Notes Payable and Convertible Notes

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Notes Payable and Convertible Notes

Note 11: NOTES PAYABLE AND CONVERTIBLE NOTES

The Company’s notes payable and convertible notes are as follows:

	Gotham Green Partners, LLC			LI Lending, LLC			May 2020 Convertible Notes			May 2020 Convertible Notes (Swap)			October 2021 Convertible Note		Other Loans			Total
Balance, December 31, 2019	$	35,607		$	44,289		$	—		$	—		$	—	$	8,093		$	87,989
Loans advanced, net		2,810			—			5,827			—			—		509			9,146
Equity exchanged		—			—			—			13,661			—		—			13,661
Equity component		(692	)		—			(3,982	)		—			—		(1,168	)		(5,842	)
Accretion income		(643	)		—			—			—			—		—			(643	)
Loan payments		(39,855	)		(6,840	)		—			—			—		(685	)		(47,380	)
Gain on extinguishment of debt		(1,218	)		—			—			—			—		—			(1,218	)
Converted to equity		—			—			(145	)		(1,794	)		—		—			(1,939	)
Accrued interest		3,991			7,913			1,155			—			—		182			13,241
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
Less current portion		—			—			—			—			—		(6,197	)		(6,197	)
Long-term portion		—			48,266			—			—			14,641		1,709			64,616

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 Class A Subordinate Voting Shares of the Company for $0.25 per share at any time at the option of the holder. The Company can 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 Class A Subordinate Voting Shares of the Company for $1.03 per share at any time at the option of the holder. As of December 31, 2021, no payments have been made for this loan.

Gotham Green Partners LLC

Through the Cannex business combination (Note 1), the Company assumed senior secured convertible notes issued to Gotham Green Partners LLC (“GGP”). The convertible loan had a fair value on acquisition of $39,881 which was determined as the present value of the loan and the fair value of the conversion feature. The fair value of the conversion feature was determined to be $4,874 based on the acquisition date intrinsic value of the option. Upon acquisition, the Company reclassified the fair value of the conversion feature to equity. The Company used an independent valuation company to value the notes as of July 31, 2019 using a 10.25% discount rate which management determined was the rate for similar notes with no conversion feature or warrants. The notes were repaid in full in December 2020.

On January 29, 2020, the Company issued convertible secured promissory notes for a total of $3,000 to entities associated with GGP. These notes were due on July 29, 2020 and accrued interest at 15% per annum with no payments due until the maturity date. The notes were convertible at the option of the holder into the Company’s stock for the equivalent of $0.65 per share. The notes were issued with detachable stock warrants that gave the holders of the notes the option to purchase 2,230,080 shares of the Company’s stock for $0.67 per share. The notes were repaid in full in May 2020.

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 December 31, 2021, 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 December 31, 2021 is $48,682, less debt discount of $416, for a net balance of $48,266. See Note 17 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 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 lease back transactions described in Note 10 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 is still 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 will take 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 $7,575 includes a loan discount accretion expense of $125 for the year ended December 31, 2021. Monthly interest-only payments are required, and the Company has paid all interest due as of December 31, 2021.

Other

Outstanding as of December 31, 2021 were other payables totaling $7,906 which include notes issued as part of the acquisitions of Healthy Pharms and Arkansas entities as follows:

Other
Subsidiary	Terms	December 31, 2021		December 31, 2020
Healthy Pharms Inc.	Unsecured convertible note at $0.50 per share due December 18, 2022 at 10% per annum (1)	$	2,784	$	1,652
Healthy Pharms Inc.	Unsecured promissory note, due November 18, 2021 at 12% per annum (Note 24)		3,213		2,823
Arkansas Entities	Unsecured Promissory note, monthly interest payments at 14% per annum		1,709		1,907
Equipment Loans	Secured by equipment, monthly payments beginning in 2021 at 15% per annum		49		512
Other	Various		151		37
Total Notes Payable and Convertible Notes		$	7,906	$	6,931

(1) In November 2021, the unsecured convertible 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.

Future minimum payments on the notes payable and convertible debt are as follows:

	December 31, 2021
2022	$	6,186
2023		—
2024		65,625
2025		—
2026		—
Thereafter		—
Total minimum payments		71,811
Effect of discounting		(998	)
Present value of minimum payments		70,813
Less current portion		(6,197	)
Long-term portion	$	64,616