NOTES PAYABLE

12 Months Ended

Dec. 31, 2022

NOTES PAYABLE.

NOTES PAYABLE

NOTE 13. NOTES PAYABLE

Our notes payable consisted of the following:

	December 31, 2022						December 31, 2021
	Third-party		Related-party		Total		Third-party		Related-party		Total
2022 12% Notes	$	13,167,796	$	332,204	$	13,500,000	$		$	—	$	—
2020 10% Notes		—		—		—		6,580,000		—		6,580,000
Trees Transaction Notes		—		1,191,865		1,191,865		—		2,013,644		2,013,644
Green Tree Acquisition Notes		774,750		2,725,250		3,500,000		320,000		—		320,000
Green Man Acquisition Notes		1,500,000		—		1,500,000		—		—		—
Unamortized debt discount		(1,527,346)		(361,587)		(1,888,933)		(1,911,447)		—		(1,911,447)
Total debt		13,915,200		3,887,732		17,802,932		4,988,553		2,013,644		7,002,197
Less: Current portion		(179,827)		(1,723,517)		(1,903,344)		—		(1,094,398)		(1,094,398)
Long-term portion	$	13,735,373	$	2,164,215	$	15,899,588	$	4,988,553	$	919,246	$	5,907,799

Aggregate Maturities

As of December 31, 2022, aggregate future contractual maturities of long-term debt (excluding issue discounts) are as follows:

Year ending December 31,	Amount
2023	$	2,340,960
2024		3,434,238
2025		416,667
2026		13,500,000
	$	19,691,865

Trees Transaction Notes

In September 2021, with the completion of the Englewood acquisition, we are obligated to pay the Seller cash equal to $1,732,884 in equal monthly installments over a period of 24 months. The monthly payments began on October 15, 2021, and the payment is equal to $72,204 per month.

In December 2021, with the completion of the Trees Portland and Trees Waterfront acquisitions, we are obligated to pay the Seller cash equal to $497,371 in equal monthly installments over a period of 24 months. The payments began on February 15, 2022, and the payment is equal to $20,724 per month.

In January 2022, with the completion of the Trees MLK acquisition, we are obligated to pay the Seller cash equal to $384,873 in equal monthly installments over a period of 24 months. The payments began on June 15, 2022, and the payment is equal to $16,036 per month.

In December 2022, with the completion of the Green Tree Acquisition, we are obligated to pay the Seller cash equal to $3,500,000 in equal monthly installments over a period of 15 months. The payments begin in September 2023, and the payment is equal to $233,333 per month.

In December 2022, with the completion of the Green Man Acquisition, we are to pay the Seller cash equal to $1,500,000 in equal monthly installments over a period of 18 months. The payments begin in December 2023, and the payment is equal to $83,333 per month.

12% Notes

On September 15, 2022, we entered into a Securities Purchase Agreement with certain accredited investors (the "12% Investors”), pursuant to which we agreed to issue and sell senior secured convertible notes (the "12% Notes”) with an aggregate principal amount of $13,500,000 to such 12% Investors, in exchange for payment by certain 12% Investors of an aggregate amount of $10,587,250 in cash, as well as cancellation of outstanding indebtedness in the aggregate amount of $2,912,750 represented by the 10% Notes discussed below.

In connection with the 12% Notes, the 12% Investors received warrants (the "12% Warrants”) to purchase shares of our Common Stock equal to 20% coverage of the aggregate principal amount with an exercise price of $0.70 per share, which equals an aggregate of warrants to purchase 3,857,150 shares of Common Stock. The lead 12% Investor received an additional 10% warrant coverage on the aggregate principal amount of 12% Notes for total additional warrants to purchase 1,928,571 shares of our Common Stock. The lead 12% Investor also will receive a five percent fee on the aggregate principal amount of the 12% Notes. This total fee in the amount of $675,000 was recorded as a debt discount and will be amortized over the life of the loan. The 12% Notes bear interest at an annual rate of 12% and will mature on September 16, 2026. The 12% Investors have the option to convert up to 50% of the outstanding unpaid principal and accrued interest of the 12% Notes into Common Stock at a fixed conversion price equal to $1.00 per share.

The relative fair value of the new funding on the 12% Warrants was recorded as a debt discount and additional paid-in capital of $569,223. The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $103,577. We recorded amortization of debt discount expense

from the 12% Notes of $90,334 and nil for the year ended December 31, 2022 and 2021, respectively. We determined there was no beneficial conversion feature on the 12% Notes issued. The 12% Notes are treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the black-scholes model to determine the fair value of the 12% Warrants as of September 15, 2022, were:

Current stock price	$	0.20
Exercise price	$	0.70
Risk-free interest rate		3.66%
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		107%

10% Notes

In December 2020, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement’) with certain accredited investors (the “10% Investors”), pursuant to which we issued and sold senior convertible promissory notes (the “10% Notes”) with an aggregate principal amount of $2,940,000 in exchange for payment to us by certain 10% Investors of an aggregate amount of $1,940,000 in cash, as well as cancellation of outstanding indebtedness of the 15% Notes (defined below) in the aggregate amount of $1,000,000. In connection with the issuance of the 10% Notes, the holders of the 10% notes received warrants (the “10% Warrants”) to purchase shares of our Common Stock equal to 20% coverage of the aggregate principal amount at $0.56 per share. In the aggregate, this equals 1,050,011 shares of our Common Stock. The 10% Notes will bear interest at an annual rate of 10% and will mature on December 23, 2023. The 10% Investors have the option at any time to convert up to 50% of the outstanding unpaid principal and accrued interest of the Notes into Common Stock at a variable price of 80% of the market price but no less than $0.65 per share and no more than $1.00 per share. The 10% Warrants are exercisable at an exercise price of $0.56 per 10% Warrant.

The relative fair value of the new funding on the 10% Warrants was recorded as a debt discount and additional paid-in capital of $254,400.  The relative fair value of the cancellation of the outstanding indebtedness was recorded as an extinguishment of debt and additional paid-in capital of $131,000.  For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $84,375 and $86,759, respectively, from the 10% Notes.  We determined there was no beneficial conversion feature on the 10% Notes. The 10% Notes are treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10% Warrants as of December 31, 2020, were:

Current stock price	$	0.53
Exercise price	$	0.56
Risk-free interest rate		0.38%
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		115%

On February 8, 2021, we entered into a Securities Purchase Agreement with an accredited 10% Investor, pursuant to which we issued and sold 10% Notes with an aggregate principal amount of $1,660,000 to such 10% Investor.  The 10% Notes are part of an over-allotment option exercised by us in connection with the convertible note offering consummated on December 23, 2020, as discussed above. In connection with the issuance of the 10% Notes, the holder received warrants to purchase shares of our Common Stock equal to 20% coverage of the aggregate principal amount at $0.56 per share. In the aggregate, this equals 592,858 shares of our Common Stock. The 10% Notes bear interest at an annual rate of 10% and will mature on February 8, 2024.  The 10% Investor has the option to convert up to 50% of the outstanding unpaid principal and accrued interest of the 10% Notes into Common Stock at a variable price of 80% of the market price but no less than $0.65 per share and no more than $1.00 per share. The 10% Warrants are exercisable at an exercise price of $0.56 per warrant.

The relative fair value of the new funding on the 10% Warrants was recorded as a debt discount and additional paid-in capital of $429,300. We determined that this 10% Note had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $0.66 at the date of the note issuance and the fair value of the Common Stock into which the debt is convertible at the commitment date, per share being $0.90, multiplied by the number of shares into which the debt is convertible).  The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued. For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $594,721 and $252,118, respectively. The 10% Notes are treated as conventional debt. 

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10% Warrants as of February 8, 2021, were:

Current stock price	$	1.12
Exercise price	$	0.56
Risk-free interest rate		0.48%
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		118%

On April 20, 2021, we entered into a Securities Purchase Agreement with accredited 10% Investors, pursuant to which we issued and sold 10% Notes with an aggregate principal amount of $2,300,000 to such 10% Investors. The 10% Notes are part of an over-allotment approved by the existing noteholders in connection with the original convertible note offering of $4,600,000 consummated on December 23, 2020 and February 8, 2021. In connection with the issuance of the 10% Notes, each holder received warrants to purchase shares of our Common Stock equal to 20% coverage of the aggregate principal amount at $0.56 per share, except that the warrants coverage to one Investor acting as lead investor in the raise received approximately 35.5% of the aggregate principal amount invested. The 10% Notes bear interest at an annual rate of 10% and will mature on April 20, 2024. The 10% Investors have the option to convert up to 50% of the outstanding unpaid principal and accrued interest of the 10% Notes into Common Stock at a variable price of 80% of the market price but no less than $0.65 per share and no more than $1.00 per share. The 10% Warrants are exercisable at an exercise price of $0.56 per warrant.

The relative fair value of the new funding on the 10% Warrants was recorded as a debt discount and additional paid-in capital of $810,000. We determined that these 10% Notes had a beneficial conversion feature and is calculated at its intrinsic value (that is, the difference between the effective conversion price of $0.49 at the date of the note issuance and the fair value of the Common Stock into which the debt is convertible at the commitment date, per share being $0.83, multiplied by the number of shares into which the debt is convertible).  The valuation of the beneficial conversion feature recorded cannot be greater than the face value of the note issued.  We recorded $692,500 as additional paid in capital and a debt discount and included in our consolidated statement of operations. For the years ended December 31, 2022 and 2021, amortization of debt discount expense was $1,024,442 and $350,471, respectively. The 10% Notes are treated as conventional debt.

For purposes of determining the debt discount, the underlying assumptions used in the binomial lattice model to determine the fair value of the 10% Warrants as of April 20, 2021, were:

Current stock price	$	0.83
Exercise price	$	0.56
Risk-free interest rate		0.81%
Expected dividend yield		—
Expected term (in years)		5.0
Expected volatility		115%

See Note 17 for a summary of the outstanding warrants issued in conjunction with our debt.