Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.23.3
LEASES
 9 Months Ended
Sep. 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. Due to changing demographics and business environment, the Company performed a reassessment of its previously classified real estate finance leases in June 2023 and certain real estate operating leases in September 2023. These reassessments 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 June 2023 reassessment, the classification of some leases were changed from finance to operating, resulting in an aggregate decrease in finance lease obligations and related right-of-use (“ROU”) assets of $45,768 and $42,349, respectively, and an aggregate net increase in
operating lease obligations and related ROU assets of $8,691 and $5,271, respectively. The impact of the September 2023 reassessment was an aggregate net decrease in operating lease obligations and related ROU assets of $6,084 and $6,084, 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 rent expense will be higher. The expiry dates of the leases, including reasonably certain estimated renewal periods, are between 2024 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 September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Finance lease cost:
   Amortization of lease assets $ 1,149  $ 1,532  $ 4,208  $ 3,935 
   Interest on lease liabilities 2,335  2,754  7,282  8,668 
Total finance lease cost 3,484  4,286  11,490  12,603 
Operating lease cost 1,764  898  3,412  2,698 
Variable lease cost 33  99  119  281 
Total lease cost $ 5,281  $ 5,283  $ 15,021  $ 15,582 
Other information related to operating and finance leases as of the balance sheet dates presented are as follows:
September 30, 2023 December 31, 2022
(unaudited)
Finance Leases Operating Leases Finance Leases Operating Leases
Weighted average discount rate 16.07  % 14.84  % 11.23  % 11.51  %
Weighted average remaining lease term (in years) 16.8 8.7 22.7 14.1
The maturities of the contractual undiscounted lease liabilities as of September 30, 2023 are as follows:
Finance Leases Operating Leases
Remainder of year $ 1,903  $ 1,017 
2024 10,738  5,970 
2025 10,602  5,848 
2026 10,494  5,315 
2027 10,002  4,986 
Thereafter 158,136  23,471 
Total lease payments 201,875  46,607 
Less: Imputed interest (140,236) (21,703)
Total present value of minimum lease payments $ 61,639  $ 24,904 
Lease liabilities - current portion $ 8,740  $ 4,916 
Lease liabilities - non-current $ 52,899  $ 19,988 
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. Due to changing demographics and business environment, the Company performed a reassessment of its previously classified real estate finance leases in June 2023 and certain real estate operating leases in September 2023. These reassessments 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 June 2023 reassessment, the classification of some leases were changed from finance to operating, resulting in an aggregate decrease in finance lease obligations and related right-of-use (“ROU”) assets of $45,768 and $42,349, respectively, and an aggregate net increase in
operating lease obligations and related ROU assets of $8,691 and $5,271, respectively. The impact of the September 2023 reassessment was an aggregate net decrease in operating lease obligations and related ROU assets of $6,084 and $6,084, 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 rent expense will be higher. The expiry dates of the leases, including reasonably certain estimated renewal periods, are between 2024 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 September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Finance lease cost:
   Amortization of lease assets $ 1,149  $ 1,532  $ 4,208  $ 3,935 
   Interest on lease liabilities 2,335  2,754  7,282  8,668 
Total finance lease cost 3,484  4,286  11,490  12,603 
Operating lease cost 1,764  898  3,412  2,698 
Variable lease cost 33  99  119  281 
Total lease cost $ 5,281  $ 5,283  $ 15,021  $ 15,582 
Other information related to operating and finance leases as of the balance sheet dates presented are as follows:
September 30, 2023 December 31, 2022
(unaudited)
Finance Leases Operating Leases Finance Leases Operating Leases
Weighted average discount rate 16.07  % 14.84  % 11.23  % 11.51  %
Weighted average remaining lease term (in years) 16.8 8.7 22.7 14.1
The maturities of the contractual undiscounted lease liabilities as of September 30, 2023 are as follows:
Finance Leases Operating Leases
Remainder of year $ 1,903  $ 1,017 
2024 10,738  5,970 
2025 10,602  5,848 
2026 10,494  5,315 
2027 10,002  4,986 
Thereafter 158,136  23,471 
Total lease payments 201,875  46,607 
Less: Imputed interest (140,236) (21,703)
Total present value of minimum lease payments $ 61,639  $ 24,904 
Lease liabilities - current portion $ 8,740  $ 4,916 
Lease liabilities - non-current $ 52,899  $ 19,988