Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.23.3
DEBT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
DEBT
 9. DEBT
The components of the Company’s debt are as follows:
Effective Interest Rate Maturity Date September 30, 2023 December 31, 2022
Principal amounts:
Second Lien Notes 15% December 2026 $ 73,991  $ 73,182 
Acquisition Facility 15% December 2024 62,563  65,000 
Acquisition-related promissory notes payable
8% - 23%
August 2024 - April 2027
 35,716  35,716 
Mortgage loans
6% - 9%
January 2027 - April 2028
 29,505  7,770 
Total debt subject to scheduled repayments 201,775  181,668 
Promissory notes payable to Sammartino (1)
11%
September 2024 - September 2026
 21,500  21,500 
Jushi Europe debt (2)
n/a March 2022 3,162  3,190 
Total debt 226,437  206,358 
Less: debt issuance costs and original issue discounts (14,346) (17,096)
Total debt, net $ 212,091  $ 189,262 
Debt, net - current portion $ 35,620  $ 8,704 
Debt, net - non-current portion $ 176,471  $ 180,558 
(1)This amount is related to the promissory notes issued to Sammartino in connection with the acquisition of Nature's Remedy in September 2021. Any repayment of principal and interest are currently on hold until the resolution of the Sammartino Matter. Refer to Note 18 - Commitments and Contingencies for more information.
(2)On February 16, 2022, Jushi Europe SA, a company organized under the laws of Switzerland (“Jushi Europe”), filed a notice of over-indebtedness with the Swiss courts. Then, the Swiss courts declared Jushi Europe’s bankruptcy on May 19, 2022. As a result, Jushi Europe updated its corporate name to Jushi Europe SA in liquidation, which is still on-going. This debt balance will be adjusted, including the extinguishment of any outstanding debt, upon the final liquidation of Jushi Europe. Refer to Note 17 - Related Party Transactions for more information.
Second Lien Notes
In March 2023, the Company, one of its wholly subsidiaries (JGMT, LLC) and the Company’s Chief Executive Officer and Chairman of the Board of Directors (“CEO”) entered into an amendment to his existing employment agreement (the “Amendment”) pursuant to which the CEO agreed to receive the $750 annual cash bonus that would otherwise have been paid to him in the following alternative form: (i) a lump sum cash payment in the amount of $250, which was paid on March 15, 2023, (ii) $750 aggregate principal amount of 12% second lien notes (“Second Lien Notes”) due December 7, 2026, which was issued on March 15, 2023, and (iii) fully-detached warrants to purchase up to approximately $375 worth of the Company’s SVS (“Warrants”), which was settled on September 1, 2023 resulting in the issuance of Warrants to purchase 551,471 SVS at an exercise price of $0.68 per share. The fair value of the Warrants that were issued was $200, which was recorded as additional debt discount to the Second Lien Notes, with a corresponding offset to Paid-in capital within equity.
In June 2023, the Company amended its Second Lien Notes to modify the Change of Control provisions and make other changes. The consideration paid by the Company for the amendment was a repricing of the related outstanding warrants to purchase SVS of the Company from an exercise price of $2.086 per warrant to $1.00 per warrant. In addition to the repricing of the warrants, the respective warrant agreements were amended and resulted in a change in accounting classification of the respective warrants from liability to equity. The estimated value of the consideration of $1,341 was determined based on the incremental change in the fair value of the warrants before and after repricing. The consideration was recorded as additional debt discount to the Second Lien Notes with a corresponding offset to Paid-in capital. Refer to Note 11 - Derivative Liabilities for more information.
Mortgage loans
Arlington Mortgage
In December 2021, the Company entered into a $6,900 mortgage loan agreement (the “Arlington Mortgage”), which is principally secured by the Company’s retail property in Arlington, Virginia. The Arlington Mortgage bears a fixed interest rate of 5.875% per annum, payable monthly, and will mature in January 2027. As of December 31, 2022, the Company had drawn down $5,000, and the remaining $1,900 was drawn down in January 2023.
Dickson City Mortgage
In July 2022, the Company entered into a $2,800 mortgage loan agreement (the “Dickson City Mortgage”), which is principally secured by the Company’s retail property in Dickson City, Pennsylvania. The Dickson City Mortgage matures in July 2027 and bears interest at a variable rate equal to prime rate plus 2%. The interest rate as of September 30, 2023 was 10.50%.
Manassas Mortgage
In April 2023, the Company entered into a $20,000 mortgage loan agreement (the “Manassas Mortgage”), which is principally secured by the Company’s cultivation and manufacturing facility located in Manassas, Virginia. The Manassas Mortgage bears interest of 8.875% per annum as of September 30, 2023, payable monthly, and will mature in April 2028. The interest rate is variable and determined based on the 30-day average secured overnight financing rate plus 3.55%, with a floor rate of not less than 8.25%.
Financial covenants
Acquisition Facility
The Senior Secured Credit Facility (the “Acquisition Facility”) contains certain financial and other covenants with which the Company is required to comply. On May 10, 2023, the Company was non-compliant with an affirmative covenant relating to a minimum cash deposit requirement in a specified bank account. The Company received a waiver for this instance on May 11, 2023. As of September 30, 2023, the Company was in compliance with its financial covenants related to (i) minimum unrestricted cash and cash equivalents balance requirement and (ii) minimum quarterly revenue requirement.
Mortgage loans
The Company’s three mortgage loan agreements contain certain financial and other covenants with which the Company is required to comply. As of September 30, 2023, the Company was in compliance with all financial covenants contained in each of the mortgage loan agreements.
Annual Maturities
As of September 30, 2023, aggregate future scheduled repayments of the Company’s debt are as follows:
Remainder of the year 2024 2025 2026 2027 Thereafter Total
Second Lien Notes $ —  $ —  $ —  $ 73,991  $ —  $ —  $ 73,991 
Acquisition Facility 2,438  60,125  —  —  —  —  62,563 
Acquisition-related promissory notes payable 3,448  5,885  1,970  1,971  22,442  —  35,716 
Mortgage loans 54  485  658  669  9,399  18,240  29,505 
Total debt subject to scheduled repayments $ 5,940  $ 66,495  $ 2,628  $ 76,631  $ 31,841  $ 18,240  $ 201,775 
The above table excludes the contractual maturities of the Company’s (i) promissory notes payable to Sammartino and (ii) Jushi Europe debt, as the repayments of these two debts are contingent on the resolution of the Sammartino Matter and completion of the liquidation of Jushi Europe, respectively. Refer to Note 18 - Commitments and Contingencies and Note 17 - Related Party Transactions for more information. Specifically, the contractual maturities of (i) the promissory notes payable to Sammartino are as follows: $16,500 in 2024 and $5,000 in 2026 and (ii) Jushi Europe debt of $3,162 was March 2022.
Interest Expense
Interest expense, net is comprised of the following:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Interest expense
Interest and accretion - 10% Senior Notes
 $ —  $ 6,779  $ —  $ 18,015 
Interest and accretion - Second Lien Notes 2,640  —  7,568  — 
Interest and accretion - Finance lease liabilities 2,335  2,754  7,282  8,668 
Interest and accretion - Promissory notes
 1,547  1,709  4,625  3,794 
Interest and accretion - Acquisition Facility 2,298  1,918  7,265  5,212 
Interest and accretion - Mortgage loans and other financing activities 612  266  1,422  885 
Capitalized interest (54) (124) (464) (2,171)
Total interest expense 9,378  13,302  27,698  34,403 
Interest income (33) (191) (43) (229)
Total interest expense, net $ 9,345  $ 13,111  $ 27,655  $ 34,174