LEASES

3 Months Ended

Mar. 31, 2024

Arrangements that are determined to be leases with a term greater than one year are accounted for by the recognition of right-of-use assets that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities that represent the Company’s obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately.

Right-of-use assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term, utilizing the Company’s incremental borrowing rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company was the lessee under eight operating leases and twenty-six finance leases at March 31, 2024. These leases contain rent holidays and customary escalations of lease payments for the type of facilities being leased. The Company's operating leases include its corporate headquarters, dispensaries and cannabis production and processing facilities. The Company subleases three of these leased facilities to a cannabis-licensed client. The Company recognizes rent expense on a straight-line basis over the expected lease term, including cancelable option periods which the Company fully expects to exercise. Certain leases require the payment of property taxes, insurance and/or maintenance costs in addition to the rent payments. The Company leases machinery and office equipment under finance leases that expire from January 2026 through April 2030, with such terms being a major part of the economic useful life of the leased property.

The components of lease expense for the three months ended March 31, 2024 and 2023 were as follows (in thousands):


	Three months ended
		March 31, 2024		March 31, 2023

Operating lease expense		$	517	$	299

Finance lease expenses:
Amortization of right of use assets		$	196	$	54
Interest on lease liabilities		$	82	$	15
Total finance lease expense		$	278	$	69

The weighted average remaining lease terms and weighted average discount rates for the Company's operating leases and finance leases at March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024		December 31, 2023
Weighted average remaining lease term (years):
Operating leases	9.69		9.83
Finance leases	3.56		3.29
Weighted average discount rate:
Operating leases	11.0	%	11.0	%
Finance leases	9.8	%	11.0	%

Future minimum lease payments as of March 31, 2024 under all non-cancelable leases having an initial or remaining term of more than one year were (in thousands):


	Operating leases		Finance leases

Remainder of 2024	$	1,462	$	977
2025	1,988		1,304
2026	1,915		1,022
2027	1,813		453
2028	1,757		199
Thereafter	2,230		431
Total lease payments	11,165		4,386
Less: imputed interest	(992)		(793)
	$	10,173	$	3,593

LEASES

The components of lease expense for the three months ended March 31, 2024 and 2023 were as follows (in thousands):


	Three months ended
		March 31, 2024		March 31, 2023

Operating lease expense		$	517	$	299

Finance lease expenses:
Amortization of right of use assets		$	196	$	54
Interest on lease liabilities		$	82	$	15
Total finance lease expense		$	278	$	69

The weighted average remaining lease terms and weighted average discount rates for the Company's operating leases and finance leases at March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024		December 31, 2023
Weighted average remaining lease term (years):
Operating leases	9.69		9.83
Finance leases	3.56		3.29
Weighted average discount rate:
Operating leases	11.0	%	11.0	%
Finance leases	9.8	%	11.0	%

Future minimum lease payments as of March 31, 2024 under all non-cancelable leases having an initial or remaining term of more than one year were (in thousands):


	Operating leases		Finance leases

Remainder of 2024	$	1,462	$	977
2025	1,988		1,304
2026	1,915		1,022
2027	1,813		453
2028	1,757		199
Thereafter	2,230		431
Total lease payments	11,165		4,386
Less: imputed interest	(992)		(793)
	$	10,173	$	3,593