Note 8 - Notes Payable

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE 8 – NOTES PAYABLE

Red Beard Holdings, LLC Note Payable

On April 1, 2020, the Company, Charlie's and its VIE, Don Polly, issued a secured promissory note (the "Red Beard Note") to one of the Company's largest stockholders, Red Beard Holdings, LLC ("Red Beard"), in the principal amount of $750,000 (the "Principal Amount"), and required a guaranteed minimum interest amount of $75,000 (“Minimum Interest”). The Red Beard Note was secured by all assets of the Company pursuant to the terms of a Security Agreement entered into by and between the Company and Red Beard (the "Red Beard Note Financing"). The Red Beard Note was subsequently amended on August 27, 2020, September 30, 2020, October 29, 2020, December 1, 2020, and January 19, 2021, ultimately increasing Principal Amount to $1,400,000 and Minimum Interest to $150,000.

On March 24, 2021, the Company and Red Beard entered into a Satisfaction and Release (the "Red Beard Release"), pursuant to which the Company made a payment to Red Beard in the amount of $1,550,000 in exchange for an acknowledgment of satisfaction and full release of the Company by Red Beard from liability and obligations arising under the Red Beard Note.

Small Business Administration Loan Programs

On April 30, 2020, Charlie's received approval to enter into a U.S. Small Business Administration ("SBA") Promissory Note (the "PPP Loan Agreement") with TBK Bank, SSB (the "SBA Lender"), pursuant to the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") as administered by the SBA (the "Charlie's PPP Loan").

The Charlie's PPP Loan provided for working capital to Charlie’s in the amount of $650,761. The Charlie's PPP Loan was set to mature on April 30, 2022 and accrued interest at a rate of 1.00% per annum. Per the PPP Loan Agreement, payments of principal and interest were deferred for six months from the date of the Charlie's PPP Loan, or until November 30, 2020.

During the year ended December 31, 2021, Charlie’s received notice from SBA Lender that the Charlie’s PPP Loan was forgiven, and its promissory note was cancelled as a result of the loan forgiveness process set forth by the SBA. There is no further action required on the part of Charlie’s to satisfy this liability. During the year ended December 31, 2021, the Company recorded a debt extinguishment gain of approximately $1,060,000, including principal and accrued interest, which is reflected in the other income section of the Company’s consolidated statements of operations.

On April 14, 2020, Don Polly also obtained a loan pursuant to the PPP enacted under the CARES Act (the "Polly PPP Loan" and together with the Charlie's PPP Loan, the "PPP Loans") from Community Banks of Colorado, a division of NBH Bank (the "Polly Lender"). The Polly PPP Loan provided for working capital to Don Polly in the amount of $215,600. The Polly PPP Loan was set to mature on April 14, 2022 and accrued interest at a rate of 1.00% per annum. Payments of principal and interest were deferred for six months from the date of the Polly PPP Loan, or until November 14, 2020. Interest, however, continued to accrue during that time.

On February 19, 2021, Don Polly received notice from the Polly Lender, that the Polly PPP Loan was forgiven, and its promissory note was cancelled as a result of the loan forgiveness process set forth by the SBA. There is no further action required on the part of Don Polly to satisfy this liability. For the period ended March 31, 2021, the Company recorded a debt extinguishment gain of approximately $217,000, including principal and accrued interest, which is reflected in the other income section of the Company’s consolidated statements of operations.

On March 17, 2021, Don Polly obtained a second draw PPP loan (“Polly PPP Loan 2”) under the CARES Act from Polly Lender. The Polly PPP Loan 2 obtained by Don Polly provided general working capital in the amount of $184,200. The Polly PPP Loan 2 was set to mature on March 17, 2026, and accrued interest at a rate of 1.00% per annum. Payments of principal and interest were deferred, however interest continued to accrue during that time.

During the year ended December 31, 2021, Don Polly received notice from the Polly Lender that the Polly PPP Loan 2 was forgiven, and its promissory note was cancelled as a result of the loan forgiveness process set forth by the SBA. There is no further action required on the part of Don Polly to satisfy this liability.

On June 24, 2020, SBA authorized (under Section 7(b) of the Small Business Act, as amended) an Economic Injury Disaster Loan (“EID Loan”) to Don Polly in the amount of $150,000. Installment payments, including principal and interest of $731 monthly, will begin thirty months from the date of the EID Loan. The balance of principal and interest is payable thirty years from the date of the EID Loan and interest accrues at the rate of 3.75% per annum.

April 2022 Note Financing

On April 6, 2022, the Company issued a secured promissory note ("Note") to one of its largest stockholders, Michael King (the "Lender") in the principal amount of $1,000,000, which Note is secured by certain assets of the Company pursuant to the terms of a Security Agreement entered into by and between the Company and the Lender (the "Note Financing").

The Note requires the payment of principal and guaranteed interest in the amount of at least $90,000 on or before the earlier date of (i) a Liquidity Event, as defined under the terms of the Note; or (ii) September 28, 2022. The Company intends to use the proceeds from the Note Financing for general corporate purposes, and its working capital requirements, pending the availability of alternative debt financing.

The following summarizes the Company’s notes payable maturities as of June 30, 2022 (amounts in thousands):

Remaining months Ending December 31, 2022	$	1,000
Year Ending December 31, 2023		-
Year Ending December 31, 2024		-
Year Ending December 31, 2025		-
Thereafter		150
Total	$	1,150