Edible Garden AG Inc

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should consider the risks described in Part I, Item 1A, "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023. Except as set forth below, there have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K. Any of these risks and uncertainties, including those discussed below, could materially and adversely affect our business, results of operations, financial condition, and/or the market price of our common stock. The risks described below and in our Annual Report on Form 10-K, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our financial condition and/or operating results.

On April 11, 2024, we received a letter from the Listing Qualifications Department of Nasdaq indicating that we do not comply with the minimum stockholders’ equity requirement for continued listing on Nasdaq under the Stockholders’ Equity Rule because: (i) our stockholders’ equity was less than the required minimum of $2,500,000; and (ii) as of August 15, 2024, we do not meet the alternative compliance standards of market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. As of June 30, 2024, our stockholders’ equity is $366 thousand and we have not regained compliance with the Stockholders’ Equity Rule.

On June 17, 2024, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC indicating that Nasdaq granted the Company until October 8, 2024 to regain compliance with requirements for continued listing on Nasdaq.

On or before October 8, 2024, we must evidence compliance with the Stockholders’ Equity Rule, which requires us to have a minimum $2,500,000 in stockholders’ equity, $35,000,000 market value of listed securities, or $500,000 net income from continuing operations. If we fail to regain compliance with the Stockholders’ Equity Rule, or fail to evidence compliance with the Rule in our periodic report for the year ending December 31, 2024, we may be subject to delisting. In that event, we would have the right to a hearing before a Nasdaq hearings panel, which would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing.

We cannot assure you that we will be able to regain compliance with Nasdaq listing standards. Our failure to continue to meet these requirements would result in our common stock being delisted from Nasdaq, and if our common stock is delisted, our warrants will also be delisted. We and holders of our securities could be materially adversely impacted if our securities are delisted from Nasdaq. In particular:

We may not be able to repay, refinance, or restructure our substantial indebtedness, which would have a material adverse effect on our financial condition and may cause us to discontinue our business.

The promissory note initially issued to Sament Capital Investments, Inc. and later assigned to third parties (the “Sament Note”) is secured by a security interest in all of our assets located at our Belvidere, New Jersey facility, and the promissory note (the “Michigan Note”) issued in connection with our purchase of the assets of 2900 Madison Ave. SE, Grand Rapids, Michigan (the “Property”) is secured by a mortgage on the Property and a security interest in the assets at the Property. In addition, the balance under the Restated Agreement is collateralized by our cash and receivable accounts. As of June 30, 2024, we had short-term debt, net of discounts of $4.9 million. Short-term debt, net of discounts, as of June 30, 2024, includes the outstanding principal balance under the Sament Note of $3.1 million, $308 thousand of the outstanding balance of the Michigan Note and $1.5 million of the outstanding balance of the Restated Agreement. We could be required to dispose of material assets or operations to meet our debt service and other obligations, and the value realized on such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount and may limit our ability to adequately operate our business. If we were to attempt to sell material assets or operations, the foregoing encumbrances may limit our ability to dispose of material assets or operations.

We cannot provide any assurances that we will be able to generate cash from operating activities or raise the necessary amount of capital to repay these obligations or that we will be able to extend the maturity dates or otherwise refinance these obligations. If we are unable to generate sufficient income or raise additional capital, we may default on our obligations under these loans and arrangements. We recognized net losses of $6.1 million and $10.2 million during the six months ended June 30, 2024 and the year ended December 31, 2023, respectively. 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. If we are unable to raise additional capital or improve our ability to generate cash from operating activities, we would not have sufficient cash on hand or available liquidity that can be utilized to repay our short-term debt obligations when they become due. If we were to default on our obligations under these loans and arrangements, the secured counterparties would have the right to our assets. In the event that the counterparties enforced their rights to our assets, we may have to discontinue our business, and our stockholders could lose all or a part of their investment in us.