Quarterly report pursuant to Section 13 or 15(d)

DEBT

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DEBT
 6 Months Ended
Jun. 30, 2024
Debt Disclosure [Abstract]  
DEBT

NOTE 6. DEBT

 

Our debt balance, excluding operating lease liabilities and finance lease liabilities, consisted of the following amounts at the dates indicated:

 

(in thousands)  

June 30, 2024

    

December 31, 2023

  
    As of  
(in thousands)  

June 30, 2024

    

December 31, 2023

  
Future Receivables Financing   $ 1,786     $ 2,174  
Note payable     794       —  
Secured Bridge Loan     2,451       5,109  
 Total long term debt     5,031       7,283  
Less unamortized debt issuance costs     (126 )     —  
Less current portion of debt     (4,905 )     (7,283 )
Debt, net, excluding operating and finance leases and liabilities   $ —     $ —  

 

Future Receivables Financings

 

In July, August, October, and November 2023, the Company received an aggregate of approximately $3.9 million in cash pursuant to the terms of future receivables financings (collectively, the “Future Receivables Financings”) entered into with two private lenders. The Company will make weekly payments under the Future Receivables Financings and is scheduled to repay the amounts due under the Future Receivables Financings in full in approximately six to eight months. The total amount to be repaid under the initial Future Receivables Financings was approximately $4.5 million. In connection with the Future Receivables Financings, the Company granted the lenders security interests in Company’s accounts receivable equal to the amounts due thereunder, and in connection with any event of default, the lenders may file financing statements evidencing the security interests.

 

Note Payable

 

On June 7, 2024, the Company entered into a subscription agreement for a note payable with Cobra Alternative Capital Strategies, LLC. As of June 30, 2024, the Company had been loaned $793,700 with net cash proceeds of $634,960. The note was issued with a 20% original issue discount and is due in full on December 7, 2024. Upon default, the note can be converted at a variable price equal to 30% discount to the average daily volume weighted average price (“VWAP”) for the 20 trading days preceding the date of conversion. As of June 30, 2024, the note is not considered convertible.

 

Secured Bridge Loan

 

On September 22, 2023, the Company entered into a secured loan pursuant to a Loan and Security Agreement (the “September 2023 Loan Agreement”), dated as of September 22, 2023 with Synergy Imports, LLC (the “Secured Bridge Loan Lender” or “Synergy”).

 

Pursuant to the September 2023 Loan Agreement, the Secured Bridge Loan Lender agreed to make available to the Company a six-month bridge loan of $2.2 million in new funds. Additionally, the Secured Bridge Loan Lender agreed to defer payments totaling $2,028,604 already owed by the Company under existing payment obligations and potentially defer up to an additional $2,655,778 which may become due pursuant to existing agreements during the term of the September 2023 Loan Agreement.

 

Subject to certain exceptions, the Company agreed to pledge all of its assets, with the exception of deposit accounts and accounts receivable, as collateral. Additionally, the Company agreed to transfer one US patent and two related foreign patents and a related trademark in exchange for an exclusive license back of such assets in the area of smoking products and accessories in connection with the September 2023 Loan Agreement.

 

On May 6, 2024, the Company, Warehouse Goods and Synergy entered into an asset purchase agreement, dated May 1, 2024 (the “Asset Purchase Agreement”) pursuant to which Synergy purchased all of the intellectual property, a specified amount of inventory, and other assets related to the Eyce and DaVinci brands. In consideration for the acquisition, all parties entered into a loan modification agreement, effective May 1, 2024 (the “Loan Modification Agreement”) and an amended and restated secured promissory note, effective May 1, 2024 (the “Amended and Restated Secured Promissory Note”), an amendment to the original Eyce and Davinci Asset Purchase Agreements, a distribution agreement, the termination of a license granted by Eyce, and the termination of certain consulting and employment agreements. As part of the overall modification, the principal balance with Synergy decreased by $2.7 million from $5.1 million. Synergy acquired certain assets from the Company in exchange for the reduction in overall principal owed and as part of the transaction, the Company recognized a gain on the debt modification of $2.2 million. This amount is included in the accompanying financial statements within the statement of operations for the three and six months ended June 30, 2024 within other income (expense). At June 30, 2024, $2.5 million of such financing remained outstanding. The updated date of maturity will be through August 2024.

 

Future Minimum Principal Payments

 

The following table summarizes future scheduled minimum principal payments of debt at June 30, 2024. Future debt principal payments are presented based upon the stated maturity dates in the respective debt agreement.

 

(in thousands)   Remainder 2024     2025     2026     2027     2028     Total  
    Year Ending December 31,  
(in thousands)   Remainder 2024     2025     2026     2027     2028     Total  
Future Receivables Financing   $ 1,786     $ —     $ —     $ —     $ —     $ 1,786  
Note payable     794       —       —       —       —       794  
Secured Bridge Loan     2,451       —       —       —       —       2,451  
Total   $ 5,031     $ —     $ —     $ —     $ —     $ 5,031