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DEBT
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
DEBT

NOTE 13. DEBT

 

A breakdown of the Company’s debt as of June 30, 2026 and December 31, 2025 is presented below:

 

   June 30, 2026   December 31, 2025 
Promissory note  $4,909,972   $7,513,867 
Debt discount and issuance cost   (181,256)   (215,408)
Total debt, net of debt discount and issuance costs   4,728,716    7,298,459 
Current portion of long-term debt   (1,176,203)   (1,186,833)
Current portion of debt discount and issuance cost   68,874    68,872 
Long-term debt  $3,621,387   $6,180,498 

 

 

Promissory Notes

 

In connection with the Green’s Natural Foods acquisition, on October 14, 2022, the Company issued a secured promissory note (the “Greens Note”) in the principal amount of $3,000,000 as a portion of the purchase price. The Greens Note has a five-year term, an interest rate of 6.0% per annum and is secured by the assets of the Green’s Natural Foods. The outstanding balance was approximately $890,000 and $1,205,000 as of June 30, 2026 and December 31, 2025, respectively. The Company incurred approximately $15,000 and $24,000 interest expense for the three months ended June 30, 2026 and 2025, and approximately $32,000 and $51,000 interest expense for the six months ended June 30, 2026 and 2025, respectively.

 

In connection with the Ellwood Thompson’s acquisition, on October 1, 2023, the Company issued a secured promissory note (the “Ellwood Note”) in the principal amount of $750,000, and discounted present value of $718,000 as a portion of the purchase price. The Ellwood Note has a five-year term, an interest rate of 6.0% per annum. The outstanding balance of the Ellwood Note was approximately $378,000 and $452,000 in principal amount as of June 30, 2026 and December 31, 2025, respectively. The Company recognized interest expense of approximately $6,000 and $8,000 for the three months ended June 30, 2026, and 2025, and approximately $13,000 and $17,000 for the six months ended June 30, 2026, and 2025, respectively.

 

In connection with the GreenAcres Market acquisition, on August 23, 2024, the Company issued a secured promissory note (the “GreenAcres Note”) in the principal amount of $1,825,000 as a portion of the purchase price. The GreenAcres Note has a five-year term, an interest rate of 6.0% per annum and is secured by the assets of the GreenAcres Market. The outstanding balance was approximately $1,218,000 and $1,390,000 as of June 30, 2026 and December 31, 2025, respectively. The Company incurred approximately $19,000 and $24,000 interest expense for the three months ended June 30, 2026 and 2025, and approximately $40,000 and $50,000 interest expense for the six months ended June 30, 2026 and 2025, respectively.

 

Acquisition Loan

 

On July 18, 2024 (the “Loan Effective Date”), the Company entered into a loan and security agreement with a private lender for a $7,500,000 loan (the “Acquisition Loan”). A portion of the Acquisition Loan proceeds were used to acquire GreenAcres Markets. The loan is guaranteed by all of the subsidiaries of the Company (the “Guarantors”) and secured by all of the assets of the Company and the Guarantors. The Acquisition Loan has a term of three years and interest accrues at a rate of 12% on amounts borrowed. The Acquisition Loan may be prepaid at any time at a premium in the amount of ten percent (10%) of the principal amount of the Acquisition Loan outstanding prior to such prepayment. Payments on the Acquisition Loan are required to be made as follows: $1,125,000 on first anniversary of the Loan Effective Date, $1,875,000 on the second anniversary of the Loan Effective Date, and the remaining outstanding principal balance of principal and accrued interest on the third anniversary of the Loan Effective Date.

 

Throughout the year ended December 31, 2025 and six months ended June 30, 2026, the Company entered into a series of exchange agreements (the “Exchange Agreements”) with the holders of the Acquisition Loan (the “Noteholders”), who are unrelated third parties, to convert portions of the outstanding principal and accrued interest into shares of the Company’s Class A common stock. These conversions were accounted for as debt extinguishments. The difference between the carrying amount of the extinguished debt and the fair value of the common stock issued was recognized as a loss on debt extinguishment.

 

In summary, as a result of these exchange agreements during the first and second quarters of 2026, the Company exchanged approximately $2.0 million of outstanding principal of the Acquisition Loan in exchange for 7,410,075 shares of the Company’s Class A common stock.

 

 

The following table summarizes the conversion activity during the six months ended June 30, 2026, and during the year ended December 31, 2025:

 

Exchange Agreement Date  Principal Converted   Shares Issued 
October 24, 2025  $192,569    660,075 
February 10, 2026   1,106,602    4,000,000 
May 28, 2026   742,500    2,750,000 
Total converted in six months ended June 30, 2026  $2,041,671    7,410,075 

 

Exchange Agreement Date  Principal Converted   Shares Issued 
March 2, 2025  $450,000    750,000 
April 3, 2025   500,000    1,136,364 
May 1, 2025   175,000    863,637 
July 15, 2025   1,000,000    2,500,000 
October 24, 2025   909,315    2,325,000 
Total converted in year 2025  $3,034,315    7,575,001 

 

As a result of these debt conversions, the Company recorded approximately $259,000 net loss on extinguishment of debt and $14,000 net gain on extinguishment of debt in the Condensed Consolidated Statement of Operations for the three months ended June 30, 2026 and 2025, and $364,000 net loss on extinguishment of debt and $6,000 net gain on extinguishment of debt for the six months ended June 30, 2026 and 2025, respectively. Following these transactions, $2,424,014 in principal remains outstanding under the Acquisition Loan as of June 30, 2026.

 

As of June 30, 2026, all conversions under the February 10, 2026 exchange agreement have been fully fulfilled, with the maximum authorized shares of 4,000,000 having been issued to settle the outstanding principal balance of $1,106,602. Accordingly, no further conversion rights or derivative liabilities remain outstanding under that agreement.

 

As of June 30, 2026, the Company had converted $742,500 of principal under the May 2026 Agreement into 2,750,000 shares of common stock. The remaining principal balance under this agreement as of June 30, 2026 is $692,671, which is convertible by the holders into 2,565,450 additional shares of common stock, subject to the 9.99% beneficial ownership limitation contained in the agreement. The conversion feature embedded in the May 2026 Agreement represents a fixed-for-fixed conversion option that is indexed to the Company’s own common stock and meets the criteria for equity classification under ASC 815-40. Accordingly, it does not meet the definition of a derivative and is not required to be bifurcated. Furthermore, as the conversion price approximated the fair value of the common stock on the commitment date, no beneficial conversion feature was recognized. The remaining outstanding balance of $692,671 is included in the outstanding principal balance of the Acquisition Loan as of June 30, 2026.

 

Future Principal Payments

 

The Company may, at its option, at any time or from time to time prepay the outstanding principal amount or any accrued but unpaid interest, in each case in whole or in part, without penalty or premium, provided that any such prepayment of any outstanding amount of principal shall be accompanied by the payment of all accrued but unpaid interest on the amount of principal being prepaid, plus any costs and fees incurred.

 

The following table summarizes the five-year repayment schedule:

 

For the years ending December 31,    
2026 (remaining six months)  $579,303 
2027   3,519,372 
2028   534,923 
2029   276,374 
2030   - 
Total  $4,909,972