11. Notes Payable

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Notes payable are as follows:

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Revolving Facility

On July 21, 2021, the Company, through its subsidiary, Jupiter, entered into a two-year, $10,000 asset-based revolving credit facility with Entrepreneur Growth Capital, LLC, a private lender (“Revolving Facility”). Borrowings under the Revolving Facility are limited to the available borrowing base, bear interest at the prime rate plus 3.5% with interest payments calculated based on the daily outstanding principal of the loan and payable to the lender monthly.

The Revolving Facility is secured by Jupiter’s inventory, accounts receivable and related property. The Revolving Facility had a two-year initial term and will continue for successive one-year terms unless terminated by either party effective at the end of the then-current term. On March 13, 2023, the Company, through Jupiter, entered into an amendment to the Revolving Facility that increased the amount available to $12,500 and extended the maturity date to July 21, 2024, thereafter the Revolving Facility automatically renewed for successive one-year terms unless terminated by the Company or the lender.

On October 3, 2024, the Company entered into the Revolving Facility Amendment through its subsidiary Jupiter. The Revolving Facility Amendment amended the required fixed charge coverage ratio financial covenant, the minimum monthly charge paid to the lender, and the inventory availability amount. The Revolving Facility Amendment also reduced the borrowing capacity from $12,500 to $6,000.

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The Company paid $560 and $294 for lender fees during the year ended December 31, 2024 and 2023, respectively.

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Amortization expense related to the discount was $143 and $309 for the years ended December 31, 2024 and 2023, respectively. The discount was fully amortized as of December 31, 2024. The discount net of amortization was $143 as of December 31, 2023. 

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2023 Refinanced Notes

The 2023 Refinanced Notes include the remaining $38,000 in aggregate principal from the 2019 Junior Notes. The 2023 Refinanced Notes mature on February 15, 2026, and bear interest at the greater of 16% or the prime rate plus 8.5% payable monthly. The interest rate is subject to an increase by 1% annually if the aggregate principal amount outstanding under the 2023 Refinanced Notes is greater than $30,000 on the first anniversary or greater than $22,000 on the second anniversary of the Effective Date. On February 15, 2024, the base interest rate increased from 17.0% to 18.0%, as the aggregate principal amount was greater than $30,000 on that date. As of December 31, 2024, the default rate of 25.0% applied to accrue interest on the 2023 Refinanced Notes due to its noncompliance. The 25.0% interest rate represents the prime rate of 7.5% plus 8.5%, the 8% default interest rate, and the 1.0% annual increase pursuant to the NPA Amendment, as the principal balance was more than $30,000 as of the first anniversary of February 15, 2023 (the “Effective Date”). During the years ended December 31, 2024 and 2023, compounded interest of $12,138 and $1,943, respectively, was added to the principal balance and no principal payments were made.

As part of the 2023 Refinanced Notes, the Company recognized a debt discount of $7,106. This amount included $5,106 related to the fair value of warrants issued to each Note Holder (the “Debt Modification Warrants”), and $2,000 in fees owed to the Note Holders. During the years ended December 31, 2024 and 2023, the Company recorded amortization expense of $366 and $1,603, respectively. These amortization amounts are included in interest expense on the consolidated statements of operations and comprehensive loss. The balance net of amortization was $5,314 and $6,152 as of December 31, 2024, and 2023, respectively.

As of the date of this filing, the Company is not in compliance with certain payment obligations and covenants under the 2023 Refinanced Notes. However, the Note Holders have not provided the requisite notice of an event of default under these notes. The Company is currently negotiating a waiver and forbearance agreement with the Note Holders to address the non-compliance. The Company can provide no assurance that the parties will reach a mutually agreeable resolution.

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2023 New Notes

The 2023 New Notes issued included aggregate principal of $8,260 due to the Note Holders, with a maturity date of February 15, 2027. The 2023 New Notes bear interest at the greater of 16% or the prime rate plus 8.5% payable quarterly. Compounded interest of $2,888 and $1,909 was added to the principal balance and no principal payments were made during the years ended December 31, 2024 and 2023, respectively.

Employee Retention Credit Note

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During August 2023, the Company filed a claim with the IRS for ERCs applicable to the first and second fiscal quarter of 2021 totaling $3,615.

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To accelerate access to the ERC funds, the Company signed an agreement with 1861 Acquisition LLC (“1861 Acquisition”). 1861 Acquisition advanced cash of $3,594 to the Company, which included $619 for fees charged by 1861 Acquisition. During the year ended December 31, 2023, these fees were included in interest expense on the consolidated statements of operations and comprehensive loss. The Company expected the IRS to approve or deny its claim within the next 12 months. The Company has not yet received approval or denial from the IRS for the entirety of the claim. Subsequent to December 31, 2024, the Company received refunds in the amount of $1,274. Upon approval and payment of the remainder of the claim, the Company will settle the outstanding balance in cash to 1861 Acquisition. In the event the claim is denied in part or in total, the Company is required to pay the outstanding balance upon the denial.

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CGSF/SFNY Divestiture

During September 2023, the Company completed the CGSF/SFNY Divestiture. Pursuant the MIPA, the transaction was subject to the satisfaction or waiver of certain conditions set forth in the MIPA, including, among others, the termination of the amended and restated loan agreement dated August 24, 2021 by and between SFNY and CGSF Group (the “CGSF Loan Agreement”) in the form of a loan termination agreement (the “CGSF Loan Termination Agreement”). Under the CGSF Loan Termination Agreement, SFNY and CGSF Group mutually agreed to terminate and retire the CGSF Loan Agreement and any other agreement entered into in connection with the CGSF Loan Agreement, including the Little Beach Harvest Note and all of SFNY and CGSF Group’s obligations under the CGSF Loan Agreement, the related promissory note, and any other related loan agreements were satisfied, terminated and released as of the date of the MIPA. As a result, the Company derecognized related notes payable of $350 during the three months ended September 30, 2023.

2024 Standard Farms Loan

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On May 2, 2024, Standard Farms PA entered into the 2024 Standard Farms Loan. Under the terms of the 2024 Standard Farms Loan, Standard Farms PA can borrow up to $10,500 from the Lender. Proceeds from the 2024 Standard Farms Loan will be used to construct dispensaries obtained via a permit issued from the Department of Health, Bureau of Medical Marijuana, of the Commonwealth. The Standard Farms PA permit will allow the construction and operation of up to three of the Retail Locations. Proceeds from the 2024 Standard Farms Loan will also be utilized for the initial setup and operation of the Retail Locations.

The 2024 Standard Farms Loan will mature on December 31, 2027, and will initially bear interest at 20%. No principal or interest payments will be due under the 2024 Standard Farms Loan before the maturity date, and the 2024 Standard Farms Loan may not be prepaid in cash or kind without the Lender’s prior written consent.

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On May 2, 2024, the Company drew $3,000 on the 2024 Standard Farms Loan and recognized a debt discount of $784. Of this amount, $662 was related to lender fees, and $122 represents above market interest, which is the difference between the market interest rate and the stated interest rate. For the year ended December 31, 2024, the amortization expense was $142 which is included in interest expenses on the consolidated statements of operations and comprehensive loss. The balance net of amortization was $642 as of December 31, 2024.

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The $3,000 cash receipt was allocated first to the fair value of a bifurcated embedded derivative at $1,700, with the remainder allocated to the note balance. The embedded derivative comprises a contingent interest feature. The contingent

interest feature applies an escalating interest rate to the 2024 Standard Farms Loan outstanding balance upon Standard Farms PA opening a Retail Location and completing the Location Opening Date. At that time, the interest rate will increase to 30%, and then to 40% six months after the Location Opening Date that applies through maturity.

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The Company can request the remaining $7,500 in three separate tranches based on achieving certain criteria set forth in the 2024 Standard Farms Loan agreement.

Because the capital is to fund the construction and operation of the new dispensaries, the 2024 Standard Farms Loan is secured by a first priority security interest in the retail assets of Standard Farms PA (the “Borrower Collateral”), and a second priority security interest in the equity interests of Standard Farms PA that are held by the Company’s subsidiary Baker (the “Baker Collateral”). Also on May 2, 2024, the Lender entered into a Consent, Collateral Release and Subordination Agreement (the “Subordination Agreement”) with the Company’s existing creditors to subordinate the Lender’s interest in the Baker Collateral and release the existing creditors’ interest in the Borrower Collateral. The Lender’s security interest is further described in in a Security Agreement, dated May 2, 2024, by and among Standard Farms PA, the Lender and Baker Technologies, Inc. (the “Security Agreement” and, collectively with the Note and the Subordination Agreement, the “Dispensary Agreements”).

The 2024 Standard Farms Loan and the Security Agreement include usual and customary loan provisions including: affirmative and negative covenants, events of default, representations and warranties. In the case of an event of default under the 2024 Standard Farms Loan, Standard Farms PA may become obligated to pay a multiplied balance of up to four times the then-outstanding obligations under the 2024 Standard Farms Loan, all obligations under the 2024 Standard Farms Loan may be accelerated and all remedies may be exercised by Lender. All obligations under the 2024 Standard Farms Loan are guaranteed by the Company, which guarantee shall terminate if and when a first priority security interest in the properly held retail assets of a wholly-owned subsidiary of Standard Farms PA is activated. In order to provide collateral free from prior liens, under the terms of the loan documents, Lender will have a first-priority security interest in the equity interests of any such wholly-owned subsidiary that may be held by Standard Farms PA.

Future maturities of all notes payable as of December 31, 2024 are as follows:

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