RELATED PARTY TRANSACTIONS
|6 Months Ended|
Jun. 30, 2021
|Related Party Transactions [Abstract]|
|RELATED PARTY TRANSACTIONS||
NOTE 18 – RELATED PARTY TRANSACTIONS
In April 2020, the Company issued options to purchase up to 6,000 was charged to compensation expense over the annual vesting period. No options were issued to related parties in 2021.shares of common stock to its COO, with an exercise price of $ per share and expiring three years from grant date. The fair value of these options of approximately $
In 2020, options to purchase an aggregate of shares of common stock were exercised by the Company’s CEO, CFO, and an independent board member at exercise prices of $and $per share. No options were exercised by related parties in 2021.
The Company’s corporate offices are leased from an entity in which the Company’s CFO has an investment interest. This lease expires in October 2028 and contains a five-year extension option. In each of the six-month periods ended June 30, 2021 and 2020, expenses incurred under this lease approximated $78,000.
The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s COO. The aggregate purchases from this entity in the six months ended June 30, 2021 and 2020 approximated $2,015,000 and $1,141,000, respectively.
The Company pays royalties on the revenue generated from its Betty’s Eddies® product line to an entity owned by the Company’s COO and its SVP of Sales under a royalty agreement. This agreement was amended effective January 1, 2021 whereby, among other modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies® products to (i) 3.0% and 10.0% of wholesale sales of existing products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively, and (ii) 0.5% and 1.0% of wholesale sales of future developed products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively. The aggregate royalties due to this entity in the six months ended June 30, 2021 and 2020 approximated $162,000 and $148,000, respectively.
In the six months ended June 30, 2021 and 2020, one of the Company’s majority owned subsidiaries paid aggregate distributions of approximately $21,000 and $19,000, respectively, to the Company’s CEO and CFO, who own minority equity interests in such subsidiary.
In the six months ended June 30, 2021, the Company purchased fixed assets and consulting services of approximately $573,000 in the aggregate from two entities owned by two of the Company’s general managers. No payments were made to these two entities in the same period in 2020.
In the six months ended June 30, 2021 and 2020, the Company purchased fixed assets of approximately $466,000 and $145,000 from an entity owned by an employee.
The balance of Due To Related Parties at December 31, 2020 of approximately $1.2 million was comprised of amounts owed of approximately (i) $460,000 to the Company’s CEO, (ii) $653,000 to entities owned by the Company’s CEO and CFO, and (iii) $45,000 to a stockholder of the Company. All amounts owed were repaid in March 2021.
The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the Company’s CEO and CFO.
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://www.xbrl.org/2003/role/disclosureRef