LEASES

9 Months Ended

Sep. 30, 2024

Leases [Abstract]

LEASES

LEASES

New Lease Agreement

On February 14, 2024, the Company entered into a guaranty of a lease agreement for a fourth dispensary location in Illinois. Rent payments commence on the earlier of one year after the commencement date or the date on which business opens. As of September 30, 2024, the Company recognized an initial right of use asset and lease liability of $1.2 million in connection with the lease agreement.

Lease Modifications

On April 10, 2024, the Company amended its lease agreement for the cultivation and production facility in Matteson, Illinois to increase the tenant improvement allowance under the lease by $1.6 million, to increase the base rent by $20,000 per month, and to increase the annual rent escalation to 3.5%. The modification resulted in an increase in right-of-use asset and lease liability of $14.5 million during the fiscal second quarter of 2024.

The Company as a Lessor:

Lease income for operating and direct financing leases for the periods presented are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Real estate income:
Operating leases	$	850	$	2,318	$	2,655	$	6,952
Direct financing leases	990		574		2,970		1,795
Total real estate income	$	1,840	$	2,892	$	5,625	$	8,747

The Company leases buildings in Olympia, Washington and Elk Grove, Illinois that are subleased or partly subleased to a third party. The subleases are classified as operating leases under ASC 842. The underlying assets are presented in the condensed consolidated balances sheets as follows:

	September 30, 2024		December 31, 2023
Right-of-use assets	$	24,885	$	25,249
Current portion of lease liability	$	282	$	289
Long-term portion of lease liability	$	22,566	$	22,380

The Company also leases a building in Elma, Washington that is subleased to a third party. This sublease is classified as a finance lease. A reconciliation of the lease receivables is as follows:

	September 30, 2024		December 31, 2023
Balance, beginning of period	$	7,953	$	9,421
Interest	1,445		2,342
Lease payments transferred to accounts receivable	(2,970)		(3,810)
Balance, end of period	6,428		7,953
Less current portion	(4,125)		(3,990)
Long-term lease receivables	$	2,303	$	3,963

LEASES

LEASES

New Lease Agreement

On February 14, 2024, the Company entered into a guaranty of a lease agreement for a fourth dispensary location in Illinois. Rent payments commence on the earlier of one year after the commencement date or the date on which business opens. As of September 30, 2024, the Company recognized an initial right of use asset and lease liability of $1.2 million in connection with the lease agreement.

Lease Modifications

On April 10, 2024, the Company amended its lease agreement for the cultivation and production facility in Matteson, Illinois to increase the tenant improvement allowance under the lease by $1.6 million, to increase the base rent by $20,000 per month, and to increase the annual rent escalation to 3.5%. The modification resulted in an increase in right-of-use asset and lease liability of $14.5 million during the fiscal second quarter of 2024.

The Company as a Lessor:

Lease income for operating and direct financing leases for the periods presented are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Real estate income:
Operating leases	$	850	$	2,318	$	2,655	$	6,952
Direct financing leases	990		574		2,970		1,795
Total real estate income	$	1,840	$	2,892	$	5,625	$	8,747

The Company leases buildings in Olympia, Washington and Elk Grove, Illinois that are subleased or partly subleased to a third party. The subleases are classified as operating leases under ASC 842. The underlying assets are presented in the condensed consolidated balances sheets as follows:

	September 30, 2024		December 31, 2023
Right-of-use assets	$	24,885	$	25,249
Current portion of lease liability	$	282	$	289
Long-term portion of lease liability	$	22,566	$	22,380

The Company also leases a building in Elma, Washington that is subleased to a third party. This sublease is classified as a finance lease. A reconciliation of the lease receivables is as follows:

	September 30, 2024		December 31, 2023
Balance, beginning of period	$	7,953	$	9,421
Interest	1,445		2,342
Lease payments transferred to accounts receivable	(2,970)		(3,810)
Balance, end of period	6,428		7,953
Less current portion	(4,125)		(3,990)
Long-term lease receivables	$	2,303	$	3,963