Edible Garden AG Inc

Previous wording

On March 14, 2024, the Company entered into a standard merchant cash advance agreement (the “Advance Agreement” with Cedar Advance LLC (“Cedar”), pursuant to which the Company agreed to sell $1,491,000 of trade receivables to Cedar in exchange for $1,000,000 of cash proceeds, after deducting $50,000 for underwriting fees and other transaction expenses. On May 7, 2024, the Company entered into an amended and restated standard merchant cash advance agreement (the “Restated Agreement”) with Cedar that amends and restates the Advance Agreement. Except as amended by the Restated Agreement, the remaining terms of the Advance Agreement remain in full force and effect. Under the Restated Agreement, the Company sold to Cedar an additional $994,000 of its future accounts receivable for a purchase price of $700,000, less aggregate fees and expenses of $87,500, for additional net funds provided of $544,250, bringing the total financing with Cedar to $2,485,000 in accounts receivable sold for $1,544,250 of net funds provided. Pursuant to the Restated Agreement, the Company is required to pay Cedar 35.0% of all funds collected from customers for the sale of goods and services. Weekly, Cedar is authorized to withdraw $65,000 of funds from Edible Garden’s bank account until such time a reconciliation is provided calculating the 35.0% of collections owed to Cedar, until such time the total balance of $2,485,000 is repaid. The Restated Agreement is collateralized by the Company’s cash and receivable accounts. In the event of a default (as defined in the Restated Agreement), Cedar, among other remedies, can enforce its security interest in the collateral and demand payment in full of the uncollected amount of receivables purchased plus all fees due under the Restated Agreement.

Current wording

On March 14, 2024, we entered into a standard merchant cash advance agreement (the “Advance Agreement”) with Cedar Advance LLC (“Cedar”), pursuant to which we agreed to sell $1,491,000 of trade receivables to Cedar in exchange for $1,000,000 of cash proceeds, after deducting $50,000 for underwriting fees and other transaction expenses. On May 7, 2024, we entered into an amended and restated standard merchant cash advance agreement (the “Restated Agreement”) with Cedar that amends and restates the Advance Agreement. Except as amended by the Restated Agreement, the remaining terms of the Advance Agreement remain in full force and effect. Under the Restated Agreement, we sold Cedar an additional $994,000 of our future accounts receivable for a purchase price of $700,000, less aggregate fees and expenses of $87,500, for additional net funds provided of $544,250, bringing the total financing with Cedar to $2,485,000 in accounts receivable sold for $1,544,250 of net funds provided. Under the Restated Agreement, we are required to pay Cedar 35.0% of all funds collected weekly from customers for the sale of goods and services. Weekly, Cedar is authorized to withdraw $65,000 of funds from our bank account until such time a reconciliation is provided calculating the 35.0% of collections owed to Cedar or until the total balance of $2,485,000 is repaid. The Restated Agreement is collateralized by our cash and receivable accounts. In the event of a default (as defined in the Restated Agreement), Cedar, among other remedies, can enforce its security interest in the collateral and demand payment in full of the uncollected amount of receivables purchased plus all fees due under the Restated Agreement.

Previous wording

On April 11, 2024, we received letters from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we do not comply with the minimum stockholders’ equity requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Rule”) and Nasdaq Listing Rule 5550(a)(4), which requires us to have a minimum of 500,000 publicly held shares (the “Publicly Held Shares Rule”). These notices of noncompliance have no immediate impact on the continued listing or trading of our securities on Nasdaq, which will continue to be listed and traded on Nasdaq, subject to our compliance with the other Nasdaq continued listing requirements. By May 28, 2024, we must submit a plan to Nasdaq showing how we intend to regain compliance with the Stockholders’ Equity Rule. Because there are 549,392 shares of common stock outstanding as of May 6, 2024, (of which 3,360 are held by our officers and directors), we believe we are in compliance with the Publicly Held Shares Rule.

Current wording

On April 11, 2024, we received letters from the Listing Qualifications Department of Nasdaq indicating that we did not comply with the minimum stockholders’ equity requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Rule”) and Nasdaq Listing Rule 5550(a)(4), which requires us to have a minimum of 500,000 publicly held shares (the “Publicly Held Shares Rule”). These notices of noncompliance have no immediate impact on the continued listing or trading of our securities on Nasdaq, which will continue to be listed and traded on Nasdaq, subject to our compliance with the other Nasdaq continued listing requirements.

Previous wording

On April 19, 2024, we received a letter from the Listing Qualifications Staff of Nasdaq indicating that we had regained compliance with the minimum bid price requirement under Nasdaq Rule 5550(a)(2).

Current wording

On June 17, 2024, we received a letter from the Listing Qualifications Department of Nasdaq indicating that we had regained compliance with the Publicly Held Shares Rule.

Previous wording

The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360,*“Property, Plant, and Equipment.”*When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Current wording

The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of Accounting Standards Codification (“ASC”) 360,*“Property, Plant, and Equipment.”*When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Previous wording

During the three months ended March 31, 2024, total revenue was reduced by approximately $67 thousand as we adjusted the transaction price of our sales to a customer to account for funds we agreed to pay to the customer for the installation of fixtures in their stores. See Note 2,"Summary of Significant Accounting Policies.”

Current wording

During the six months ended June 30, 2024, total revenue was reduced by approximately $124 thousand as we adjusted the transaction price of our sales to a customer to account for funds we agreed to pay to the customer for the installation of fixtures in their stores. See Note 2,"Summary of Significant Accounting Policies.”

Previous wording

Selling, general and administrative expenses (“SG&A”) were $3.884 million for the three months ended March 31, 2024, compared to $2.691 million for the three months ended March 31, 2023. SG&A increased $1.193 million, or 44.3%, due to a one-time severance charge of $0.6 million and higher audit, accounting and legal fees related to the departure of our Chief Financial Officer.

Current wording

SG&A were $6.632 million for the six months ended June 30, 2024, compared to $5.071 million for the six months ended June 30, 2023. SG&A increased $1.561 million, or 30.78%, due to the departure of our Chief Financial Officer, a related one-time severance charge of $0.6 million and higher audit, accounting and legal fees related to our capital raising activities.

Previous wording

Higher SG&A expense resulted in a loss from operations of $3.861 million for the three months ended March 31, 2024, compared to $2.715 million for the three months ended March 31, 2023. The increase in net loss from operations was $1.146 million, or 42.2% compared with the three months ended March 31, 2023.

Current wording

Higher SG&A expense resulted in a loss from operations of $5.042 million for the six months ended June 30, 2024, compared to $4.543 million for the six months ended June 30, 2023. The increase in net loss from operations was $499 thousand, or 10.98% compared with the six months ended June 30, 2023.

Previous wording

During the three months ended March 31, 2023, the Company recognized a gain from the extinguishment of debt of $70 thousand by prepaying a promissory note owed to our Predecessor company.

Current wording

During the six months ended June 30, 2023, the Company recognized a loss from the extinguishment of debt of $335 thousand related to the Restated Agreement.

Previous wording

Net loss was $3.977 million for the three months ended March 31, 2024, compared to a net loss of $2.879 million for the three months ended March 31, 2023. The reasons for the increase in net loss are explained above.

Current wording

Net loss was $5.909 million for the six months ended June 30, 2024, compared to a net loss of $3.517 million for the six months ended June 30, 2023. The reasons for the increase in net loss are explained above.

Previous wording

We have incurred significant losses since our inception. We recognized net losses of approximately $3.977 million during the three months ended March 31, 2024 and $10.188 million during the twelve months ended December 31, 2023. We expect our capital expenses and operational expenses to increase in the future due to expected increased sales and marketing expenses, operational costs, and general and administrative costs. Therefore, we believe our operating losses will continue or even increase at least through the near term.

Current wording

We have incurred significant losses since our inception. We recognized net losses of approximately $5.909 million during the six months ended June 30, 2024 and $10.188 million during the twelve months ended December 31, 2023. As of June 30, 2024, we have an accumulated deficit of $36.3 million. Our operating activities used $5.6 million and $8.5 million of cash during the six months ended June 30, 2024 and the year ended December 31, 2023, respectively. We expect our capital expenses and operational expenses to increase in the future due to expected increased sales and marketing expenses, operational costs, and general and administrative costs. Therefore, we believe our operating losses will continue or even increase at least through the near term. In addition, before June 30, 2025, approximately $4.9 million of short-term debt, net of discounts will become due and payable.

Previous wording

As of March 31, 2024 and December 31, 2023, we had $388 thousand and $510 thousand in cash and cash equivalents available, respectively. During the three months ended March 31, 2024, we used $1.06 million of cash for operating activities. As of March 31, 2024 and December 31, 2023, we had a working capital deficit of $6.966 million and $257 thousand, respectively. As of March 31, 2024 and December 31, 2023, we had $5.290 million and $4.427 million of total debt outstanding, respectively. To meet our cash needs, we entered into the Advance Agreement and the Restated Agreement, raised approximately $1.1 million in an at-the-market offering and are implementing cost savings strategies. See “Capital Resources” below for additional details.

Current wording

As of June 30, 2024 and December 31, 2023, we had $2.188 million and $510 thousand in cash and cash equivalents available, respectively. During the six months ended June 30, 2024, we used $5.649 million of cash for operating activities. As of June 30, 2024 and December 31, 2023, we had a working capital deficit of $2.315 million and $257 thousand, respectively. As of June 30, 2024 and December 31, 2023, we had $5.735 million and $4.445 million of total gross debt outstanding, respectively. To meet our cash needs, we entered into the Advance Agreement and the Restated Agreement, raised approximately $5.998 million in gross proceeds in an best efforts public offering, $1.1 million in an at-the-market offering and are implementing cost savings strategies. See “Capital Resources” below for additional details.

Previous wording

We may not be able to access the capital markets in the future on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control, including those described under “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on April 1, 2024.

Current wording

We may not be able to access the capital markets in the future on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control, including those described under “Risk Factors” below and in our Annual Report on Form 10-K, filed with the SEC on April 1, 2024.

Previous wording

On March 14, 2024, we entered into the Advance Agreement with Cedar, pursuant to which we agreed to sell $1,491,000 of trade receivables to Cedar in exchange for $1,000,000 of cash proceeds, after deducting $50,000 for underwriting fees and other transaction expenses. On May 7, 2024, we entered into the Restated Agreement with Cedar, pursuant to which we sold Cedar an additional $994,000 of our future accounts receivable for a purchase price of $700,000, less aggregate fees and expenses of $87,500, for additional net funds provided of $544,250, bringing the total financing with Cedar to $2,485,000 in accounts receivable sold for $1,544,250 of net funds provided. Pursuant to the Restated Agreement, we are required to pay Cedar 35.0% of all funds collected weekly from customers for the sale of goods and services. Weekly, Cedar is authorized to withdraw $65,000 of funds from our bank account until such time a reconciliation is provided calculating the 35.0% of collections owed to Cedar, until such time the total balance of $2,485,000 is repaid. The Restated Agreement is collateralized by our cash and receivable accounts. In the event of a default (as defined in the Restated Agreement), Cedar, among other remedies, can enforce its security interest in the collateral and demand payment in full of the uncollected amount of receivables purchased plus all fees due under the Restated Agreement.

Current wording

On March 14, 2024, we entered into the Advance Agreement with Cedar, pursuant to which we agreed to sell $1,491,000 of trade receivables to Cedar in exchange for $1,000,000 of cash proceeds, after deducting $50,000 for underwriting fees and other transaction expenses. On May 7, 2024, we entered into the Restated Agreement with Cedar, pursuant to which we sold Cedar an additional $994,000 of our future accounts receivable for a purchase price of $700,000, less aggregate fees and expenses of $87,500, for additional net funds provided of $544,250, bringing the total financing with Cedar to $2,485,000 in accounts receivable sold for $1,544,250 of net funds provided. Pursuant to the Restated Agreement, we are required to pay Cedar 35.0% of all funds collected weekly from customers for the sale of goods and services. Weekly, Cedar is authorized to withdraw $65,000 of funds from our bank account until such time a reconciliation is provided calculating the 35.0% of collections owed to Cedar, until such time the total balance of $2,485,000 is repaid. The Restated Agreement is collateralized by our cash and receivable accounts. In the event of a default (as defined in the Restated Agreement), Cedar, among other remedies, can enforce its security interest in the collateral and demand payment in full of the uncollected amount of receivables purchased plus all fees due under the Restated Agreement. As of June 30, 2024, we used $821 thousand of the proceeds received from the closing of the Offering to repay the remaining principal due for the Advance Agreement and $297 thousand to pay future interest that would have been due under the Advance Agreement under the original maturity date.

Previous wording

During the three months ended March 31, 2024 and 2023, cash used for operating activities was $1.059 million and $3.319 million, respectively. Cash expenditures for the three months ended March 31, 2024 decreased primarily due to a decrease in payments to vendors, higher collections and the impact of depreciation, offset by a higher operating loss.

Current wording

During the six months ended June 30, 2024 and 2023, cash used for operating activities was $5.649 million and $5.568 million, respectively. Cash expenditures for the six months ended June 30, 2024 increased primarily due to an increase in our net loss, an increase in payments to vendors and lower collections.

Previous wording

During the three months ended March 31, 2024 and 2023, cash used in investing activities was $55 thousand and $361 thousand, respectively. The decrease was due to lower purchases of property, equipment and leasehold improvements.

Current wording

During the six months ended June 30, 2024 and 2023, cash used in investing activities was $167 thousand and $591 thousand, respectively. The decrease was due to lower purchases of property, equipment and leasehold improvements related to the completion of our Michigan facility.