RELATED PARTY TRANSACTIONS |
9 Months Ended |
|---|---|
Sep. 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 $61,000 and $39,000 for the three months ended September 30, 2023 and 2022, respectively, and approximately $190,000 and $117,000 for the nine months ended September 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 and $1.1 million in the three months ended September 30, 2023 and 2022, respectively, and $4.2 million and $3.4 million in the nine months ended September 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 $149,000 and $53,000 for the three months ended September 30, 2023 and 2022, respectively, and approximately $614,000 and $163,000 for the nine months ended September 30, 2023 and 2022, respectively.
During the three and nine months ended September 30, 2023, one of the Company’s majority-owned subsidiaries paid distributions in the aggregate of approximately $3,000 and $6,400, respectively, to the CEO, who owns a minority equity interest in such subsidiary. During the three and nine months ended September 30, 2022, this majority-owned subsidiary paid distributions aggregating approximately $4,200 and $27,300 to the Company’s then-CEO and then-Chief Financial Officer (now the CEO), each of whom owned minority equity interests in such subsidiary.
FSCC, the cannabis-licensed client in Delaware that the Company manages, pays fees to BKR Management Inc., a company partially owned by the CEO, related to the initial formation, licensing and establishment of FSCC's cannabis operations. The aggregate fees paid by FSCC were $48,000 for each of the three months ended September 30, 2023 and 2022, and $144,000 for each of the nine months ended September 30, 2023 and 2022.
The Company’s mortgages with Bank of New England and DuQuoin State Bank are personally guaranteed by the CEO. Additionally, the CEO provided a limited guaranty to the Lenders under the Company's Credit Agreement with Chicago Atlantic. The CEO had also guaranteed the South Porte Bank Mortgage prior to its repayment in May 2023.
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