Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.23.2
LEASES
 6 Months Ended
Jun. 30, 2023
Leases [Abstract]  
LEASES
 10. LEASES
The Company leases certain business facilities for corporate, retail and cultivation operations from third parties under lease agreements that specify minimum rentals. In addition, the Company leases certain equipment for use in cultivation and extraction activities. The Company determines whether a contract is or contains a lease at the inception of the contract. In June 2023, the Company performed a reassessment of its previously classified real estate finance leases due to changing demographics and business environment. This reassessment resulted in the removal of certain option renewal periods contained in the leases as the Company is no longer reasonably certain to exercise these option renewal periods. As a result of the reassessment, the classification of some leases were changed from finance to operating. Additionally, the impact of the reassessment was an aggregate decrease in finance lease obligations and related right-of-use (“ROU”) assets of $45,768 and $42,349, respectively, and an aggregate increase in operating lease obligations and related ROU assets of $8,691 and $5,271, respectively. In connection with the change from finance to operating lease, the Company’s
depreciation and interest expense related to ROU assets will be lower after the change, and the rent expense will be higher. The expiry dates of the leases, including reasonably certain estimated renewal periods, are between 2023 and 2043. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table provides the components of lease cost recognized in the consolidated statements of operations and comprehensive income (loss) for the periods presented.
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Finance lease cost:
   Amortization of lease assets $ 1,469  $ 1,261  $ 3,059  $ 2,403 
   Interest on lease liabilities 2,598  3,013  4,947  5,914 
Total finance lease cost 4,067  4,274  8,006  8,317 
Operating lease cost 915  914  1,648  1,800 
Variable lease cost 20  89  86  182 
Total lease cost $ 5,002  $ 5,277  $ 9,740  $ 10,299 
Other information related to operating and finance leases as of the balance sheet dates presented are as follows:
June 30, 2023 December 31, 2022
(unaudited)
Finance Leases Operating Leases Finance Leases Operating Leases
Weighted average discount rate 16.07  % 13.09  % 11.23  % 11.51  %
Weighted average remaining lease term (in years) 17.0 12.7 22.7 14.1
The maturities of the contractual undiscounted lease liabilities as of June 30, 2023 are as follows:
Finance Leases Operating Leases
Remainder of year $ 4,491  $ 2,427 
2024 10,653  5,667 
2025 10,517  5,581 
2026 10,409  5,319 
2027 9,950  5,161 
Thereafter 158,127  43,157 
Total lease payments 204,147  67,312 
Less: Imputed interest (142,662) (36,946)
Total present value of minimum lease payments $ 61,485  $ 30,366 
Lease liabilities - current portion $ 8,786  $ 4,910 
Lease liabilities - non-current $ 52,699  $ 25,456 
LEASES
 10. LEASES
The Company leases certain business facilities for corporate, retail and cultivation operations from third parties under lease agreements that specify minimum rentals. In addition, the Company leases certain equipment for use in cultivation and extraction activities. The Company determines whether a contract is or contains a lease at the inception of the contract. In June 2023, the Company performed a reassessment of its previously classified real estate finance leases due to changing demographics and business environment. This reassessment resulted in the removal of certain option renewal periods contained in the leases as the Company is no longer reasonably certain to exercise these option renewal periods. As a result of the reassessment, the classification of some leases were changed from finance to operating. Additionally, the impact of the reassessment was an aggregate decrease in finance lease obligations and related right-of-use (“ROU”) assets of $45,768 and $42,349, respectively, and an aggregate increase in operating lease obligations and related ROU assets of $8,691 and $5,271, respectively. In connection with the change from finance to operating lease, the Company’s
depreciation and interest expense related to ROU assets will be lower after the change, and the rent expense will be higher. The expiry dates of the leases, including reasonably certain estimated renewal periods, are between 2023 and 2043. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table provides the components of lease cost recognized in the consolidated statements of operations and comprehensive income (loss) for the periods presented.
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Finance lease cost:
   Amortization of lease assets $ 1,469  $ 1,261  $ 3,059  $ 2,403 
   Interest on lease liabilities 2,598  3,013  4,947  5,914 
Total finance lease cost 4,067  4,274  8,006  8,317 
Operating lease cost 915  914  1,648  1,800 
Variable lease cost 20  89  86  182 
Total lease cost $ 5,002  $ 5,277  $ 9,740  $ 10,299 
Other information related to operating and finance leases as of the balance sheet dates presented are as follows:
June 30, 2023 December 31, 2022
(unaudited)
Finance Leases Operating Leases Finance Leases Operating Leases
Weighted average discount rate 16.07  % 13.09  % 11.23  % 11.51  %
Weighted average remaining lease term (in years) 17.0 12.7 22.7 14.1
The maturities of the contractual undiscounted lease liabilities as of June 30, 2023 are as follows:
Finance Leases Operating Leases
Remainder of year $ 4,491  $ 2,427 
2024 10,653  5,667 
2025 10,517  5,581 
2026 10,409  5,319 
2027 9,950  5,161 
Thereafter 158,127  43,157 
Total lease payments 204,147  67,312 
Less: Imputed interest (142,662) (36,946)
Total present value of minimum lease payments $ 61,485  $ 30,366 
Lease liabilities - current portion $ 8,786  $ 4,910 
Lease liabilities - non-current $ 52,699  $ 25,456