RELATED PARTY TRANSACTIONS |
9 Months Ended |
|---|---|
Sep. 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 $64,000 and $61,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $168,000 and $190,000 for the nine months ended September 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 $1.3 million and $1.4 million in the three months ended September 30, 2024 and 2023, respectively, and $3.5 million and $4.2 million in the nine months ended September 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 $178,000 and $149,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $427,000 and $614,000 for the nine months ended September 30, 2024 and 2023, respectively.
During the three months ended September 30, 2024 and 2023, one of the Company’s majority-owned subsidiaries paid distributions of approximately $1,900 and $3,000, respectively, to the CEO, who owns a minority equity interest in such subsidiary. During the nine months ended September 30, 2024 and 2023, this majority-owned subsidiary made distribution payments of approximately $5,000 and $6,400, 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 the three months ended September 30, 2024, this majority-owned subsidiary accrued distribution payments of approximately $3,250 and $9,750 to the CEO and COO, respectively. During the nine months ended September 30, 2024, this majority-owned subsidiary accrued distribution payments of approximately $6,500 and $19,500 to the CEO and COO, respectively.
The Company holds a 49% interest in a delivery company that delivers products purchased at certain of the Company's dispensaries (the "Delivery Company"). The remaining interest is held by a non-executive officer employee of the Company who was a founder of the Delivery Company. The Company has provided funding to the Delivery Company; during the nine months ended September 30, 2024 and 2023, the Company provided funding of approximately $197,000 and $58,000, respectively. As of September 30, 2024, these amounts remained outstanding.
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 $144,000, respectively, for the three and nine months ended September 30, 2023. Payment of these fees terminated effective as of December 31, 2023.
At September 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.
|