Annual report pursuant to Section 13 and 15(d)

LEASES

v3.24.1
LEASES
 12 Months Ended
Dec. 31, 2023
Leases [Abstract]  
LEASES
 11. 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.
Year Ended December 31,
2023 2022 2021
Finance lease cost:
   Amortization of lease assets $ 5,358  $ 5,422  $ 3,155 
   Interest on lease liabilities 9,784  11,154  9,158 
 Total finance lease cost 15,142  16,576  12,313 
Operating lease cost 4,819  3,402  2,585 
Variable lease cost 155  390  355 
Total lease cost $ 20,116  $ 20,368  $ 15,253 
All extension options that are reasonably certain to be exercised have been included in the measurement of lease obligations. The Company reassesses the likelihood of extension option exercise if there is a significant event or change in circumstances within its control.
Other information related to operating and finance leases as of the balance sheet dates presented are as follows:
As of December 31, 2023
As of December 31, 2022
Finance Leases Operating Leases Finance Leases Operating Leases
Weighted average discount rate 16.09  % 15.09  % 11.23  % 11.51  %
Weighted average remaining lease term (in years) 16.6 8.7 22.7 14.1
Cash paid for amounts included in the measurement of lease liabilities
 $ 11,060 $ 5,168 $ 11,629 $ 3,133
The maturities of the contractual undiscounted lease liabilities as of December 31, 2023 are as follows:
Finance Leases Operating Leases
2024 $ 9,718  $ 5,081 
2025 10,602  5,665 
2026 10,494  5,428 
2027 10,002  5,185 
2028 10,166  4,787 
Thereafter 147,970  19,833 
Total undiscounted lease liabilities 198,952  45,979 
Interest on lease liabilities (137,228) (21,425)
Total present value of minimum lease payments $ 61,724  $ 24,554 
Lease liabilities - current portion $ 8,885  $ 4,693 
Lease liabilities - non-current $ 52,839  $ 19,861 
LEASES
 11. 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.
Year Ended December 31,
2023 2022 2021
Finance lease cost:
   Amortization of lease assets $ 5,358  $ 5,422  $ 3,155 
   Interest on lease liabilities 9,784  11,154  9,158 
 Total finance lease cost 15,142  16,576  12,313 
Operating lease cost 4,819  3,402  2,585 
Variable lease cost 155  390  355 
Total lease cost $ 20,116  $ 20,368  $ 15,253 
All extension options that are reasonably certain to be exercised have been included in the measurement of lease obligations. The Company reassesses the likelihood of extension option exercise if there is a significant event or change in circumstances within its control.
Other information related to operating and finance leases as of the balance sheet dates presented are as follows:
As of December 31, 2023
As of December 31, 2022
Finance Leases Operating Leases Finance Leases Operating Leases
Weighted average discount rate 16.09  % 15.09  % 11.23  % 11.51  %
Weighted average remaining lease term (in years) 16.6 8.7 22.7 14.1
Cash paid for amounts included in the measurement of lease liabilities
 $ 11,060 $ 5,168 $ 11,629 $ 3,133
The maturities of the contractual undiscounted lease liabilities as of December 31, 2023 are as follows:
Finance Leases Operating Leases
2024 $ 9,718  $ 5,081 
2025 10,602  5,665 
2026 10,494  5,428 
2027 10,002  5,185 
2028 10,166  4,787 
Thereafter 147,970  19,833 
Total undiscounted lease liabilities 198,952  45,979 
Interest on lease liabilities (137,228) (21,425)
Total present value of minimum lease payments $ 61,724  $ 24,554 
Lease liabilities - current portion $ 8,885  $ 4,693 
Lease liabilities - non-current $ 52,839  $ 19,861