Annual report pursuant to Section 13 and 15(d)

RELATED PARTY TRANSACTIONS

v3.22.4
RELATED PARTY TRANSACTIONS
12 Months Ended
Dec. 31, 2022
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 President and Chief Executive Officer ("Mr. Levine") has an investment interest. This lease expires in October 2028 and contains a five-year extension option. Expenses under this lease in both of the years ended December 31, 2022 and 2021 approximated $156,000.

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 $4.8 million and $4.9 million in the years ended December 31, 2022 and 2021, respectively.

The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the COO and the Company's 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 1.3% 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 for the years ended December 31, 2022 and 2021 approximated $219,000 and $266,000, respectively.

During the years ended December 31, 2022 and 2021, one of the Company’s majority-owned subsidiaries paid distributions aggregating approximately $27,300 and $44,000, respectively, to Mr. Fireman and Mr. Levine, who own
minority equity interests in such subsidiary. In addition, the Company accrued $1,800 in the aggregate at December 31, 2022 for payments relate to the fourth quarter of 2022.

During the years ended December 31, 2022 and 2021, another of the Company’s majority-owned subsidiaries paid distributions of approximately $17,500 and $7,000 to a current employee who owns a minority equity interest in such subsidiary, and accrued $9,000 at December 31, 2022 for a payment related to the fourth quarter of 2022.

During the years ended December 31, 2022 and 2021, the Company purchased fixed assets and consulting services aggregating $1.2 million and $0.9 million, respectively, from two entities owned by two of the Company’s general managers.

During the years ended December 31, 2022 and 2021, the Company purchased fixed assets aggregating approximately $600,000 and $642,000 from an entity owned by an employee.

In the first quarter of 2021, the Company made payments aggregating $1.2 million that had been accrued at December 31, 2020, comprised of approximately $460,000 paid to Mr. Fireman, $653,000 paid to entities owned by Mr. Fireman and Mr. Levine, and $45,000 paid to a stockholder of the Company.

At December 31, 2022, the Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank were personally guaranteed by Mr. Levine.