8-K: Edible Garden Secures $1.625M Note from Streeterville Capital

Edible Garden AG Incorporated has secured a $1.625 million secured promissory note from Streeterville Capital, LLC, backed by company assets and subsidiary guarantees.

Summary

• Edible Garden AG Incorporated (EDBL) entered into a Note Purchase Agreement with Streeterville Capital, LLC on March 3, 2026.
• The agreement involves a secured promissory note with an original principal amount of $1,625,000.
• The company received $1,500,000 in net proceeds after an Original Issue Discount (OID) of $120,000 and $5,000 for transaction expenses.
• The note bears an interest rate of 8.0% per annum and matures 13 months from its issuance date, on April 3, 2027.
• The note is secured by substantially all of the company's assets, excluding those related to Tetra Pak, and is guaranteed by its subsidiaries, 2900 Madison Ave Holdings, LLC and Edible Garden Corp.
• Streeterville Capital, LLC has the right to redeem up to $50,000 per month, starting six months after the issuance date.
• The company is subject to various covenants, including timely SEC filings, maintaining its Nasdaq listing, and restrictions on certain types of future debt or equity issuances ("Restricted Issuances").
• Events of default can lead to an immediate acceleration of the note at a "Mandatory Default Amount" and an increased interest rate of 18% per annum.
• A 10% monitoring fee will be added to the outstanding balance if the note is outstanding on the three-month anniversary, though it is pro-rata forgiven with cash payments.
• Streeterville Capital, LLC holds a right of first refusal for unsecured working capital loans up to $5,000,000 for Edible Garden Prairie Hills, LLC.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a necessary but costly financing. While it provides immediate capital, the high effective interest rate, significant OID, restrictive covenants, and broad security interest reflect a challenging financial position for the company.

Positives

• Secured $1,500,000 in immediate financing for working capital.
• The company retains the option to prepay the note at any time without penalty.
• The interest rate of 8.0% is fixed, providing predictability for interest expenses.

Negatives

• The financing includes a significant Original Issue Discount (OID) of $120,000 and $5,000 in transaction expenses, reducing net proceeds to $1,500,000 from a $1,625,000 principal.
• A 10% monitoring fee will be applied if the note is outstanding on the three-month anniversary, adding to the cost of capital.
• Extensive covenants restrict future financing options, particularly those with variable or reset conversion prices, potentially limiting strategic flexibility.
• The note is secured by substantially all company assets, which could limit access to other forms of secured financing.
• Subsidiaries are restricted from selling equity or incurring debt outside the ordinary course of business.
• Upon an event of default, the outstanding balance automatically increases to a "Mandatory Default Amount" and the interest rate jumps to 18% per annum, or the maximum legal rate.
• Streeterville Capital, LLC has the right to redeem up to $50,000 per month, which could create a continuous cash outflow requirement for the company.

Risks

• Default Risk: Failure to meet payment obligations or breach any of the numerous covenants (e.g., timely SEC filings, Nasdaq listing, restrictions on future financings, judgments over $250,000) could trigger an Event of Default, leading to immediate acceleration of the note at a higher principal amount and increased interest.
• Liquidity Risk: The monthly redemption right of up to $50,000 by Streeterville Capital, LLC, starting six months after issuance, could strain the company's cash flow.
• Financing Restrictions: Covenants prohibiting "Restricted Issuances" (e.g., variable conversion price securities) and granting Streeterville a right of first refusal on unsecured working capital loans up to $5,000,000 could limit the company's ability to raise future capital or engage in certain strategic transactions.
• Asset Encumbrance: The note is secured by substantially all of the company's assets, which could make it difficult to obtain additional secured financing from other lenders.
• Corporate Governance Impact: The "Fundamental Transaction" clause, requiring repayment or Streeterville's consent for mergers, consolidations, or significant changes in control, could impede future M&A activities.
• Delisting Risk: Being entered into Nasdaq's delisting protocol is a Trigger Event, which could lead to default remedies.

Future Outlook

The filing does not provide explicit forward-looking statements or guidance beyond the terms of the financing agreement itself, which outlines future payment obligations and potential actions by the lender.

Management Comments

• Company has carefully read this Agreement and each of the other Transaction Documents and has asked any questions needed for Company to understand the terms, consequences and binding effect of this Agreement and each of the other Transaction Documents and fully understand them.
• Company has had the opportunity to seek the advice of an attorney of Company’s choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents voluntarily and without any duress or undue influence by Investor or anyone else.
• Company acknowledges that the State of Utah has a reasonable relationship and sufficient contacts to the transactions contemplated by the Transaction Documents and any dispute that may arise related thereto such that the laws and venue of the State of Utah, as set forth more specifically in Section 9.2 below, shall be applicable to the Transaction Documents and the transactions contemplated therein, and Company waives any objection to such jurisdiction or venue.
• Company acknowledges that Investor is not registered as a dealer under the 1934 Act; and Company has performed due diligence and background research on Investor and its affiliates and has received and reviewed the due diligence summary sheet provided by Investor.
• Company, being aware of the matters and legal issues described in subsections (xvii) and (xviii) above, acknowledges and agrees that such matters, or any similar matters, have no bearing on the transactions contemplated by the Transaction Documents and covenants and agrees it will not use any such information or legal theory as a defense to performance of its obligations under the Transaction Documents or in any attempt to avoid, modify, reduce, rescind or void such obligations.

Industry Context

StockSavvy.ai notes that this type of secured promissory note with an Original Issue Discount (OID) and extensive covenants is often utilized by smaller, growth-stage companies or those facing liquidity challenges, where traditional bank financing may be less accessible. The terms, including the relatively high effective interest rate (considering OID and monitoring fee) and the broad security interest, suggest a higher risk profile perceived by the lender, Streeterville Capital, LLC, a firm specializing in alternative financing. The right of first refusal on future working capital loans further indicates the lender's desire to maintain a strong position in the company's financing structure.

Comparison to Industry Standards

• The 8.0% stated interest rate is moderate, but the effective cost of capital is significantly higher due to the $120,000 OID and $5,000 transaction expenses on a $1.5 million net raise, making it a more expensive form of debt compared to typical senior secured bank loans for established, profitable companies.
• The 10% monitoring fee on the outstanding balance after three months is an unusual and costly provision, not commonly seen in standard corporate debt instruments from traditional lenders like JPMorgan Chase or Bank of America.
• The extensive covenants, including restrictions on "Restricted Issuances" (e.g., variable conversion price securities) and the right of first refusal for future unsecured working capital loans up to $5,000,000, are more stringent than those typically found in investment-grade corporate bonds or syndicated loans from major financial institutions. These terms are more akin to those seen in distressed debt or highly specialized private credit markets, where lenders like Ares Management or Oaktree Capital might impose similar protective measures.
• The broad security interest over "all assets" (with the specific Tetra Pak exclusion) is standard for highly secured debt but can be more restrictive than typical for companies with diverse asset bases seeking flexible financing.
• The default interest rate of 18% per annum is significantly higher than standard default rates in conventional corporate debt, reflecting the high-risk nature of this financing.

Corporate Governance

Legal Proceedings

• The filing details mandatory binding arbitration for all claims arising under the Transaction Documents, to be conducted in Salt Lake County, Utah, under the Utah Uniform Arbitration Act.
• Both parties irrevocably waive their rights to a jury trial for any claims related to the Guaranty or the transactions contemplated.

Stakeholder Impact

• Shareholders: The financing provides necessary capital but comes with significant dilution risk if future equity raises are needed under restrictive terms, or if the company defaults. The extensive covenants and security interest could also limit shareholder value creation by restricting strategic flexibility.
• Creditors: Streeterville Capital, LLC gains a first-position security interest in most of the company's assets and a guarantee from subsidiaries, enhancing its position relative to other unsecured creditors.
• Employees: Securing financing may provide stability for operations, potentially safeguarding jobs, but the company's financial constraints and restrictive covenants could impact growth opportunities.
• Customers/Suppliers: Continued operations due to financing ensure ongoing supply and service, but the company's financial health remains under pressure due to the costly debt.

Next Steps

• Company to make interest and principal payments according to the note's schedule.
• Streeterville Capital, LLC may begin exercising its monthly redemption right of up to $50,000 starting six months after the Purchase Price Date.
• Company must comply with all covenants, including timely SEC filings and maintaining its Nasdaq listing.
• If Edible Garden Prairie Hills, LLC seeks unsecured working capital loans up to $5,000,000, it must first offer Streeterville Capital, LLC the right of first refusal.

Key Dates

Recommendation

The financing provides critical working capital, which is a positive for immediate operational stability. However, the terms are highly unfavorable, characterized by a substantial Original Issue Discount, a high effective interest rate, and restrictive covenants that severely limit future financial and strategic flexibility. The broad security interest and potential for rapid acceleration upon default introduce significant risks. While the capital infusion prevents immediate distress, the long-term implications of this expensive and restrictive debt warrant caution. A "hold" recommendation reflects the balance between the immediate benefit of liquidity and the substantial long-term costs and constraints imposed by the financing terms.

Keywords

Edible Garden AG Incorporated, EDBL, Streeterville Capital, Secured Promissory Note, Debt Financing, Corporate Debt, SEC Filing, 8-K, Original Issue Discount, OID, Corporate Governance, Risk Management, Financial Covenants, Nasdaq Listing, Right of First Refusal, Subsidiary Guarantee, Secured Lending, Working Capital