Related Party Transactions
|6 Months Ended|
Jun. 30, 2019
|Related Party Transactions [Abstract]|
|Related Party Transactions||
NOTE 17 – RELATED PARTY TRANSACTIONS
During the quarter ended June 30, 2019, the Company entered into several hemp seed sale transactions with GenCanna, a related party, whereby the Company acquired large quantities of top-grade feminized hemp seeds with proven genetics at volume discounts that it sold to GenCanna at market rates. As previously disclosed in Note 1 – Organization and Description of Business, the Company classified the $25.2 million due from GenCanna as a receivable from a related party, with $22,0 million recognized as revenue from a related party for the six months ended June 30, 2019, and $3.2M recorded under Unearned Revenue From Related Party on the balance sheet. When GenCanna makes its payments to the Company in December 2019, the amount in Unearned Revenue From Related Party will be recognized as revenue.
As disclosed in Note 3 – Acquisitions, the current CEO and CFO of the Company were part of the ownership group from whom Sigal Consulting LLC was acquired in May 2014. The 49% ownership in the Company’s subsidiary, MariMed Advisors Inc., which this ownership group acquired as part of the purchase price, was acquired by the Company from this ownership group in June 2017 in exchange for 75 million shares of the Company’s common stock.
In October 2017, the Company acquired certain assets of the Betty’s Eddies™ brand of cannabis-infused products, as disclosed in Note 3 – Acquisitions, from a company that was minority-owned by the Company’s chief operating officer.
As disclosed in Note 11 – Debt, the Company’s two mortgages with Bank of New England are personally guaranteed by the Company’s CEO and CFO.
In January 2018, the Company granted options to purchase 1.45 million shares of common stock to the Company’s board members at exercise prices ranging from $0.14 to $0.77 and expiring between December 2020 and December 2022. Also during this month, options to purchase 200,000 were forfeited by board members. During the six months ended June 30, 2019 and 2018, options to purchase 350,000 and 400,000 shares of common stock, respectively, were exercised by board members on a cashless basis with the exercise prices paid via the surrender of 139,985 shares of common stock in 2019 and 98,000 shares of common stock in 2018. All of the option transactions referred to in this paragraph have been previously disclosed in Note 14 – Stock Options.
The Company’s current corporate offices are leased from a company owned by a related party under a 10-year lease that commenced August 2018 and contains a five-year extension option. Previous to this lease, the Company’s former corporate offices were also leased from a company owned by a related party. For the six months ended June 30, 2019 and 2018, expenses incurred under these leases approximated $34,000 and $6,000, respectively.
The outstanding Due To Related Parties balances at June 30, 2019 and December 31, 2018 of approximately $77,000 and $276,000, respectively, were comprised of amounts owed of approximately (i) zero and $81,000 in respectively to the Company’s CEO and CFO, (ii) $17,000 and $135,000, respectively, to two companies partially owned by these officers, and (iii) $60,000 in both periods to two shareholders of the Company. Such amounts owed are not subject to repayment schedules and are expected to be repaid during 2019.
The outstanding Due From Related Parties balance at December 31, 2018 of approximately $120,000 was comprised of an advance to a company partially owned by the Company’s CEO and CFO. This amount was entirely offset by advances from such related parties. At June 30, 2019, there were no amounts due from related parties.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef