RELATED PARTY TRANSACTIONS |
6 Months Ended |
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Jun. 30, 2024 | |
| 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 (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 $63,000 and $64,000 for the three months ended June 30, 2024 and 2023, respectively, and approximately $104,000 and $129,000 for the six months ended June 30, 2024 and 2023, 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 $1.2 million and $1.4 million in the three months ended June 30, 2024 and 2023, respectively, and $2.2 million and $2.7 million in the six months ended June 30, 2024 and 2023, 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. Under this agreement, the royalty percentage on all
sales of Betty’s Eddies products is 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 earned by the entity under this agreement were approximately $131,000 and $346,000 for the three months ended June 30, 2024 and 2023, respectively, and approximately $249,000 and $465,000 for the six months ended June 30, 2024 and 2023, respectively.
During the three months ended June 30, 2024 and 2023, one of the Company’s majority-owned subsidiaries paid distributions of approximately $1,900 and $2,100, respectively, to the CEO, who owns a minority equity interest in such subsidiary. During the six months ended June 30, 2024 and 2023, this majority-owned subsidiary made distribution payments of approximately $3,100 and $12,600, respectively, to the CEO.
On June 10, 2024 (the "Membership Unit Purchase Date"), the CEO and COO purchased 5% and 15%, respectively, of the membership units of Mari Holdings Metropolis, LLC, one of the Company's majority-owned subsidiaries. These membership units were purchased from the previous minority interest-holder, and accordingly, the percentage of this majority-owned subsidiary held by noncontrolling interests remains unchanged. During both the three- and six-month periods ended June 30, 2024, this majority-owned subsidiary accrued distribution payments of $3,250 and $9,750 to the CEO and COO, respectively.
Prior to December 31, 2023, FSCC, the cannabis-licensed client in Delaware that the Company manages, paid 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 and $96,000, respectively, for the three and six months ended June 30, 2023. Payment of these fees terminated effective as of December 31, 2023.
At June 30, 2024, the Company’s mortgages with Bank of New England and DuQuoin State Bank were personally guaranteed by the CEO. Additionally, the CEO provided a limited guaranty to the Lenders under the Company's Credit Agreement with Chicago Atlantic through its repayment in November 2023. The CEO had also guaranteed the South Porte Bank Mortgage prior to its repayment in May 2023.
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