v3.23.1
Subsequent Events
12 Months Ended
Dec. 31, 2022
Subsequent Events [Abstract] [Standard Label]  
Subsequent Events

15. Subsequent Events

 

Issuance of common stock options – In January 2023, the Company issued options for the purchase of 100,000 shares of common stock each to our three directors as board fees for the year. The exercise price of the options is $0.30 and they have a ten year term. One-third of the options vested immediately. The remaining options vest in equal tranches over the next two years.

 

Commencement of Bitcoin Operations and Acquisition of Toro Energía Sociedad Anonima – In January 2023, the Company announced a new strategic direction into sustainable energy projects, starting with bitcoin mining. The Company’s name was changed to Evergreen Sustainable Enterprises, Inc. (“EGSE”) in March 2023. The Company’s existing operations will continue to be maintained as a fully operating wholly-owned subsidiary.

 

On January 9, 2023, the Company purchased 80% of Toro Energía Sociedad Anonima (“Toro”), a Costa Rican corporation with ownership of a hydroelectric dam in Costa Rica. The source of approximately one megawatt of power produced from the hydroelectric dam (six generators) will be used to power new Bitcoin mining machines at an extremely low cost. The transaction included seller-financed debt of $985 thousand. The seller-financed debt has a term of 10 years and a 9.5% per annum variable interest rate (based on the prime rate) with straight line amortization. The seller-financed debt is secured by pledge of the Toro Dam.

 

The purchase price for 80% of Toro’s equity was $1.4 million. These amounts were paid in cash from proceeds of a Secured Promissory Note (“Secured Note”) with the Gary C. Evans, CEO of the Company (‘Evans”). Under the terms of the Secured Note, (a) the Company and Evans restructured (i) the Subordinated Promissory Note dated November 20, 2020 and (ii) Convertible Promissory Note dated July 20, 2021, such that all accrued and unpaid interest on each note were rolled into a new Secured Note, (b) Evans lent the Company $500 thousand on January 9, 2023 and $969 thousand on January 10, 2023. The Secured Note has a maturity date of July 15, 2023 and bears interest at the rate of 10.00% per annum. The Secured Note has a conversion feature which permits Evans to convert at the Maturity Date then outstanding principal and interest at a conversion price of $0.275 (the closing price of the Company’s stock on January 9, 2023).

 

The Toro Dam is located approximately 25 miles from San Jose between two volcano craters. The site generates all its energy from green resources with a proven 98% run time over the years and has a full-time staff in place under a new Operating & Maintenance Agreement.

 

Hydroelectric power is a clean and renewable energy source that is used to generate electricity by harnessing the energy of falling water and can provide a reliable and a very cost-effective source of energy for bitcoin mining operations. Hydroelectric power can help reduce the carbon footprint of cryptocurrency mining, as many cryptocurrencies are produced using fossil fuels, which continues to contribute to greenhouse gas emissions and climate change. By using hydroelectric power, bitcoin mining can be made more environmentally friendly and sustainable and can help improve the stability and reliability of cryptocurrency networks. Hydroelectric power is a relatively stable and reliable source of energy, compared to other sources such as coal or fossil fuels, which can be prone to price fluctuations and supply disruptions. The Company has committed to acquire 240 new Bitmain S19J Pro+ ASIC miners that will be deployed at the Toro Dam in the first half of 2023.

 

Subordinated Promissory Note and Warrants to Investor – As discussed in Note 5, on March 1, 2023, the Company paid $240 thousand in full repayment of this note and accrued interest thereon.

 

Hemp Processing Operating Facility – The Company’s lease of its operating facility in Kentucky from Oz Capital, LLC, a related party, was amended in January 2023. As amended, the lease payment was increased to $20.5 thousand monthly beginning in March 2023. The lease expiration date of May 31, 2024 was not changed.

 

Issuance of Series C Preferred Units – In the first quarter of 2023, the Company issued six Series C Preferred Units in a private placement for total proceeds of $300 thousand. Each unit consists of one share of 8.50% Series C Redeemable Convertible Preferred Stock and 5,000 warrants to acquire one share of common stock. Cumulative dividends at 8.5% of the stated value of the Series C Redeemable Convertible Preferred Stock are payable each calendar quarter end in cash or additional shares of Series C Redeemable Convertible Preferred Stock, at the Company’s option.

 

Each share of Series C Redeemable Convertible Preferred Stock is convertible, at the holder’s option, into 100 thousand shares of our common stock at any time. It is subject to automatic conversion if (a) the rolling five (5)-trading day volume-weighted average trading price of shares of our common stock exceeds $0.75 and (b) there shall be an effective registration statement under the Securities Act of 1933. The conversion ratio may be adjusted for certain dilutive issuances or in the event a dividend is paid on our common stock. The Series C Redeemable Convertible Preferred Stock is redeemable at any time at the Company’s option.

 

The warrants are exercisable for a cash exercise price of $0.50 per share and expire in three years. The warrants may be redeemed at the Company’s option if after one year from issuance, the trading price of the Company’s common stock exceeds $0.875 over a ten consecutive day trading period having a minimum trading volume of 25 thousand shares daily.

 

Promissory Note to Investment Hunter, LLC – In the first quarter of 2023, Investment Hunter, LLC, a Texas LLC controlled by our CEO, made advances totaling $300 thousand to the Company.

 

Secured Promissory Note to a Director and our CEO – On April 19, 2023, Razorback I, LLC, a wholly-owned subsidiary of the Company, borrowed $300 thousand under a secured promissory note from one of our directors and our CEO. Proceeds from the note are expected to be utilized in the acquisition of land in Arkansas to expand bitcoin mining operations.

 

The promissory note matures on April 15, 2024. Interest accrues at 12% per annum and is due quarterly beginning on July 15, 2023. The holders have the option to convert the outstanding principal and interest into restricted shares at a conversion price of $0.30 per share of common stock.

 

The secured promissory note is collateralized by a pledge of 100% of the ownership interest of Razorback I, LLC and has been guaranteed by the Company as well.