Note 13 - Notes Payable |
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Debt Disclosure [Text Block] |
NOTE 13 – NOTES PAYABLE
Notes payable consists of the following:
Scheduled maturities of debt as of December 31, 2024 are as follows:
Amendment of Promissory Notes Related to SilverStreak Acquisition
On March 23, 2023, Unrivaled entered into a binding term sheet to modify the terms of the $2.00 million and $2.50 million unsecured promissory notes originally issued on October 1, 2021, which reduced the principal to an aggregate of $1.25 million, with required monthly aggregate payments of approximately $0.03 million, interest of 10% per annum, and maturing on March 15, 2028 ("Notes Modification"). The parties also agreed that Unrivaled shall be responsible for certain tax liabilities of approximately $0.53 million. The Notes Modification was classified as a troubled debt restructuring pursuant to ASC 470-60, and the Company recorded a gain on extinguishment of debt of $3.03 million and reduced the carrying value of the promissory notes to total future cash payments of $1.59 million.
On April 30, 2023, Unrivaled entered into a Settlement Agreement and Release (the “Settlement Agreement”) as definitive documentation of the binding term sheet dated March 23, 2023 related to the unsecured promissory notes issued on October 1, 2021 in connection with the acquisition of SilverStreak Solutions, Inc.
On November 6, 2024, the promissory notes related to the acquisition of SilverStreak were deconsolidated upon the bankruptcy petition filed by Unrivaled.
Amendment of Senior Convertible Promissory Notes
On
January 25, 2021, Unrivaled entered into a Securities Purchase Agreement with an accredited investor (the “Lender”) pursuant to which Unrivaled issued senior convertible promissory notes in the aggregate principal amount of
$3.50 million (the “Notes”) and a total of
300,000 warrants to purchase shares of the Company’s Common Stock. The Notes bore interest at a rate of
3.0% and were convertible into Common Stock at any time at the discretion of the respective Lender at a conversion price of
$17.50 per share. The Notes matured on
July 24, 2022 and Unrivaled was in default of the Notes thereon. In the event of default, the Notes bore interest at a rate of
18.0% per annum. The warrants are exercisable at any time before the close of business on
June 25, 2026 and comprised of
150,000 “A Warrants” with an exercise price of
$1.00 per share and
150,000 “B Warrants” with an exercise price of
$22.84 per share.
On
November 15, 2023, Unrivaled entered into a binding settlement term sheet with the Lender in which Unrivaled agreed that the principal balance of
$3.25 million would be paid on or before
May 15, 2024 with the assignment of a
$3.00 million note receivable, proceeds from the sale of the Halladay building, and cash from the receipt of certain employee retention credits. Accrued interest and penalties were waived as part of the settlement. As a result of the terms of the settlement, Unrivaled recognized a payable due to the Lender in the amount of
$1.75 million. The amendment was classified as a troubled debt restructuring pursuant to ASC
470-
60 and the Company recorded a gain on restructuring of payables of
$2.42 million for the year ended
December 31, 2023.
On
November 6, 2024, the senior convertible promissory notes were deconsolidated upon the bankruptcy petition filed by Unrivaled.
Promissory Note Related to People's California, LLC
On March 6, 2023, Unrivaled entered into a binding settlement term sheet ("Settlement Term Sheet") to resolve pending litigation matters with People’s, whereby the parties agreed to amend the terms of that certain secured promissory note ("People's Note"), issued by Unrivaled to People's on November 22, 2021. The People's Note was amended and restated into two secured promissory notes: a $3.00 million note ("$3M Note") and a $20.00 million note ("Settlement Note"). The $3M Note accrues simple interest at 10.0% annually, interest payable monthly in cash, and principal is due 180 days after effective date of the Settlement Term Sheet.
The Settlement Note accrues interest at 5.0% for the first 180 days, and thereafter, interest is paid in cash (or the Company’s Common Stock based on the 10-day volume-weighted average price ("VWAP") at the date of issuance) starting 180 days after the effective date of the Settlement Term Sheet and on the first of the month thereafter. The amount of $5.00 million of principal is due in cash within 90 days of the effective date of the Settlement Term Sheet with the balance due on the fifth anniversary of the effective date of the Settlement Term Sheet, which is March 6, 2028. When the million principal payment for the Settlement Note and the $3.00 million payment under the $3M Note are paid (“Up-front Settlement”) in accordance with the Settlement Term Sheet, People's will be obligated to transfer the Riverside and Costa Mesa licenses and stores to the Company as described in that certain membership interest purchase agreement, dated as of November 22, 2021, with People's for no additional consideration.
On the earlier of the date of the Up-front Settlement payment or 180 days after the effective date of the Settlement Term Sheet, People's will have the option to convert a portion or all of the principal balance of the Settlement Note into the Company's Common Stock subject to certain requirements in the Settlement Term Sheet. The conversion price is the lower of $20.00 or the 10-day VWAP of the Company's Common Stock. Upon payment of the Up-front Settlement, Unrivaled has the option to convert the unpaid principal balance of either notes into the Company's Common Stock at a conversion price of per share as long as the at the time of the conversion the Company's Common Stock has a 10-day VWAP of $20.00 per share or greater.
After the first $5.00 million principal payment on the Settlement Note, principal payments made in cash prior to the first anniversary of the Settlement Term Sheet reduce the principal balance by twice the amount of the cash payment. The modification to the promissory note under the Settlement Term Sheet was classified as troubled debt restructuring pursuant to ASC 470-60, "Troubled Debt Restructurings by Debtors" ("ASC 470-60") and the Company recorded a premium of $0.47 million. See "Note 26 – Commitments and Contingencies" for details on the related litigation matters.
On May 17, 2023, Unrivaled amended the Settlement Term Sheet wherein the maturity date of the $3M Note was extended to December 6, 2023 and payments of the $5.00 million portion of the Up-front Settlement was extended through September 6, 2023, with $0.80 million being due and paid in cash on May 18, 2023. In addition, Unrivaled shall make an additional $2.20 million principal repayment on or before July 6, 2023. Monthly interest payments were amended to provide Unrivaled with the option to pay 50% of interest in the form of registered shares of Common Stock. The amendment to the Settlement Term Sheet was classified as a troubled debt restructuring pursuant to ASC 470-60.
On July 10, 2023, the Company received a notice from People's in respect of the Settlement Term Sheet, as amended on May 17, 2023, wherein People’s notified Unrivaled had failed to make the principal repayment of $2.20 million on July 6, 2023 and a monthly interest payment of $25,000 for the month of June 2023. As a result, the promissory notes became callable by the creditor. Accordingly, the Company classified the long-term debt as current notes payable in the consolidated balance sheet as of December 31, 2023.
Pursuant to the Settlement Term Sheet, on June 10, 2024, Unrivaled entered into a Membership Interest Purchase Agreement to sell its controlling membership interest in PFC. Of the total consideration of $24.84 million, cash consideration of $9.00 million (the "Cash Consideration") was paid from the sale in the form of $8.00 million in cash due at closing and $1.00 million in a secured promissory note to be paid over 12 months. The Cash Consideration was paid to People’s in settlement of the debt pursuant to the Settlement Term Sheet. As a result of the sale and pursuant to the terms of the Settlement Term Sheet, after the Cash Consideration, the remaining debt to People’s is settled, subject to any deficiencies as defined therein. Accordingly, the Company recognized a gain on extinguishment of debt of $15.18 million for the year ended December 31, 2024. Refer to "Note 21 – Discontinued Operations" for further information on the disposition.
On November 6, 2024, the promissory notes related to People's were deconsolidated upon the bankruptcy petition filed by Unrivaled. Litigation and adversarial proceedings between the parties are subject to the settlement on February 12, 2025 in which payment of $0.40 million from the sale of the Halladay Holding property will be made to People's. The terms of the settlement must be presented to the Bankruptcy Court for approval with a noticed motion and opportunity for hearing and order thereon pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure. Refer to "Note 3 - Bankruptcy Filing".
Convertible Promissory Notes Related to Acquisition of Coastal Pines Group
As of December 31, 2024, the net carrying value of the convertible promissory notes was $1.60 million with an effective interest rate of 7.9%.
Unsecured Note Financing
On November 12, 2024, the Company issued an unsecured promissory note in the principal amount of $0.40 million (the "Original Note") to a third-party investor. The Original Note was set to mature on May 12, 2026, and incurred no interest except upon default, at a rate of 10.0% per annum plus a 5.0% late charge. The Company was able to prepay the Original Note at any time without penalty. The Original Note was convertible at the lender's election into a convertible promissory note, simple agreement for future equity, or similarly situated document that includes terms typical for transactions of such a nature and scope and that shall include (i) a 15% discount to future qualified financings, (ii) warrant coverage as negotiated by the parties, and (iii) other reasonable representations and warranties and terms and conditions. On December 31, 2024, the Company amended and restated the Original Note wherein the principal amount was increased to $0.80 million and the maturity date was extended to December 30, 2026 (the "A&R Note"). The A&R Note may be convertible at the Lender's election into a convertible promissory note that shall include (i) an automatic conversion into the shares of Common Stock issued by the Company in its next bona fide equity financing with proceeds of at least $10.00 million or such lesser amount as approved by Lender at a conversion price equal to the lesser of (x) 85% of the lowest price paid by the cash investors in such financing and (y) the price represented by a $30.00 million pre-money valuation of the Company. Refer to "Note 14 – Derivative Liabilities" for the related conversion option. In connection with the A&R Note, the Company issued to the Lender a warrant to purchase up to 117,647 shares of Common Stock with an exercise price of $0.17 and a warrant to purchase up to 37,736 shares of Common Stock with an exercise price of $0.53. Refer to "Note 18 – Warrants" for additional details. The amendment was deemed to be a substantial modification under ASC Subtopic 470-50 and a loss on extinguishment of debt of $0.05 million was recorded in the consolidated statement of operations for the year ended December 31, 2024.
As of December 31, 2024, the net carrying value of the A&R Note was $0.67 million and the unamortized discount balance was $0.13 million with an effective interest rate of 26.2%.
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