RELATED PARTY TRANSACTIONS
|3 Months Ended|
Mar. 31, 2023
|Related Party Transactions [Abstract]|
|RELATED PARTY TRANSACTIONS||
(17) RELATED PARTY TRANSACTIONS
The Company’s corporate offices are leased from an entity in which the Company’s Chief Executive Officer and President (the "CEO"), has an investment interest. This lease expires in October 2028 and contains a five-year extension option. Expenses incurred under this lease were approximately $39,000 for each of the three-month periods ended March 31, 2023 and 2022.
The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s Chief Operating Officer (the “COO”). Purchases from this entity totaled $1.0 million and $0.9 million in the three months ended March 31, 2023 and 2022, respectively.
The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the COO and its Chief Revenue Officer (the “CRO") 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 3.0% if sold directly by the Company and between 1.35% and 2.5% if licensed by the Company for sale by third parties. Future developed products (i.e., ice cream) have a royalty rate of 0.5% if sold directly by the Company and between 0.125% and 0.135% if licensed by the Company for sale by third parties. The aggregate royalties due to this entity were approximately $77,000 and $56,000 for the three months ended March 31, 2023 and 2022, respectively.
During the three months ended March 31, 2023, one of the Company’s majority-owned subsidiaries paid distributions in the aggregate of approximately $1,300 to the CEO, who owns a minority equity interest in such subsidiary. During the three months ended March 31, 2022, this majority-owned subsidiary paid aggregate distributions of approximately $11,000 to the Company’s then-CEO and then-Chief Financial Officer (now the CEO), each of whom owned minority equity interests in such subsidiary.
During the three months ended March 31, 2023 and 2022, the Company purchased fixed assets and consulting services aggregating $267,000 and $82,000, respectively, from two entities owned by two of the Company’s general managers.
The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the CEO.
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