate the acquired businesses, products, or technologies with ours. Some of the challenges to successful integration of our acquisitions include:

 

   

unanticipated costs or liabilities resulting from our acquisitions;

 

   

retention of key employees from acquired businesses;

 

   

difficulties integrating acquired operations, personnel, technologies, or products;

 

   

diversion of management attention from existing business operations and strategy;

 

   

diversion of resources that are needed in other parts of our business, including integration of other acquisitions;

 

   

potential write-offs of acquired assets;

 

   

inability to maintain relationships with customers and partners of the acquired businesses;

 

   

difficulty of transitioning acquired technology and related infrastructures into our existing product offerings;

 

   

difficulty maintaining security and privacy standards of acquired technology consistent with our existing products;

 

   

potential financial and credit risks associated with the acquired businesses or their customers;

 

   

the need to implement internal controls, procedures, and policies at the acquired companies;

 

   

the need to comply with additional laws and regulations applicable to the acquired businesses; and

 

   

the income and indirect tax impacts of any such acquisitions.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of such acquisitions or investments and negatively impact our business, financial condition, and results of operations.

We face significant competition from both established and new companies offering marketing, sales, and engagement software and other related applications, as well as internally developed software, which may harm our ability to add new customers, retain existing customers, and grow our business.

The marketing, sales, customer service, operations, and engagement software market is evolving, highly competitive, and significantly fragmented. With the introduction of new technologies and the potential entry of new competitors into the market, we expect competition to persist and intensify in the future, which could harm our ability to increase sales, maintain or increase renewals, and maintain our prices.

We face intense competition from other software companies that develop marketing, sales, customer service, operations, and engagement management software and from marketing services companies that provide interactive marketing services. Competition could significantly impede our ability to sell subscriptions to our products on terms favorable to us. Our current and potential competitors may develop and market new technologies that render our existing or future products less competitive or obsolete. In addition, if these

 

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competitors develop products with similar or superior functionality to our platform, we may need to decrease the prices or accept less favorable terms for our platform subscriptions in order to remain competitive. If we are unable to maintain our pricing due to competitive pressures, our margins will be reduced and our operating results will be negatively affected.

Our competitors include:

 

   

Vimeo, Zoom, and GoToWebinar with respect to video platforms;

 

   

Mailchimp and Constant Contact with respect to email marketing; and

 

   

Marketo, Hubspot, and Braze with respect to marketing automation platforms.

We compete across five distinct categories within the B2B (as defined below) MarTech landscape: digital events and webinars, demand generation, creative development, engagement platforms and marketing automation, and measurement and attribution. Our current and potential competitors within any or all of such categories may have significantly more financial, technical, marketing, and other resources than we have, be able to devote greater resources to the development, promotion, sale, and support of their products and services, may have more extensive customer bases and broader customer relationships than we have, and may have longer operating histories and greater name recognition than we have. As a result, these competitors may respond faster to new technologies and undertake more extensive marketing campaigns for their products. In a few cases, these vendors may also be able to offer additional software at little or no additional cost by bundling it with their existing suite of applications. To the extent any of our competitors has existing relationships with potential customers for either marketing software or other applications, those customers may be unwilling to purchase our products because of their existing relationships with our competitor. If we are unable to compete with such companies, the demand for our product offerings could substantially decline.

In addition, if one or more of our competitors were to merge or partner with another of our competitors, our ability to compete effectively could be adversely affected. Our competitors may also establish or strengthen cooperative relationships with our current or future strategic distribution and technology partners or other parties with whom we have relationships, thereby limiting our ability to promote and implement our product offerings. We may not be able to compete successfully against current or future competitors, and competitive pressures may harm our business.

Our business, results of operations, and financial condition may fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet any projections that we may provide or the expectations of securities analysts or investors.

Our operating results have in the past and could in the future vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance, our projections, or the expectations of securities analysts because of a variety of factors, many of which are outside of our control and, as a result, should not be relied upon as an indicator of future performance. As a result, we may not be able to accurately forecast our operating results and growth rate. Any of these events could cause the market price of Class A Common Stock to fluctuate. Factors that may contribute to the variability of our operating results include:

 

   

our ability to attract new customers and retain existing customers;

 

   

the financial condition of our current and potential customers;

 

   

changes in our sales and implementation cycles;

 

   

introductions and expansions of our product offerings, offerings, or challenges with their introduction;

 

   

changes in our pricing or fee structures or those of our competitors;

 

   

the timing and success of new offering introductions by us or our competitors or any other change in the competitive landscape of our industry;

 

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increases in operating expenses that we may incur to grow and expand our operations and to remain competitive;

 

   

our ability to successfully expand our business;

 

   

breaches of information security or privacy;

 

   

changes in stock-based compensation expenses;

 

   

the amount and timing of operating costs and capital expenditures related to the expansion of our business;

 

   

adverse litigation judgments, settlements, or other litigation-related costs;

 

   

the cost and potential outcomes of ongoing or future regulatory investigations or examinations, or of future litigation;

 

   

changes in our effective tax rate;

 

   

our ability to make accurate accounting estimates and appropriately recognize revenue for our existing and future offerings;

 

   

changes in accounting standards, policies, guidance, interpretations, or principles;

 

   

instability in the financial markets;

 

   

general economic conditions, both domestic and international;

 

   

volatility in the global financial markets;

 

   

political, economic, and social instability, including terrorist activities and outbreaks of public health threats, such as coronavirus, influenza, or other highly communicable diseases or viruses, and any disruption these events may cause to the global economy; and

 

   

changes in business or macroeconomic conditions.

The impact of one or more of the foregoing and other factors may cause our operating results to vary significantly. As such, we believe that quarter-to-quarter and year-to-year comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance.

Because we recognize revenue from subscriptions for our product offerings over the terms of the subscriptions, our financial results in any period may not be indicative of our financial health and future performance.

We generally recognize revenue from subscription fees paid by customers ratably over the terms of their subscription agreements. As a result, most of the subscription revenue we report in each quarter is the result of agreements entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any one quarter will not be fully reflected in our revenue results for that quarter. Any such decline, however, will negatively affect our revenue in future quarters. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as subscription revenue from new customers must be recognized over the applicable subscription terms.

Our sales cycle can be lengthy and unpredictable, which may cause our operating results to vary significantly.

Our sales cycle, which is the time between initial contact with a potential new customer and the ultimate sale to that customer, is often lengthy and unpredictable. Potential new customers typically spend significant time and resources evaluating product offering solutions, which requires us to expend substantial time, effort, and money educating them about the value of our platform. Accordingly, it is difficult for us to forecast when or if a sale will close or the size of any specific sales to new customers. In addition, customers may delay their

 

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purchases from one quarter to another as they wait for us to develop new features, assess their budget constraints, or forecast future business activity. Any delay in closing, or failure to close, sales in a particular quarter or year could significantly harm our projected growth rates and could cause our operating results to vary significantly.

Covenant restrictions in our existing or future debt instruments may limit our flexibility to operate and grow our business, and if we are not able to comply with such covenants or pay amounts when due, our lenders could accelerate our indebtedness, proceed against certain collateral or exercise other remedies, which could have a material adverse effect on us.

On February 19, 2021, we entered into the Loan Agreement with CP BF. The Loan Agreement contains a number of provisions that impose operating and financial restrictions which, subject to certain exceptions, limit our ability to, among other things: incur additional indebtedness, pay dividends or make distributions or redeem or repurchase our securities, make certain investments, grant liens on assets, sell or dispose of any material assets; and acquire the assets of, or merge or consolidate with, other companies. Additionally, the Loan Agreement contains affirmative covenants that require to us take, and have taken by certain dates, specific actions, some of which have not been satisfied. As a result, on August 24, 2023, we entered into the Original Forbearance Agreement, as amended by the Forbearance Amendment dated as of December 14, 2023, under which we acknowledged that we were in default of several obligations and such holder acknowledged such defaults and agreed, subject to certain conditions, not to exercise any right or remedy under the Loan Agreement, including its right to accelerate the aggregate amount outstanding under the Loan Agreement, until June 14, 2024.

Complying with these covenants, as well as those that may be contained in any future debt agreements, may limit our ability to finance our future operations or working capital needs or to take advantage of future business opportunities. Our ability to comply with these covenants will depend on our future performance, which may be affected by events beyond our control. If we do not maintain and regain compliance with our continuing obligations or any covenants, terms and conditions of the Loan Agreement, after the expiration of the Forbearance Agreement, we could be in default and required to repay outstanding borrowings on an accelerated basis, which could subject us to decreased liquidity and other negative impacts on our business, results of operations and financial condition. In the case of an event of default, we may not have sufficient funds available to make the required payments under the Loan Agreement and may not be able to borrow sufficient funds to refinance the Loan Agreement. Even if new financing is available, it may not be on terms that are acceptable to us. If we are unable to repay amounts owed under the terms of the Loan Agreement, our Lender may choose to exercise its remedies in respect to the collateral, including a foreclosure of their lien (which may result in a sale of certain of our assets to satisfy our obligations under the Loan Agreement or ultimately in a bankruptcy or liquidation). The foregoing would materially and adversely affect the ongoing viability of our business.

The impacts of geopolitical, macroeconomic, and market conditions, including pandemics, epidemics and other public health crises, have had, and may continue to have, a significant effect on our industry, which in turn affects how we and our customers are operating our respective businesses. Our business is susceptible to declines or disruptions in the demand for meetings and events, including those due to economic downturns, natural disasters, geopolitical upheaval, and global pandemics.

The macroeconomic impacts of geopolitical events, such as pandemics, inflation, labor shortages, lack of access to capital, lack of consumer confidence, supply chain disruptions, and market volatility can pose risks to our and our customers’ business. Uncertainty about the duration of these negative macroeconomic conditions have impacted fiscal and monetary policy, including increases in interest rates, increased labor costs, and decreased corporate and consumer spending. The effects from a broadening or protracted extension of these conditions could result in a decrease in overall economic activity, hinder economic growth, or cause a recession in the United States or in the global economy. We sell our products throughout the United States, as well as in several international countries, commercial and non-profit customers. As a result, our business may be harmed by factors in the United States and other countries such as disruptions in financial markets; reductions in spending,

 

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or downturns in economic activity in specific countries or regions, or in the various industries in which we operate; social, political, or labor conditions in specific countries or regions; or adverse changes in the availability and cost of capital, interest rates, tax rates, or regulations. Further economic weakness and uncertainty may result in significantly decreased spending on our event marketing and management solutions, which may adversely affect harm our business.

Our business depends on discretionary corporate spending. Negative macroeconomic conditions may adversely affect our customers’ businesses and reduce our customers’ operating expense budgets, which could result in reduced demand for our product offerings or cancellations, increased demands for pricing accommodations or higher rates of delays in collection of, or losses on, our accounts receivable, which could adversely affect our results of operations and financial position. During periods of economic slowdown and recession, consumers have historically reduced their discretionary spending, and our ability to sign new customers, and to upsell to and renew contracts with our existing customers may be significantly impacted. Additionally, challenging economic conditions also may impair the ability of our customers to pay for products and services they have purchased. As a result, our cash flow may be negatively impacted and our allowance for credit losses and write-offs of accounts receivable may increase. If we are unable to offset any decrease in revenue by increasing sales to new or existing customers, or otherwise offset higher costs through price increases, our revenue may decline. The extent to which the ongoing impacts of these negative macroeconomic conditions will impact our business, results of operations, and financial position is uncertain and will depend on political, social, economic, and regulatory factors that are outside of our control, including actions that may be taken by regulators and businesses (including our customers) in response to the macroeconomic uncertainty. Our business and financial performance may be unfavorably impacted in future periods if a significant number of our customers are unable to continue as viable businesses or they significantly reduce their operating budgets, or if there is a reduction in business confidence and activity, a decrease in government, corporate and consumer spending, or a decrease in growth in the overall market, among other factors.

Our business and financial performance are affected by the health of the worldwide meetings and events industry. Meetings and events are sensitive to business-related discretionary spending levels and tend to grow more slowly or even decline during economic downturns. Decreased expenditures by marketers and participants could also result in decreased demand for our product offerings, thereby causing a reduction in our sales. The impact of economic slowdowns on our business is difficult to predict, but has and may continue to result in reductions in events and our ability to generate revenue.

Cybersecurity and data security breaches and ransomware attacks may create financial liabilities for us, damage our reputation, and harm our business.

Our customers provide us with information that our solutions store, some of which is confidential information. In addition, we store personal information about our employees. We have security systems and information technology infrastructure designed to protect against unauthorized access to such information and money, but we may not be successful in protecting against all security breaches and cyber-attacks. Threats to and breaches of our information technology security can take various forms, including viruses, worms, ransomware, and other malicious software programs, or actions or omissions by an employee. Significant cybersecurity or data security breaches could result in the loss of business, litigation, regulatory investigations, loss of customers, and penalties that could damage our reputation and adversely affect the growth of our business.

In some cases, we must rely on the safeguards put in place by third parties to protect against security threats. These third parties, including vendors that provide products and services for our operations and our network of business application providers, could also be a source of security risk to us in the event of a failure of their own security systems and infrastructure, whether unintentionally or through a malicious backdoor. We do not review the software code included in third-party integrations in all instances.

Because the techniques used to obtain unauthorized access, sabotage systems, or otherwise access data and/or data backups change frequently and generally are not recognized until launched against a target, we or these

 

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third parties have been and, in the future, may be unable to anticipate these techniques or to implement adequate preventative measures. With the increasing frequency of cyber-related frauds to obtain inappropriate payments, we need to ensure our internal controls related to authorizing the transfer of funds are adequate. We may also be required to expend resources to remediate cyber-related incidents or to enhance and strengthen our cyber security. Any of these occurrences could create liability for us, put our reputation in jeopardy, and harm our business.

Privacy and data security laws and regulations could impose additional costs and reduce demand for our solutions.

We store and transmit personal information relating to our employees, customers, prospective customers, and other individuals, and our customers use our technology platform to store and transmit a significant amount of personal information relating to their customers, vendors, employees, and other industry participants. Federal, state, and foreign government bodies and agencies have adopted, and are increasingly adopting, laws and regulations regarding the collection, use, processing, storage, and disclosure of personal or identifying information obtained from customers and other individuals. These obligations have and will likely continue to increase the cost and complexity of delivering our services.

In addition to government regulation, privacy advocates and industry groups may propose various self-regulatory standards that may legally or contractually apply to our business. As new laws, regulations, and industry standards take effect, and as we offer new services in new markets, market segments and, potentially, new industries, we will need to understand and comply with various new requirements, which may impede our plans for growth or result in significant additional costs. These laws, regulations, and industry standards have had, and will likely continue to have, negative effects on our business, including by increasing our costs and operating expenses, and/or delaying or impeding our deployment of new or existing core functionality. Failure to comply with these laws, regulations, and industry standards could result in negative publicity, subject us to fines or penalties, expose us to litigation, or result in demands that we modify or cease existing business practices. Furthermore, privacy and data security concerns may cause our customers’ customers, vendors, employees, and other industry participants to resist providing the personal information necessary to allow our customers to use our applications effectively, which could reduce overall demand for our product offerings. Any of these outcomes could harm our business.

Our product offerings, solutions, and internal systems, as well as external internet infrastructure, may be subject to disruption that could harm our reputation and future sales or result in claims against us.

Because our operations involve delivering engagement solutions to our customers through a cloud-based software platform, our continued growth depends in part on the ability of our platform and related computer equipment, third-party data centers, infrastructure, and systems to continue to support our product offerings. In addition, in delivering our products to customers, we are reliant on internet infrastructure limitations. In the past, we have experienced temporary and limited platform disruptions, outages in our product functionality, and degraded levels of performance due to human and software errors, file corruption, and first and third-party capacity constraints associated with the number of customers accessing our products simultaneously. While our past experiences have not materially impacted us, in the future we may face more extensive disruptions, outages, or performance problems. In addition, malicious third parties may also conduct attacks designed to sabotage, impede the performance, or temporarily deny customers access to, our product offerings. If an actual or perceived disruption, outage, performance problem, or attack occurs, it could harm our reputation and the market perception of our product offerings; divert the efforts of our technical and management personnel; impair our ability to operate our business; cause us to lose customer information; or harm our customers’ businesses. Any of these events may increase non-renewals, limit our ability to acquire new customers, result in delayed or withheld payments from customers, or result in claims against us.

 

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Undetected defects in our product offerings could harm our reputation or decrease market acceptance of our product offerings, which would harm our business and results of operations.

Our product offerings may contain undetected defects, such as errors or bugs. We have experienced such defects in the past in connection with new solutions and solution upgrades, and we expect that such defects may be found from time to time in the future. Despite testing by us, defects may not be found in our product offerings until they are deployed to or used by our customers. In the past, we have discovered software defects in our product offerings after they have been deployed to customers.

Defects, disruptions in service, or other performance problems may damage our customers’ business and could hurt our reputation. We may be required, or may choose, for customer relations or other reasons, to expend additional resources to correct actual or perceived defects in our product offerings. If defects are detected or perceived to exist in our product offerings, we may experience negative publicity, loss of competitive position, or diversion of the attention of our key personnel; our customers may delay or withhold payment to us or elect not to renew their subscriptions; other significant customer relations problems may arise; or we may be subject to liability claims for damages. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our product offerings may harm our business and results of operations.

We rely on internet infrastructure, bandwidth providers, data center providers, other third parties, and our own systems for providing solutions to our customers, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with customers, adversely affecting our brand and our business.

Our ability to deliver our solutions is dependent on the development and maintenance of the infrastructure of the Internet and other telecommunications services by third parties. We currently host our technology platform, serve our customers and members, and support our operations primarily using third-party data centers and telecommunications solutions, including cloud infrastructure services such as Amazon Web Services (“AWS”) and Google Cloud. We do not have control over the operations of the facilities of our data center providers, AWS, or Google Cloud. These facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures, and other events. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice, or other unanticipated problems could result in lengthy interruptions in our product offerings. The facilities also could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism, and other misconduct. Any errors, failures, interruptions, or delays experienced in connection with these third-party technologies and information services or our own systems could negatively impact our relationships with customers and harm our business and could expose us to third-party liabilities.

For some of these services, we may not maintain redundant systems or facilities. Our technology platform’s continuing and uninterrupted performance is critical to our success. Members may become dissatisfied by any system failure that interrupts our ability to provide our solutions to them. We may not be able to easily switch our AWS and Google Cloud operations to another cloud service provider if there are disruptions or interference with our use of AWS or Google Cloud. Sustained or repeated system failures would reduce the attractiveness of our technology platform to customers and members and result in contract terminations, thereby reducing revenue. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact use of our existing and future offerings. We may not carry sufficient business interruption insurance to compensate us for losses that may occur as a result of any events that cause interruptions in our service. Neither our third-party data and call center providers nor AWS or Google Cloud have an obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew our agreements with these providers on commercially reasonable terms, if our agreements with our providers are prematurely terminated, or if in the future we add additional data or call center providers or cloud service providers, we may experience costs or downtime in connection with the transfer to, or the addition of, new providers. If these providers were to increase the cost of their services, we may have to increase the price of our existing and future offerings. Any such increased costs or pricing may have a negative effect on our customer relationships and may adversely affect our business and results of operations.

 

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If we fail to effectively maintain and enhance our brands, our business may suffer.

We believe that continuing to strengthen our brands will be critical to achieving widespread acceptance of our product offerings and will require continued focus on active marketing efforts. Our brand awareness efforts will require continued investment across our business, particularly as we introduce new solutions that we develop or acquire and as we continue to expand in new markets. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses incurred in building our brand. If we fail to promote and maintain our brands, or if we incur substantial expense in an unsuccessful attempt to promote and maintain our brand, our business could be harmed.

Any failure to offer high-quality customer support services could adversely affect our relationships with our customers and our operating results.

Our customers depend on our support to assist with their needs. We may be unable to accurately predict our customers’ demand for services or respond quickly enough to accommodate short-term increases in customer or member demand for services. Increased customer demand for our product offerings, without a corresponding increase in productivity or revenue, could increase costs and adversely affect our operating results. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality customer support, could adversely affect our reputation, our ability to sell our product offerings to existing and prospective customers, our relationships with third parties and our ability to form new partnerships, and our business and operating results.

Our ability to use our net operating loss to offset future taxable income may be subject to certain limitations.

We have incurred substantial losses during our history and do not expect to become profitable in the near future and may never achieve profitability. Under current U.S. federal income tax law, unused losses for the tax year ended December 31, 2017 and prior tax years will carry forward to offset future taxable income, if any, until such unused losses expire, and unused federal losses generated after December 31, 2017 will not expire and may be carried forward indefinitely, but will be only deductible to the extent of 80% of current year taxable income in any given year. Many states have similar laws.

In addition, both current and future unused net operating loss (“NOL”) carryforwards and other tax attributes may be subject to limitation under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in equity ownership by certain stockholders over a rolling three-year period. Additional ownership changes in the future could result in additional limitations on our NOL carryforwards. Consequently, even if we achieve profitability, we may not be able to utilize a material portion of our NOL carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

We may need to make significant investments in software development and equipment to improve our business.

To improve the scalability, security, performance, efficiency, availability, and failover aspects of our product offerings, and to support the expansion of our product offerings and stay competitive, we may need to make significant capital equipment expenditures and also invest in additional software and infrastructure development. If we experience increasing demand in subscriptions, we may not be able to augment our infrastructure quickly enough to accommodate such increasing demand. To reach the goal of supporting the increasing demand, we will need additional capital to make the investments in software development and equipment either through operations or through financing. Additionally, we are continually updating our software, creating expenses for us. We may also need to review or revise our software architecture and user experience as we grow, which may require significant resources and investments. Any of these factors could negatively impact our business and results of operations.

 

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Adverse litigation results could have a material adverse impact on our business.

We are, have been, and may be involved in regulatory and government investigations and other proceedings, involving competition, intellectual property, data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial disputes, and other matters. Such claims, suits, actions, regulatory and government investigations, and other proceedings can impose a significant burden on management and employees, could prevent us from offering one or more of our products, services, or features to customers, could require us to change our technology or business practices, or could result in monetary damages, fines, civil or criminal penalties, reputational harm, or other adverse consequences. Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business. Litigation and other claims are subject to inherent uncertainties and management’s view of the materiality or likely outcome of any such matters may change in the future. A material adverse impact in our consolidated financial statements could occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

Failure to protect or enforce our intellectual property rights could harm our business and results of operations.

To establish and protect our proprietary rights, we rely on a combination of trademarks and trade secrets, including know-how, license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment agreements, and other contractual rights. As of December 31, 2023, we held two registered trademarks in the United States: Banzai and Demio. We believe that our intellectual property is an essential asset of our business. If we do not adequately protect our intellectual property, our brand and reputation could be harmed and competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business, negatively affect our position in the marketplace, limit our ability to commercialize our technology, and delay or render impossible our achievement of profitability. A failure to protect our intellectual property in a cost-effective and meaningful manner could have a material adverse effect on our ability to compete. We regard the protection of our intellectual property as critical to our success.

We strive to protect our intellectual property rights by relying on federal, state, and common law rights and other rights provided under foreign laws. These laws are subject to change at any time and could further restrict our ability to protect or enforce our intellectual property rights. In addition, the existing laws of certain foreign countries in which we operate may not protect our intellectual property rights to the same extent as do the laws of the United States.

We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with other parties, with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, we may not be successful in executing these agreements with every party who has access to our confidential information or contributes to the development of our intellectual property.

The agreements that we execute may be breached, and we may not have adequate remedies for any such breach. These contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our intellectual property or deter independent development of similar intellectual property by others.

Obtaining and maintaining effective intellectual property rights is expensive, including the costs of monitoring unauthorized use of our intellectual property and defending our rights. We make business decisions about when to seek patent protection for a particular technology and when to rely upon trade secret protection, and the approach we select may ultimately prove to be inadequate. We strive to protect certain of our intellectual property rights through filing applications for trademarks, patents, and domain names in a number of

 

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jurisdictions, a process that is expensive and may not be successful in all jurisdictions. However, there is no assurance that any resulting patents or other intellectual property rights will adequately protect our intellectual property, or provide us with any competitive advantages. Moreover, we cannot guarantee that any of our pending patent or trademark applications will issue or be approved. Even where we have intellectual property rights, they may later be found to be unenforceable or have a limited scope of enforceability. In addition, we may not seek to pursue such protection in every jurisdiction. The United States Patent and Trademark Office also requires compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process and after a patent has issued. Noncompliance with such requirements and processes may result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to develop and commercialize substantially similar and competing applications, which would harm our business.

We believe it is important to maintain, protect, and enhance our brands. Accordingly, we pursue the registration of domain names and our trademarks and service marks in the United States. Third parties may challenge our use of our trademarks, oppose our trademark applications, or otherwise impede our efforts to protect our intellectual property in certain jurisdictions. In the event that we are unable to register our trademarks in certain jurisdictions, we could be forced to rebrand our solutions, which would result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors and others could also attempt to capitalize on our brand recognition by using domain names or business names similar to ours. Domain names similar to ours have been registered in the United States and elsewhere. We may be unable to prevent third parties from acquiring or using domain names and other trademarks that infringe on, are similar to, or otherwise decrease the value of, our brands, trademarks, or service marks. We also may incur significant costs in enforcing our trademarks against those who attempt to imitate our brand and other valuable trademarks and service marks.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. We may not be able to detect infringement or unauthorized use of our intellectual property rights, and defending or enforcing our intellectual property rights, even if successfully detected, prosecuted, enjoined, or remedied, could result in the expenditure of significant financial and managerial resources. Litigation has in the past and may be necessary in the future to enforce our intellectual property rights, protect our proprietary rights, or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could harm our business. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, countersuits, and adversarial proceedings such as oppositions, inter partes review, post-grant review, re-examination, or other post-issuance proceedings, that attack the validity and enforceability of our intellectual property rights. An adverse determination of any litigation proceeding could adversely affect our ability to protect the intellectual property associated with our product offerings. Further, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation there could be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of Class A Common Stock. If we fail to maintain, protect, and enhance our intellectual property rights, our business may be harmed and the market price of Class A Common Stock could decline.

Our competitors also may independently develop similar technology that does not infringe on or misappropriate our intellectual property rights. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. Effective patent, trademark, copyright, and trade secret protection may not be available to us in every country in which our solutions or technology are developed. Further, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. The laws in the

 

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United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property. Our failure to meaningfully protect our intellectual property could result in competitors offering solutions that incorporate our most technologically advanced features, which could seriously reduce demand for existing and future offerings.

Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could harm our business.

Our success depends in part on our ability to develop and commercialize our offerings and use our proprietary technology without infringing the intellectual property or proprietary rights of third parties. Intellectual property disputes can be costly to defend and may cause our business, operating results, and financial condition to suffer. As the MarTech industry in the United States expands and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our offerings and technology of which we are not aware or that we must challenge to continue our operations as currently contemplated. Whether merited or not, we may face allegations that we, our partners, our licensees, or parties indemnified by us have infringed or otherwise violated the patents, trademarks, copyrights, or other intellectual property rights of third parties. Such claims may be made by competitors seeking to obtain a competitive advantage or by other parties.

Additionally, in recent years, individuals and groups have begun purchasing intellectual property assets for the purpose of making claims of infringement and attempting to extract settlements from companies like ours. We may also face allegations that our employees have misappropriated the intellectual property or proprietary rights of their former employers or other third parties. It may in the future be necessary for us to initiate litigation to defend ourselves in order to determine the scope, enforceability, and validity of third-party intellectual property or proprietary rights, or to establish our respective rights. Regardless of whether claims that we are infringing patents or other intellectual property rights have merit, such claims can be time-consuming, divert management’s attention and financial resources, and can be costly to evaluate and defend. Results of any such litigation are difficult to predict and may require us to stop commercializing or using our solutions or technology, obtain licenses, modify our solutions and technology while we develop non-infringing substitutes, or incur substantial damages, settlement costs, or face a temporary or permanent injunction prohibiting us from marketing or providing the affected solutions. If we require a third-party license, it may not be available on reasonable terms or at all, and we may have to pay substantial royalties, upfront fees, or grant cross-licenses to intellectual property rights for our solutions. We may also have to redesign our solutions so that they do not infringe third-party intellectual property rights, which may not be possible or may require substantial monetary expenditures and time, during which our technology and solutions may not be available for commercialization or use. Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable to uphold its contractual obligations. If we cannot or do not obtain a third-party license to the infringed technology, license the technology on reasonable terms, or obtain similar technology from another source, our revenue and earnings could be adversely impacted.

From time to time, we have been and may be subject to legal proceedings and claims in the ordinary course of business with respect to intellectual property. Some third parties may be able to sustain the costs of complex litigation more effectively than we can because they have substantially greater resources. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of Class A Common Stock. Moreover, any uncertainties resulting from the initiation and continuation of any legal proceedings could have a material adverse effect on our ability to raise the funds necessary to continue our operations. Assertions by third parties that we violate their intellectual property rights could therefore harm our business.

 

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Our use of open source software could adversely affect our ability to offer our solutions and subject us to possible litigation.

We use open source software in connection with our existing offerings and may continue to use open source software in connection with our future offerings. Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software, and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third-parties certain rights of further use. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software and to make our proprietary software available under open source licenses, if we combine and/or distribute our proprietary software with open source software in certain manners. Although we monitor our use of open source software, we cannot be sure that all open source software is reviewed prior to use in our proprietary software, that our programmers have not incorporated open source software into our proprietary software, or that they will not do so in the future. Additionally, the terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts.

There is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our existing and future offerings to our customers and members. In addition, the terms of open source software licenses may require us to provide software that we develop using such open source software, to others, including our competitors, on unfavorable license terms. As a result of our current or future use of open source software, we may face claims or litigation, be required to release our proprietary source code, pay damages for breach of contract, re-engineer our technology, discontinue sales in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our development efforts, any of which could harm our business.

Risks Related to the Offering and Ownership of Our Securities

Purchasers in the offering will suffer immediate dilution.

If you purchase securities in this offering, the value of your shares based on our net tangible book value will immediately be less than the offering price you paid. This reduction in the value of your equity is known as dilution. At the public offering price of $0.18 per share, purchasers of common stock in this offering will experience immediate dilution of approximately $(1.09) per share. See “Dilution.”

The Common Warrants are speculative in nature.

The Common Warrants will be exercisable for five years from the date of initial issuance at an exercise price of $0.18 per share. There can be no assurance that the market price of the Class A Common Stock will ever equal or exceed the exercise price of the Common Warrants. In the event that our Class A Common Stock price does not exceed the exercise price of the Common Warrants during the period when the Common Warrants are exercisable, a holder of the Common Warrants may be unable to profit from exercising such Common Warrants before they expire.

The Pre-Funded Warrants or the Common Warrants will not be listed or quoted on any exchange.

There is no established public trading market for the Pre-Funded Warrants or Common Warrants being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the Pre-Funded Warrants or Common Warrants on any national securities exchange or other nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the Pre-Funded Warrants and the Common Warrants will be limited.

The Common Warrants may not have any value.

Each Common Warrant has an exercise price per share equal to the public offering price of the shares of Class A Common Stock in this offering and expires on the fifth anniversary of its original issuance date. In the

 

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event the market price per share of Class A Common Stock does not exceed the exercise price of the Common Warrants during the period when the Common Warrants are exercisable, the Common Warrants may not have any value.

The best efforts structure of this offering may have an adverse effect on our business plan.

The Placement Agent is offering the shares of Class A Common Stock, Common Warrants and Pre-Funded Warrants in this offering on a best efforts basis. The Placement Agent is not required to purchase any securities, but will use its best efforts to sell the securities offered. As a “best efforts” offering, there can be no assurance that the offering contemplated hereby will ultimately be consummated or will result in any proceeds being made available to us or, if consummated, the amount of proceeds to be received. The success of this offering will impact our ability to use the proceeds to execute our business plan. An adverse effect on the business may result from raising less than anticipated and from the fact that there is no minimum raise.

Purchasers who purchase our securities in this offering pursuant to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit of a securities purchase agreement.

In addition to rights and remedies available to all purchasers in this offering under federal securities and state law, the purchasers that enter into a securities purchase agreement will also be able to bring claims of breach of contract against us. The ability to pursue a claim for breach of contract provides those investors with the means to enforce the covenants uniquely available to them under the securities purchase agreement.

Except as otherwise provided in the Common Warrants and Pre-Funded Warrants, holders of Common Warrants and Pre-Funded Warrants purchased in this offering will have no rights as stockholders until such holders exercise their Common Warrants or Pre-Funded Warrants and acquire our Class A Common Stock.

Except as otherwise provided in the Common Warrants and Pre-Funded Warrants, until holders of Common Warrants or Pre-Funded Warrants acquire our Class A Common Stock upon exercise of the Common Warrants or Pre-Funded Warrants, holders of Common Warrants and Pre-Funded Warrants will have no rights with respect to our Class A Common Stock underlying such Common Warrants and Pre-Funded Warrants. Upon exercise of the Common Warrants and Pre-Funded Warrants, the holders will be entitled to exercise the rights of a holder of our Class A Common Stock only as to matters for which the record date occurs after the exercise date.

This is a best efforts offering; no minimum amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business.

The Placement Agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number of securities that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, Placement Agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth in this prospectus. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to pursue the business goals outlined in this prospectus. Thus, we may not raise the amount of capital we believe is required for our business and may need to raise additional funds, which may not be available or available on terms acceptable to us. Despite this, any proceeds from the sale of securities offered by us will be available for our immediate use, and because there is no escrow account and no minimum offering amount in this offering, investors could be in a position where they have invested in us, but we are unable to fulfill our objectives due to a lack of interest in this offering.

 

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Our management will have broad discretion over the use of the net proceeds from this offering.

We currently intend to use the net proceeds from the sale of our securities in this offering to pay off a portion of the currently outstanding Yorkville Promissory Notes, and for general corporate purposes, including working capital, operating expenses and capital expenditures. Except for the proceeds we intend to use to pay off a portion of the currently outstanding Yorkville Promissory Notes, we have not reserved or allocated specific amounts for any of these purposes, and we cannot specify with certainty how we will use the net proceeds (see “Use of Proceeds”). Accordingly, our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. We may use the net proceeds for corporate purposes that do not increase our operating results or market value.

Our use of proceeds may not increase the value of your investment.

The use of a portion of the proceeds from the sale of our securities in this offering to pay off the Yorkville Promissory Notes instead of using such proceeds for working capital or otherwise in furtherance of the Company’s business objectives may not increase the value of your investment.

In order to support the growth of our business and repay our indebtedness, we will need to seek capital through new equity or debt financings or incur additional indebtedness under our credit facilities, which sources of additional capital may not be available to us on acceptable terms or at all.

Our operations have consumed substantial amounts of cash since inception, and we intend to continue to make significant investments to support our business growth, respond to business challenges or opportunities, develop new applications and solutions, enhance our existing product offerings, enhance our operating infrastructure, and acquire complementary businesses and technologies. For the years ended December 31, 2023 and 2022, Legacy Banzai’s net cash used in operating activities was $1.6 million and $5.2 million, respectively. As of March 31, 2024, December 31, 2023 and 2022, Banzai and Legacy Banzai, respectively, had $1.0 million, $2.1 million and $1.0 million of cash, respectively, which was held for working capital purposes. As of March 31, 2024, December 31, 2023 and 2022, Banzai and Legacy Banzai, respectively, had borrowings of $16.8 million, $16.2 million and $13.7 million, respectively, outstanding under its term loans and promissory notes.

Our future capital requirements may be significantly different from previous estimates and will depend on many factors, including the need to:

 

   

finance unanticipated working capital requirements;

 

   

develop or enhance our technological infrastructure and our existing product offerings;

 

   

fund strategic relationships, including joint ventures and co-investments;

 

   

fund additional implementation engagements;

 

   

respond to competitive pressures; and

 

   

acquire complementary businesses, technologies, products, or services.

Accordingly, we may need to engage in equity or debt financings to secure additional funds. We entered into the SEPA with an entity managed by Yorkville to provide liquidity to us after the Business Combination, but there can be no guarantee that we will be able to affect any advances under the SEPA or to secure additional financing on favorable terms, or at all. To the extent that cash on hand and cash generated from operations are not sufficient to fund capital requirements, or if we do not meet the conditions to sell shares to Yorkville under the SEPA, we may require proceeds from asset sales, additional debt, equity financing, or alternative financing structures. In addition, if we do not identify additional financing to refinance our existing Loan Agreement prior to the expiration of the forbearance granted by our Lender through June 14, 2024, we will be in default of our obligations under the Loan Agreement. Additional financing may not be available on favorable terms, or at all.

 

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If we raise additional funds through further issuances of equity or convertible debt securities, including shares of Class A Common Stock issued in connection with advances under the SEPA or upon exercise of the GEM Warrant, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of shares of our Class A Common Stock. Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, during times of economic instability, it has been difficult for many companies to obtain financing in the public markets or to obtain debt financing, and we may not be able to obtain additional financing on commercially reasonable terms, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we need or want it, it could harm our business.

Future sales of shares of Class A Common Stock may depress their stock price.

Future sales of shares of Class A Common Stock in the public market, including the resale of shares pursuant to our effective registration statements or pursuant to Rule 144, could depress the stock price. See “Sales of a substantial number of shares of Class A Common Stock in the public market pursuant to our registration statements could reduce the market price of Class A Common Stock.” Subject to certain exceptions, the Amended and Restated Registration Rights Agreement executed at the time of the Closing provides for certain restrictions on transfer with respect to our securities. Such restrictions began upon the Closing and end the earliest of (A) 180 days after the Closing and (B) the first date on which (x) the closing price of our Class A Common Stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing or (y) we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in our stockholders having the right to exchange their shares of our Class A Common Stock for cash, securities, or other property.

In connection with the execution of the Merger Agreement, we and certain stockholders of Legacy Banzai, including Legacy Banzai’s officers, directors, and certain holders of 10% or more of the outstanding shares of Legacy Banzai Common Stock as of the date of the Merger Agreement, entered into the lock-up agreements effective as of the Closing Date (the “Lock-Up Agreements”). Pursuant to the Lock-Up Agreements, such stockholders agree not to, without our prior written consent (subject to certain exceptions): (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Act and the rules and regulations of the SEC promulgated thereunder, any shares of Common Stock held by him, her, or it immediately after the Closing, any shares of Common Stock issuable upon the exercise of options to purchase shares, or any securities convertible into or exercisable or exchangeable for Common Stock held by him, her, or it immediately after such closing, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii) until 180 days after the Closing.

Additionally, Cantor is subject to a 12-month lock-up period with respect to the Class A Common Stock issued pursuant to the Fee Reduction Agreement, subject to customary exceptions.

However, equityholders not subject to a lock-up and, following the expiration of the applicable lock-up periods, such equityholders referred to above will not be restricted from selling shares of our Common Stock held by them, other than by applicable securities laws, and sales could occur at any time and such sales could depress the stock price.

 

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Issuances of shares of our Class A Common Stock pursuant to any Advances under the SEPA and conversion of any amounts under the Yorkville Promissory Notes, exercise of the GEM Warrant and conversion of any amounts under the GEM Promissory Note, and conversion of any amounts under the Senior Convertible Notes would result in substantial dilution of our stockholders and may have a negative impact on the market price of our Class A Common Stock.

At Closing, the Senior Convertible Notes and the obligation to issue the GEM Warrant automatically became our obligation. On December 15, 2023, we issued the GEM Warrant in the amount of 828,533 shares of Class A Common Stock at an exercise price of $6.49 per share, which will be adjusted to $0.19 per share, an amount equal to 105% of the per share consideration received in this offering pursuant to anti-dilution price protections contained in those warrants (see “Description of Securities-Warrants-GEM Warrant”). The exercise price will be adjusted to 105% of the then-current exercise price if, on the one-year anniversary date of the date of issuance, the GEM Warrant has not been exercised in full and the average closing price per share of shares of Class A Common Stock for the 10 days preceding the anniversary date is less than 90% of the initial exercise price. Additionally, the GEM Warrant contains weighted average anti-dilution provisions that provide that if the Company issues shares of Class A Common Stock, or securities convertible into or exercisable or exchangeable for, shares of Class A Common Stock at a price per share that is less than 90% of the exercise price then in effect or without consideration, then the exercise price of the GEM Warrant upon each such issuance will be adjusted to the price equal to 105% of the consideration per share paid for such Class A Common Stock or other securities. The issuance of shares of Class A Common Stock in this offering may cause such an adjustment in the exercise price of the GEM Warrant. GEM may exercise the GEM Warrant at any time and from time to time until December 14, 2026.

On February 5, 2024, we issued the GEM Promissory Note, which is convertible upon nonpayment of and in lieu of a monthly payment in the amount of $100,000, payable for ten months on the first of the month starting on March 1, 2024. The GEM Promissory Note provides for the issuance of shares of Class A Common Stock at a conversion price equal to the VWAP of the trading day immediately preceding the applicable payment due date. As of the date of this prospectus, we have issued an aggregate of 562,803 shares of Class A Common Stock to GEM in lieu of monthly payment obligations.

The shares of Class A Common Stock issuable pursuant to the GEM Warrant and the GEM Promissory Note, to the extent exercised, converted and issued, would impose significant dilution on our stockholders. Under the terms of the GEM Warrant and the GEM Promissory Note, as of May 10, 2024, 828,533 and 2,142,857 additional shares of Class A Common Stock may be issued assuming full exercise and conversion (and no adjustments to the exercise or conversion price thereof) of each of the GEM Warrant and the GEM Promissory Note, respectively, which would reflect approximately 3.7% or 9.6% respectively, of the outstanding shares of our Class A Common Stock as of May 10, 2024 after giving effect to such issuances.

Further, the shares of Class A Common Stock issuable pursuant to the Senior Convertible Notes, to the extent exercised, converted and issued, would impose significant dilution on our stockholders. Based on the total number of shares of Class A Common Stock outstanding as of May 10, 2024, and a stock price of $0.34, up to 665,388 additional shares of Class A Common Stock may be issued assuming full conversion (and no adjustments to the conversion price thereof) of the Senior Convertible Notes, which would reflect approximately 3.3% of the outstanding shares of our Class A Common Stock as of May 10, 2024 after giving effect to such issuance.

Pursuant to the SEPA, subject to certain conditions and Yorkville’s right to require issuances while its promissory notes are outstanding, we have the option, but not the obligation, to sell to Yorkville, and Yorkville will subscribe for, an aggregate amount of up to $100,000,000 of shares of Class A Common Stock, at our request any time during the commitment period terminating on the 36-month anniversary of the Original SEPA; provided that any Advance Notice may only be made if (x) no amount remains outstanding on the Yorkville Promissory Notes, (y) there is an effective Resale Registration Statement filed with the SEC for the resale under the Securities Act, of the shares of Class A Common Stock to be issued pursuant to such Advance Notice, and (z) other customary conditions precedent are satisfied. The price at which we may issue and sell shares pursuant

 

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to an Advance under the SEPA may be at either (a) Pricing Option 1 or (b) Pricing Option 2, provided that we are subject to certain caps on the amount of shares of Class A Common Stock that we may sell pursuant to any advance under the SEPA.

Additionally, at any time during the commitment period, provided there is a balance remaining outstanding under a Yorkville Promissory Note, Yorkville may deliver an Investor Notice, causing an Advance Notice to be deemed delivered to Yorkville, subject to certain conditions. As of May 15, 2024, 3,242,543 shares of Class A Common Stock had been issued upon conversion of the Yorkville Promissory Notes and the aggregate principal amount remaining outstanding under the Yorkville Promissory Notes was $2,700,000. In addition, 710,025 shares of Class A Common Stock had been issued in satisfaction of a deferred fee payment in the amount of $500,000. Assuming that (a) we issue and sell the full $100 million of shares of Class A Common Stock under the SEPA to Yorkville, (b) there are no beneficial ownership limitations, and (c) the issue price for such sales is $1.00 or $3.00 per share, such additional issuances would represent in the aggregate approximately 100,000,000 or 33,333,333 additional shares of Class A Common Stock, respectively, or approximately 518% or 173% of the total number of shares of Class A Common Stock outstanding as of May 10, 2024, after giving effect to such issuance.

Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

On February 5, 2024, we received a letter from the staff at Nasdaq notifying us that, for 30 consecutive business days prior to the date of the letter, our Market Value of Listed Securities was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A). The staff at Nasdaq also noted that we were not in compliance with Nasdaq Listing Rule 5450(b)(3)(A), which requires listed companies to have total assets and total revenue of at least $50,000,000 each for the most recently completed fiscal year or for two of the three most recently completed fiscal years. We have 180 calendar days, or until August 5, 2024, to regain compliance.

On April 3, 2024, we received a second letter from the staff at Nasdaq notifying us that, for the 30 consecutive business days prior to the date of the letter, the Class A Common Stock did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(a)(1). Also on April 3, 2024, we received a third letter from the staff at Nasdaq notifying us that, for the 30 consecutive business days prior to the date of the third letter, our Market Value of Publicly Held Shares was below the minimum of $15 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(C). We have 180 calendar days, or until September 30, 2024, to regain compliance with these listing rules.

If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

   

a determination that our common stock is a “penny stock” which will require brokers trading in our Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

   

a limited amount of news and analyst coverage;

 

   

a decreased ability to issue additional securities or obtain additional financing in the future; and

 

   

being subject to regulation in each state in which we offer our securities.

 

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If our Class A Common Stock ceases to be listed on a national securities exchange it will become subject to the so-called “penny stock” rules that impose restrictive sales practice requirements.

If we are unable to maintain the listing of our Class A Common Stock on The Nasdaq Global Market or another national securities exchange, our Class A Common Stock could become subject to the so-called “penny stock” rules if the shares have a market value of less than $5.00 per share. The SEC has adopted regulations that define a penny stock to include any stock that has a market price of less than $5.00 per share, subject to certain exceptions, including an exception for stock traded on a national securities exchange. The SEC regulations impose restrictive sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. For transactions covered by this rule, the broker-dealer must make a special suitability determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to sale. This means that if we are unable maintain the listing of our Class A Common Stock on a national securities exchange, the ability of stockholders to sell their common stock in the secondary market could be adversely affected. If a transaction involving a penny stock is not exempt from the SEC’s rule, a broker-dealer must deliver a disclosure schedule relating to the penny stock market to each investor prior to a transaction. The broker-dealer also must disclose the commissions payable to both the broker-dealer and its registered representative, current quotations for the penny stock, and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the customer’s account and information on the limited market in penny stocks.

Our dual class common stock structure has the effect of concentrating voting power with our Chief Executive Officer and Co-Founder, Joseph Davy, which limits an investor’s ability to influence the outcome of important transactions, including a change in control.

Shares of our Class B Common Stock have 10 votes per share, while shares of our Class A Common Stock have one vote per share. Mr. Davy, who is our Chief Executive Officer and is Legacy Banzai’s Co-Founder, including his affiliates and permitted transferees, holds all of the issued and outstanding shares of Class B Common Stock. Accordingly, Mr. Davy held, directly or indirectly, approximately 54.5%% of our outstanding voting power as of May 10, 2024 and is able to control matters submitted to our stockholders for approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. Mr. Davy may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing, or deterring a change in control, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale, and might ultimately affect the market price of Class A Common Stock.

As a “controlled company” within the meaning of Nasdaq listing rules, we qualify for exemptions from certain corporate governance requirements and have the opportunity to elect to avail ourselves of any of the exemptions afforded a controlled company. If we elect to rely on some of these exemptions, our stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Because Mr. Davy currently controls more than a majority of our total voting power, we are a “controlled company” within the meaning of Nasdaq corporate governance listing rules. Under Nasdaq listing rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain Nasdaq rules regarding corporate governance, including the following:

 

   

the requirement that a majority of its board of directors consist of independent directors;

 

   

the requirement that director nominees must be selected, or recommended for selection, by either (i) the independent directors constituting a majority of the board of directors’ independent directors in a vote in which only independent directors participate or (ii) a nominations committee comprised solely of independent directors;

 

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the requirement to maintain a compensation committee with prescribed duties and a written charter comprised solely of independent directors; and

 

   

the requirement of an annual performance evaluation of our nominating and corporate governance and compensation committees.

As a “controlled company,” we may elect to rely on some or all of these exemptions. Despite the fact that we currently do not intend to take advantage of these exemptions, our status as a controlled company could make Class A Common Stock less attractive to some investors or otherwise harm the stock price of Class A Common Stock. Further, if we elect to rely on some or all of these exemptions, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

Following the completion of this offering, assuming the maximum amount of shares of Class A Common Stock being offered for sale in this offering is subscribed for, Mr. Davy will no longer own a majority of the total outstanding voting power of the outstanding common stock of the Company. As a result, we will no longer be a “controlled company” under the corporate governance rules for Nasdaq-listed companies.

The market price of our Class A Common Stock has been, and is likely to continue to be, highly volatile, and you may lose some or all of your investment.

The market price of our Class A Common Stock has fluctuated, and may continue to fluctuate, significantly due to a number of factors, some of which may be beyond our control, including those factors discussed in this “Risk Factors” section and many others, such as:

 

   

actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in its quarterly and annual results;

 

   

developments involving our competitors;

 

   

changes in laws and regulations affecting our business;

 

   

variations in our operating performance and the performance of our competitors in general;

 

   

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

 

   

additions and departures of key personnel;

 

   

announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

 

   

our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

 

   

publication of research reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;

 

   

changes in the market valuations of similar companies;

 

   

overall performance of the equity markets;

 

   

sales of Common Stock by us or our stockholders in the future;

 

   

trading volume of Class A Common Stock;

 

   

significant lawsuits, including stockholder litigation;

 

   

failure to comply with the requirements of Nasdaq;

 

   

the impact of any natural disasters, pandemics, epidemics or other public health emergencies;

 

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general economic, industry and market conditions and other events or factors, many of which are beyond our control; and

 

   

changes in accounting standards, policies, guidelines, interpretations, or principles.

Volatility in the price of our Class A Common Stock could subject us to securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

If securities or industry analysts do not publish research or reports about us, or publish negative reports, then our stock price and trading volume could decline.

The trading market for our Class A Common Stock will depend, in part, on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our Class A Common Stock or change their opinion, then the market price of our Class A Common Stock would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the market price of our Class A Common Stock or trading volume to decline.

We have incurred and will continue to incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, results of operations, and financial condition.

As a public company, we are subject to the reporting requirements of the Exchange Act, the listing standards of Nasdaq, and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, results of operations, and financial condition. Although we have already hired additional employees and engaged outside consultants to assist us in complying with these requirements, we will need to hire more employees in the future or may need to engage additional outside consultants, which will increase our operating expenses.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. These factors could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors (our “Board”),

 

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particularly to serve on our audit committee and compensation committee, and qualified executive officers. As a result of disclosure of information in this prospectus and in our other public filings, our business and financial condition will become more visible, which may result in pricing pressure from customers or an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of its management and harm our business.

We have identified material weaknesses in our internal control over financial reporting in the past. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.

Prior to the Closing, Legacy Banzai was a private company with limited accounting personnel to adequately execute its accounting processes and limited supervisory resources with which to address its internal control over financial reporting. In connection with the audit of Legacy Banzai’s financial statements as of and for the year ended December 31, 2022 and continuing through the year ended December 31, 2023, Legacy Banzai identified material weaknesses in its internal control over financial reporting. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Legacy Banzai’s annual or interim financial statements will not be prevented or detected on a timely basis.

Legacy Banzai did not design or maintain an effective control environment under the rules and regulations of the SEC. Accordingly and specifically, (i) management does not have appropriate IT general controls in place over change management, user access, cybersecurity, and reviews of service organizations, (ii) management does not have suitable entity level controls in place in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013) (“COSO”), including reviews of the financial statements, and certain entity level controls were not performed by management, and (iii) pervasive transactional and account level reconciliations and analyses are not performed, or not performed with sufficient detail to prevent or detect a material weakness. These issues related to managements controls over the review of complex significant transactions, complex debt and equity, income and sales taxes, & revenue recognition.

We have taken certain steps, such as recruiting additional personnel, in addition to utilizing third-party consultants and specialists, to supplement our internal resources, to enhance our internal control environment and plans to take additional steps to remediate the material weaknesses. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take. We cannot assure you that the measures taken to date and to be taken in the future, will be sufficient to remediate the control deficiencies that led to Legacy Banzai’s material weakness in internal control over financial reporting or that it will prevent or avoid potential future material weaknesses. If the steps we take do not correct the material weakness in a timely manner, we will be unable to conclude that we maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.

Any failure to remediate existing material weaknesses, or to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the

 

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trading price of our Class A Common Stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq. We will not be required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and will therefore not be required to make a formal assessment of the effectiveness of control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have an adverse effect on our business and results of operations and could cause a decline in the price of our Class A Common Stock.

Our executive officers and directors collectively beneficially own approximately 72.6% of the voting power of our outstanding Common Stock and have substantial control over us, which will limit your ability to influence the outcome of important transactions, including a change in control.

Our executive officers and directors, in the aggregate, beneficially own approximately 72.6% of the voting power of our outstanding shares of Common Stock as of the date of this prospectus, based on the number of shares outstanding as of May 10, 2024. As a result, these stockholders, if acting together, will be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers, acquisitions, or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing, or deterring a change in control of the Company, could deprive our stockholders of an opportunity to receive a premium for their Class A Common Stock as part of a sale of the Company, and might ultimately affect the market price of our Class A Common Stock.

It is not currently anticipated that we will pay dividends on shares of our Class A Common Stock, and, consequently, your ability to achieve a return on your investment will depend on appreciation, if any, in the market price of the Class A Common Stock.

It is currently anticipated that we will retain future earnings for the development, operation, and expansion of the business, and we do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to our stockholders will therefore be limited to the appreciation of their shares of Class A Common Stock. There is no guarantee that shares of Class A Common Stock will appreciate in value or even maintain the price at which stockholders have purchased their shares of Class A Common Stock.

The DGCL and our Charter and Bylaws contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

Our Charter, our Bylaws and the DGCL contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the Board and therefore depress the trading price of our Class A Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Board or taking other corporate actions, including effecting changes in our management. Among other things, our Charter and/or Bylaws include provisions regarding:

 

   

that shares of our Class B Common Stock are entitled to 10 votes per share;

 

   

the ability of the Board to issue shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”), including “blank check” preferred stock and to determine the price and other terms of those

 

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shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 

   

the limitation of the liability of, and the indemnification of, our directors and officers;

 

   

the requirement that a special meeting of stockholders may be called only by a majority of the entire Board, the chairperson of the Board or the Chief Executive Officer which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

   

controlling the procedures for the conduct and scheduling of Board and stockholder meetings;

 

   

the ability of the Board to amend the Bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and

 

   

advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act (the “WBCA”) may apply to us under certain circumstances now or in the future. These provisions prohibit a “target corporation” from engaging in any of a broad range of business combinations with any stockholder constituting an “acquiring person” for a period of five years following the date on which the stockholder became an “acquiring person.”

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Board or our management.

In addition, our Charter includes a provision substantially similar to Section 203 of the DGCL, which may prohibit certain stockholders holding 15% or more of our outstanding capital stock from engaging in certain business combinations with us for a specified period of time.

Our Charter designates the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for substantially all disputes between us and our stockholders, which restricts our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.

Our Charter provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of claims or causes of action under Delaware statutory or common law: any derivative claims or causes of action brought on our behalf; any claims or causes of action asserting a breach of a fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our Charter, or our Bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. In addition, our Charter provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Such provisions are intended to benefit and may be enforced by us and our officers and directors, employees and agents.

These provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other

 

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employees, which may discourage lawsuits with respect to such claims or make such lawsuits more costly for stockholders, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find either choice of forum provisions contained in our Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

The exclusive forum clause set forth in the Warrant Agreement may have the effect of limiting an investor’s rights to bring legal action and could limit the investor’s ability to obtain a favorable judicial forum.

The Warrant Agreement provides that (i) any action, proceeding or claim against us arising out of or relating in any way to the Warrant Agreement will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York and (ii) we irrevocably submit to such jurisdiction, which jurisdiction will be exclusive. We have waived or will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. However, there is uncertainty as to whether a court would enforce these provisions and investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

Notwithstanding the foregoing, these provisions of the Warrant Agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in any of the Public Warrants shall be deemed to have notice of and to have consented to the forum provisions in the Warrant Agreement. If any action, the subject matter of which is within the scope of the forum provisions of the Warrant Agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of the Public Warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of New York or the United States District Court for the Southern District of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.

This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the Warrant Agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and our Board.

We are an emerging growth company and smaller reporting company, and the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies may make our shares of Class A Common Stock less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a

 

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nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of 7GC’s initial public offering (December 22, 2025), (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter; and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We are also a smaller reporting company as defined in the Exchange Act. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this prospectus and our other periodic reports and proxy statements. We will be able to take advantage of these scaled disclosures for so long as our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

We cannot predict if investors will find our Class A Common Stock less attractive because we may rely on these exemptions. If some investors find Class A Common Stock less attractive as a result, there may be a less active trading market for the Class A Common Stock and its market price may be more volatile.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected.

The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We will base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our financial statements include, but are not limited to, estimates of impairment on goodwill, recognition and measurement of convertible, warrants and SAFEs, including the valuation of the bifurcated embedded derivatives liabilities, and measurement and recognition of stock-based compensation. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A Common Stock.

Additionally, we will regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards, and changes in their interpretation, we might be required to change our accounting policies, alter our operational policies, and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or we may be required to restate our published financial statements. Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial position, and profit.

 

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We may issue additional shares of Common Stock or Preferred Stock, including under our equity incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks.

We may issue a substantial number of additional shares of Common Stock or Preferred Stock, including under our 2023 equity incentive plan, which had 3,576,076 unissued shares authorized as of December 31, 2023. Any such issuances of additional shares of Common Stock or Preferred Stock:

 

   

may significantly dilute the equity interests of our investors;

 

   

may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock;

 

   

could cause a change in control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and

 

   

may adversely affect prevailing market prices for our Common Stock and/or Public Warrants.

Sales of a substantial number of shares of Class A Common Stock in the public market pursuant to our registration statements could reduce the market price of Class A Common Stock.

Sales of a substantial number of shares of Class A Common Stock in the public market pursuant to the Registration Statement on Form S-1 (File No. 333-276307) (the “S-1 Registration Statement”) could occur at any time. These sales, or the perception in the market that the holders of a large number of shares of Class A Common Stock intend to sell shares, could reduce the market price of the Class A Common Stock. In particular, until such time as it is no longer effective, the S-1 Registration Statement permits the resale of shares held by the Sponsor, who has beneficial ownership of approximately 26.2% of our outstanding shares of Class A Common Stock, and Mr. Joseph Davy, who holds approximately 10.7% of outstanding Common Stock of the Company, including shares of both Class A Common Stock and Class B Common Stock and approximately 54.5% of our outstanding voting power, subject, in each case, to the applicable lock-up periods. The resale, or expected or potential resale, of a substantial number of shares of our Class A Common Stock in the public market could adversely affect the market price for the Class A Common Stock and make it more difficult for you to sell your holdings at times and prices that you determine are appropriate. Furthermore, we expect that, because there is a large number of shares registered pursuant to the S-1 Registration Statement, the selling securityholders will continue to offer the securities covered thereby pursuant to the S-1 Registration Statement or pursuant to Rule 144 for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures resulting from an offering pursuant to any of our registration statements may continue for an extended period of time. We may also file additional registration statements in connection with the possible sale of other securities.

If certain holders of the Class A Common Stock sell a significant portion of their securities, it may negatively impact the market price of the shares of the Class A Common Stock and such holders still may receive significant proceeds.

As of the date of this prospectus, the market price of our Class A Common Stock is below $10.00 per share, which was the price per unit sold in the IPO, the per-share value of the consideration issued to Legacy Banzai stockholders upon consummation of the Business Combination. However, certain of our stockholders hold shares of Class A Common Stock that were originally purchased by the Sponsor in a private placement prior to the IPO (“Founder Shares”) and may nonetheless be inclined to sell such Founder Shares, as they were originally purchased at an effective price significantly less than $10.00 per share. The currently outstanding 5,064,110 Founder Shares, representing 26.2% of our Class A Common Stock as of May 10, 2024, were purchased at an effective price of $0.0050 per share. Accordingly, holders of the Founder Shares could sell their securities at a per-share price that is less than $10.00 and still realize a significant profit from the sale of those securities that could not be realized by our other stockholders. On May 10, 2024, the closing price of our Class A Common

 

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Stock was $0.34. Based on this closing price, the aggregate sales price of the Founder Shares would be approximately $1.7 million.

It is not possible to predict the actual number of shares we will sell under the SEPA, or the actual gross proceeds resulting from those sales. Further, we may not have access to any or the full amount available under the SEPA.

On December 14, 2023, we entered into the SEPA with Yorkville, pursuant to which Yorkville has committed to purchase up to $100 million of Class A Common Stock, pursuant to Advance Notices delivered by the Company any time during the commitment period terminating on the 36-month anniversary of the SEPA; provided that any Advance Notice may only be made if (x) no amount remains outstanding on the Yorkville Promissory Notes, (y) there is an effective Resale Registration Statement filed with the SEC for the resale under the Securities Act of the shares of Class A Common Stock to be issued pursuant to such Advance Notice, and (z) other customary conditions precedent. Additionally, at any time during the commitment period, provided there is a balance remaining outstanding under a Yorkville Promissory Note, Yorkville may deliver an Investor Notice, causing an Advance Notice to be deemed delivered to Yorkville, subject to certain conditions.

Save for the issuance of shares of Class A Common Stock following receipt of an Investor Notice (as defined in the SEPA) or pursuant to conversion of a Yorkville Promissory Note, we generally have the right to control the timing and amount of any sales of shares of Class A Common Stock to Yorkville under the SEPA. Sales of Class A Common Stock, if any, to Yorkville under the SEPA will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Yorkville all, some or none of the shares of Class A Common Stock that may be available for us to sell to Yorkville pursuant to the SEPA.

Because the purchase price per share to be paid by Yorkville for the shares of Class A Common Stock that we may elect to sell to Yorkville under the SEPA, if any, will fluctuate based on the market prices of Class A Common Stock prior to each sale made pursuant to the SEPA, if any, it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the number of shares of Class A Common Stock that we will sell to Yorkville under the SEPA, the purchase price per share that Yorkville will pay for shares purchased from us under the SEPA, or the aggregate gross proceeds that we will receive from those purchases by Yorkville under the SEPA, if any.

Moreover, although the SEPA provides that we may issue up to an aggregate of $100 million of our Class A Common Stock to Yorkville, only 5,726,282 shares of Class A Common Stock (excluding 300,000 shares issued to Yorkville in lieu of a commitment fee at Closing) were registered for resale under the S-1 Registration Statement. If we issue to Yorkville all of the 5,726,282 shares of Class A Common Stock registered for resale under the S-1 Registration Statement, depending on the market price of our Class A Common Stock prior to each Advance made pursuant to the SEPA, the actual gross proceeds from the sale of all such shares may be substantially less than the $100 million available to us under the SEPA.

If it becomes necessary for us to issue to Yorkville under the SEPA more than the 5,726,282 shares of Class A Common Stock registered for resale under the S-1 Registration Statement in order to receive aggregate gross proceeds equal to $100 million under the SEPA, we must file with the SEC one or more additional registration statements to register under the Securities Act the resale by Yorkville of any such additional shares of Class A Common Stock we wish to issue from time to time under the SEPA, which the SEC must declare effective.

The SEPA does not obligate Yorkville to subscribe for or acquire any shares of Class A Common Stock under the SEPA if those shares of Class A Common Stock, when aggregated with all other shares of Class A Common Stock acquired by Yorkville under the SEPA, would result in Yorkville beneficially owning more than 9.99% of the then outstanding shares of Class A Common Stock.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering from the sale of the securities will be approximately $2.1 million, after deducting the Placement Agent fees and estimated offering expenses. This amount excludes the proceeds, if any, from the exercise of the Common Warrants issued in this offering. If all of the Common Warrants sold in this offering were to be exercised in cash, we would receive additional net proceeds of approximately $2.4 million. We cannot predict when or if these Common Warrants will be exercised. It is possible that the Common Warrants may expire and may never be exercised.

We intend to use the net proceeds from the sale of our securities in this offering to pay off a portion of the currently outstanding Yorkville Promissory Notes and for general corporate purposes, including working capital, operating expenses and capital expenditures. Our management will have broad discretion in the application of the net proceeds.

We plan to use $750,000 of the net proceeds from this offering to repay a portion of indebtedness owed to Yorkville pursuant to the Yorkville Promissory Notes. As of May 10, 2024, we had $2.8 million aggregate principal amount outstanding under the Yorkville Promissory Notes. Each of the Yorkville Promissory Notes accrues interest at a rate of 0.0% per annum, which rate increases to 18% per annum upon the occurrence of an Event of Default (as defined in the Yorkville Promissory Notes) for so long as such event remains uncured. The maturity date of each of the Yorkville Promissory Notes is expected to be extended to the date that is 120 days after the repayment of a portion of the Yorkville Promissory Notes described above is completed. The proceeds from the Yorkville Promissory Notes were used for working capital.

As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us from this offering. Accordingly, our management will have broad discretion in the timing and application of these proceeds.

 

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MARKET INFORMATION FOR CLASS A COMMON STOCK AND DIVIDEND POLICY

Market Information

Our Class A Common Stock is currently listed on The Nasdaq Global Market under the symbol “BNZI.” Our Public Warrants are currently listed on The Nasdaq Capital Market under the symbol “BNZIW.” As of May 10, 2024, there were 46 holders of record of our Class A Common Stock and one holder of record of our Public Warrants. These numbers do not include beneficial owners whose securities were held in street name.

Dividend Policy

As of the date of this prospectus, we have not declared or paid any cash dividends on our Common Stock. We expect to retain future earnings, if any, for future operations, expansion and debt repayment and have no plans to declare or pay cash dividends on our Common Stock for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur.

Securities Authorized for Issuance under Equity Compensation Plans

The following table summarizes our equity securities authorized for issuance as of December 31, 2023.

 

Plan Category

   Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
     Weighted average exercise
price of outstanding
options, warrants and
rights (b)
     Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a)) (c) (1)
 

Equity compensation plans approved by shareholders

     748,087      $ 5.87        4,148,248  

Equity compensation plans not approved by shareholders

     —         —         —   

Total:

     748,087      $ 5.87        4,148,248  
  

 

 

    

 

 

    

 

 

 

 

(1)

Includes 3,576,076 shares available pursuant to our 2023 Equity Incentive Plan and 572,172 shares available pursuant to our Employee Stock Purchase Plan.

 

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CAPITALIZATION

The following table sets forth our cash, as well as our capitalization, as of March 31, 2024, as follows:

 

   

On an actual basis; and

 

   

On an as adjusted basis, giving effect to the assumed sale by us of 5,227,780 shares of Class A Common Stock and 8,661,110 Pre-Funded Warrants in this offering at the public offering price of $0.18 per share and accompanying Common Warrant (assuming the exercise of all Pre-Funded Warrants), after deducting the Placement Agent fees and other estimated offering expenses payable by us, and the anticipated use of the net proceeds from this offering to pay off a portion of the currently outstanding Yorkville Promissory Notes as described under “Use of Proceeds”.

You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements for the period ended March 31, 2024, and the related notes thereto, that appear elsewhere in this prospectus.

 

     Actual      As Adjusted  

Cash

   $ 1,026,932      $ 2,367,807  
  

 

 

    

 

 

 

Total liabilities

   $ 35,281,386      $ 34,531,386  
  

 

 

    

 

 

 

Stockholders’ deficit:

     

Preferred stock, $0.0001 par value, 75,000,000 shares authorized, 0 shares issued and outstanding

   $ —       $ —   

Common stock, $0.0001 par value, 275,000,000 shares (250,000,000 Class A Common Stock and 25,000,000 Class B Common Stock) authorized; 20,221,589 shares (17,910,455 Class A Common Stock and 2,311,134 Class B Common Stock) issued and outstanding, actual, and 34,110,479 shares (31,799,345 Class A Common Stock and 2,311,134 Class B Common Stock) issued and outstanding, as adjusted

   $ 2,022      $ 3,411  

Additional paid-in capital

   $ 20,421,999      $ 22,511,485  

Accumulated deficit

   $ (51,266,596    $ (51,266,596
  

 

 

    

 

 

 

Total stockholders’ deficit

   $ (30,842,575    $ (28,751,700
  

 

 

    

 

 

 

The number of shares of Class A Common Stock to be outstanding immediately after giving effect to this offering as shown above excludes:

 

   

1,412,005 shares issued by us in the aggregate between March 31, 2024 and May 10, 2024;

 

   

11,500,000 shares issuable upon exercise of outstanding Public Warrants with an exercise price of $11.50;

 

   

828,533 shares issuable upon exercise of the GEM Warrant with an exercise price of $6.49 per share, which will be adjusted to $0.19 per share, an amount equal to 105% of the per share consideration received in this offering pursuant to anti-dilution price protections contained within those warrants (See “Description of Securities-Warrants-GEM Warrant”);

 

   

2,142,857 shares issuable for repayment of the GEM Promissory Note based on a VWAP of $0.3267;

 

   

2,145,873 shares issuable upon exercise of outstanding stock options with a weighted average exercise price of $3.95 granted through May 15, 2024;

 

   

892,543 shares issuable upon vesting of outstanding restricted stock units granted through May 15, 2024;

 

   

665,388 shares issuable upon conversion of Senior Convertible Notes;

 

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340,136 shares issued to Yorkville on May 15, 2024 in connection with Yorkville’s delivery of an Investor Notice pursuant to the Yorkville Promissory Notes;

 

   

up to 6,632,653 shares issuable upon conversion of the Yorkville Promissory Notes, after giving effect to the repayment of an aggregate amount of $750,000 outstanding thereunder with proceeds from this offering;

 

   

2,311,134 shares issuable upon conversion of outstanding shares of Class B Common Stock; and

 

   

13,888,890 shares issuable upon exercise of the Common Warrants and 833,333 shares issuable upon exercise of the Placement Agent Warrants to be issued in this offering.

 

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DILUTION

If you invest in our Class A Common Stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the public offering price per share of our Class A Common Stock and the as adjusted net tangible book value per share of our Class A Common Stock after this offering.

Our historical net tangible (negative) book value as of March 31, 2024, was $(33,014,101), or $(1.63) per share of Class A Common Stock based on 17,910,455 shares of Class A Common Stock and 2,311,134 shares of Class B Common Stock outstanding as of March 31, 2024. Historical net tangible book value per share is calculated by subtracting our total liabilities from our total tangible assets, which is total assets less intangible assets, and dividing this amount by the number of shares of Common Stock outstanding as of such date.

After giving effect to the assumed sale by us of 5,227,780 shares of Class A Common Stock and 8,661,110 Pre-Funded Warrants at the public offering price of $0.18 per share (without attributing any value to the Common Warrants, and assuming the exercise of all of the Pre-Funded Warrants), and after deducting the Placement Agent fees and estimated offering expenses payable by us, our as adjusted net tangible negative book value as of March 31, 2024 would have been approximately $(30.9) million or $(0.91) per share of Class A Common Stock. This represents an immediate increase in the net tangible negative book value of $0.73 per share to our existing shareholders and an immediate and substantial dilution in net tangible book value of $(1.09) per share to new investors. The following table illustrates this hypothetical per share dilution:

 

Public offering price per share

   $ 0.18  

Historical net tangible negative book value per share as of March 31, 2024

   $ (1.63

Increase in net tangible negative book value, as adjusted, per share attributable to this offering

   $ 0.73  

As adjusted net tangible negative book value per share as of March 31, 2024, after giving effect to this offering

   $ (0.91

Dilution per share to new investors purchasing shares in this offering

   $ (1.09

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated audited financial statements and related notes, and our interim condensed consolidated financial statements and related notes, that appear elsewhere in this prospectus, as well as the section entitled “Business.” In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere particularly in the section titled “Risk Factors” and elsewhere in this prospectus.

Certain figures, such as interest rates and other percentages, included in this section have been rounded for ease of presentation. Percentage figures included in this section have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.

Overview

Banzai is a MarTech company that produces data-driven marketing and sales solutions for businesses of all sizes. Our mission is to help our customers accomplish their mission-by enabling better marketing, sales, and customer engagement outcomes. Banzai endeavors to acquire companies strategically positioned to enhance our product and service offerings, increasing the value provided to current and prospective customers.

Banzai was founded in 2015. The first product Banzai launched was Reach, a SaaS and managed services offering designed to increase registration and attendance of marketing events, followed by the acquisition of Demio, a SaaS solution for webinars designed for marketing, sales, and customer success teams, in 2021 and the launch of Boost, a SaaS solution for social sharing designed to increase attendance for Demio-hosted events by enabling easy social sharing by event registrants, in 2023. Our customer base included over 2,700 customers as of December 31, 2023 and comes from a variety of industries, including (among others) healthcare, financial services, e-commerce, technology and media, operating in over 90 countries. Our customers range in size from solo entrepreneurs and small businesses to Fortune 500 companies. No single customer represents more than 10% of our revenue. Since 2021, we have focused on increasing mid-market and enterprise customers for Demio. Progress towards this is reflected in our increase in multi-host Demio customers from 14 on January 1, 2021 to 116 on December 31, 2023, an approximately 10-fold increase.

We sell our products using a recurring subscription license model typical in SaaS businesses. Pricing tiers for our main product, Demio, are based on the number of host-capable users, desired feature sets, and maximum audience size. Boost pricing tiers are based on the Demio plan to which the customer subscribes. Reach pricing is based on the number of event campaigns a customer has access to run simultaneously or the maximum number of registrations a customer is allowed to generate per subscription period. Banzai’s customer contracts vary in term length from single months to multiple years.

Banzai generated revenue of $4.6 million, $5.3 million, $1.1 million and $1.2 million in the years ended December 31, 2023 and 2022 and the three months ended March 31, 2024 and 2023, respectively. Banzai has incurred significant net losses since inception, including net losses of $14.4 million, $15.5 million, $4.5 million and $3.8 million in the years ended December 31, 2023 and 2022 and the three months ended March 31, 2024 and 2023, respectively. Banzai had an accumulated deficit of $46.8 million, $32.4 million and $51.3 million as of December 31, 2023 and 2022 and March 31, 2024, respectively.

 

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Summary of our Merger

On December 14, 2023, we consummated the Business Combination with Legacy Banzai. Pursuant to the terms of the Merger Agreement, the Business Combination was effected through (a) the merger of First Merger Sub with and into Legacy Banzai, with Legacy Banzai surviving as a wholly-owned subsidiary of 7GC and (b) the subsequent merger of Legacy Banzai with and into Second Merger Sub, with the Second Merger Sub being the surviving entity of the Second Merger, which ultimately resulted in Legacy Banzai becoming a wholly-owned direct subsidiary of 7GC. Upon closing the Business Combination, we changed our name from 7GC & Co. Holdings Inc. to Banzai International, Inc.

Operating Metrics

In the management of our businesses, we identify, measure, and evaluate a variety of operating metrics, as described below. These key performance measures and operating metrics are not prepared in accordance with GAAP and may not be comparable to or calculated in the same way as other similarly titled measures and metrics used by other companies. Measurements are specific to the group being measured, i.e. total customers, new customers, or other cohorts. We currently use these operating metrics with our Demio product. We do not track and use these operating metrics with prior products.

The following table presents the percentage of Banzai’s revenue generated from Demio for the years ended December 31, 2023 and 2022 and the three months ended March 31, 2024 and 2023 as compared to their other SaaS products.

 

Revenue %

   Three Months
Ended March 31,

2024
    Three Months
Ended March 31,

2023
    Year Ended
December 31,
2023
    Year Ended
December 31,
2022
 

Reach

     1.0     7.0     4.5     15.0

Demio

     99.0     93.0     94.9     84.6

Other

     0.0     0.0     0.6     0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100.0     100.0     100.0     100.0

Net Revenue Retention (“NRR”)

NRR is a metric Banzai uses to measure the revenue retention of its existing customer base. NRR calculates the change in revenue from existing customers by cohort over a period of time, after taking into account revenue lost due to customer churn and downgrades, and revenue gained due to upgrades and reactivations.

The formula for calculating NRR is: NRR = (Revenue at the beginning of a period—Revenue lost from churn, and downgrades + Revenue gained from expansion and reactivation) / Revenue at the beginning of the period.

The following table presents average monthly NRR for Demio for the years ended December 31, 2023 and 2022.

 

Product: Demio

   Year Ended
December 31,
2023
    Year Ended
December 31,
2022
 

Average Monthly NRR

     95.5     93.7

Average Customer Value (“ACV”)

ACV is a metric Banzai uses to calculate the total revenue that it can expect to generate from a customer in a year. ACV is commonly used in the SaaS industry to measure the value of a customer to a subscription-based company over a 12-month period. Banzai uses ACV to segment its customers and to determine whether the value of new customers is growing or shrinking relative to the existing customer base. Banzai uses this information to make strategic decisions about pricing, marketing, and customer retention.

 

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The formula for calculating ACV is: ACV = Total Annual Recurring Revenue (“ARR”) / Total Number Customers, where ARR is defined as annual run-rate revenue of subscription agreements from all customers measured at a point in time.

The following table presents new customer ACV and total average ACV for Demio for the years ended December 31, 2023 and 2022.

 

Product: Demio

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
 

New Customer ACV

   $ 1,355      $ 1,453  

Total Average ACV

   $ 1,406      $ 1,213  

Customer Acquisition Cost (“CAC”)

CAC is a financial metric Banzai uses to evaluate the average cost of acquiring a new customer. It includes marketing, sales, and other related expenses incurred while attracting and converting prospects into paying customers. CAC is a critical metric for Banzai to understand the efficiency and effectiveness of its marketing and sales efforts, as well as to ensure sustainable growth.

The formula for calculating CAC is: CAC = Total Sales & Marketing Cost / Number of Customers Acquired.

The following table presents CAC for Demio for the years ended December 31, 2023 and 2022.

 

Product: Demio

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
 

Customer Acquisition Cost (CAC)

   $ 1,030      $ 785  

Customer Churn %

Customer Churn % is the rate of customers who deactivate in a given period relative to the number of active customers at the beginning of such period or end of the prior period. Understanding drivers of churn allows Banzai to take measures to reduce the number of customers who deactivate and increase the overall rate of customer retention. There are two types of Churn % measured: Revenue churn and Customer (or logo) churn.

The formula for calculating Churn % is: Churn % = [# or $ value of] Deactivations / [# or $ value of] Active Customers (Beginning of period).

The following table presents revenue Churn and new customer (or logo) Churn for Demio for the years ended December 31, 2023 and 2022.

 

Product: Demio

   Year Ended
December 31,
2023
    Year Ended
December 31,
2022
 

Average Monthly Churn—Revenue

     6.9     7.1

Average Monthly Churn—Customer (Logo)

     7.9     7.6

Customer Lifetime Value (“LTV”)

LTV is a financial metric Banzai uses to estimate the total revenue it can expect to generate from a customer throughout their entire relationship. LTV helps Banzai understand the long-term value of each customer, enabling it to make informed decisions about marketing, sales, customer support, and product development strategies. It also helps Banzai allocate resources more efficiently by identifying high-value customer segments to focus on growth and retention.

 

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The formula for calculating LTV is comprised of two metrics: Monthly Recurring Revenue (“MRR”) and Customer Life represented in # of months. Calculations for these metrics on a per-customer basis, as follows:

MRR = ACV / 12

Customer Life (# of months) = 1 / Churn %

LTV = MRR * Customer Life (# of months)

MRR is calculated by aggregating, for all customers from customer base or the group being measured during that month, monthly revenue from committed contractual amounts. For customers on annual contracts, this represents their ACV divided by 12.

The following table presents MRR, Customer Life, and LTV for Demio for the years ended December 31, 2023 and 2022.

 

Product: Demio

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
 

MRR (New Customers)

   $ 117      $ 121  

Customer Life (months)

     14.5        14.1  

LTV (New Customers)

   $ 1,635      $ 1,706  

LTV / CAC Ratio

LTV / CAC ratio is a culminating metric measuring the efficiency of Sales and Marketing activities in terms of the dollar value of new business generated versus the amount invested in order to generate that new business. This provides a measurement of ROI for Sales and Marketing activities. A segmented view of LTV / CAC ratio gives additional insight into the profitability of various business development activities.

The formula for calculating LTV / CAC ratio is: LTV / CAC for the segment or activity being measured.

The following table presents the LTV / CAC ratio for Demio for the years ended December 31, 2023 and 2022.

 

Product: Demio

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
 

LTV / CAC Ratio

     1.6        2.2  

Analysis of the Impact of Key Business Drivers on Financial Performance

Banzai strives to maximize revenue growth within a reasonable cost structure through optimizing and continuous monitoring of the key business metrics described above relative to SaaS industry benchmarks, Banzai’s direct competition, and historical company performance. This is accomplished through a combination of increased revenue per customer (higher ACVs and NRR) on an increasing customer base, generated through efficient customer acquisition (LTV / CAC ratio) and improved customer retention (lower churn, higher customer life). Other business activities contribute to improved performance and metrics, including but not limited to the following:

 

   

Customer Success and Onboarding, leading to maximum customer satisfaction and retention.

 

   

Product Development and Support, maximizing customer value, supporting usage and expansion revenue.

 

   

Company Initiatives, designed to improve trial experience and conversion rates, on-demand adoption, and emphasis on data to position our products as a system of automation and a system of record for our customers, supporting growth and retention.

 

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Table of Contents

Identification of Operational Risk Factors

There are a number of key internal and external operational risks to the successful execution of Banzai’s strategy.

Internal risks include, among others:

 

   

Management and leadership issues: ineffective leadership, poor decision-making, or lack of direction.

 

   

Operational inefficiencies: inadequate processes and poor resource allocation may lead to decreased productivity or insufficient ROI.

 

   

Financial mismanagement: inadequate financial planning, improper accounting practices, or excessive debt can lead to financial instability.

 

   

Employee-related challenges: high turnover, lack of skilled staff, or internal conflicts can impact morale and productivity.

 

   

Technological obsolescence: failing to develop (or adapt) to new technologies in anticipation or response to changes in market trends can lead to competitive disadvantages.

External risks include, among others:

 

   

Economic factors: including economic downturns, inflation, or currency fluctuations impacting business spending and overall market conditions.

 

   

Competition: from established industry players to new entrants, eroding market share and profitability.

 

   

Legal and regulatory: changes in laws or regulations that impact operations or increase compliance costs.

 

   

Technological disruptions: from advancements in technology leading to obsolescence of existing products.

 

   

Unforeseen events: including natural disasters, geo-political instability, and pandemics, potentially impacting market demand, operational or supply chain disruption.

Analysis of the Impact of Operational Risks on Financial Performance

The risk factors described above could have significant impacts on Banzai’s financial performance. These or other factors, including those risk factors summarized in the section titled “Risk Factors” could impact Banzai’s ability to generate and grow revenue, contain costs, or inhibit profitability, cash flow, and overall financial performance:

 

   

Revenue and Sales: Internal risks from operating inefficiency or external factors, including economic downturns or increased competition, could lead to lower sales, impaired unit economics, and reduced revenue.

 

   

Costs and Expenses: Internal operating mismanagement or external factors, including supplier issues, may cause increased cost relative to revenue generation, resulting in insufficient return on investment or profit margins.

By continuing to conduct comprehensive risk monitoring and analysis on financial performance, Banzai can optimize its ability to make informed decisions and improve its ability to navigate internal and external challenges. Such activities include: identification and categorization of risks, quantification and analysis of potential severity, and development of risk mitigation strategies. It is also important for Banzai to ensure financial reports and disclosures accurately reflect the potential impact of risks on financial performance, essential for transparent communication with investors and stakeholders.

 

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The Business Combination and Public Company Costs

The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, 7GC was treated as the acquired company for financial statement reporting purposes. Accordingly, for accounting purposes, the financial statements of Banzai represent a continuation of the financial statements of Legacy Banzai with the Business Combination treated as the equivalent of Legacy Banzai issuing stock for the net assets of 7GC, accompanied by a recapitalization. The net assets of 7GC were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Legacy Banzai in this and future reports of Banzai.

As a consequence of the Business Combination, we became the successor to an SEC-registered and Nasdaq-listed company, which required Banzai to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We incurred and expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees. We are qualified as an “emerging growth company.” As a result, we have been provided certain disclosure and regulatory relief. Our future results of operations and financial position may not be comparable to Legacy Banzai’s historical results of operations and financial position as a result of the Business Combination.

Results of Operations

 

($ in Thousands)

  Three
Months
Ended
March 31,
2024
    Three
Months
Ended
March 31,
2023
    Period-
over-
Period
$
    Period-
over-
Period
%
    Year Ended
December 31,
2023
    Year Ended
December 31,
2022
    Year-over-
Year $
    Year-over-
Year%
 

Operating income:

               

Revenue

  $ 1,079     $ 1,177     $ (98     -8.3   $ 4,561     $ 5,333     $ (772     -14.5

Cost of revenue

    381       412       (31     -7.5     1,445       1,957       (512     -26.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  $ 698     $ 765     $ (67     -8.8   $ 3,116     $ 3,376     $ (260     -7.7

Operating expenses:

               

General and administrative expenses

    4,309       3,170       1,139       35.9   $ 12,905     $ 9,275     $ 3,630       39.1

Depreciation expense

    2       2       —        0.0     7       10       (3     -30.0

Impairment loss on operating lease

    —        —        —        —        —        303       (303     -100.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  $ 4,311     $ 3,172     $ 1,139       35.9   $ 12,912     $ 9,588     $ 3,324       34.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

  $ (3,613   $ (2,407   $ (1,206     50.1   $ (9,796   $ (6,212   $ (3,584     57.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expenses (income):

               

SEPA commitment fee and deferred fee expense

  $ —      $ —      $ —        nm     $ 3,826     $ —      $ 3,826       nm  

GEM warrant expense

    —        —        —        nm       2,448       —        2,448       nm  

GEM commitment fee expense

    200       —        200       nm       2,000       —        2,000       nm  

Other income, net

    (4     (63     59       -93.7     (63     (151     88       -58.3

Interest income

    —        —        —        nm       (1     —        (1     nm  

Interest expense

    451       538       (87     -16.2     2,631       1,651       980       59.4

Interest expense - related party

    578       383       195       50.9     2,923       729       2,194       301.0

Loss (gain) on extinguishment of debt

    (528     —        (528     nm       —        57       (57     -100.0

Loss on debt issuance

    171       —        171       nm       —        —        —        —   

Change in fair value of warrant liability

    (408     —        (408     nm       (1,807     —        (1,807     nm  

 

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Table of Contents

($ in Thousands)

  Three
Months
Ended
March 31,
2024
    Three
Months
Ended
March 31,
2023
    Period-
over-
Period
$
    Period-
over-
Period
%
    Year Ended
December 31,
2023
    Year Ended
December 31,
2022
    Year-over-
Year $
    Year-over-
Year%
 

Change in fair value of warrant liability - related party

    (115     —        (115     nm       115       —        115       nm  

Loss on modification of simple agreement for future equity

    —        —        —        nm       —        121       (121     -100.0

Loss on modification of simple agreement for future equity - related party

    —        —        —        nm       —        1,602       (1,602     -100.0

Change in fair value of simple agreement for future equity

    —        23       (23     -100.0     (208     308       (516     -167.5

Change in fair value of simple agreement for future equity - related party

    —        303       (303     -100.0     (2,752     4,078       (6,830     -167.5

Change in fair value of bifurcated embedded derivative liabilities

    —        32       (32     -100.0     (1,405     254       (1,659     -653.1

Change in fair value of bifurcated embedded derivative liabilities - related party

    —        137       (137     -100.0     (3,063     607       (3,670     -604.6

Change in fair value of convertible promissory notes

    544       —        544       nm       (34     —        (34     nm  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other (income) expenses

  $ 889     $ 1,353     $ (464     -34.3   $ 4,610     $ 9,256     $ (4,646     -50.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

  $ (4,502   $ (3,760   $ (742     19.7   $ (14,406   $ (15,468   $ 1,062       -6.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax (benefit) expense

    (1     3       (4     -133.3     —        —        —        nm  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (4,501   $ (3,763   $ (738     19.6   $ (14,406   $ (15,468   $ 1,062       -6.9

The percentage changes included in the tables herein that are not considered meaningful are presented as “nm”.

Components of Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenue Analysis

 

($ in Thousands)

   Three
Months
Ended
March  31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period
%
 

Revenue

   $ 1,079      $ 1,177      $ (98      -8.3

For the three months ended March 31, 2024, Banzai reported total revenue of approximately $1,079 thousand, representing a decrease of approximately $98 thousand, or approximately 8.3%, compared to the three months for the same period ended March 31, 2023. This decrease is primarily attributable to lower Reach revenue which declined by approximately $74 thousand due to a shift in Banzai’s focus to its Demio product and decision, which decision was reversed in 2024, to begin phasing out the Reach product. In 2024 Banzai is revitalizing its focus on the Reach product through re-engineering and expanded sales efforts. Demio revenue was lower by approximately $25 thousand for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 due to churn and lower new sales period-over-period.

 

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Table of Contents

Cost of Revenue Analysis

 

($ in Thousands)

   Three
Months
Ended
March  31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period
%
 

Cost of revenue

   $ 381      $ 412      $ (31      -7.5

For the three months ended March 31, 2024 and 2023, Banzai’s cost of revenue totaled approximately $381 thousand and approximately $412 thousand, respectively. This represents a decrease of approximately $31 thousand, or approximately 7.5%, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, is due primarily to lower customer base and an approximately 4% lower average cost per customer, driven by lower infrastructure costs of approximately $45 thousand, contracted services of approximately $34 thousand, subscription payroll of approximately $14 thousand, and merchant fee costs of approximately $3 thousand. The lower contracted services and data licenses cost described above were offset by the increase of the streaming services costs of approximately $65 thousand.

Gross Profit Analysis

 

($ in Thousands)

   Three
Months
Ended
March 31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period

%
 

Gross profit

   $ 698      $ 765      $ (67      -8.8

For the three months ended March 31, 2024 and 2023, Banzai’s gross profit was approximately $698 thousand and approximately $765 thousand, respectively. This represents a decrease of approximately $67 thousand, or approximately 8.8% due to the decreases in revenue of approximately $98 thousand and decreases in cost of revenue of approximately $31 thousand described above.

Operating Expense Analysis

 

($ in Thousands)

   Three
Months
Ended
March  31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period
%
 

Total operating expenses

   $ 4,311      $ 3,172      $ 1,139        35.9

Total operating expenses for the three months ended March 31, 2024 and 2023, were approximately $4.3 million and approximately $3.2 million, respectively, an increase of approximately $1.1 million, or 35.9%. This increase was due primarily to an overall increase in salaries and related expenses by approximately $0.1 million, marketing expenses by approximately $0.1 million, costs associated with audit, technical accounting, and legal and other professional services of approximately $0.7 million.

Other Expense Analysis

 

($ in Thousands)

   Three
Months
Ended
March  31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period
%
 

Total other expenses (income)

   $ 889      $ 1,353      $ (464      -34.3

 

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Table of Contents

For the three months ended March 31, 2024, Banzai reported total other expenses of approximately $0.9 million. This represents a decrease of approximately $0.5 million from the three months ended March 31, 2023, when the Company reported total other expenses of approximately $1.4 million. The change in other expenses (income), net was primarily driven by the following:

 

   

GEM settlement commitment fee expense of approximately $0.2 million.

 

   

Gain on extinguishment of debt of approximately $0.5 million.

 

   

There were no changes in fair value of the simple agreement for future equity (“SAFEs”) during the three months ended March 31, 2024 relative to a loss of approximately $0.3 million, approximately $0.3 million of which related to related party SAFEs.

 

   

Changes in fair value of warrant liability was a gain of approximately $0.4 million during the three months ended March 31, 2024, with a gain of approximately $0.1 million related to related party warrant liabilities. These warrants, both third party and related party, were issued and assumed in December 2023, and as such, there was no equivalent gain or loss on warrant liabilities during the three months ended March 31, 2023.

 

   

Interest expense increased by approximately $0.1 million period-over-period to approximately $1.0 million for the three months ended March 31, 2024 due to the company raising additional interest bearing debt.

 

   

There were no changes in fair value of bifurcated embedded derivative liabilities during the three months ended March 31, 2024 relative to a loss of approximately $0.2 million during the three months ended March 31, 2023.

Provision for Income Taxes

 

($ in Thousands)

   Three
Months
Ended
March  31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period
%
 

Income tax (benefit) expense

   $ (1    $ 3      $ (4      -133.3

For the three months ended March 31, 2024 and 2023, Banzai’s reported provision for income tax benefit was $1 thousand and expense was $3.0 thousand, respectively.

Due to Banzai’s history of losses since inception, there is not enough evidence at this time to support that Banzai will generate future income of a sufficient amount and nature to utilize the benefits of its net deferred tax assets. Accordingly, the deferred tax assets have been reduced by a full valuation allowance, since Banzai cannot currently support that realization of its deferred tax assets is more likely than not.

At March 31, 2024, Banzai had no unrecognized tax benefits that would reduce Banzai’s effective tax rate if recognized.

Net Loss Analysis

 

($ in Thousands)

   Three
Months
Ended
March  31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period%
 

Net loss

   $ (4,501    $ (3,763    $ (738      19.6

For the three months ended March 31, 2024 and 2023, Banzai reported net losses of approximately $4.5 million and approximately $3.8 million, respectively. The greater net loss is primarily due to a reduction in total

 

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Table of Contents

other expenses of approximately $0.5 million during the three months ended March 31, 2024 compared to the three months ended March 31, 2023, offset by an increase in operating expenses of approximately $1.1 million and a decrease in gross profit of approximately $0.1 million.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenue Analysis

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-over-
Year $
     Year-over-
Year%
 

Revenue

   $ 4,561      $ 5,333      $ (772      -14.5

For the year ended December 31, 2023, Banzai reported total revenue of $4.6 million, representing a decrease of $0.8 million, or approximately 14.5%, over 2022. This decrease is primarily attributable to lower Reach revenue which declined by approximately $0.55 million due to a shift in Banzai’s focus to its Demio product and decision, which decision was reversed in 2024, to begin phasing out the Reach product. In 2024 Banzai is revitalizing its focus on the Reach product through re-engineering and expanded sales efforts. Demio revenue was lower by $0.19 million in 2023 as compared to 2022 due to churn and lower new sales year-over-year.

Cost of Revenue Analysis

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-over-
Year $
     Year-over-
Year%
 

Cost of revenue

   $ 1,445      $ 1,957      $ (512      -26.2

For the years ended December 31, 2023 and 2022, Banzai’s cost of revenue totaled $1.4 million and $2.0 million, respectively. This represents a decrease of $0.5 million, or approximately 26.2%, in 2023 compared to 2022, due primarily to lower customer base and an approximately 5% lower cost per average customer, driven by lower contracted services and data licenses costs of approximately $0.3 million and $0.2 million, respectively.

Gross Profit Analysis

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-over-
Year $
     Year-over-
Year%
 

Gross profit

   $ 3,116      $ 3,376      $ (260      -7.7

For the years ended December 31, 2023 and 2022, Banzai’s gross profit was $3.1 million and $3.4 million, respectively. This represents a year-over-year decrease of $0.3 million, or approximately 7.7% due to the decreases in revenue of $0.8 million and decreases in cost of revenue of $0.5 million described above.

Operating Expense Analysis

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-
over-
Year $
     Year-
over-
Year%
 

Total operating expenses

   $ 12,912      $ 9,588      $ 3,324        34.7

Total operating expenses for the years ended December 31, 2023 and 2022, were $12.9 million and $9.6 million, respectively, signifying a year-over-year increase of approximately $3.3 million, or 34.7%. This increase was due primarily to fees associated with the Business Combination and the initial public offering of our predecessor, 7GC, including the cost associated with audit, technical accounting, legal and other professional services of approximately $3.7 million, primarily offset by the loss on impairment of lease of $0.3 million.

 

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Table of Contents

Other Expense Analysis

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-
over-
Year $
     Year-
over-
Year%
 

Total other (income) expenses

   $ 4,610      $ 9,256      $ (4,646      -50.2

For the year ended December 31, 2023, Banzai reported total other expenses of $4.6 million. This represents a decrease of $4.6 million from the year ended December 31, 2022, when the Company reported total other expenses of $9.3 million. The change in other expenses (income), net was primarily driven by the following:

 

   

The cost associated with the Yorkville SEPA, of $3.8 million.

 

   

GEM warrants issued as a financing expense of approximately $2.4 million.

 

   

GEM commitment fee expense of $2.0 million.

 

   

Changes in fair value of the simple agreement for future equity (“SAFEs”) was a gain of $3.0 million in 2023, of which $2.8 million pertained to related party SAFEs. This represents a net change of $7.3 million from the 2022 loss of $4.4 million, $4.1 million of which related to related party SAFEs.

 

   

Loss on modification of SAFEs was $1.7 million in 2022, $1.6 million of which was related to related party SAFEs, with no equivalent modification or resulting gain or loss in 2023.

 

   

Changes in fair value of warrant liability was a gain of $1.7 million in 2023, with a loss of $0.1 million related to related party warrant liabilities. These warrants, both third party and related party, were issued and assumed in 2023, and as such, there was no equivalent gain or loss on warrant liabilities in 2022.

 

   

Interest expense increased by $3.2 million ($2.2 million due to related party) year-over-year to $5.6 million for the year ended December 31, 2023 ($2.9 million for related party) due to the company raising additional interest bearing debt during 2023.

 

   

Changes in fair value of bifurcated embedded derivative liabilities was a gain of $4.5 million ($3.1 million for related party) as of December 31, 2023, relative to a loss of $0.9 million in 2022.

Provision for Income Taxes

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-
over-
Year
$
     Year-
over-
Year%
 

Provision for income taxes

   $ —       $ —       $ —         nm  

For the years ended December 31, 2023 and 2022, Banzai’s reported provision for income tax expense was $0.0 million and $0.0 million, respectively. There was no year-over-year increase or decrease to income tax expense.

As of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $26,705,200 and $13,043,900, respectively. As of December 31, 2022, the Company had federal and state net operating loss carryforwards of approximately $15,325,300 and $9,175,400, respectively. Federal losses of $124,500 begin to expire in 2036 and $26,580,700 of the federal losses carryforward indefinitely. State losses of $10,666,100 begin to expire in 2031 and $2,377,800 of the state losses carryforward indefinitely. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions.

Banzai has determined, based upon available evidence, that it is more likely than not that all of the net deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance against its net

 

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deferred tax asset. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carryback potential, and tax planning strategies in making these assessments. Banzai has determined that it had no material uncertain tax benefits for the years ended December 31, 2023 and 2022.

Banzai recognizes interest accrued for unrecognized tax benefits and penalties in interest expense and penalties in operating expense. No amounts were accrued for the payment of interest and penalties at December 31, 2023, and 2022. Banzai files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, Banzai is subject to examination by federal and state jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. Our 2016 and subsequent tax years remain open to examination by the IRS. Banzai had no open tax audits with any taxing authority as of December 31, 2023.

Net Loss Analysis

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-
over-
Year $
     Year-
over-
Year%
 

Net loss

   $ (14,406    $ (15,468    $ 1,062        -6.9

For the years ended December 31, 2023 and 2022, Banzai reported net losses of $14.4 million and $15.5 million, respectively. This improvement is primarily due to a reduction in total other expenses of $4.6 million in 2023 compared to 2022, offset by an increase in operating expenses of $3.3 million and a decrease in gross profit of $0.3 million.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. On a recurring basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in an estimate, if any, will be reflected in the consolidated financial statements prospectively from the date of the change in the estimate.

We believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Impairment of goodwill

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is reviewed for impairment at least annually, in December, or more frequently if a triggering event occurs between impairment testing dates. As of December 31, 2023, the Company had one operating segment, which was deemed to be its reporting unit, for the purpose of evaluating goodwill impairment.

The Company’s impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. Qualitative factors may include, macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity

 

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and Company specific events. If, based on the qualitative test, the Company determines that it is “more likely than not” that the fair value of a reporting unit is less than its carrying value, then we evaluate goodwill for impairment by comparing the fair value of our reporting unit to its respective carrying value, including its goodwill. If it is determined that it is not likely that the fair value of the reporting unit is less than its carrying value, then no further testing is required.

The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. Fair values may be determined using a combination of both income and market-based approaches.

Recognition and measurement of convertible and Simple Agreement for Future Equity (SAFE) notes, including the associated embedded derivatives

The Company accounts for SAFEs at fair value in accordance with Accounting Standards Codification (“ASC”) 480 Distinguishing Liabilities from Equity. The SAFEs are subject to revaluation at the end of each reporting period, with changes in fair value recognized in the accompanying Consolidated Statement of Operations.

The Company evaluates all its financial instruments to determine if such instruments contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period. Bifurcated embedded derivatives are classified with the related host contract in the Company’s balance sheet.

Determination of the fair value of the warrant liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Public Warrants

The Public Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations.

The Public Warrants were initially measured at fair value using a Monte Carlo simulation model and have subsequently been measured based on the listed market price of such warrants. The determination of the fair value of the warrant liabilities may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Warrant liabilities are classified as current liabilities on the Company’s consolidated balance sheets.

GEM Warrants

The GEM Warrants were not considered indexed to the issuer’s stock as the holder’s ability to receive one percent of the total consideration received by the Company’s stockholders in connection with a Change of Control in lieu of the GEM Warrant, where the surviving corporation is not publicly traded, adjusts the

 

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settlement value based on items outside the Company’s control in violation of the fixed-for-fixed option pricing model. As such, the Company recorded the Warrants as liabilities initially measured at fair value with subsequent changes in fair value recognized in earnings each reporting period.

The measurement of fair value was determined utilizing a Monte Carlo simulation considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, probability of dilutive term of three years, and expected time to conversion). The Company determined the GEM Warrants were share issuance costs associated with an aborted offering. Aborted offering costs may not be deferred and charged against proceeds of a subsequent offering. As such, the Company recorded an expense for the corresponding fair value.

Recognition and measurement of stock compensation

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards in accordance with ASC 718, Stock Compensation. The Company accounts for forfeitures as they occur. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Non-GAAP Financial Measures

Adjusted EBITDA

In addition to our results determined in accordance with GAAP, we believe that Adjusted EBITDA, a non-GAAP measure as defined below, is useful in evaluating our operational performance distinct and apart from certain irregular, non-cash, and non-operational expenses. We use this information for ongoing evaluation of operations and for internal planning purposes. We believe that non-GAAP financial information, when taken collectively with results under GAAP, may be helpful to investors in assessing our operating performance and comparing our performance with competitors and other comparable companies.

Non-GAAP measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We endeavor to compensate for the limitation of Adjusted EBITDA, by also providing the most directly comparable GAAP measure, which is net loss, and a description of the reconciling items and adjustments to derive the non-GAAP measure. Some of these limitations are:

 

   

Adjusted EBITDA does not consider the potentially dilutive impact of stock-based compensation;

 

   

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or contractual commitments;

 

   

Adjusted EBITDA does not reflect impairment and restructuring costs;

 

   

Adjusted EBITDA does not reflect interest expense or other income;

 

   

Adjusted EBITDA does not reflect income taxes;

 

   

Adjusted EBITDA does not reflect audit, legal, incremental accounting and other expenses tied to M&A or the Business Combination; and

 

   

Other companies, including companies in our own industry, may calculate Adjusted EBITDA differently from the way we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should only be considered alongside results prepared in accordance with GAAP, including various cash-flow metrics, net income (loss) and our other GAAP results and financial performance measures.

 

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Adjusted EBITDA Analysis

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

 

 

($ in Thousands)

   Three
Months
Ended
March 31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
period

$
     Period-
over-
Period

%
 

Adjusted EBITDA (Loss)

   $ (1,508    $ (626    $ (882      141.1

For the three months ended March 31, 2024, Banzai’s Adjusted EBITDA loss was approximately $1,508 thousand, reflecting a decrease in the earnings of approximately $882 thousand compared to a loss of approximately $626 thousand for the three months ended March 31, 2023. This period-over-period decrease in earnings is primarily attributable to an increase in interest expense - related party and transaction related expenses.

Net Income/(Loss) to Adjusted EBITDA Reconciliation

 

($ in Thousands)

   Three
Months
Ended
March 31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period

$
     Period-
over-
Period

%
 

Net loss

   $ (4,501    $ (3,763    $ (738      19.6
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income, net

     (4      (63      59        -93.7

Depreciation expense

     2        2        —         0.0

Stock based compensation

     253        402        (149      -37.1

Interest expense

     451        538        (87      -16.2

Interest expense - related party

     578        383        195        50.9

Income tax (benefit) expense

     (1      3        (4      -133.3

GEM commitment fee expense

     200        —         200        nm  

Gain on extinguishment of debt

     (528      —         (528      nm  

Loss on debt issuance

     171        —         171        nm  

Change in fair value of warrant liability

     (408      —         (408      nm  

Change in fair value of warrant liability - related party

     (115      —         (115      nm  

Change in fair value of simple agreement for future equity

     —         23        (23      -100.0

Change in fair value of simple agreement for future equity - related party

     —         303        (303      -100.0

Change in fair value of bifurcated embedded derivative liabilities

     —         32        (32      -100.0

Change in fair value of bifurcated embedded derivative liabilities - related party

     —         137        (137      -100.0

Change in fair value of convertible promissory notes

     544        —         544        nm  

Transaction related expenses*

     1,842        1,251        591        47.2
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA (Loss)

   $ (1,508    $ (626    $ (882      141.1
  

 

 

    

 

 

    

 

 

    

 

 

 

 

*

Transaction related expenses include:

 

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($ in Thousands)

   Three
Months
Ended
March 31,
2024
     Three
Months
Ended
March 31,
2023
     Period-
over-
Period
$
     Period-
over-
Period

%
 

Professional fees - audit

   $ 344      $ 277      $ 67        24.2

Professional fees - legal

     597        68        529        777.9

Incremental accounting

     680        808        (128      -15.8

Market study, M&A support

     221        98        123        125.5
  

 

 

    

 

 

    

 

 

    

 

 

 

Transaction related expenses

   $ 1,842      $ 1,251      $ 591        47.2
  

 

 

    

 

 

    

 

 

    

 

 

 

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-
over-
Year $
     Year-
over-
Year%
 

Adjusted EBITDA (Loss)

   $ (10,218    $ (4,826    $ (5,392      111.7

For the year ended December 31, 2023, Banzai’s Adjusted EBITDA (loss) was $10.2 million, reflecting an increase in the loss of $5.4 million from $4.8 million for the year ended December 31, 2022. This year-over-year increase in loss is primarily attributable to increased general and administrative expenses.

Net Income/(Loss) to Adjusted EBITDA Reconciliation

 

($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-
over-
Year $
     Year-
over-
Year%
 

Net loss

   $ (14,406    $ (15,468    $ 1,062        -6.9
  

 

 

    

 

 

    

 

 

    

 

 

 

Other income, net

     (63      (151      88        -58.3

Depreciation expense

     7        10        (3      -30.0

Stock based compensation

     1,246        770        476        61.8

Interest expense

     2,631        1,651        980        59.4

Interest expense - related party

     2,923        729        2,194        301.0

Provision for income taxes

     —         —         —         nm  

Loss (gain) on extinguishment of debt

     —         57        (57      -100.0

Loss on modification of simple agreement for future equity

     —         121        (121      -100.0

Loss on modification of simple agreement for future equity - related party

     —         1,602        (1,602      -100.0

Change in fair value of simple agreement for future equity

     (208      308        (516      -167.5

Change in fair value of simple agreement for future equity - related party

     (2,752      4,078        (6,830      -167.5

Change in fair value of bifurcated embedded derivative liabilities

     (1,405      254        (1,659      -653.1

Change in fair value of bifurcated embedded derivative liabilities - related party

     (3,063      607        (3,670      -604.6

Transaction related expenses*

     4,746        304        4,442        1461.2
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ (10,218    $ (4,826    $ (5,392      111.7

 

*

Transaction related expenses include:

 

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($ in Thousands)

   Year Ended
December 31,
2023
     Year Ended
December 31,
2022
     Year-
over-
Year $
     Year-
over-
Year%
 

Professional fees - audit

   $ 560      $ —       $ 560        nm  

Professional fees - legal

     254        102        152        149.0

Incremental accounting

     2,731        202        2,529        1252.0

Market study, M&A support

     1,201        —         1,201        nm  
  

 

 

    

 

 

    

 

 

    

 

 

 

Transaction related expenses

   $ 4,746      $ 304      $ 4,442        1461.2

Liquidity and Capital Resources

Going Concern

Since inception, Banzai has financed its operations primarily from the sales of redeemable convertible preferred stock and convertible promissory notes, and proceeds from senior secured loans. As of March 31, 2024, Banzai had cash and cash equivalents of approximately $1.0 million.

Banzai has incurred losses since its inception, had a working capital deficit of approximately $33.1 million as of March 31, 2024, and had an accumulated deficit at March 31, 2024 totaling approximately $51.3 million. As of March 31, 2024, Banzai had approximately $10.0 million and approximately $6.8 million aggregate principal amount outstanding on term/ promissory notes and convertible notes, respectively. During the three months ended March 31, 2024, Banzai has raised additional capital under the SEPA through the issuance of additional convertible notes for a total of approximately $2.5 million to fund the Company’s operations. Additionally, during the three months ended March 31, 2024, the Company issued non-cash share payments of approximately $1.5 million in partial settlement of the Yorkville Promissory Note financing; an approximately $0.5 million non-cash share payment to settle the deferred fee liability recognized as of March 31, 2024, and payable to Yorkville in terms of the SEPA. These stock issuances described herein do not represent sources of new capital, rather the issuances were made to settle existing liabilities in lieu of cash payments, as described above. Banzai has historically used debt financing proceeds principally to fund operations.

Banzai intends to seek additional funding through the SEPA arrangement and other equity financings in 2024. If Banzai is unable to raise such funding, Banzai will have to pursue an alternative course of action to seek additional capital through other debt and equity financing.

If Banzai is unable to raise sufficient additional capital, through future debt or equity financings or through strategic and collaborative ventures with third parties, Banzai will not have sufficient cash flows and liquidity to fund its planned business for 12 months from the issuance of its condensed consolidated financial statements for the three months ended March 31, 2024. There can be no assurances that Banzai will be able to secure alternate forms of financing at terms that are acceptable to management. In that event, Banzai might be forced to limit many of its business plans and consider other means of creating value for its stockholders. Based on the factors described above, and after considering management’s plans, there is substantial doubt about Banzai’s ability to continue as a going concern within one year from the date the financial statements were available to be issued. The accompanying condensed consolidated financial statements have been prepared assuming Banzai will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

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Cash Flows

The following table sets forth Banzai’s cash flows for the three months ended March 31, 2024 and 2023 and the years ended December 31, 2023 and 2022:

 

($ in Thousands)

   Three
Months
Ended
March 31,
2024
    Three
Months
Ended
March 31,
2023
    Period-
over-
Period

$
    Period-
over-
Period

%
    Year Ended
December 31,
2023
    Year Ended
December 31,
2022
    Year-over-
Year $
    Year-over-
Year%
 

Net loss

   $ (4,500   $ (3,765   $ (735     19.5   $ (14,406   $ (15,469   $ 1,063       -6.9

Adjustments to reconcile net loss to net cash used in operating activities:

     2,383       2,286       97       4.2     12,855       10,300       2,555       24.8

Net cash used in operating activities

     (2,117     (1,479     (638     43.1     (1,551     (5,168     3,617       -70.0

Net cash used in investing activities

     —        —        —        nm       —        (11     11       -100.0

Net cash provided by financing activities

     1,050       1,506       (456     -30.3     2,621       4,416       (1,795     -40.6

Net increase / (decrease) in cash

     (1,067     26       (1,093     4203.8     1,070       (763     1,833       -240.2

Cash Flows for the three months ended March 31, 2024

Net cash used in operating activities was approximately $2.1 million for the three months ended March 31, 2024. Net cash used in operating activities consists of net loss of approximately $4.5 million, offset by total adjustments of $2.4 million for non-cash items and the effect of changes in working capital. Non-cash adjustments included non-cash settlement of the GEM commitment fee of approximately $0.2 million, stock-based compensation expense of approximately $0.3 million, gain on extinguishment of liability of $0.5 million, non-cash interest expense of approximately $0.5 million (approximately $0.09 million for related party), amortization of debt discount and issuance costs of approximately $0.5 million (approximately $0.5 million for related party), amortization of operating lease ROU assets of approximately $0.04 million, fair value adjustment for warrant liabilities gain of approximately $0.5 million (gain of approximately $0.1 million for related party), and net of change in operating assets and liabilities of approximately $1.2 million.

There were no net cash investing activities for the three months ended March 31, 2024.

Net cash provided by financing activities was approximately $1.1 million for the three months ended March 31, 2024, and was primarily related to proceeds from convertible debt financing of approximately $2.3 million and payment of the GEM commitment fee of approximately $1.2 million.

Cash Flows for the three months ended March 31, 2023

Net cash used in operating activities was approximately $1.5 million for the three months ended March 31, 2023. Net cash used in operating activities consists of net loss of approximately $3.8 million, total adjustments of approximately $2.3 million for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense of approximately $0.4 million, non-cash interest expense of approximately $0.2 million (approximately $0.09 million for related party), amortization of debt discount and issuance costs of approximately $0.4 million (approximately $0.3 million for related party), amortization of operating lease ROU assets of approximately $0.04 million, fair value adjustments to simple agreement for future equity of approximately $0.3 million (approximately $0.3 million for related party), fair value adjustments to bifurcated embedded derivative liabilities of approximately $0.2 million (approximately $0.1 million for related party), and net of change in operating assets and liabilities of approximately $0.7 million.

There were no net cash investing activities for the three months ended March 31, 2023.

 

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Net cash provided by financing activities was approximately $1.5 million for the three months ended March 31, 2023, and was primarily related to proceeds from the issuance of convertible note, net of issuance costs of approximately $1.5 million (all amounts for related party).

Cash Flows for the Year Ended December 31, 2023

Net cash used in operating activities was $1.6 million for the year ended December 31, 2023. Net cash used in operating activities consists of net loss of $14.4 million, offset by total adjustments of $12.9 million for non-cash items and the effect of changes in working capital. Non-cash adjustments included non-cash issuance of shares to Yorkville in terms of the aggregate commitment fee of $3.3 million, non-cash issuance of warrants accounted for as liabilities of $2.4 million, non-cash GEM commitment fee of $2.0 million, stock-based compensation expense of $1.2 million, non-cash interest expense of $1.2 million ($0.5 million for related party), amortization of debt discount and issuance costs of $3.4 million ($2.4 million for related party), amortization of operating lease ROU assets of $0.2 million, fair value adjustments to simple agreement for future equity gain of $3.0 million (gain of $2.8 million for related party), fair value adjustments to bifurcated embedded derivative liabilities gain of $4.5 million (gain of $3.1 million for related party), fair value adjustment for warrant liabilities gain of $1.7 million (loss of $0.1 million for related party), and net of change in operating assets and liabilities of $8.1 million.

There were no net cash investing activities for the year ended December 31, 2023.

Net cash provided by financing activities was $2.6 million for the year ended December 31, 2023, and was primarily related to proceeds from convertible debt financing of $5.8 million ($2.6 million for related party), related party note payable financing of $4.4 million, offset by the effect of the Business Combination, net of transaction costs of $7.6 million.

Cash Flows for the Year Ended December 31, 2022

Net cash used in operating activities was $5.2 million for the year ended December 31, 2022. Net cash used in operating activities consists of net loss of $15.5 million, total adjustments of $10.3 million for non-cash items and the effect of changes in working capital. Non-cash adjustments include stock-based compensation expense of $0.8 million, non-cash interest expense of $0.9 million ($0.1 million for related party), bad debt expense of $(0.1 million), amortization of debt discount and issuance costs of $0.7 million ($0.5 million for related party), amortization of operating lease ROU assets of $0.2 million, impairment of operating lease ROU assets of $0.3 million, loss on extinguishment of debt of $0.1 million, loss on modification of SAFE $1.7 million ($1.6 million for related party), fair value adjustments to simple agreement for future equity of $4.4 million ($4.0 million for related party), fair value adjustments to bifurcated embedded derivative liabilities of $0.9 million ($0.6 million for related party), and net of change in operating assets and liabilities of $0.5 million.

Net cash used in investing activities was $(0.01) million for the year ended December 31, 2022, and was primarily related to the purchase of equipment.

Net cash provided by financing activities was $4.4 million for the year ended December 31, 2022, and was primarily related to convertible debt financing of $5.9 million ($4.2 million for related party), net of deferred offering cost payment of $1.5 million.

 

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Capital Expenditure Commitments and Financing Requirements

 

($ in Thousands)    Total      Less than
1 year
     1 - 3
Years
 

Debt principal - 14% CP BF convertible notes

   $ 1,821      $ 1,821      $ —   

Debt principal - 14% CP BF term notes

     6,500        6,500        —   

Debt principal - 8% Alco promissory notes

     4,400        4,400        —   

Debt principal - Yorkville Convertible promissory note

     3,000        3,000        —   

Debt principal - GEM promissory note

     900        900        —   

Interest on debt

     3,365        3,365        —   

Operating leases

     162        162        —   

Total capital expenditure commitments and financing requirements at March 31, 2024

   $ 20,148      $ 20,148      $ —   

Debt principal - 14% CP BF convertible and term notes

On February 19, 2021, the Company entered into a loan agreement with CP BF Lending, LLC (“CP BF”) for $8,000,000 (the “Loan Agreement”). The Loan Agreement was comprised of a Term Note for $6,500,000 and a Convertible Note for $1,500,000, with the option upon the request of the Company for Additional Loan (“Additional Loan”) principal amount of up to $7,000,000, evidenced by additional notes with 81.25% of the principal amount of such Additional Loan being evidenced by a Term Note, and 18.75% of the principal amount of such an Additional Loan being evidenced by a Convertible Note. The Term Note bears cash interest at a rate of 14% per annum paid monthly and accrued interest payable-in-kind (“PIK”) cumulatively at 1.5% per annum. The outstanding principal balance of the Term Note together with accrued and unpaid interest thereon, unpaid fees and expenses and any other Obligations then due, shall be paid on February 19, 2025 (“Loan Maturity Date”). The Convertible Note accrues PIK interest cumulatively at a rate of 15.5% per annum, and is convertible into Class A Common Stock upon Qualified Financing (as defined in the agreement), upon a Change of Control (as defined in the agreement), upon Prepayment, or at Maturity at a fixed conversion price. If not sooner converted or prepaid, the Convertible Note principal together with accrued and unpaid interest thereon, unpaid fees and expenses and any other Obligations then due, shall be paid on the Loan Maturity Date. Upon the occurrence, and during the continuance, of an Event of Default (as defined in the agreement), interest on the Term Note will bear cash interest at a per annum rate of 20% (“Default Rate”) and no PIK interest shall accrue at any time during an Event of Default and the Convertible Note will bear PIK Interest at a per annum at the Default Rate.

Additionally, the Company may voluntarily prepay the Principal of the Loans, in accordance with their terms, in whole or in part at any time. On the date of any such prepayment, the Company will owe to Lender: (i) all accrued and unpaid Cash Interest with respect to the principal amount so prepaid through the date the prepayment is made; (ii) if such prepayment is prior to the twelve-month anniversary of the Closing Date, all unpaid interest (including for the avoidance of doubt, PIK Interest and Cash Interest) with respect to the principal amount so prepaid that would have been due and payable on or prior to the twelve-month anniversary of the Closing Date had the Loans remained outstanding until such twelve-month anniversary date (the “Yield Maintenance Premium”); (iii) the Exit Fee with respect to the principal amount so prepaid, calculated as 1.0% of the outstanding principal balance of the Loans, with only the portion of the principal balance so converted counted for purposes of determining the applicable Exit Fee; and provided further, that, in the event of a partial prepayment of the Loans, the Exit Fee shall be calculated on the principal amount so repaid and not on the entire outstanding principal balance thereof, and (iv) all other Obligations, if any, that shall have become due and payable hereunder with respect to the principal amount so prepaid.

The Loan Agreement contains customary covenants, including restrictions on the Company’s ability to incur indebtedness, grant liens or security interest on assets, make acquisitions, loans, advances or investments, or sell or otherwise transfer assets, among others. The Loan Agreement also contains other financial covenants related

 

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to minimum gross profit margin, minimum ARR (Annual Recurring Revenue) growth rate, and fixed charge ratio, among other financial covenants per the terms of the Loan Agreement. The Loan Agreement is secured by a first-priority Lien (subject to Permitted Liens) on and security interest in the Collateral pursuant to the terms of the Collateral Documents. The Loan Agreement named Joseph Davy, CEO, as Guarantor, and per the term of the Loan Agreement, he is willing to guarantee the full payment, performance and collection of all of the Credit Parties’ obligations thereunder and under the Loan Agreement, all as further set forth therein.

For all respective periods presented, the Company was not in compliance with the Minimum Gross Profit Margin covenant in section 7.14.1 of the Loan Agreement, the Minimum ARR Growth covenant in section 7.14.2 of the Loan Agreement, and the Fixed Charge Coverage Ratio covenant in section 7.14.3 of the Loan Agreement. As a result of the Company’s noncompliance with the financial covenants, the entire principal amount and all unpaid and accrued interest will be classified as current on the Company’s consolidated balance sheets.

Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by CP BF or cured to the satisfaction of Lender, subject to the exercise of customary commercial underwriting standards in determining such satisfaction, Lender may, without notice or demand to the Credit Parties declare the unpaid principal of and any accrued interest shall be immediately due and payable. While the Company and the Lender are engaged in good faith discussions to resolve these matters, no agreement to resolve such matters has been reached and all of the Loans remain in default for the reasons stated above, and the Lender is not presently exercising remedies, which the Lender reserves the right to so do at any time.

On October 10, 2022 the Loan Agreement was amended, where CP BF waived payment by the Company of four months of cash interest with respect to the Term Note in replacement for a Convertible Note (“First Amendment Convertible Note”) in the principal amount of $321,345, which is not considered an Additional Loan as defined above. The First Amendment Convertible Note has the same features as the Convertible Note described above.

Modification of Term and Convertible Notes (CP BF)

On August 24, 2023, the Company entered into a forbearance agreement (the “Forbearance Agreement”) with CP BF Lending. Under the terms of this Forbearance Agreement, and as a result of the Company’s non-compliance with certain covenants of its Loan Agreement with CP BF, CP BF agreed to (i) amend certain provisions of the Loan Agreement to clarify the treatment of the Merger with 7GC under the Loan Agreement, (ii) consent to the consummation of the Merger Agreement with 7GC and (iii) forbear from exercising any of its rights and remedies under the Loan Agreement with the Company from the effective date of the Forbearance Agreement until the earlier of (a) the four-month anniversary of the closing of the Merger if the Merger is closed on or prior to December 29, 2023, (b) December 29, 2023 if the Merger is not consummated on or prior to December 29, 2023 or (c) the date on which any Termination Event (as defined within the Forbearance Agreement) shall have occurred. In connection with the Forbearance Agreement, CP BF and the Company also agreed to amend and restate CP BF’s existing convertible promissory notes (the “A&R CP BF Notes”) so that they may remain outstanding following the closing of the Merger and, at CP BF’s option, be convertible into Class A shares of the combined company.

On December 14, 2023, the Company entered into the First Amendment to the Forbearance Agreement with the Lender. In particular, the Company agreed to pay the Lender an amount in cash equal to $23,748 (the “Amendment Fee”) on the execution date to extend the forbearance period from the four-month anniversary of the closing of the Merger to the six-month anniversary of the closing of the Merger. This amendment was deemed to be a debt modification in accordance with ASC 470, Debt, which will be accounted for prospectively. Modification does not result in recognition of a gain or loss in the consolidated statement of operations but does impact interest expense recognized in the future.

 

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Debt principal - 8% Alco promissory notes

On August 30, 2023, the Company issued a subordinate promissory note (“Alco August Promissory Note”) in the aggregate principal amount of $150,000 to Alco Investment Company, a related party. Alco held its ownership of over 10% of the issued equity of the Company, through its ownership of Series A preferred stock. The Alco August Promissory Note bears interest at a rate of 8% per annum. The outstanding principal and accrued interest are due and payable on April 29, 2024. The Company recorded a $3,711 debt discount upon issuance of the Alco August Promissory Note. For the three months ended March 31, 2024, interest expense on the Alco August Promissory Note totaled $5,449, comprised of $2,991 of contractual accrued interest and $2,458 for the amortization of the discount. As of March 31, 2024 and December 31, 2023, $150,000 of principal and $7,035 and $4,044, respectively, of accrued interest is outstanding under the Alco August Promissory Note.

On September 13, 2023, the Company issued a subordinate promissory note (“Alco September Promissory Note”) in the aggregate principal amount of up to $1,500,000 to Alco Investment Company, a related party. The Alco September Promissory Note bears interest at a rate of 8% per annum. The outstanding principal and accrued interest are due and payable on September 30, 2024. The Company recorded $8,588 of debt issuance costs and a $638,808 debt discount upon issuance of the Alco September Promissory Note, relating to the share transfer agreements, see below. For the three months ended March 31, 2024, interest expense on the Alco September Promissory Note totaled $91,563, comprised of $29,918 of contractual accrued interest and $61,645 for the amortization of the discount. As of March 31, 2024 and December 31, 2023, $1,500,000 of principal and $60,493 and $30,575, respectively, of accrued interest is outstanding under the Alco September Promissory Note.

On November 16, 2023, the Company issued a subordinate promissory note (“Alco November Promissory Note”) in the aggregate principal amount of up to $750,000 to Alco Investment Company, a related party. The Alco November Promissory Note bears interest at a rate of 8% per annum. The outstanding principal and accrued interest are due and payable on April 13, 2024. The Company recorded a $363,905 debt discount upon issuance of the Alco November Promissory Note relating to the share transfer agreements, see below. For the three months ended March 31, 2024, interest expense on the Alco November Promissory Note totaled $248,285, comprised of $14,959 of contractual accrued interest and $233,326 for the amortization of the discount. As of March 31, 2024 and December 31, 2023, $750,000 of principal and $22,356 and $7,397, respectively, of accrued interest is outstanding under the Alco November Promissory Note.

On December 13, 2023, the Company issued a subordinate promissory note (“Alco December Promissory Note”) in the aggregate principal amount of up to $2,000,000 to Alco Investment Company, a related party. The Alco December Promissory Note bears interest at a rate of 8% per annum. The outstanding principal and accrued interest are due and payable on December 31, 2024. The Company recorded a $1,496,252 debt discount upon issuance of the Alco December Promissory Note, relating to the share transfer agreements, see below. For the three months ended March 31, 2024, interest expense on the Alco December Promissory Note totaled $232,216, comprised of $39,890 of contractual accrued interest and $192,326 for the amortization of the discount. As of March 31, 2024 and December 31, 2023, $2,000,000 of principal and $47,780 and $7,890, respectively, of accrued interest is outstanding under the Alco December Promissory Note.

In connection with the issuances of the Alco September, November, and December Promissory Notes, the Company, 7GC and the Sponsor entered into share transfer agreements (the “Alco Share Transfer Agreements”) with Alco Investment Company. Pursuant to which for each $10.00 in principal borrowed under the Alco September and November Promissory Notes, the Sponsor agreed to forfeit one share of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive one New Banzai Class A Share. For each $10.00 in principal borrowed under the December Note, the Sponsor agreed to forfeit three shares of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive three New Banzai Class A Shares. Such forfeited and issued shares under the Alco September, November, and December Promissory Notes are capped at an amount equal to 150,000, 75,000, and 600,000, respectively. Pursuant to the Alco Share Transfer Agreements, the shares are subject to an 180-day lock-up period upon issuance of the shares.

 

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Debt principal - 7GC Convertible promissory note

The Company assumed two promissory notes in connection with the Merger which remained outstanding as of March 31, 2024. The promissory notes were issued on December 21, 2022 for a principal amount of $2,300,000 (“December 2022 7GC Note”) and on October 3, 2023 for a principal amount of $250,000 (“October 2023 7G Note, together with the December 2022 7GC Note, the “7GC Promissory Notes”). The 7GC Promissory Notes were issued to the Sponsor, 7GC & Co. Holdings LLC. The 7GC Promissory Notes do not bear interest and were repayable in full upon the earlier of the consummation of a business combination or the date the Company liquidates the trust account (the “Trust Account”) established in connection with the Company’s initial public offering (the “IPO”) upon the failure of the Company to consummate a business combination within the requisite time period. Under the original terms of the 7GC Promissory Notes, the Sponsor has the option, but not the obligation, to convert the principal balance of the Note, in whole or in part, into that number of shares of Class A common stock, $0.0001 par value per share, of the Company equal to the principal amount of the Note so converted divided by $10.00.

Modification of Promissory Notes - 7GC

On December 12, 2023, in connection with the Merger, the Sponsor came to a non-binding agreement (“First Amendment”) with the Company to amend the optional conversion provision of the 7GC Promissory Notes. The First Amendment provided that the holder has the right to elect to convert up to the full amount of the principal balance of the 7GC Promissory Notes, in whole or in part, 30 days after the closing of the Merger (the “Closing”) at a conversion price equal to the average daily VWAP of the Class A Common Stock for the 30 trading days following the Closing. This amendment was deemed to be a debt modification in accordance with ASC 470, Debt, which will be accounted for prospectively. Modification does not result in recognition of a gain or loss in the consolidated statement of operations but does impact interest expense recognized in the future. Pursuant to ASC 470, if the modification or exchange of a convertible debt instrument is not accounted for as an extinguishment, the accounting for the change in the fair value of the embedded conversion option which increases the value of the embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) is recorded as a reduction to the carrying amount of the 7GC Promissory Notes with a corresponding increase to additional paid in capital. The 7GC Promissory Notes were converted in full and subsequently cancelled on March 6, 2024.

Debt principal - Yorkville Convertible promissory note

On December 14, 2023, in connection with and pursuant to the terms of its Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership managed by Yorkville Advisors Global, LP (“Yorkville”), (refer to Note 15 - Equity for further details), Yorkville agreed to advance to the Company, in exchange for convertible promissory notes, an aggregate principal amount of up to $3,500,000, $2,000,000 of which was funded at the Closing in exchange for the issuance by the Company of a Convertible Promissory Note (the “December Yorkville Convertible Note”). The Company received net proceeds of $1,800,000 after a non-cash original issue discount of $200,000.

On February 5, 2024, the Company and Yorkville entered into a supplemental agreement (the “SEPA Supplemental Agreement”) to increase the amount of convertible promissory notes allowed to be issued under SEPA by $1,000,000 (the “Additional Pre-Paid Advance Amount”), for an aggregate principal amount of $4,500,000 to be advanced by Yorkville to the Company in the form of convertible promissory notes. On February 5, 2024 in exchange for a promissory note in the principal amount of $1,000,000 (the “February Yorkville Promissory Note”), with the same terms as the December Yorkville Convertible Note, the Company received net proceeds of $900,000 after a non-cash original issue discount of $100,000.

On March 26, 2024, the Company, in exchange for a convertible promissory note with a principal amount of $1,500,000 (the “March Yorkville Promissory Note”, together with the December Yorkville Convertible Note

 

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and February Yorkville Promissory Note (the “Yorkville Promissory Notes”), received net proceeds of $1,250,000 after a non-cash original issue discount of $250,000 from Yorkville.

The Yorkville Convertible Notes have a maturity date of June 14, 2024, and accrue interest at 0% per annum, subject to an increase to 18% per annum upon events of default as defined in the agreement. As of March 31, 2024, no events of default have occurred.

Yorkville has the right to convert any portion of the outstanding principal into shares of Class A common stock at any time. The number of shares issuable upon conversion is equal to the amount of principal to be converted (as specified by Yorkville) divided by the Conversion Price (as defined in the Standby Equity Purchase Agreement disclosure in Note 15). Yorkville will not have the right to convert any portion of the principal to the extent that after giving effect to such conversion, Yorkville would beneficially own in excess of 9.99% of the total number of shares of Class A common stock outstanding after giving effect to such conversion.

Additionally, the Company, at its option, shall have the right, but not the obligation, to redeem early a portion or all amounts outstanding under the Promissory Notes at a redemption amount equal to the outstanding principal balance being repaid or redeemed, plus a 10% prepayment premium, plus all accrued and unpaid interest; provided that (i) the Company provides Yorkville with no less than ten trading days’ prior written notice thereof and (ii) on the date such notice is issued, the VWAP of the Class A common stock is less than the Fixed Price.

Upon the occurrence of certain triggering events, as defined in the Yorkville Convertible Notes agreement (each an “Amortization Event”), the Company may be required to make monthly repayments of amounts outstanding under the Yorkville Convertible Notes, with each monthly repayment to be in an amount equal to the sum of (x) $1,000,000, plus (y) 10% in respect of such amount, and (z) all outstanding accrued and unpaid interest as of each payment date.

During the three months ending March 31, 2024, $500,000 of principal under the December Yorkville Convertible Note was converted into 788,211 Class A Common stock of the Company and the full principal amount of $1,000,000 under the February Yorkville Convertible Note was converted into 1,445,524 Class A Common stock of the Company.

As of March 31, 2024 and December 31, 2023, the principal amount outstanding under the Yorkville Convertible Notes was $3 million and $2 million, respectively. During the three months ended March 31, 2024, the Company recorded interest expense of $0 in connection with the Yorkville Convertible Notes.

Debt principal - GEM Promissory Note

On February 5, 2024, the Company and GEM entered into a settlement agreement (the “GEM Settlement Agreement”), pursuant to which (a) the Company and GEM agreed to (i) settle the Company’s obligations under and terminate the binding term sheet entered into between Legacy Banzai and GEM, dated December 13, 2023, and (ii) terminate the share repurchase agreement, dated May 27, 2022, by and among the Company and GEM, and (b) the Company (i) agreed to pay GEM $1.2 million in cash within three business days of the GEM Settlement Agreement and (ii) issued to GEM, on February 5, 2024, an unsecured promissory zero coupon note in the amount of $1.0 million, payable in monthly installments of $100,000 beginning on March 1, 2024, with the final payment to be made on December 1, 2024 (the “GEM Promissory Note”). The Company paid GEM the $1.2 million in cash in February 2024.

The GEM Promissory Note provides that, in the event the Company fails to make a required monthly payment when due, the Company shall issue to GEM a number of shares of Class A Common Stock equal to the monthly payment amount divided by the VWAP of the Class A Common Stock for the trading day immediately

 

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preceding the applicable payment due date. In addition, the Company agreed to register on a registration statement 2,000,000 shares of Class A Common Stock that may be issuable under the terms of the GEM Promissory Note. The GEM Promissory Note contains customary events of default. If an event of default occurs, GEM may, at its option, demand from the Company immediate payment of any outstanding balance under the GEM Promissory Note.

As of March 31, 2024, the Company has issued an aggregate of 139,470 shares of Class A Common Stock to GEM in lieu of monthly payment obligations and the remaining balance of the GEM Promissory Note as of March 31, 2024 is $900,000.

Interest on Debt

Interest on debt totals $3.4 million for the three months ended March 31, 2024, representing the aggregate interest expenses / payments obligation to be paid and to be recognized during the rest of the terms of the Loan Agreements and Senior Convertible Notes, described above.

Operating Leases

Banzai has an operating lease for its real estate for office use. The lease term expires in October 2024. Banzai adopted ASC 842 Leases by applying the guidance at adoption date, January 1, 2022. The $158,965 balance recognized as of March 31, 2024 represents the future minimum lease payments under non-cancellable leases as liabilities.

Debt Structure and Maturity Profile

 

($ in Thousands)

   Principal      Debt Discount /
Issuance Cost
    Carrying
Value
     Accrued
Interest
     Carrying Value
and Accrued
Interest
 

As of March 31, 2024

             

Debt principal - 14% CP BF term notes

   $ 6,500      $ (107   $ 6,393      $ 556      $ 6,949  

Debt principal - 8% Alco promissory notes

     4,400        (1,455     2,945        138        3,038  

Debt principal - Yorkville Convertible promissory note

     3,000        64       3,064        —         3,064  

Debt principal - 14% CP BF convertible notes

     1,821        (35     1,786        1,023        2,809  

Debt principal - GEM promissory note

     900        —        900        —         900  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total debt carrying values at March 31, 2024

   $ 16,621      $ (1,533   $ 15,088      $ 1,717      $ 16,805  

Contractual Obligations and Commitments

Revenue

Under ASC 606, revenue is recognized throughout the life of the executed agreement. Banzai measures revenue based on considerations specified in terms and conditions agreed to by a customer. Furthermore, Banzai recognizes revenue in an amount that reflects the consideration we expect to be entitled to in exchange for those services. The performance obligation is satisfied by transferring control of the service to the customer, which occurs over time.

Leases

Banzai’s existing leases contain escalation clauses and renewal options. Banzai is not reasonably certain that renewal options will be exercised upon expiration of the initial terms of its existing leases. Prior to adoption of ASU 2016-02 effective January 1, 2022, Banzai accounted for operating lease transactions by recording lease expense on a straight-line basis over the expected term of the lease.

 

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Banzai entered into a sublease which it had identified as an operating lease prior to the adoption of ASC 842 Leases. Banzai remains the primary obligor to the head lease lessor, making rental payments directly to the lessor and separately billing the sublessee. The sublease is subordinated to the master lease, and the sublessee must comply with all applicable terms of the master lease. Banzai subleased the real estate to a third-party at a monthly rental payment amount that was less than the monthly cost that it pays on the headlease with the lessor.

Deferred underwriting fees

On December 28, 2023, the Company and Cantor amended the Fee Reduction Agreement to provide that the Reduced Deferred Fee was payable in the form of 1,113,927 shares of Class A Common Stock and to provide that Cantor is subject to a 12-month lock-up with respect to the Cantor Fee Shares. On December 28, 2023, the Company issued the Cantor Fee Shares to Cantor, covering the Reduced Deferred Fee in accordance with the Fee Reduction Agreement. The fair value of the 1,113,927 shares of Class A Common Stock was determined to be $2,450,639 on December 28, 2023 based on the Company’s opening stock price of $2.20. Although the Company issued the Cantor Fee Shares, as of March 31, 2024, the Company has not satisfied its Cantor Registration Rights Obligations. As such, the Company cannot conclude that it has settled its outstanding obligations to Cantor. Therefore, neither criteria under ASC 405 for extinguishment and derecognition of the liability were satisfied and the $4,000,000 Reduced Deferred Fee remained outstanding as a current liability on the Company’s March 31, 2024 balance sheet.

GEM commitment fee liability

In May 2022, Legacy Banzai entered into the GEM Agreement with GEM pursuant to which, among other things, upon the terms and subject to the conditions of the GEM Agreement, GEM was to purchase Legacy Banzai (or its successor per the GEM Agreement) up to the number of duly authorized, validly issued, fully paid and non-assessable shares of common stock having an aggregate value of $100,000,000 (the “GEM Financing”). Further, in terms of the GEM Agreement, on the date of public listing of Legacy Banzai, Legacy Banzai was required to make and execute a warrant granting GEM the right to purchase up to the number of common shares of Legacy Banzai that would be equal to 3% of the total equity interests, calculated on a fully diluted basis, and at an exercise price per share equal to the lesser of (i) the public offering price or closing bid price on the date of public listing or (ii) the quotient obtained by dividing $650 million by the total number of equity interests.

On December 13, 2023, Legacy Banzai and GEM entered into the GEM Term Sheet and, on December 14, 2023, the GEM Letter, agreeing to terminate in its entirety the GEM Agreement by and between Legacy Banzai and GEM, other than with respect to the Company’s obligation (as the post-combination company in the Business Combination) to issue the GEM Warrant granting the right to purchase Class A Common Stock in an amount equal to 3% of the total number of equity interests outstanding as of the Closing, calculated on a fully diluted basis, at an exercise price on the terms and conditions set forth therein, in exchange for issuance of a $2.0 million convertible debenture with a five-year maturity and 0% coupon. Due to the determination of the final terms of the planned $2.0 million convertible debenture having not been finalized, nor the final agreement related to the convertible debenture having been executed, as of March 31, 2024, the Company recognized, concurrent with the close of the merger, a liability for the GEM commitment fee, along with a corresponding GEM commitment fee expense, in the amount of $2.0 million.

On February 5, 2024, the Company and GEM entered into the GEM Settlement Agreement, pursuant to which (a) the Company and GEM agreed to (i) settle the Company’s obligations under and terminate the GEM Term Sheet, and (ii) terminate the GEM Agreement, and (b) the Company (i) agreed to pay GEM $1.2 million in cash within three business days of the GEM Settlement Agreement and (ii) issued to GEM the GEM Promissory Note on February 5, 2024.

The GEM Promissory Note provides that, in the event the Company fails to make a required monthly payment when due, the Company shall issue to GEM a number of shares of Class A Common Stock equal to the

 

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monthly payment amount divided by the VWAP of the Class A Common Stock for the trading day immediately preceding the applicable payment due date. In addition, the Company agreed to register on a registration statement 2,000,000 shares of Class A Common Stock that may be issuable under the terms of the GEM Promissory Note. The GEM Promissory Note contains customary events of default. If an event of default occurs, GEM may, at its option, demand from the Company immediate payment of any outstanding balance under the GEM Promissory Note. As of the date of this prospectus, we have issued an aggregate of 562,803 shares of Class A Common Stock to GEM in lieu of monthly payment obligations.

Off-Balance Sheet Arrangements

Banzai had no off-balance sheet arrangements as of December 31, 2023 or March 31, 2024.

Quantitative and Qualitative Disclosures About Market Risk

This item is not applicable as we are a smaller reporting company.

Internal Control Over Financial Reporting

Previously Identified Material Weaknesses

As of December 31, 2023, the Company concluded that it had material weaknesses in its IT General Controls, adherence to the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in Internal Control—Integrated Framework (2013), and period end financial close and reporting process as described below.

The material weaknesses in our internal control over financial reporting for the year ended and as of December 31, 2023 were as follows:

 

  (1)

IT General Controls—We did not maintain an effective IT control environment because we did not maintain a formal cybersecurity governance program, sufficient provisioning, deprovisioning, user access reviews, and reviews of service organizations.

 

  (2)

COSO Entity Level Controls—We did not maintain effective controls over the identification and monitoring of related party relationships and transactions and have not yet implemented a formal delegation of authority process.

 

  (3)

Period end financial close and reporting—Our assessment of internal controls has identified a material weakness whereby the CFO has unrestricted administrative access to the General Ledger (GL) system. Given the concentration of responsibility includes approval of key transactions, bank account reconciliations, and journal entries, administrative access to the G/L system should be restricted to personnel outside of Accounting and Finance function.

Remediation of Material Weaknesses

We are committed to the remediation of the material weaknesses described above, as well as the continued improvement of our internal control over financial reporting. We are in the process of taking steps to remediate the identified material weaknesses and continue to evaluate our internal controls over financial reporting, including the following:

IT General Controls:

 

   

We have implemented enhanced segregation of duties and workflow approvals to prevent unauthorized changes in our systems.

 

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We have begun utilizing the services of external consultants to review our internal controls environment and make recommendations to remediate the material weaknesses in our financial reporting.

 

   

We have begun utilizing the services of external consultants to complete a formal cybersecurity assessment and subsequently identified remediation plans to address any gaps and weaknesses.

 

   

We utilized the services of external consultants to assist in the development of an incident response plan to mitigate the IT control risk, which we expect to formalize in 2024.

COSO Entity Level Controls:

 

   

We utilized the services of external consultants to assist in the identification and documentation of entity level controls as of March 31, 2024. Additionally, in Q1 2024 we completed a formal COSO mapping document and remediation plans have been drafted where gaps were identified.

 

   

We implemented an Audit Committee, Compensation Committee, Nominating and Governance Committee and Board of Directors immediately post-merger.

Period End Financial Close and Reporting:

 

   

We have begun utilizing the services of external consultants to assess our overall security role design and privileged user access for each of our in-scope applications, including our general ledger system. We expect to implement certain user access changes during the second quarter of 2024 and further system-wide changes thereafter.

As we continue our evaluation and improve our internal control over financial reporting, management may identify and take additional measures to address control deficiencies. We cannot assure you that we will be successful in remediating the material weaknesses in a timely manner. See the section titled “Risk Factors-We have identified material weaknesses in our internal control over financial reporting in the past. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price.

 

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BUSINESS

Banzai International, Inc. (f/k/a 7GC & Co. Holdings Inc.) is a MarTech company that produces data-driven marketing and sales solutions for businesses of all sizes. We were originally incorporated in Delaware in September 2020 as a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities. Upon closing the Business Combination on December 14, 2023 pursuant to the Original Merger Agreement (as amended by the Merger Agreement Amendment, we acquired Legacy Banzai. Legacy Banzai operates under the name “Banzai Operating Co Inc.” (the “Operating Company”) and is one of our two wholly owned subsidiaries. Legacy Banzai was incorporated in Delaware in September 2015. Our business operations are currently conducted by the Operating Company.

As a MarTech company, our mission is to help our customers accomplish their mission-to enable better marketing, sales, and customer engagement outcomes by increasing the value of every customer interaction. We plan to do this by delivering SaaS MarTech tools that leverage data, analytics, and artificial intelligence (“AI”) to improve all types of customer interactions and provide powerful benefits to our customers across three key areas of focus: targeting, engagement, and measurement. As part of our acquisition strategy, we also endeavor to acquire companies strategically positioned to enhance our product and service offerings, increasing the value provided to current and prospective customers.

Our platform currently includes three products. The first product we launched was Reach, a SaaS and managed services offering designed to increase registration and attendance of marketing events, followed by the acquisition of Demio, a SaaS solution for webinars designed for marketing, sales, and customer success teams in 2021. In 2023, we launched Boost, a SaaS solution for social sharing designed to increase attendance for Demio-hosted events by enabling easy social sharing by event registrants.

We sell our products using a recurring subscription license model typical in SaaS businesses, with customer contracts that vary in term length from single months to multiple years. As of December 31, 2023, our customer base included over 2,770 customers operating in over 90 countries, representing a variety of industries, including (among others) healthcare, financial services, e-commerce, technology, media and others. Our customers range in size from solo entrepreneurs and small businesses to Fortune 500 companies. No single customer represents more than 1% of our revenue.

Industry Background and Trends

The MarTech industry has experienced significant growth and transformation in recent years. As companies increasingly rely on digital channels to reach customers, the demand for MarTech solutions has grown. MarTech refers to the software and tools that enable marketers to plan, execute, and measure their campaigns across various channels.

The MarTech landscape is vast and complex, with thousands of vendors offering a wide range of solutions. There are 11,038 MarTech companies included in the 2023 Marketing Technology Landscape report published by ChiefMartec, a leading marketing technology research group. MarTech solutions can be grouped into several broad categories, including advertising and promotion, content and experience, social and relationships, commerce and sales, data management and analytics, and marketing automation.

One of the key drivers of growth in the MarTech industry is the increasing importance of data-driven marketing. As companies collect more data on their customers’ behaviors and preferences, they need more sophisticated tools to analyze this data and use it to inform and optimize their marketing strategies. This has led to a proliferation of customer data platforms, customer relationship management (“CRM”) systems, analytics tools, and other solutions that help marketers make sense of their data and utilize it more effectively.

 

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Another trend driving growth in the MarTech industry is the rise of AI and machine learning. These technologies can be used to automate many aspects of marketing campaigns, from ad targeting to content creation. Overall, the MarTech industry is expected to continue growing rapidly in the coming years as companies invest more heavily in digital marketing channels. However, with so many vendors offering similar solutions, competition is fierce, making it essential for MarTech companies to differentiate themselves through innovation and exceptional customer service.

There are several key trends in MarTech that are shaping the industry and driving innovation:

 

  1.

Personalization: Consumers today expect personalized experiences from the brands they interact with, and MarTech solutions are helping companies deliver on this expectation. By leveraging data and AI, marketers can create highly targeted campaigns that speak directly to individual customers’ needs and preferences.

 

  2.

Automation: As marketing campaigns become more complex, automation is becoming increasingly important. By leveraging data and AI, MarTech solutions can automate many aspects of marketing, from ad targeting to content creation, freeing up marketers’ time to focus on strategy and creativity.

 

  3.

Integration: With so many different MarTech solutions available, integration has become a major challenge for marketers. To address this issue, many vendors are working to create more open platforms that can easily integrate with other tools and systems. The growing trend of open platforms allows us to gather larger amounts of data as an input from an increasing variety of marketing tools and platforms to then leverage in AI systems.

 

  4.

Data Privacy: With the increasing importance of data-driven marketing comes a greater need for data privacy and security. MarTech vendors are working to ensure that their solutions comply with regulations like the EU General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 (“CCPA”), while also providing customers with greater control over their data.

 

  5.

Results Driven Environment: In today’s economic environment, marketers are faced with internal pressure to prove the value of every dollar spent while also maintaining results across every channel. Marketers require a complete view of performance and ROI of all marketing campaigns and investments to enable better decision making and streamline their operations.

The MarTech industry is constantly evolving, and these trends are just a few of the many factors shaping its future. As technology continues to advance, the success of any MarTech company will depend on its ability to adapt to these trends and deliver real value to marketers and their customers alike.

Market Size

We compete within the business-to-business (“B2B”) MarTech value chain, which encompasses tasks ranging from acquiring and nurturing leads, to executing and optimizing campaigns and managing and measuring content, data, and performance.

In 2023, we engaged Verista Partners Inc., also known as Winterberry Group (“Winterberry”), to conduct an analysis of our opportunity within the MarTech space. Winterberry provided a Strategic Due Diligence Assessment Report (the “Winterberry Report”) on April 14, 2023, which estimated the size of our total addressable market (our “TAM”), which is defined to include B2B spending in the United States on demand generation, marketing automation, digital events platforms, account-based marketing, customer relationship management, engagement, content management systems, customer data platforms, measurement and attribution, and predictive and prescriptive analytics. The Winterberry Report forecasted our TAM to reach an estimated $39.42 billion by 2026, which would represent a projected compound annual growth rate (“CAGR”) of 11.80% during the 2020 to 2026 period. The Winterberry Report also estimated our Serviceable Addressable Market (our “SAM”), which is defined to include B2B spending in the United States on measurement and attribution, demand generation, and digital events platforms. The Winterberry Report forecasted our SAM to reach an estimated $8.37 billion by 2026. This would represent a projected CAGR of 16.07% during the 2020 to 2026 period.

 

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To calculate our estimated SAM and TAM, Winterberry started with the B2B MarTech stack from acquiring and nurturing leads to executing and optimizing campaigns to managing and measuring content, data and performance. Within that value chain, Winterberry identified which components were core to the Banzai business as of the date of the Winterberry Report (i.e., measurement and attribution, demand generation, and digital events platforms) and which would be natural adjacencies and future offerings (i.e., demand generation, marketing automation, digital events platforms, account-based marketing, customer relationship management, engagement, content management systems, customer data platforms, measurement and attribution, and predictive and prescriptive analytics). The identified core components make up our SAM, and both core components and adjacent and future offerings are included in our TAM. Winterberry then sized each component individually utilizing a range of sources estimating market spending and forecasted growth rates, including Winterberry proprietary models, as well as various other market research company products and forecasts. Depending on the estimate and whether it was global or included in B2B use cases, Winterberry utilized assumptions that 25% of spend is B2B and 33% of global spend is U.S.-specific.

The models provided by Winterberry were based on economic forecasts from government and private sector analysts as well as third-party media forecasts primarily provided by marketing agencies, governing bodies and associations, trade publications, and research analysts, all of which are subject to change. There are uncertainties inherent in attempting to make such projections and forecasts, and we encourage our stockholders and investors to perform their own investigation and carefully consider such uncertainties.

Products and Services

Our platform offers three SaaS products: Demio, Boost, and Reach.

Demio

Demio is a user-friendly, browser-based webinar platform with extensive data and marketing features designed to help businesses effectively engage with their audience through live events and on-demand, interactive video content. Demio enables customers to create, host, and manage webinars with ease, providing a suite of tools and features that enhance audience interaction, generate leads, and drive sales. Demio provides the following features and benefits to customers:

 

  1.

Easy Webinar Creation and Setup: Demio allows users to quickly create and schedule webinars with a simple, intuitive interface. Users can customize their webinar registration pages, add branding elements, and set up email reminders for attendees.

 

  2.

Live Webinars: Customers can host live webinars, where they can interact with their audience in real-time using features like polls, question & answer sessions, featured actions, and pre-loaded content.

 

  3.

Automated Webinars: Automated webinars run on a pre-set schedule and can run with or without participation from the host. This flexibility enables businesses to reach their audience at the most convenient times and increase engagement.

 

  4.

Audience Interaction: Demio offers a range of engagement tools, such as polls, question & answer sessions, and real-time chat, which allow presenters to interact with their audience during the webinar and helps create a more interactive experience, leading to higher attendee engagement.

 

  5.

Screen Sharing and Presentations: Presenters can share their screen, display slides, or play videos during the webinar, providing a seamless multimedia experience for the audience. This helps to create a more professional and polished presentation.

 

  6.

Integration with Marketing Tools: Demio integrates with various marketing tools and platforms, such as CRM systems, email marketing services, and marketing automation software, allowing users to streamline their lead generation and follow-up processes.

 

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  7.

Analytics and Reporting: Demio provides detailed analytics and reporting features, giving users insights into attendee engagement, registration conversion, and overall webinar performance. This data can help businesses optimize their webinar strategies and improve their results.

 

  8.

Lead Generation and Sales: With customizable registration forms, Demio enables customers to capture lead information during the registration process. Additionally, Demio’s built-in call-to-action (“CTA”) feature allows presenters to promote products or services during the webinar, driving sales and audience conversions.

In summary, Demio enables customers to create and host engaging, interactive webinars with ease, helping businesses generate leads, drive sales, and foster strong relationships with their audience.

Boost

Boost is a tool utilized by customers to enhance participation in their Demio webinars. This tool allows registered attendees to promote Demio webinars on social media platforms. Moreover, Boost offers incentives to current registrants to encourage additional signups. In this manner, registrants become promoters, with the ability to tailor promotional content for platforms such as Facebook, LinkedIn, Twitter, and email. Boost’s native integration with Demio ensures a smooth user experience. Boost offers customers a series of features and benefits, as outlined below:

 

  1.

Email Notifications: Boost integrates with Demio to send automated notifications to all event registrants directing them to a share page.

 

  2.

Social Sharing: Boost provides a share page that makes it easy for registrants to share Demio registration links on LinkedIn, Twitter, Facebook, and via email.

 

  3.

Link Tracking: Boost’s seamless link tracking enables customers to identify which registrants have driven additional registrations through their links.

 

  4.

Rewards: Boost enables offering rewards for registrants who drive additional registrations and tracking reward attainment through tracking links.

In summary, Boost enables customers to create social sharing campaigns for their events more easily, leading to increased registrations.

Reach

Customers use Reach to directly connect with their event’s target audience to increase registrations for their events. Reach’s Audience AI feature generates target lists of potential event attendees, and the email marketing feature sends personalized email invitations to those target lists. Reach provides features such as:

 

  1.

Audience AI: Reach enables targeting of a potential audience based on customer-defined criteria such as region, job title, company size, and revenue.

 

  2.

Automatic Event Invitations: Event invitations are automatically generated and sent to targeted customers.

 

  3.

Event Confirmation and Reminders: Confirmations and reminders are automatically generated and sent to registrants to improve attendance rate.

 

  4.

Opt-ins and Privacy Compliance: Reach enables customers to define customized privacy policy and opt-in language to help customers maintain compliance with privacy regulations such as GDPR.

 

  5.

Target Lists: Account and contact lists can be specified for inclusion or exclusion, allowing customers to enact account-based marketing (“ABM”) campaigns or exclude sensitive accounts or contacts.

 

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  6.

List Scrubbing: Target lists are pre-validated to remove invalid email addresses and other invalid contacts, improving email deliverability rates.

Reach can be used to drive event attendance and reach leads that customers might be otherwise unable to engage.

Product Roadmap and Enhancements

Improving our family of products is how we create more value for our customers and our product roadmap is an essential part of delivering on our vision of improving the value of customer interactions for companies throughout the world. The role of product management at Banzai is to identify and prioritize underserved and unmet customer and market needs and to use our ability to create products and features based on data and AI to increase customer value.

 

  1.

Strategic Vision and Alignment: We align our cross-functional objectives around a set of strategies that we update as the needs of our business change. We use these strategies to create alignment for our engineering, sales, and marketing teams. This helps us to work cohesively towards shared goals, maximizing the efficiency and effectiveness of our efforts.

 

  2.

Customer-Centric Approach: By prioritizing innovation, we demonstrate a commitment to addressing the evolving needs and expectations of our customers. This customer-centric approach helps us maintain a competitive edge, as we continuously adapt our products and services to stay relevant and valuable to our existing and future customers.

 

  3.

Long-Term Growth: By identifying opportunities for new features, enhancements, and market segments, we can strategically plan and execute our growth initiatives, supporting our long-term sustainability and success.

 

  4.

Customer Expansion: We believe our strategies support increasing the average amount of revenue we earn per customer per year (our average customer value or “ACV”) through development of features that are correlated with usage by higher value customers. We also develop add-on features and products that can be sold to our existing customers.

 

  5.

Resource Allocation: Our strategic planning process allows us to better allocate resources between projects, allowing us to advance multiple initiatives at once. This capability is essential for a multi-product company to maintain product leadership on multiple fronts.

 

  6.

Stakeholder Communication: A product roadmap serves as a powerful communication tool, enabling us to set clear expectations with our customers. We use tools such as Product Board to accept customer feedback and share upcoming product changes.

There are several product areas that we are focused on for the foreseeable future. These may change from time to time as we learn from our customers and make changes to our strategy.

 

  1.

Mobile Capabilities: By expanding our mobile web experience or developing future mobile apps, we believe we can increase customer value across multiple products, including Demio.

 

  2.

Integrations: Integrations are a core feature of Demio. Over time, we will want to develop integrations with new systems, as well as improve our existing integrations.

 

  3.

AI: We are exploring a number of additional AI-powered features such as text-to-voice, translation, transcription, and content generation.

 

  4.

Analytics & Insights: We are embedding analytics and insights features into multiple products, including Demio. These features seek to enable our customers to see new perspectives on their data, further improve their results, and dramatically reduce their manual analysis effort.

 

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  5.

Ad Generation: We believe there may be opportunities in automating ad-creative generation (e.g., text, images, and videos) to help our customers improve their ad performance through automated testing.

 

  6.

Content and Experience Hosting: We are expanding the content and experiences that can be hosted and deployed using Banzai products. For example, we plan to improve our automated events capability in Demio.

Research and Development Expenses

As a product-led company, we attain and maintain our competitive advantage through our investment in our products. Maintenance of existing products and development of new products are both essential to our long-term success. Therefore, our management team feels that significant investment in technology is required in the future. We plan to utilize a combination of in-house employees and development partners to maintain and improve our technology.

Our Growth Strategies

Our growth strategy is to expand our platform to make it more valuable to customers and find new ways to enhance a wider range of MarTech interactions. The key elements of our growth strategy are:

 

  1.

Cost Efficient Customer Acquisition: Continue to acquire new customers cost effectively through organic traffic, content, affiliates, social media, partnerships, advertising, word-of-mouth, and other sources.

 

  2.

Customer Retention and Expansion: Continue to expand our customer success and customer marketing organizations to increase customer retention and customer expansion.

 

  3.

Implement Product Improvements: Continue to develop our family of products to create defensibly differentiated solutions that are essential to customers.

 

  4.

Introduce New Products: Roll out new products that attract new customers and expand the ways we can serve existing customers.

 

  5.

Acquisition Strategy: Banzai signed and announced non-binding letters of intent (“LOI”) to acquire 4 target companies in Q1 2024. The company is still engaged in the potential acquisition of Boast and Cliently, for which the company previously announced non-binding LOIs. These companies, which operate in the MarTech space, provide data analytics, innovative solutions in social media and B2B scraping across multiple platforms. Completion of these acquisitions would enhance the company’s product offerings that would lead to the next stage of growth for Banzai.

Sales and Marketing

Our primary focus is on increasing mid-market and enterprise customers for Demio. Progress towards this is reflected in our increase in multi-host Demio customers from 12 on January 1, 2021 to 116 on December 31, 2023, an approximately 10-fold increase.

As a product-led growth company, we utilize a hybrid self-service and direct sales go-to-market approach. Our self-service customers subscribe or purchase directly from our product websites or start free product trials which can lead to a later paid subscription or purchase. Our direct sales customers subscribe or purchase through sales representatives, who are compensated with a base salary and typically participate in incentive plans such as commissions or bonuses.

Trials, customers, and leads come from organic website visitors, affiliates and partners, and visitors from paid ads such as Google ads. We also utilize partner marketing, account-based marketing, lead generation and demand generation programs, webinars, and other direct and indirect marketing activities to reach our target audience and acquire leads and customers.

 

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We sell our products using a recurring subscription license model typical in SaaS businesses. Pricing tiers for our main product, Demio, are based on the number of host-capable users, desired feature sets, and maximum audience size. Boost pricing tiers are based on the Demio plan to which the customer subscribes. Reach pricing is based on the number of event campaigns a customer has access to run simultaneously or the maximum number of registrations a customer is allowed to generate per subscription period. Our customer contracts vary in term length from single months to multiple years. It is common for our customers to purchase services to supplement their subscriptions to include additional licenses or products. For example, as of December 31, 2023, less than 8 months after the launch of the Boost product, approximately 1.0% of Demio customers had also purchased the Boost add-on product.

Competition, Strengths, and Differentiation

We compete across five distinct categories within the B2B MarTech landscape: digital events and webinars, demand generation, creative development, engagement platforms and marketing automation, and measurement and attribution.

We believe our strengths are:

 

  1.

Brand: Our recognizable brand, and the brands of our products, especially Demio, can be leveraged to acquire customers at lower costs than reliance on paid advertising alone.

 

  2.

Existing Customer Base: Our existing customers can be cross-sold additional products we may offer in the future. We can also cross sell our current products to existing customers.

 

  3.

Customer Success: We have developed an operational competency in customer success, enabling us to more effectively leverage our customer base to drive expansion sales.

We seek to differentiate ourselves from the crowded MarTech market in the following ways:

 

  1.

Data: Our products incorporate data either as a primary value proposition or an enabling feature, or by utilizing data through integrations to simplify and streamline otherwise complex business processes.

 

  2.

AI / Machine Learning: Many of our products incorporate AI and machine learning to deliver new capabilities or improved performance for our customers.

 

  3.

Marketing Industry Focus: Our focus exclusively on the marketing industry differentiates us from broad-market competitors such as Zoom and GoToWebinar in the digital event, analytics, and webinar product categories.

 

  4.

Organic Customer Acquisition: The majority of our product trials and new leads come from organic customer acquisition due to our content, social media, affiliates, word-of-mouth, and brand awareness.

 

  5.

Multi-Product Strategy: Multiple products provide opportunities to grow our customer base through expansion that single-product companies typically do not have.

Intellectual Property

To establish and protect our proprietary rights, we rely on a combination of trademarks and trade secrets, including know-how, license agreements, confidentiality procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment agreements, and other contractual rights. As of December 31, 2023, we held two registered trademark in the United States: “Banzai”, “Demio”. For more information regarding risks related to our intellectual property, please see “Risk Factors-Risks Related to Business and Industry-Failure to protect or enforce our intellectual property rights could harm our business and results of operations” and “Risk Factors-Risks Related to Business and Industry-Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could harm our business.”

 

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Government Regulation

We are subject to federal, state, and foreign legal requirements on matters customary to the SaaS and MarTech industries such as data privacy and protection, employment and labor relations, immigration, taxation, anti-corruption, import/export controls, trade restrictions, internal and disclosure control obligations, securities regulation, and anti-competition considerations.

Regarding privacy and communications, we are subject to the following regulatory standards and laws: the GDPR, CCPA, Telephone Consumer Protection Act (TCPA), Canada’s Anti-Spam Legislation (CASL), the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM), and others that may apply in the various regions in which we operate.

Violations of one or more of these diverse legal requirements in the conduct of our business could result in significant fines and other damages, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations or contractual obligations related to regulatory compliance in connection with the performance of customer contracts could also result in liability for significant monetary damages, fines and/or criminal prosecution, unfavorable publicity and other damage to our reputation, restrictions on our ability to compete for certain work and allegations by our customers that we have not performed our contractual obligations. To date, we have not experienced material fines or penalties related to these regulations.

Properties

Our principal executive office is located at 435 Ericksen Ave NE, Suite 250, Bainbridge Island, WA 98110 and, as of December 31, 2023, consists of approximately 1,800 square feet of space under a lease that expires in September 2024. We believe this facility is adequate and suitable for our current and anticipated future needs.

Legal Proceedings

From time to time, we may be party to litigation and subject to claims incident to the ordinary course of our business. As our growth continues, we may become party to an increasing number of litigation matters and claims. The outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially affect our future results of operations, cash flows, or financial position. We are not presently party to any legal proceedings that, in the opinion of management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.

Employees and Management

As of December 31, 2023, we had 13 full-time employees, 0 part-time employees, and 54 contractors.

Our culture is unique and an important contributor to our success. Our culture allows us to scale our business by attracting and retaining great people who are aligned to our values. Having shared values enables our team members to make independent decisions, encourages accountability, and fosters collaboration. Our culture is defined by four core values:

 

  1.

Learning. Technology and marketing are constantly changing. We value learning because adaptation is essential to delivering the best solutions for our customers. Our team members are open-minded, critical-thinkers who are willing to disagree, try new things, and change their minds when warranted.

 

  2.

Serving Others. Nothing happens without our customers. We value Serving Others because serving customers is the reason we exist. Our team members prioritize the needs of our customers, our team, and our communities.

 

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  3.

Game Changing. To succeed in a competitive marketplace, we have to deliver impactful solutions for our customers. Our team members find creative solutions, raise the bar, take risks, and help our customers realize more successful outcomes.

 

  4.

“10,000 Years.” To achieve long-term success, we must plan and act with the end goal in mind. We value the symbolism of the term “10,000 Years” (the literal translation of the Japanese word “Banzai”), because it reminds us that we’re building for the future-to something greater than what we see today-and that each day we’re contributing toward that vision.

Corporate Information

7GC, our predecessor company, was incorporated in the State of Delaware in September 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination involving 7GC and one or more businesses. 7GC completed its IPO in December 2020. In December 2023, First Merger Sub merged with and into Legacy Banzai, and Legacy Banzai as the Surviving Corporation merged with and into Second Merger Sub, with Second Merger Sub being the surviving entity, which ultimately resulted in Legacy Banzai becoming a wholly-owned direct subsidiary of 7GC. In connection with the Mergers, 7GC changed its name to Banzai International, Inc. Our offices are located at 435 Ericksen Ave NE, Suite 250, Bainbridge Island, WA 98110. Our website is www.banzai.io.

We have two wholly owned operating subsidiaries: Banzai Operating Co LLC (f/k/a Banzai International, Inc.) and Demio Holding, Inc.

 

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MANAGEMENT

The following is a list of the persons who currently serve, as of the date of this prospectus, as directors and executive officers of Banzai.

 

Name

   Age   

Position

Joseph P. Davy    34    Chief Executive Officer, Chairman and Director
Mark Musburger    60    Chief Financial Officer
Simon Baumer    38    Chief Technology Officer
Ashley Levesque    37    Vice President of Marketing
Rachel Stanley    41    Vice President of Customer Experience
Jack Leeney (3)    38    Director
Mason Ward (1)(2)(3)    42    Director
Paula Boggs (1)(2)(3)    64    Director
William Bryant (1)(2)    66    Director

 

(1)

Member of the audit committee.

(2)

Member of the compensation committee.

(3)

Member of the nominating and corporate governance committee.

Executive Officers

Joseph P. Davy serves as our Chief Executive Officer and a member of our Board and prior to the Business Combination, served as Chief Executive Officer and as a member the Board of Legacy Banzai since co-founding Legacy Banzai in 2015. Prior to co-founding Legacy Banzai, Mr. Davy served as the General Manager at Avalara from 2013 to 2016. From 2012 to 2013, he served as Chief Executive Officer of Buystand. From 2012 to 2013, he also served as Customer Advisory Board Member at Microsoft Corp. Mr. Davy founded EvoApp in 2009 and served as its Chief Executive Officer and Chief Product Officer from 2009 to 2012. Prior to his service at EvoApp, Mr. Davy was a software engineer at International Business Machines Corp (IBM). Mr. Davy also served as a member of the board of directors of Legalpad Inc. from 2019 to 2022. Prior to joining IBM, Mr. Davy attended the University of North Carolina at Chapel Hill from 2007 to 2010. We believe Mr. Davy is qualified to serve on the Board due to his extensive venture capital experience and experience as founder and chief executive officer of Legacy Banzai.

Mark Musburger serves as our Chief Financial Officer and prior to this, served as Legacy Banzai’s Vice President of Finance since 2022. Mr. Musburger previously served as the Chief Financial Officer of Corvee from 2021 to 2022, as the Senior Director of Finance at Identity Digital from 2016 to 2021, as a Director, Finance at Avalara from 2014 to 2016 and as a Director, FP&A at Solavei from 2013 to 2014. Mr. Musburger holds a bachelor’s degree in finance and economics and a masters in business administration from Seattle University.

Simon Baumer serves as our Chief Technology Officer and prior to this, served as Legacy Banzai’s Chief Technology Officer since 2021. Prior to that, Mr. Baumer worked at Verivox GmbH as Vice President of Engineering from 2018 to 2021, as Head of Software Development from 2016 to 2021, and as Teamlead for Software Development from 2015 to 2021.

Ashley Levesque serves as our Vice President of Marketing and prior to this, served as Legacy Banzai’s Vice President of Marketing since 2021 and Director of Marketing from 2020 to 2021. Ms. Levesque previously served as Marketing host at RevGenius and as a Marketing Host for The Revenue Podcast in 2020. Ms. Levesque worked at Soft Robotics as Senior Marketing Manager from 2019 to 2020, as Manager of Marketing from 2018 to 2019, and as Commercial Operations Manager from 2017 to 2018, and as Executive Assistant to the Chief Executive Officer from 2016 to 2017. Ms. Levesque began her career in numerous roles at Bad Habit Productions, Inc. and Great Hill Partners. Ms. Levesque holds a master’s degree from the Boston Conservatory at Berklee and a bachelor’s degree from Lawrence University.

 

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Rachel Stanley serves as our Vice President of Customer Experience and prior to this, served as Legacy Banzai’s Vice President of Revenue since 2022 and previously served as Legacy Banzai’s Vice President of Customer Experience from 2021 to 2022, as Senior Director of Customer Adoption and Support in 2021, as Director of Customer Adoption from 2020 to 2021, and as Enterprise Customer Success Manager from 2019 to 2020. In 2018, she served as Marketing Manager at Amazon. Prior to that, she worked at ACS Technologies as Team Leader from 2014 to 2018, as Implementation Consultant from 2012 to 2014, and as Launch and Onboarding Coordinator in 2012. Ms. Stanley worked at CRISTA Ministries as Administrative Assistant in the President’s Office from 2011 to 2012. Ms. Stanley holds a degree from Palm Beach Atlantic University.

Non-Employee Directors

Jack Leeney has served as a member of the Board since December 2023, and prior to this, served as 7GC’s Chairman and Chief Executive Officer since its inception. Since September 2016, Mr. Leeney has served as a Founding Partner of 7GC & Co Sarl and is responsible for running the firm’s operations. Mr. Leeney led the firm’s investments in Cheddar TV, Capsule Pharmacy, hims & hers, Jyve, Roofstock, The Mom Project, and Reliance Jio. Since 2020, he has served as a director for The Mom Project. From December 2020 to November 2022, he served as a director of PTIC, a SPAC that closed an initial business combination with RW National Holdings, LLC (d/b/a Appreciate), the parent holding company of Renters Warehouse, in November 2022. Between April 2011 and December 2016, Mr. Leeney served on the boards of directors of Quantenna Communications, Inc. (Nasdaq: QTNA), DoAt Media Ltd. (Private), CinePapaya (acquired by Comcast), Joyent (acquired by Samsung), BOKU, Inc. (AIM: BOKU), Eventful (acquired by CBS) and Blueliv (Private). Previously, Mr. Leeney served as the Head of U.S. Investing for Telefonica Ventures, the investment arm of Telefonica (NYSE: TEF), between June 2012 and September 2016 and as an investor at Hercules Capital (NYSE: HTGC) between May 2011 and June 2012. He began his career as a technology-focused investment banker at Morgan Stanley in 2007, where he worked on the initial public offerings for Tesla Motors, LinkedIn, and Pandora. Mr. Leeney holds a B.S. from Syracuse University. We believe Mr. Leeney is qualified to serve on the Board due to his extensive venture capital experience.

Mason Ward has served as a member of the Board since December 2023, and prior to this, has served as the Chief Financial Officer of Alco Investment Company since 2018, and served as its Controller and Finance Director from 2015 to 2018. Prior to joining Alco, Mr. Ward served as an Infantry Officer in multiple operations, logistics, risk management and fiscal operations roles during two deployments to Afghanistan with the United States Army. Mr. Ward holds a B.S. in Civil Engineering from the University of Cincinnati and a Certificate in Accounting and a Masters in Business Administration from the University of Washington, and he is also a certified public accountant (inactive). We believe Mr. Ward is qualified to serve on the Board due to his extensive finance and accounting expertise and experience.

Paula Boggs has served as a member of the Board since December 2023, and prior to this, is the founder and owner of Boggs Media, LLC, which manages Ms. Boggs’ musical, public speaking, and other creative business endeavors. A former executive at the Starbucks Coffee Company, she led the global law department of Starbucks from 2002 to 2012 and was Corporate Secretary of the Starbucks Foundation. Prior to that, Ms. Boggs was a Vice President of Legal for products, operations and information technology at Dell Computer Corporation from 1997 to 2002 and also held the role of Senior Deputy General Counsel starting in June 1997. Before joining Dell, Ms. Boggs was a partner with the law firm of Preston Gates & Ellis LLP from 1995 to 1997. Ms. Boggs is also a voting member and Pacific Northwest Chapter Governor of the Recording Academy, and serves on the Newport Festivals Foundation board, overseeing both the Newport Jazz Festival and Newport Folk Festival. She was previously on the board of Fender; a member of the Board of Premera Blue Cross and chair of its compensation and investments committees; a member of the Nominating/Trusteeship, Audit/Compliance (including six years as the chair of the audit committee) and Executive Committees of Johns Hopkins University’s board of trustees; a member of the Executive Committee of KEXP Radio, an affiliate of National Public Radio and the University of Washington; a member of the audit committee for School of Rock LLC; a member of the American Bar Association board of governors, chairing its investments committee; a member of

 

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the President’s Committee for the Arts and the Humanities from 2013 through 2017; a member of the White House Council for Community Solutions from 2010 to 2012; a member of the audit and nominating committee of the American Red Cross; and a member of the board of Sterling Financial Inc. Ms. Boggs holds a B.A. from Johns Hopkins University and a J.D. from the University of California at Berkeley. We believe Ms. Boggs is qualified to serve on the Board due to her extensive governance and Fortune 500 experience with high-growth companies.

William Bryant has served as a member of the Board since December 2023, and prior to this, has served as the general partner of Threshold Ventures, a venture capital firm, since 2007 and has been a founder, board member, advisor and investor in over twenty venture backed startups. Prior joining Threshold Ventures, Mr. Bryant served as the Chief Executive Officer of Mixxer Inc. from 2005 to 2006, as a Venture Partner with Atlas Venture from 2001 to 2002 and as Chief Executive Officer and Chairman of Qpass Inc. from 1997 until its acquisition in 2001 by Amdocs. Mr. Bryant has also served as a director for multiple public and private companies, including, recently, Remitly Global (REMY) from 2015 to 2022. Mr. Bryant holds a Ph.D. in Business Strategy and a Masters in Business Administration in Business Strategy and Entrepreneurship from the University of Washington. We believe Mr. Bryant is qualified to serve on the Board due to his extensive experience in venture capital and as a public company board member.

Role of Board in Risk Oversight

One of the key functions of the Board is informed oversight of the Company’s risk management process. The Board does not currently have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoring and assessing strategic risk exposure and the Company’s audit committee (the “Audit Committee”) has the responsibility to consider and discuss the Company’s major financial risk exposures and the steps its management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Company’s audit committee also monitors compliance with legal and regulatory requirements. The Company’s compensation committee (the “Compensation Committee”) assesses and monitors whether the Company’s compensation plans, policies and programs comply with applicable legal and regulatory requirements. See “Description of Securities-Anti-Takeover Effects of Delaware Law and the Charter.”

Composition of the Board

The Company’s business and affairs is managed under the direction of the Board. The Board currently consists of five members, with Joseph Davy serving as Chairman of the Board. The primary responsibilities of the Board are to provide oversight, strategic guidance, counseling, and direction to the Company’s management. The Board meets on a regular basis and additionally as required.

In accordance with the terms of the Charter, the Board is divided into three classes, Class I, Class II and Class III, with only one class of directors being elected in each year and each class serving a three-year term. The Class I directors are elected to an initial one-year term (and three-year terms subsequently), the Class II directors are elected to an initial two-year term (and three-year terms subsequently) and the Class III directors are elected to an initial three-year term (and three-year terms subsequently). There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.

The Board is divided into the following classes:

 

   

Class I, which consists of Joseph Davy, whose term will expire at the Company’s first annual meeting of stockholders to be held in 2024;

 

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Class II, which consists of William Bryant and Mason Ward, whose terms will expire at the Company’s annual meeting of stockholders to be held in 2025; and

 

   

Class III, which consists of Paula Boggs and Jack Leeney, whose terms will expire at the Company’s third annual meeting of stockholders to be held in 2026.

At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following their election and until their successors are duly elected and qualified. This classification of the Board may have the effect of delaying or preventing changes in the Company’s control or management. Directors may be removed for cause by the affirmative vote of the holders of at least 66 2/3% of the voting power of all outstanding shares of capital stock of the Company entitled to vote at an election of directors, voting together as a single class.

Director Independence

The Board has determined that each of the directors of the Company other than Mr. Davy qualify as independent directors, as defined under the listing rules of Nasdaq (the “Nasdaq listing rules”), and that the Board consists of a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq listing rules relating to director independence requirements.

Board Committees and Committee Composition

The Board has three standing committees: the audit committee, the compensation committee and the nominating and corporate governance committee. Each committee operates under a written charter that has been approved by the Board and satisfies the applicable listing standards of Nasdaq. Written copies of these committee charters may be obtained by contacting our Investor Relations Department at 435 Ericksen Ave NE, Suite 250, Bainbridge Island, WA 98110. These documents are also available on the Corporate Governance section of our website at https://ir.banzai.io/corporate-governance/governance-overview.

The Chair of each committee reviews and discusses the agendas and materials for meetings with senior management in advance of distribution to the other committee members, and reports to the Board on actions taken at each committee meeting. The following table sets forth the current membership of each committee.

 

Name

  

Audit

Committee

  

Compensation

Committee

  

Nominating and Corporate Governance
Committee

Joseph P. Davy

   —     —     — 

Jack Leeney

   —     —    

Mason Ward

  

   Chair   

Paula Boggs

  

  

   Chair

William Bryant

   Chair   

   — 

Audit Committee

The Audit Committee consists of William Bryant, who serves as the chairperson, Mason Ward, and Paula Boggs. Each member qualifies as an independent director under the Nasdaq corporate governance standards, and that each of Ms. Boggs and Mr. Bryant qualifies as independent under the independence requirements of Rule 10A-3 of the Exchange Act. In arriving at this determination, the Board examined each audit committee member’s scope of experience and the nature of their prior and/or current employment.

The Board determined that Mr. Bryant qualifies as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K and possesses financial sophistication, as defined under the rules of Nasdaq. In making this determination, the Board considered Mr. Bryant’s: understanding of generally accepted accounting principles and financial statements, ability to assess the general application of such principles in

 

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connection with the accounting for estimates, accruals and reserves; experience in actively supervising one or more persons engaged in preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements; understanding of internal control over financial reporting; and understanding of audit committee functions. We are relying on the phase-in exemption provided under Rule 10A-3 of the Exchange Act and the Nasdaq rules. While we believe Mr. Ward may be deemed to own in excess of 10% of our Class A Common Stock, a class of voting securities, as of the date of this prospectus, which would leave him outside the safe harbor provision of SEC Rule 10A-3, Mr. Ward will serve on the Audit Committee under the phase-in exemption referenced above. In accordance with the phase-in exemption, we expect that a majority of the members of our Audit Committee will satisfy the independence standards under the Exchange Act and Nasdaq listing rules within 90 days of the closing of the Business Combination and all members of our Audit Committee will satisfy the independence standards under the Exchange Act and Nasdaq listing rules within 12 months of the Closing of the Business Combination.

The primary purpose of the Audit Committee is to discharge the oversight responsibilities of the Board with respect to our corporate accounting and financial reporting processes, systems of internal control over financial reporting, and financial statement audits, as well as the quality and integrity of the financial statements and reports and to oversee the qualifications, independence, and performance of our independent registered public accounting firm. The Audit Committee also provides oversight assistance in connection with legal, risk, regulatory, and ethical compliance programs established by management and the Board. Specific responsibilities of the Audit Committee include:

 

   

helping the Board oversee its corporate accounting and financial reporting processes;

 

   

reviewing and discussing with management the adequacy and effectiveness of our disclosure controls and procedures;

 

   

assisting with design and implementation of our risk assessment functions;

 

   

managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

 

   

discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;

 

   

developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

 

   

reviewing related person transactions;

 

   

obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes our internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law; and

 

   

approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm.

Compensation Committee

The Compensation Committee consists of Mason Ward, who serves as the chairperson, Paula Boggs and William Bryant. Each member is independent under the listing standards of Nasdaq, including Nasdaq’s controlled company exemption which is discussed below, and a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.

The primary purpose of the Compensation Committee will be to discharge the responsibilities of the Board in overseeing the Company’s compensation policies, plans, and programs and to review, approve, and/or

 

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recommend the compensation to be paid to its executive officers, directors, and other senior management, as appropriate. Specific responsibilities of the Compensation Committee include:

 

   

reviewing and recommending to the Company’s Board the compensation of the Chief Executive Officer and other executive officers;

 

   

reviewing and recommending to the Board the compensation of the Company’s directors;

 

   

administering the Company’s equity incentive plans and other benefit programs;

 

   

reviewing, adopting, amending and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections and any other compensatory arrangements for the Company’s executive officers and other senior management;

 

   

reviewing and establishing general policies relating to compensation and benefits of the Company’s employees, including the Company’s overall compensation philosophy; and

 

   

reviewing and evaluating with the Chief Executive Officer the succession plans for the Company’s executive officers.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee consists of Paula Boggs, who serves as the chairperson, Jack Leeney and Mason Ward. Each member is independent under the listing standards of Nasdaq, including Nasdaq’s controlled company exemption which is discussed below.

Specific responsibilities of the Nominating and Corporate Governance Committee include:

 

   

identifying, reviewing, and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by stockholders, to serve on the Board;

 

   

considering and making recommendations to the Board regarding the composition and chairmanship of the committees of the Board;

 

   

reviewing with the Chief Executive Officer the plans for succession to the offices of the Company’s executive officers and make recommendations to the Board with respect to the selection of appropriate individuals to succeed to these positions;

 

   

developing and making recommendations to the Board regarding corporate governance guidelines and matters; and

 

   

overseeing periodic evaluations of the Board’s performance, including committees of the Board.

Controlled Company Exemption

Mr. Davy currently controls more than a majority of the total voting power of stockholders of the Company. As a result, the Company is a “controlled company” within the meaning of Nasdaq corporate listing rules. Under Nasdaq listing rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain Nasdaq rules regarding corporate governance, including the following:

 

   

the requirement that a majority of its board of directors consist of independent directors;

 

   

the requirement that director nominees must be selected, or recommended for selection, by either (i) the independent directors constituting a majority of the board of directors’ independent directors in a vote in which only independent directors participate or (ii) a nominations committee comprised solely of independent directors;

 

   

the requirement to maintain a compensation committee with prescribed duties and a written charter comprised solely of independent directors; and

 

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the requirement of an annual performance evaluation of our nominating and corporate governance and compensation committees.

As a “controlled company,” the Company may elect to rely on some or all of these exemptions. However, the Company does not currently intend to take advantage of any of these exemptions. Following the completion of this offering, assuming the maximum amount of shares of Class A Common Stock being offered for sale in this offering is subscribed for, Mr. Davy will no longer own a majority of the total outstanding voting power of the outstanding common stock of the Company. As a result, we will no longer be a “controlled company” under the corporate governance rules for Nasdaq-listed companies.

Code of Business Conduct and Ethics

We have a code of business conduct and ethics (the “Code of Conduct”) that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We will provide, without charge, a copy of our Code of Conduct upon written request mailed to the attention of our Investor Relations Department at 435 Ericksen Ave NE, Suite 250, Bainbridge Island, WA 98110. Our Code of Conduct is available under the Corporate Governance section of our website at https://ir.banzai.io/corporate-governance/governance-overview.We will post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the Code of Conduct. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is currently or has been during the Company’s last fiscal year one of its officers or employees. None of the Company’s executive officers currently serves, or has served during the last year, as a member of the Board or Compensation Committee of any entity that has one or more executive officers that serve as a member of the Board or Compensation Committee.

Limitation on Liability and Indemnification of Directors and Officers

Our Charter eliminates each director’s liability for monetary damages for breaches of fiduciary duty as a director, except to the extent prohibited by law, unless a director violated his or her duty of loyalty to the Company or its stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived improper personal benefit from his or her actions as a director. The Charter eliminates directors’ liability for monetary damages to the fullest extent permitted by applicable law. Our Charter requires the Company to indemnify and advance expenses to, to the fullest extent permitted by applicable law, its directors, officers, and agents and prohibit any retroactive changes to the rights or protections or increase the liability of any director in effect at the time of the alleged occurrence of any act or omission to act giving rise to liability or indemnification. We believe these provisions in our Charter are necessary to attract and retain qualified persons as directors and officers. However, these provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

 

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EXECUTIVE AND DIRECTOR COMPENSATION

Executive Officer Compensation

Our named executive officers for the fiscal year ended December 31, 2023, consisting of our principal executive officer, principal financial officer and the next two most highly compensated executive officers, were:

Joseph P. Davy, our Chief Executive Officer;

Mark Musburger, our Chief Financial Officer;

Simon Baumer, our Chief Technology Officer; and

Ashley Levesque, our Vice President of Marketing.

2023 Summary Compensation Table

The following table presents the compensation paid or awarded to our named executive officers with respect to the fiscal years ended December 31, 2023 and, to the extent required by SEC disclosure rules, December 31, 2022.

 

Name and Principal Position    Year      Salary
($)
     Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
     All Other
Compensation
($)(3)
     Total
($)
 

Joseph P. Davy

     2023      $ 300,000      $ —      $ —       $ 18,216      $ 318,216  

Chief Executive Officer

     2022        237,500        —        —         5,500        243,000  

Mark Musburger

     2023        216,000        1,133,105 (1)      —         —         1,349,105  

Chief Financial Officer

     2022        —         —        —         —         —   

Simon Baumer

     2023        250,000        289,559 (1)      —         —         539,559  

Chief Technology Officer

     2022        250,000        38,210       —         —         288,210  

Ashley Levesque

     2023        180,000        621,296 (1)      —         11,594        812,890  

Vice President of Marketing

     2022        151,818        7,642 (2)      —         3,000        162,460  

 

(1)

The amounts disclosed represent the (i) aggregate grant date fair value of the stock options granted to our named executive officers during the fiscal year ended December 31, 2023 under the 2016 Plan Equity Incentive Plan (the “2016 Plan”) (Mr. Musburger, $1,104,209; Mr. Baumer $262,289; Ms. Levesque, $595,294) and (ii) the incremental cost under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“ASC Topic 718”) associated with a reduction in the exercise price of certain outstanding options that occurred in December 2023 (Mr. Musburger, $28,896; Mr. Baumer, $27,270; Ms. Levesque, $26,002), each computed in accordance ASC Topic 718. The assumptions used in calculating the grant date fair value of the stock options are set forth in Note 19 to our audited consolidated financial statements included in the registration statement of which this prospectus forms a part. This amount does not reflect the actual economic value that may be realized by the named executive officer.

(2)

The amounts disclosed represent the aggregate grant date fair value of the stock options granted to our named executive officers during the fiscal year ended December 31, 2022 under the 2016 Plan computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the stock options are set forth in Note 19 to our audited consolidated financial statements included elsewhere in the registration statement of which this prospectus forms a part. This amount does not reflect the actual economic value that may be realized by the named executive officer.

(3)

Consists of Company contributions to the Company’s 401(k) plan.

 

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Narrative Disclosure to Summary Compensation Table

Non-Equity Incentive Plan Compensation

In addition to base salaries, our named executive officers are eligible to receive annual performance-based cash bonuses, which are designed to provide appropriate incentives to our employees to achieve defined performance goals. None of our named executive officers received or will receive annual performance-based cash bonuses with respect to the fiscal years ended December 31, 2022 or December 31, 2023.

Equity Grants

To further align the interests of our executive officers with the interests of our stockholders and to further focus our executive officers on our long-term performance, Legacy Banzai historically granted equity compensation in the form of stock options. Stock options allow the holder to exercise the stock option and receive shares upon exercise, with the exercise price determined based on the fair market value of a share of common stock at the time of grant.

The stock options granted to our named executive officers vested or will vest in a 25% increment on the one-year anniversary of the vesting commencement date and thereafter 1/48th of the total shares underlying the option award vests in 36 equal monthly installments, subject to the named executive officer’s continued service at each vesting date.

During 2023, Ms. Levesque received option grants with respect to 115,000 shares with an original exercise price of $7.36 per share. On December 6, 2023, the Board approved a repricing of the 2023 option awards granted to Ms. Levesque, reducing the exercise price to $5.15 per share, which, upon the closing of the Business Combination, then increased to $8.38 and at the same time the original option grants reduced to 70,685 shares.

During 2023, Mr. Baumer received option grants with respect to 50,000 shares with an original exercise price of $7.36 per share. On December 6, 2023, the Board approved a repricing of the 2023 option awards granted to Mr. Baumer, reducing the exercise price to $5.15 per share, which, upon the closing of the Business Combination, then increased to $8.38 and at the same time the original option grants reduced to 30,732 shares.

During 2023, Mr. Musburger received option grants with respect to 150,000 shares with an original exercise price of $7.36 per share. On December 6, 2023, the Board approved a repricing of the 2023 option awards granted to Mr. Musburger, reducing the exercise price to $5.15 per share, which, upon the closing of the Business Combination, then increased to $8.38 and at the same time the original option grants reduced to 92,199 shares. 

 

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Outstanding Equity Awards as of December 31, 2023

The following table presents the outstanding equity incentive plan awards held by each named executive officer as of December 31, 2023.

 

                   Option Awards (1)  
Name    Grant Date      Vesting
Commencement
Date
     Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
     Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) (2)
     Option
Exercise
Price
Per
Share
($)
     Option
Expiration
Date
 

Joseph P. Davy

     —         —         —         —         —         —   

Mark Musburger

     12/3/2023        10/1/2023        —         46,099      $ 8.38        12/2/2033  
     12/3/2023        12/9/2022        9,219        27,660      $ 8.38        3/1/2033  
     12/3/2023        12/9/2022        13,829        41,490      $ 8.38        3/1/2033  

Simon Baumer

     12/3/2023        12/9/2022        7,683        23,049      $ 8.38        3/1/2033  
     2/16/2022        1/31/2022        14,725        16,007      $ 2.77        2/15/2032  
     7/14/2021        7/1/2021        18,567        12,165      $ 2.82        7/14/2031  

Ashley Levesque

     12/3/2023        6/1/2022        26,507        44,179      $ 8.38        3/1/2033  
     2/16/2022        1/31/2022        255        3,202      $ 2.77        2/15/2032  
     7/14/2021        2/21/2021        153        2,152      $ 2.82        7/14/2031  
     7/14/2021        7/1/2021        1,882        3,163      $ 2.82        7/14/2031  

 

(1)

Each of the equity awards was granted under the 2016 Plan.

(2)

25% of the total shares underlying the option award vest on the one-year anniversary of the vesting commencement date, thereafter 1/48th of the total shares underlying the option award vest in 36 equal monthly installments, subject to the named executive officer’s continued service at each vesting date.

Additional Narrative Disclosure

401(k) Plan

We maintain a 401(k) plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation up to certain Code limits, which are updated annually. We make employer contributions under the 401(k) plan and also have the ability to make employer profit sharing contributions to the 401(k) plan. The 401(k) plan is intended to be qualified under Section 401(a) of the Code, with the related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan are deductible by us when made, and contributions and earnings on those amounts are not generally taxable to the employees until withdrawn or distributed from the 401(k) plan.

Non-Employee Director Compensation

The Board reviews director compensation periodically to ensure that director compensation remains competitive such that the Company is able to recruit and retain qualified directors. While none of the non-employee directors received compensation during the fiscal years ended December 31, 2023 or December 31, 2022 for services rendered to the Company, in December 2023, the Company adopted a board of directors’ compensation program that is designed to align compensation with the Company’s business objectives and the creation of stockholder value, while enabling the Company to attract, retain, incentivize, and reward directors who contribute to the long-term success of the Company. Under that program, our non-employee directors are eligible to receive the following:

 

   

Annual base retainer of $100,000, to be paid as determined by the compensation committee;

 

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Committee Chair Retainers: Audit Committee, $10,000; Compensation Committee, $5,000; and Nominating and Corporate Governance Committee, $5,000.

 

   

Committee Member Retainers: Audit Committee, $5,000; Compensation Committee, $2,500; and Nominating and Corporate Governance Committee, $2,500

Our non-employee directors are also reimbursed for their reasonable out-of-pocket travel expenses to cover in-person attendance at and participation in Board and committee meetings.

Disclosure of Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, subject to compliance with the terms of our insider trading policy. The sale of any shares under such a plan will be subject to the Lock-Up Agreements, to the extent that the selling director or executive officer is a party thereto.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act. As an emerging growth company, we are exempt from certain requirements related to executive compensation, including the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of our chief executive officer to the median of the annual total compensation of all of our employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The following is a summary of transactions since January 1, 2022 and any currently proposed transactions to which the Company was or is to be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 and one percent of the average of the Company’s total assets at year end for the last two completed fiscal years, and in which any of the Company’s directors, executive officers or, to the Company’s knowledge, beneficial owners of more than 5% of the Company’s capital stock, or their immediate family members have had or will have a direct or indirect material interest, other than compensation and other arrangements that are described under the section of this prospectus titled “Executive and Director Compensation.”

Amended & Restated Registration Rights Agreement

In connection with the Business Combination, on the Closing Date, the Company, the Sponsor and certain securityholders of 7GC and Legacy Banzai entered into the Amended and Restated Registration Rights Agreement (the “A&R Registration Rights Agreement”), which amended and restated that certain Registration Rights Agreement, dated December 22, 2020. The A&R Registration Rights Agreements provides these holders (and their permitted transactions) with the right to require the Company, at the Company’s expense, to register shares of Class A Common Stock that they hold on customary terms for such a Business Combination, including customary demand and piggyback registration rights. The A&R Registration Rights Agreement also provides that the Company pay certain expenses of the electing holders relating to such registrations and indemnify them against certain liabilities that may arise under the Securities Act.

In addition, subject to certain exceptions, the A&R Registration Rights Agreement provides for certain restrictions on transfer with respect to the securities of the Company. Such restrictions began upon Closing and end at the earliest of (A) 180 days after the Closing and (B) the first date on which (x) the closing price of Class A Common Stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing or (y) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in the Company’s stockholders having the right to exchange their shares of Class A Common Stock for cash, securities, or other property.

Lock-up Agreements

In connection with the Business Combination, on the Closing Date, the Company and certain stockholders and executives of Legacy Banzai, including Legacy Banzai’s officers, directors, and certain holders of 10% or more of the outstanding shares of Legacy Banzai Common Stock as of the date of the Merger Agreement, entered into Lock-Up Agreements effective as of the Closing Date (each, a “Lock-Up Agreement”). The terms of the Lock-Up Agreements provide that such signatory stockholders agree not to, without the prior written consent of the Company (subject to certain exceptions): (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Act and the rules and regulations of the SEC promulgated thereunder, any shares of Common Stock held by him, her, or it immediately after the Closing, any shares of Common Stock issuable upon the exercise of options to purchase shares, or any securities convertible into or exercisable or exchangeable for Common Stock held by him, her, or it immediately after the Closing, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii) until 180 days after the Closing Date.

Share Transfer Agreements

On December 13, 2023, in connection with the Business Combination, 7GC and the Sponsor entered into a share transfer agreement (the “December Share Transfer Agreement”) with Alco, pursuant to which for each

 

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$10.00 in principal borrowed under the New Alco Note, the Sponsor agreed to forfeit three shares of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive three shares of Class A Common Stock, in each case, at (and contingent upon) the Closing, with such forfeited and issued shares capped at an amount equal to 600,000. On October 3, 2023 and November 16, 2023, 7GC, the Sponsor, and Alco also entered into share transfer agreements, pursuant to which the Sponsor agreed to forfeit an aggregate of 225,000 shares of 7GC Class B Common Stock held by the Sponsor, in exchange for the right of Alco to receive 225,000 shares of Class A Common Stock at (and contingent upon) the Closing (such share transfer agreements together with the December Share Transfer Agreement, the “Share Transfer Agreements”). Alco is subject to a 180-day lock-up period with respect to such shares of Class A Common Stock pursuant to the Share Transfer Agreements, subject to customary exceptions. Additionally, in connection with the December Share Transfer Agreement, (a) Legacy Banzai issued the New Alco Note to Alco in the aggregate principal amount of $2.0 million, which bears interest at a rate of 8% per annum and will be due and payable on December 31, 2024, and (b) Legacy Banzai, Alco, and the Lender agreed to amend that certain Subordinated Promissory Note issued by Legacy Banzai to Alco on September 13, 2023 in the aggregate principal amount of $1.5 million to extend the maturity date from January 10, 2024 to September 30, 2024. Immediately prior to, and substantially concurrently with, the Closing, (i) the Sponsor surrendered and forfeited to 7GC for no consideration an aggregate of 825,000 shares of the class B common stock of 7GC and (ii) the Company issued to Alco 825,000 shares of Class A Common Stock pursuant to the Share Transfer Agreements.

7GC Related Party Transactions

Related Party Loans

In connection with the extension of 7GC’s deadline to consummate an initial business combination, on December 21, 2022, 7GC issued to the Sponsor an unsecured promissory note, dated as of December 21, 2022 (the “2022 Promissory Note”), which provided for borrowings from time to time of up to an aggregate of $2.3 million. On October 3, 2023, 7GC also issued to the Sponsor an unsecured promissory note, dated as of October 3, 2023 (the “2023 Promissory Note,” and together with the 2022 Promissory Note, the “7GC Promissory Notes”), which provided for borrowings from time to time of up to an aggregate of $500,000.

Upon the Closing of the Business Combination, the 7GC Promissory Notes became payable, and the Sponsor gained the option, but not the obligation, to convert the principal balance of the 7GC Promissory Notes, in whole or in part, into shares of Class A Common Stock (the “Converted Shares”) equal to the principal amount of the 7GC Promissory Notes so converted divided by $10.00. On December 12, 2023, in connection with the Business Combination, the Sponsor and 7GC amended the optional conversion provision of the 7GC Promissory Notes to provide that the Sponsor has the right to elect to convert up to the full amount of the principal balance of the 7GC Promissory Notes, in whole or in part, 30 days after the Closing at a conversion price equal to the average daily VWAP of the Class A Common Stock for the 30 trading days following the Closing. Pursuant to these amended terms, each of the 7GC Promissory Notes was converted in full on February 2, 2024, resulting in the issuance to the Sponsor of an aggregate of 890,611 shares of our Class A Common Stock.

Administrative Support Agreement

As of December 31, 2023, the Company had accrued a total of approximately $40,000 related to office space, utilities, and secretarial and administrative support services, incurred by our predecessor, 7GC.

Legacy Banzai Related Party Transactions

Convertible Note Financing

Beginning in July 2022, Legacy Banzai issued convertible promissory notes (the “2022 Notes”) to certain accredited investors in an aggregate principal amount of approximately $6.0 million (of which $4.2 million was issued to related parties). The 2022 Notes accrued interest at a rate of 8% per annum. During the year ended

 

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December 31, 2023, Legacy Banzai issued additional convertible promissory notes to certain accredited investors in an aggregate principle amount of approximately $4.0 million (of which $2.6 million was issued to related parties) under the same terms of the 2022 Notes (together with the 2022 Notes, the “Legacy Banzai Notes”). The Legacy Banzai Notes, including principal and interest, converted into shares of our Class A Common Stock in connection with the Closing of the Business Combination.

The table below sets forth the aggregate principal amount of Legacy Banzai Notes issued to Legacy Banzai’s related parties:

 

Stockholder

   Aggregate
Principal
Amount
 

Entities Affiliated with DNX Partners (1)

   $ 1,500,000  

Alco (2)

   $ 5,100,538  

William Bryant (3)

   $ 33,000  

Mason Ward (4)

   $ 150,000  

 

(1)

Consists of (i) a 2022 Note issued to DNX III in the principal amount of $717,000 (ii) a 2022 Note issued to DNX Japan III in the principal amount of $258,000, (iii) a 2022 Note issued to DNX S-III in the principal amount of $25,000, (iv) a 2022 Note issued to DNX III in the principal amount of $358,500, (v) a 2022 Note issued to DNX Japan III in the principal amount of $129,000, (vi) a 2022 Note issued to DNX S-III in the principal amount of $12,500 ((i)-(iii) together, the “2022 DNX Notes”, (iv)-(vi) together, the “2023 DNX Notes” and, the 2022 DNX Notes and the 2023 DNX Notes, together, the “DNX Notes”). The 2022 DNX Notes were issued in on July 1,2022 and the 2023 DNX Notes were issued on May 11, 2023.

(2)

Consists of (i) a 2022 Note issued to Alco in the principal amount of $1,000,000 on July 1, 2022, (ii) a 2022 Note issued to Alco in the principal amount of $2,100,538.22 on July 19, 2022, (iii) a 2023 Note issued to Alco in the principal amount of $1,500,000 on March 8, 2023 and (iv) a 2023 Note issued to Alco in the principal amount of $500,000 on May 10, 2023.

(3)

Consists of (i) a 2023 Note issued to William Bryant in the principal amount of $33,000 on June 6, 2023.

(4)

Consists of (i) a 2022 Note issued to Mason Ward in the principal amount of $50,000 on July 28, 2022, (ii) a 2022 Note issued to Mason Ward in the principal amount of $50,000 on September 2, 2022, and (iii) a 2023 Note issued to Mason Ward in the principal amount of $50,000 on June 14, 2023.

Promissory Notes

On August 30, 2023, the Company issued the Alco August Promissory Note in the aggregate principal amount of $150,000 to Alco. Alco held approximately 5% of the issued equity of the Company, through its ownership of Series A Preferred Stock, for all periods presented. The Alco August Promissory Note bears interest at a rate of 8% per annum. The outstanding principal and accrued interest are due and payable on May 31, 2024, as amended on April 18, 2024.

On September 13, 2023, the Company issued the Alco September Promissory Note in the aggregate principal amount of up to $1,500,000 to Alco. The Alco September Promissory Note bears interest at a rate of 8% per annum. In December 2023, the Alco September Promissory Note was amended pursuant to the Alco September Promissory Note Amendment to extend the maturity date to September 30, 2024.

On November 16, 2023, the Company issued the Alco November Promissory Note in the aggregate principal amount of up to $750,000 to Alco. The Alco November Promissory Note bears interest at a rate of 8% per annum. The outstanding principal and accrued interest are due and payable on May 31, 2024, as amended on April 18, 2024. As of December 31, 2023, $750,000 of principal and $7,397 of accrued interest is outstanding under the Alco November Promissory Note recorded in note payable—related party on the consolidated balance sheets.

 

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On December 13, 2023, the Company issued a subordinate promissory note (“Alco December Promissory Note”) in the aggregate principal amount of up to $2,000,000 to Alco. The Alco December Promissory Note bears interest at a rate of 8% per annum. The outstanding principal and accrued interest are due and payable on December 31, 2024. As of December 31, 2023, $2,000,000 of principal and $7,890 of accrued interest is outstanding under the Alco December Promissory Note recorded in note payable—related party on the consolidated balance sheets.

Series A Preferred Stock Financing

In February 2020, Legacy Banzai issued and sold an aggregate of 2,129,476 shares of its Series A-1 Preferred Stock at a purchase price of $2.9155 per share, for an aggregate purchase price of approximately $6.2 million, and issued an aggregate of 199,347 shares of its Series A-2 Preferred Stock upon conversion of an aggregate of $100,000 in SAFE Agreements.

The table below sets forth the number of shares of Legacy Banzai Series A Preferred Stock purchased by Legacy Banzai’s related parties, which were converted into shares of our Class A Common Stock in connection with the Closing of the Business Combination:

 

Stockholder

   Shares of
Series A-1
and
Series A-2
Preferred Stock
     Total Cash
Purchase
Price
     Conversion of
SAFE
 

Entities affiliated with DNX Partners (1)

     1,371,977      $ 3,999,999      $ —   

Alco (2)

     524,219      $ 999,999      $ 100,000  

William Bryant (3)

     17,149      $ 49,998      $ —   

 

(1)

Consists of (i) 1,104,166 shares of Series A-1 Preferred Stock purchased by DNX III, (ii) 350,266 shares of Series A-1 Preferred Stock purchased by DNX Japan III, and (iii) 7,545 shares of Series A-1 Preferred Stock purchased by DNX S-III. DNX III LLC is the general partner of DNX III and DNX Japan III, and DNX S3 is the general partner of DNX S-III. Mitch Kitamura, a member of Banzai’s board of directors, is the manager of each of DNX III LLC and DNX S3.

(2)

Consists of (i) 342,994 shares of Series A-1 Preferred Stock purchased by Alco and (ii) 181,225 shares of Series A-2 Preferred Stock purchased by Alco in consideration of the conversion of a SAFE Agreement issued to Alco in 2016.

(3)

Consists of 17,149 shares of Series A-1 Preferred Stock purchased by William Bryant.

SAFE Financing

In September 2021, Legacy Banzai entered into SAFE Agreements (the “2021 SAFEs”) with accredited investors in an aggregate principal amount of approximately $3.8 million.

The table below sets forth the aggregate principal amount of 2021 SAFEs issued to Legacy Banzai’s related parties, which was converted into shares of our Class A Common Stock in connection with the Closing of the Business Combination:

 

Stockholder (3)(4)

   Aggregate
Principal
Amount
 

Entities Affiliated with DNX Partners (1)

   $ 1,000,000  

Alco (2)

   $ 2,500,000  

William Bryan (3)

   $ 67,000  

 

(1)

Consists of (i) a 2021 SAFE entered into with DNX III in the principal amount of $717,000, (ii) a 2021 SAFE entered into with DNX Japan III in the principal amount of $258,000, and (iii) a 2021 SAFE entered

 

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  into with DNX S-III in the principal amount of $25,000 (together, the “DNX SAFEs”). Each of the DNX SAFEs were issued on September 17, 2021. DNX III LLC is the general partner of DNX III and DNX Japan III, and DNX S3 is the general partner of DNX S-III. Mitch Kitamura, a member of Banzai’s board of directors, is the manager of each of DNX III LLC and DNX S3.
(2)

Consists of a 2021 SAFE in the principal amount of $2,500,000 issued to Alco on September 17, 2021.

(3)

Consists of a 2021 SAFE in the principal amount of $67,000 issued to William Bryant on September 17, 2021.

Related Person Transactions Policy

The Company is in the process of formally adopting a written related person transactions policy. The Board has historically identified, reviewed and approved any transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in Banzai or any of its subsidiaries and related persons are, were or would be participants, including the transactions described above. Prior to approving such a transaction, the material facts as to a director or officer’s relationship or interest in the agreement or transaction were disclosed to the Board.

Under the policy, a related person is any executive officer, director, nominee to become a director or a security holder known by us to beneficially own more than 5% of any class of our voting securities (a “significant stockholder”), including any of their immediate family members and affiliates, including entities controlled by such persons or such person has a 5% or greater beneficial ownership interest.

Each director and executive officer shall identify, and we shall request each significant stockholder to identify, any related person transaction involving such director, executive officer or significant stockholder or his, her or its immediate family members and inform the Chair of our Audit Committee pursuant to this policy before such related person may engage in the transaction. Each related person transaction must be reviewed and approved in accordance with our related party transactions policy either by the Audit Committee or, if the Audit Committee determines that the approval of such related party transaction should be considered by all of the disinterested, independent members of the Board, by the disinterested, independent members of the Board by the vote of a majority thereof.

In considering related person transactions, our Audit Committee or the disinterested, independent members of the Board, as the case may be, take into account the relevant available facts and circumstances, which may include, but are not limited to:

 

   

the size of the transaction and the amount payable to a related party;

 

   

the nature of the interest of the related party in the transaction;

 

   

whether the transaction may involve a conflict of interest;

 

   

whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to the Company as would be available in comparable transactions with or involving unaffiliated third parties; and

 

   

any other information regarding the related party transaction or related party that would be material to investors in light of the circumstances of the transaction.

Our Audit Committee or the disinterested, independent members of the Board, as the case may be, shall approve only those related party transactions that they determine in good faith, based on all of the relevant information available to them, are in the best interests of the Company and our stockholders.

 

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PRINCIPAL SECURITYHOLDERS

The following table sets forth information regarding the beneficial ownership of shares of our Class A Common Stock and Class B Common Stock as of May 10, 2024 for:

 

   

each person known to us to be the beneficial owner of more than 5% of our outstanding shares of Common Stock;

 

   

each of our named executive officers;

 

   

each of our directors; and

 

   

all directors and named executive officers as a group.

Beneficial ownership of our Common Stock is determined in accordance with the rules of the SEC and generally includes voting and investment power with respect to the securities. Except as otherwise provided by footnote, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them. The number of shares of Common Stock used to calculate the percentage ownership of each listed person includes the shares of Common Stock underlying options or warrants or convertible securities held by such persons that are currently exercisable or convertible within 60 days of May 10, 2024, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

Beneficial ownership as set forth below is based on our review of our record stockholders list and public ownership reports filed by certain stockholders of the Company and may not include certain securities held in brokerage accounts or beneficially owned by the stockholders described below.

Percentage of beneficial ownership is based on 19,322,460 shares of Class A Common Stock and 2,311,134 shares of Class B Common Stock outstanding as of May 10, 2024.

 

Name and Address of Beneficial Owner†

   Class A
Common Stock
     Class B
Common Stock
    % Total
Voting
Power
 
   Shares      %      Shares      %  

Directors and Named Executive Officers:

 

Jack Leeney (1)

     5,064,110        26.2%        —         —        12.0

Joseph Davy (2)

     4,398        *%        2,311,134        100     54.5

Simon Baumer (3)

     53,780        *%        —               *