Notes Payable and Convertible Notes | Note 9: NOTES PAYABLE AND CONVERTIBLE NOTES The Company’s notes payable and convertible notes are as follows: LI Lending, May 2020 2022 Island May 2020 October 2021 Other Total Balance, December 31, 2020 $ 45,362 $ 2,855 $ — $ 11,867 $ — $ 6,931 $ 67,015 Loans advanced, net — — — — 14,376 930 15,306 Loan payments (4,671 ) — — — — (1,079 ) (5,750 ) Converted to equity — (5,852 ) — (11,867 ) — — (17,719 ) Accrued interest 7,575 2,997 — — 265 1,124 11,961 Balance, December 31, 2021 $ 48,266 $ — $ — $ — $ 14,641 $ 7,906 $ 70,813 Loans advanced, net — — 245 — — 13,138 13,383 Loan payments (2,526 ) — — — — (130 ) (2,656 ) Converted to equity — — — — — (2,784 ) (2,784 ) Accrued interest 3,381 — — — 564 233 4,178 Balance, June 30, 2022 $ 49,121 $ — $ 245 $ — $ 15,205 $ 18,363 $ 82,934 Less current portion — — — — — (8,235 ) (8,235 ) Long-term portion $ 49,121 $ — $ 245 $ — $ 15,205 $ 10,128 $ 74,699 Convertible Notes On May 14, 2020, the Company issued $5,827 in convertible notes to existing investors in the Company. The notes pay interest of 5% per annum and have a maturity date of February 28, 2022. The notes can be converted into SVS of the Company for $0.25 per share at any time at the option of the holder. The Company was permitted to require mandatory conversion at any time that the Company’s stock price remains above $0.50 for 45 consecutive days. In 2021, the Company enacted the mandatory conversion feature and converted the May 2020 Convertible Note balance to subordinate voting shares. As part of issuing the convertible notes, the investors were given the right to exchange stock in the Company into separate convertible notes (swap notes). In total 29,448,468 shares with a value of $13,661 were exchanged for $13,661 in convertible notes. These notes were effective May 28, 2020, have a maturity date of May 28, 2025, and can be converted into Class A Subordinate Voting Shares of the Company for $0.46 per share at any time at the option of the holder. The notes pay no interest if the Company’s annual revenue is greater than $15,000, and 3% annually otherwise. The Company can require mandatory conversion at any time that the Company’s stock price remains above $0.92 for 45 consecutive days. In 2021, the Company exercised the mandatory conversion feature and converted the May 2020 Convertible Note (Swap) balance to subordinate voting shares. On October 6, 2021, the Company entered into a convertible promissory note purchase agreement for $15,000, less issuance costs of $624, resulting in net proceeds of $14,376. The notes pay interest of 6% per annum and have a maturity date of October 6, 2024. The notes can be converted into SVS of the Company for $1.03 per share at any time at the option of the holder. As of June 30, 2022, no payments have been made for this loan. LI Lending LLC On May 10, 2019, the Company entered into a loan agreement with LI Lending LLC, a related party, for $50,000. LI Lending LLC is related because an officer of the Company is a part-owner of LI Lending LLC. As of June 30, 2022, the Company had drawn $45,000 on the loan in two amounts, an initial $35,000 and a final $10,000, both bearing a 10.25% and 12.25% interest rate, respectively. The outstanding balance as of June 30, 2022 is $49,457, less debt discount of $336, for a net balance of $49,121. See Note 13 for further discussion of this related party transaction. In April 2020, the loan was amended. In exchange for consent to allow the sale of the Pennsylvania and Maryland assets and the release of related collateral, the Company agreed to make prepayments of principal to LI Lending LLC in the amount of $250 per month for an eight-month period beginning on May 1, 2020. The $2,000 prepayment was applied to the initial $35,000 amount, decreasing the balance to $33,000. Additionally, the Company agreed to pay an increased interest rate of 12.25% on the final $10,000 of the loan until such time as this amount has been paid down, with the initial $33,000 amount continuing to be subject to the original 10.25% interest rate. In December 2020, the loan was amended to allow for the release of collateral for the sale and leaseback transactions described in Note 8 above, which was entered into with Innovative Industrial Properties, Inc. (“IIPR”). The amendment increased both interest rates by 2.5% on the loan amounts but allowed the payments resulting from the incremental interest to be deferred until January 1, 2022. The Company elected to defer payment, and the additional 2.5% interest is accrued each month and added to the balance of the loan. The Company was required to make interest-only payments monthly of 10.25% on the initial $33,000 and 12.25% on the final $10,000 of the loan until January 1, 2022 when the interest rates of 12.75% for the initial $33,000 and 14.75% for the final $10,000 took effect for the remaining term. The loan matures on May 10, 2024. An exit fee of 20% of the principal balance will be due as principal is repaid. Accrued interest expense of $3,381 includes a loan discount accretion expense of $165 for the six months ended June 30, 2022. Accrued interest expense of $1,490 includes a loan discount accretion expense of $40 for the three months ended June 30, 2022. On January 1, 2022, the Company began making the required principal payments in addition to the interest payments for this loan. As of June 30, 2022, the Company has made $2,526 in payments on this loan. Other Outstanding as of June 30, 2022 were other payables totaling $18,363 which include notes issued as part of the acquisitions of Healthy Pharms, NECC, and Arkansas entities as follows: Other Subsidiary Terms June 30, 2022 December 31, 2021 Healthy Pharms Inc. Unsecured convertible note, due November 18 $ — $ 2,784 Healthy Pharms Inc. Unsecured promissory note at $0.50 per share due December 18, 2022 at 10% per annum (1) 3,377 3,213 Island Global Promissory note due October 25, 2026 at 6% per annum 10,128 — NECC Promissory note due September 12, 2022 at 10% per annum 2,084 — Om of Medicine, LLC Promissory note due September 1, 2022 at 12% per annum (3) 981 — Arkansas Entities Unsecured Promissory note due December 1, 2022, monthly interest payments at 14% per annum 1,709 1,709 Equipment Loans Secured by equipment, monthly payments beginning in 2021 at 15% per annum 63 49 Other Various 21 151 Total Notes Payable and Convertible $ 18,363 $ 7,906 (1) In November 2021, the unsecured promissory note was modified to be due and payable in full on or before December 18, 2022. The Company concluded the extension resulted in a debt modification under ASC 470 (2) In July 2022, the promissory note was modified, whereby 50% of the outstanding note payable was paid on July 28, 2022, and the remaining outstanding balance of the note was to be payable in full on or before September 12, 2022. (3) In April 2022, the Company entered into a seller note payable to pay the outstanding balance due resulting from the 2021 Om earnout in connection with prior period contingent considerations. The note bore 10% interest per annum and was due to be paid in full by July 1, 2022. At the time of the issuance of the note, the liability was current and was certain to be paid during 2022. In July 2022, the Company amended the note, whereby the Company paid $345 of the remaining balance on the seller note and the term of the remaining balance of the seller note was extended to September 1, 2022, bearing interest at 12% per annum. If payment is not received in full by September 1, 2022, the remaining balance on the note will accrue interest at 20% per Future minimum payments on the notes payable and convertible debt are as follows: June 30, 2022 2022 $ 8,235 2023 — 2024 64,326 2025 — 2026 12,874 Thereafter — Total minimum payments 85,435 Effect of discounting (2,501 ) Present value of minimum payments 82,934 Less current portion (8,235 ) Long-term portion $ 74,699 Construction Finance Liability On January 28, 2022, a wholly owned subsidiary of the Company acquired property at 29 Everett in conjunction with the NECC Merger (see Note 7 for further details on the transaction). Concurrently, effective January 28, 2022, the Company sold a portion of the property it had acquired in the acquisition for $16,000 . In connection with the sale of the property at 29 Everett, the Company agreed to lease the location back for cultivation, effective on January 28, 2022. The details of the lease included three purchase options that the Company can exercise, in which the Company has the ability to repurchase the property on either the second, fourth, or sixth anniversary of the lease agreement. The Company determined that the purchase and subsequent leasing of the land, building, and equipment at NECC was a sale of real estate, as the property and equipment sold as part of the building were interrelated with the building. Under ASC 842 - Leases The initial term of the agreement is 20 years, with two options to extend the term for five years each. The initial monthly rent payment is equal to $140 for the first year of the agreement, with 3% annual increases over the life of the agreement. As of June 30, 2022, the total finance liability associated with this transaction is $16,000 . The total interest expense incurred during the six months ended June 30, 2022 was $700. |