NOTES PAYABLE

6 Months Ended

Jun. 30, 2024

Debt Disclosure [Abstract]

NOTES PAYABLE

Note 9 NOTES PAYABLE

At June 30, 2024 and December 31, 2023 notes payable with third parties consisted of the following:

	June 30, 2024			December 31, 2023
Senior PIK Notes in the principal amount of $3,458, including interest of $1,249 and $745	$	4,707		$	4,203
ClearThink Notes in the aggregate principal amount of $987, net of unamortized discounts of 217		770			-
LGH Note Payable in the principal amount of $110, net of unamortized discounts of $63		47			-
IG Note Payable in the principal amount of $150 net of unamortized discounts of $31		119			-
Note payable to RHI in the principal amount of $265		265			-
Note payable to RHI in principal amount of $1,563		1,563			-
Senior Note Payable in the principal amount of $840, net of discounts of $329		511			-
Total third-party notes payable		7,982			4,203
Less current portion of third-party notes payable		(7,982	)		(4,203	)
Total third-party notes payable, net of current portion	$			$	-

In addition, as of June 30, 2024 and December 31, 2023, the Company had outstanding notes payable with related parties of $790 and $790, respectively. Each of these notes payable is more fully discussed in Note 10.

15% Senior PIK Notes

On September 20, 2022, the Company entered into separate Securities Purchase Agreements with accredited investors pursuant to which the Company issued its Senior PIK Notes in the aggregate principal amount of $3,458. The Company received net proceeds of $2,918, after deducting fees and expenses of $540.

The Senior PIK Notes bear interest at 15% per annum, paid in arrears quarterly by payment in kind through the issuance of additional Senior PIK Notes (“PIK Interest”). The Senior PIK Notes matured on April 1, 2024 (the “Maturity Date”). Commencing on November 1, 2023, the Company is required to pay the holders of the Senior PIK Notes and on each one-month anniversary thereof an equal amount until the outstanding principal balance has been paid in full on the Maturity Date. If the Senior PIK Notes were repaid in the first year, the Company was required to pay the holders the outstanding principal balance, excluding any increases as a result of PIK Interest, multiplied by 1.15. Payment of the Senior PIK Notes is past due, as more fully discussed below.

The Company had agreed to not obtain additional equity or debt financing, without the consent of a majority of the holders of the Senior PIK Notes, other than if a financing pays amounts owed on the Senior PIK Notes, with the exception of certain exempt issuances. The Company shall not incur other indebtedness, except for certain exempt indebtedness, until such time the Senior PIK Notes are repaid in full; however, the Senior PIK Notes are unsecured.

PIK Note Amendment

On May 26, 2023, the Company consummated two issuer tender offers: (i) the Exchange Offer (as described in Note 9) and (ii) the Offer to Amend 15% Senior Promissory Notes and Consent Solicitation that commenced on April 27, 2023 (the “PIK Note Offer to Amend”), pursuant to which the Company offered all holders of Senior PIK Notes 0.125 shares of the Company’s Class A Common Stock for every $1.00 of the Original Principal Amount (as defined in the Senior PIK Notes) of such holder’s Senior PIK Notes, in exchange for the consent by such holder of Senior PIK Notes to amendments to the Senior Promissory Note Purchase Agreement, dated September 20, 2022, between the Company and each purchaser of Senior PIK Notes (the “PIK Note Purchase Agreement”).

Pursuant to the PIK Note Offer to Amend, the Company solicited approval from holders of Senior PIK Notes to amend the PIK Note Purchase Agreement to permit the following issuances by the Company of its Class A Common Stock and Common Stock Equivalents (as defined in the PIK Note Purchase Agreement), without prepaying the Senior PIK Notes: (i) the issuance of shares of the Company’s Class A Common Stock in connection with the PIK Offer Note Offer to Amend, (ii) the issuance of shares of the Company’s Class A Common Stock in connection with the Exchange Offer (as defined in Note 12), (iii) the issuance of shares of the Company’s Class A Common Stock or Common Stock Equivalents (as defined in the PIK Note Purchase Agreement) in connection with the 2022 Bridge Debenture Release (defined in Note 12), (iv) the issuance of shares of the Company’s Class A Common Stock or Common Stock Equivalents (as defined in the PIK Note Purchase Agreement) in (a) a private placement of the Company’s equity, equity-linked or debt securities resulting in gross proceeds to the Company no greater than $5 million (a “Private Placement”) and/or (b) a registered offering of the Company’s equity, equity-linked or debt securities resulting in gross proceeds to the Company no greater than $20 million (a “Public Financing”); provided that (A) the proceeds of a Private Placement resulting in gross proceeds to the Company of at least $2 million are used by the Company to prepay not less than 25% of the Outstanding Principal Balance (as defined in the Senior PIK Notes) as of the date of prepayment on a pro rata basis upon the closing of such Private Placement, and (B) the proceeds of a Public Financing resulting in gross proceeds to the Company of at least $10 million are used by the Company to prepay all of the Outstanding Principal Balance as of the date of prepayment upon the closing of such Public Financing, and (v) the issuance of shares of the Company’s Class A Common Stock or Common Stock Equivalents (as defined in the PIK Note Purchase Agreement) as private placement additional consideration (collectively, the “PIK Note Amendment”).

The Company received consents from all Senior PIK Note holders and all required approvals, including stockholder approval, and issued on a pro rata basis to the holders of the Senior PIK Notes 432,188 shares of its Class A Common Stock in consideration for the PIK Note Amendment.

The Company accounted for the PIK Note Amendment as an extinguishment as the consideration of $1,339 paid to Senior PIK Note holders in the form of the Company’s Class A Common Stock caused the cash flows after the PIK Note Amendment to change by more than 10%. Due to the short-term nature of the Senior PIK Notes, the Company determined the reacquisition price of debt was equal to the principal amount at the time of the amendment. The Company recognized $1,596 of expense related to the PIK Note Amendment consisting of $256 of unamortized debt issuance costs and $1,339 for the issuance of the Company’s Class A Common Stock. The Company will continue to pay PIK Interest until maturity or repayment.

Pursuant to the terms of the Senior PIK Notes, commencing on November 1, 2023, and on each one-month anniversary thereof, the Company is required to pay the holders of the PIK Notes an equal amount until their outstanding principal balance has been paid in full on the Maturity Date, or, if earlier, upon acceleration or prepayment of the Senior PIK Notes in accordance with their terms. The Company failed to make the payments due on November 1, 2023 and on each one-month anniversary thereof, which constitutes an event of default under the Senior PIK Notes. As a result of the event of default, the interest rate of the Senior PIK Notes increased from 15% per annum (compounded quarterly on each December 20, March 20, June 20 and September 20) to 22% per annum (compounded annually and computed on the basis of a 360-day year). In addition, the holders of the Senior PIK Notes may, among other remedies, accelerate the Maturity Date and declare all indebtedness under the Senior PIK Notes due and payable at 130% of the outstanding principal balance.

Given the Company’s current cash constraints, as previously discussed in Note 2, the Company is currently in discussions with the holders of the Senior PIK Notes with respect to certain amendments to the Senior PIK Notes to cure the event of default; however, there can be no assurance that the Senior PIK Note holders will agree to amend the PIK Notes.

As of June 30, 2024 and December 31, 2023, the Company has recorded the $4,707 and $4,203 balance of the Senior PIK Notes, respectively, as current liabilities based on the monthly installments payment schedule. For the three and six months ended June 30, 2024, the Company recognized $245 and $504, respectively, of contractual interest expense on the Senior PIK Notes. For the three and six months ended June 30, 2023 the Company recognized $140 and $275, respectively of contractual interest expense on the Senior PIK Notes; and $354 and $448, respectively related to the amortization of debt issuance costs on the Senior PIK Notes. The amortization of debt issuance costs included $256 of unamortized debt issuance costs at the time of the PIK Note Amendment. The debt issue costs for the Senior PIK Notes were fully amortized as of June 30, 2023.

Notes Payable to ClearThink Capital Partners, LLC

During the six months ended June 30, 2024, the Company issued three promissory notes to ClearThink Capital Partners, LLC (“ClearThink”). On January 3, 2024, the Company issued ClearThink a promissory note in the principal amount of $75. The note was issued with a $25 original issue discount and matures on January 3, 2025. On January 30, 2024, the Company issued ClearThink a promissory note in the principal amount of up to $750. The note was issued with a $250 original issue discount and matures on January 30, 2025. On May 15, 2024, the Company issued ClearThink a promissory note in the principal amount of $300. The note was issued with a $100 original issue discount and matures on August 14, 2024. The January 3, 2024, January 30, 2024 and May 15, 2024 notes are referred to collectively as the “ClearThink Notes.” The January 3, 2024 and the January 30, 2024 notes have interest rates of 12% per annum (22% after the occurrence of an Event of Default, as defined in the ClearThink Notes). The May 15, 2024 note is non-interest bearing. 10% of all future purchase notices from the Second Strata Purchase Agreement with ClearThink, which is more fully discussed in Note 12, must be directed toward repayment of the ClearThink Notes until they are paid in full. The May 15, 2024 promissory note is convertible, but only in the event of a default. The Events of Default for the ClearThink Notes include: failure to pay amounts owed under the ClearThink Notes, uncured breach of covenants, breach of representations and warranties, bankruptcy, delisting of the Company’s Class A Common Stock from exchange or OTC Markets, failure to comply with reporting under the Exchange Act, cessation of operations, restatement of financial statements or cross-default of any other agreement with ClearThink, among others. The Company is negotiating an extension of the May 15, 2024 maturity date.

Funding of the ClearThink Notes occurred on various dates during the period January 4, 2024 through June 20, 2024. During the six months ended June 30, 2024, the Company received cash proceeds of $658. During the three and six months ended June 30, 2024, the Company recorded interest expense of $173 and $215, respectively, on the ClearThink Notes, including amortization of debt discounts of $154 and $186, respectively. The Company incurred finder’s fees due in cash and common stock warrants pursuant to a Finder’s Fee Agreement, which is more fully discussed below. The Company recorded the fair value of the warrants issuable to the finder in connection with the ClearThink Notes of $46 as debt discounts and additional paid-in-capital and it recorded the cash Finder’s Fees of $28 as additional debt discounts on the ClearThink Notes. The balance of the ClearThink Notes at June 30, 2024 was $771 and was net of unamortized discounts of $216.

Securities Purchase Agreement Dated April 28, 2024 With LGH Investments

On April 28, 2024, the Company entered into a Securities Purchase Agreement with LGH Investments, LLC, a Wyoming limited liability company (“LGH”), pursuant to which the Company issued to LGH a convertible, non-interest bearing promissory note in the principal amount of $110 and received cash proceeds of $100 (the “LGH Note Payable”) and 200,000 shares of its Class A Common Stock as inducement shares to LGH. The note is convertible into 366,666 shares of the Company’s Class A Common Stock, subject to a beneficial ownership limitation of 4.99%. The LGH Note Payable, which matures nine-months from the closing date, was issued with a 10% (or $10) original issue discount and a one-time 10% interest charge of $11, which the Company accrued. The value of the 200,000 inducement shares that the Company issued to LGH in April 2024 per the terms of the note, of $57, was recorded as additional debt discount. In addition, the Company recorded the fair value of the warrants issuable to the finder under the Finder’s Fee Agreement of $7 as debt discounts and additional paid-in-capital and it recorded the cash payable to the finder of $7 as additional debt discounts on the LGH Note Payable. The Company recorded interest expense, including the amortization of the debt discounts, of $29 during the three and six months ended June 30, 2024. The balance of the LGH Note Payable at June 30, 2024 was $47 and was net of discounts of $63.

Securities Purchase Agreement Dated April 30, 2024 With IG Holdings, Inc.

On April 30, 2024, the Company entered into a Securities Purchase Agreement with IG Holdings, Inc., an Arizona corporation (“IG”), pursuant to which the Company issued IG a promissory note in the principal amount of $150 and received cash proceeds of $100 (the “IG Note Payable”) and the Company agreed to issue 100,000 shares of its Class A Common Stock as inducement shares to IG. The IG Note Payable is convertible into shares of the Company’s Class A Common Stock upon an event of default, as defined in the agreement. Interest accrues at the rate of 22% per annum, among other penalties, upon an event of default. The IG Note Payable, which matures three-months from the closing date and is subject to extension at the option of the holder, was issued with a $50 original issue discount. The value of the 100,000 inducement shares that are issuable to IG per the terms of the note, of $28, was recorded as additional debt discount. In addition, the Company recorded the fair value of the warrants issuable to the finder under the Finder’s Fee Agreement of $7 as debt discount and additional paid-in-capital and it recorded the cash payable to the finder of $7 as additional discount on the IG Note Payable. The Company recorded interest expense resulting from the amortization of the debt discounts of $61 during the three and six months ended June 30, 2024. The balance of the IG Note Payable at June 30, 2024 was $119 and was net of discounts of $31. The Company is negotiating an extension of the maturity date.

Finder’s Fee Agreement

Under the terms of a Finder’s Fee Agreement dated October 9, 2023, the Company is obligated to pay the finder a cash fee equal to 3 to 7% of the gross proceeds received by the Company from the ClearThink Notes, the LGH Note Payable and the IG Note Payable and to issue to the Finder 5-year warrants to purchase shares of the Company’s Class A Common Stock equal to 7% warrant coverage based on the gross proceeds received by the Company from third-party investors introduced to the Company by the finder with an exercise price per share equal to 110% of the gross proceeds (as defined in the Finder ‘s Fee Agreement) or the public market closing price of the Company’s Class A Common Stock on the date of the funding, whichever is lower, subject to anti-dilutive price protection and participating registration rights. As a result of the issuances of the ClearThink Notes, the LGH Note Payable and the IG Note Payable, the Company is obligated to issue warrants as finder’s fees as more fully discussed in Note 12.

Note Payable to RHI for the Acquisition of Myrtle

Pursuant to the acquisition of Myrtle as more fully discussed in Note 5, the Company issued a non-interest bearing note payable to RHI in the amount of $265. The note is due on demand.

Note Payable to RHI

Note payable to RHI dated June 13, 2024, in the original principal amount of $1,611 transferred to the Company as part of the acquisition of Myrtle, net of $48 repaid as of June 30, 2024. The acquisition of Myrtle is more fully discussed in Note 5. The note is non-interest bearing, except if not paid by the maturity date of December 31, 2024, in which case the note will bear interest at 18% per annum.

Securities Purchase Agreement with Institutional Investor Dated June 12, 2024

On June 12, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with an institutional investor (the “Purchaser”) pursuant to which it agreed to issue to the Purchaser and subsequent purchasers who will also be parties to the SPA (the Purchaser, together with the purchasers, the “Purchasers”) Senior Notes in the aggregate principal amount of up to $2,800 (each a “Senior Note Payable” or, together, the “Senior Notes Payable”).

The closings of the SPA (each a “Closing,” or, together, the “Closings”) are as follows:

● On the Initial Closing Date (as defined below), the Purchaser or Purchasers purchased $840 in principal amount of the Senior Notes Payable. The Company was also required to issue to the Purchaser or the Purchasers on a pro rata basis an aggregate of 1,108,755 shares of the Company’s Class A Common Stock representing 9.99% of the outstanding shares of its Class A Common Stock on the Initial Closing Date (as defined below). The Company issued the 1,108,755 shares on July 17, 2024.

● Upon the filing of a preliminary proxy statement or information statement with the SEC relating to the approval by the Company’s stockholders of an agreement by the Company to acquire the shares of common stock of RCHI from RHI, and all transactions contemplated thereby (the “Acquisition”), the Purchasers will purchase up to an aggregate of $280 in principal amount of the Senior Notes Payable.

● Upon the closing of the Acquisition, the Purchasers will purchase up to an aggregate of $1,120 in principal amount of the Senior Notes Payable.

● Upon the filing of a registration statement by the Company with the SEC relating to the resale by the Purchasers (and any affiliates) of all shares of the Company’s Class A Common Stock beneficially owned by each Purchaser (and any affiliate) the Purchasers will purchase up to an aggregate of $560 in principal amount of the Senior Notes Payable.

Each Closing is subject to additional conditions as disclosed in the SPA.

On June 14, 2024 (the “Initial Closing Date”), pursuant to the SPA, the Company issued a Senior Note Payable in the principal amount of $840 to the Purchaser and it received cash proceeds of $750. The Senior Note Payable matures on June 14, 2025. The principal amount of the Senior Note Payable is the subscription amount multiplied by 1.12 which represents 12% (or $90) original issuance discount. The Senior Note Payable does not accrue any interest except for in the event of an Event of Default (as defined in the Note) upon which it will accrue interest at 18% per annum.

The Senior Note Payable provides the Purchaser with rights upon a Fundamental Transaction (as defined in the Senior Note Payable) such as assumption rights of the Successor Entity (as defined in the Senior Note Payable). The Senior Note Payable also provides the Purchaser an exchange right upon the issuance of preferred stock (except in connection with the Acquisition) and mandatory redemption rights. There is also an optional prepayment of the Senior Note Payable provided to the Company of 100% of the Senior Note Payable amount. The Senior Note Payable is guaranteed by RHI.

The Company recorded the $90 original issue discount and the value of the 1,108,755 shares of its Class A Common Stock issuable in connection with the Senior Note Payable of $255 as debt discounts. The Company recorded interest expense resulting from the amortization of the debt discounts of $16 during the three and six months ended June 30, 2024. The balance of the Senior Note Payable at June 30, 2024 was $511, which was net of debt discounts of $329.