Banzai International(US:BNZI)2024-05-15 21:17PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Q1 2024 financial statements show decreased revenue, increased net loss, significant stockholders' deficit, and substantial debt, highlighting 'going concern' risk Condensed Consolidated Balance Sheets As of March 31, 2024, total assets decreased to $4.4 million, liabilities to $35.3 million, and stockholders' deficit improved slightly to $30.8 million Condensed Consolidated Balance Sheet Summary | Balance Sheet Items | March 31, 2024 (Unaudited) ($) | December 31, 2023 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | $1,026,932 | $2,093,718 | | Total current assets | $2,135,516 | $2,939,922 | | Total assets | $4,438,811 | $5,288,486 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $35,206,386 | $37,089,615 | | Total liabilities | $35,281,386 | $37,164,615 | | Total stockholders' deficit | $(30,842,575) | $(31,876,129) | | Total liabilities and stockholders' deficit | $4,438,811 | $5,288,486 | Unaudited Condensed Consolidated Statements of Operations For Q1 2024, revenue decreased to $1.08 million, general and administrative expenses rose to $4.31 million, widening the operating loss to $3.61 million and net loss to $4.50 million Consolidated Statements of Operations Summary | Metric | Three Months Ended Mar 31, 2024 ($) | Three Months Ended Mar 31, 2023 ($) | | :--- | :--- | :--- | | Revenue | $1,079,472 | $1,177,061 | | Gross Profit | $698,092 | $764,835 | | Operating Loss | $(3,612,401) | $(2,407,632) | | Net Loss | $(4,500,272) | $(3,765,122) | | Net Loss Per Share (Basic & Diluted) | $(0.26) | $(0.59) | | Weighted Average Shares Outstanding | 17,355,609 | 6,382,180 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $2.1 million in Q1 2024, with financing activities providing $1.05 million, resulting in a net cash decrease of $1.07 million and ending cash balance of $1.03 million Consolidated Statements of Cash Flow Summary | Cash Flow Activity | Three Months Ended Mar 31, 2024 ($) | Three Months Ended Mar 31, 2023 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,116,786) | $(1,479,171) | | Net cash provided by financing activities | $1,050,000 | $1,505,543 | | Net (decrease) / increase in cash | $(1,066,786) | $26,372 | | Cash at end of period | $1,026,932 | $1,049,871 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's financial condition, including a 'going concern' warning due to recurring losses and negative cash flows, complex debt structures, and subsequent financing activities - The company's financial statements raise substantial doubt about its ability to continue as a going concern due to recurring net losses, negative cash flows, and an accumulated deficit of approximately $51.3 million as of March 31, 202427 - The company is not in compliance with several financial covenants related to its loan agreement with CP BF Lending, LLC, including Minimum Gross Profit Margin, Minimum ARR Growth, and Fixed Charge Coverage Ratio, resulting in the entire principal and accrued interest being classified as current liabilities132290 - Subsequent to the quarter end, the company engaged in several financing activities, including issuing shares to GEM and Yorkville to satisfy debt obligations and entering into a Debt Repayment Agreement with Yorkville to restructure outstanding notes192193194 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 revenue decline, increased operating expenses, and a wider net loss of $4.5 million, while highlighting improved Demio operating metrics and reiterating 'going concern' risk Key Financial Results (Q1 2024 vs Q1 2023) | Metric ($ in Thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $1,079 | $1,177 | | Gross Profit | $698 | $765 | | Operating Loss | $(3,613) | $(2,407) | | Net Loss | $(4,501) | $(3,763) | Demio Product Operating Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Average Monthly NRR | 97.2% | 96.3% | | New Customer ACV | $1,484 | $1,376 | | Customer Acquisition Cost (CAC) | $1,220 | $884 | | Average Monthly Revenue Churn | 5.2% | 8.1% | | LTV (New Customers) | $2,376 | $1,423 | | LTV / CAC Ratio | 2.0 | 1.5 | - The company has a working capital deficit of approximately $33.1 million and an accumulated deficit of $51.3 million as of March 31, 2024, reinforcing the substantial doubt about its ability to continue as a going concern273 Net Loss to Adjusted EBITDA Reconciliation ($ in Thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss | $(4,501) | $(3,763) | | Adjustments | $2,993 | $3,137 | | Adjusted EBITDA (Loss) | $(1,508) | $(626) | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company qualifies as a smaller reporting company - The company is a smaller reporting company and is not required to provide these disclosures329 Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2024, due to material weaknesses in IT General Controls, COSO framework adherence, and period-end financial close processes - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were not effective as of March 31, 2024332 - Material weaknesses were identified in three key areas: - IT General Controls: Lack of a formal cybersecurity program and insufficient user access controls - COSO Entity Level Controls: Ineffective controls over related party transactions and lack of a formal delegation of authority process - Period end financial close and reporting: The CFO has unrestricted administrative access to the General Ledger system, creating a segregation of duties conflict335 PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings that would be expected to have a material adverse effect on its business or financial condition - As of the filing date, the company is not involved in any material legal proceedings340 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes from the risk factors disclosed in the 2023 Annual Report have occurred341 Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, the company issued unregistered shares of Class A common stock to Yorkville, GEM, Roth Capital Partners, and a marketing consultant, relying on Section 4(a)(2) exemption - Issued 2,233,735 shares to Yorkville upon conversion of $1.5 million of promissory notes and 710,025 shares to satisfy a $500,000 deferred fee342 - Issued 139,470 shares to GEM as repayment for a $100,000 principal amount under a promissory note343 - Issued 175,000 shares to Roth Capital Partners for advisory services and 153,492 shares to a marketing consultant for services344345 Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period Other Information During Q1 2024, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including various promissory notes, settlement agreements, equity incentive plans, and officer certifications