RELATED PARTY TRANSACTIONS
|6 Months Ended|
Jun. 30, 2023
|Related Party Transactions [Abstract]|
|RELATED PARTY TRANSACTIONS||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 $64,000 and $39,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $129,000 and $78,000 for the six months ended June 30, 2023 and 2022, respectively.
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 $1.4 million in each of the three-month periods ended June 30, 2023 and 2022, and $2.7 million and $2.3 million in the six months ended June 30, 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 $346,000 and $53,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $465,000 and $109,000 for the six months ended June 30, 2023 and 2022, respectively.
During the three and six months ended June 30, 2023, one of the Company’s majority-owned subsidiaries paid distributions in the aggregate of approximately $2,100 and $3,400, respectively, to the CEO, who owns a minority equity interest in such subsidiary. During the three and six months ended June 30, 2022, this majority-owned subsidiary paid distributions aggregating approximately $12,600 and $23,100 to the Company’s then-CEO and then-Chief Financial Officer (now the CEO), each of whom owned minority equity interests in such subsidiary.
The Company’s mortgages with Bank of New England, DuQuoin State Bank are personally guaranteed by the CEO. The CEO had also guaranteed the South Porte Bank Mortgage prior to its repayment in May 2023.
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