Related Parties

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Related Parties

19. RELATED PARTIES

Certain subsidiaries which were acquired in the business combination with Cannex have contractual relationships with two licensed Washington cannabis producer/processors: Superior Gardens LLC (d/b/a Northwest Cannabis Solutions) (“NWCS”) and 7Point Holdings LLC (“7Point”). The sole owner of NWCS was a related party of Cannex. However, upon the acquisition on July 31, 2019, management determined the sole owner did not have significant influence in the Company thus removing consideration of NWCS as a related party. The sole owner of 7Point was an executive of the Company during 2019. As a result of his departure, 7Point is no longer considered a related party.

NWCS and the Company are parties to a commercial gross lease expiring December 31, 2022 with two five-year renewal options. For the twelve months ended December 31, 2019 the Company recognized $3,338 from interest revenue on the lease receivable for this lease.

7Point and the Company are parties to a commercial sublease expiring May 31, 2023 with one five-year renewal option. For the twelve months ended December 31, 2020 the Company recognized $1,190 from interest revenue on lease receivable for this lease.  

The Company has entered into a service agreement with NWCS to provide consulting and personnel services for growing and processing cannabis for $30 per month and to act as exclusive purchasing agent for equipment, machinery, and other supplies for $20 per month for a three-year term that expired on January 1, 2021 and automatically renewed for an additional three-year term. The Company recognized a total of $250 for the year ended December 31, 2019.  

NWCS and the Company have entered into a packaging supply agreement under commercially reasonable pricing terms by which NWCS submits packaging and equipment orders for Company-designed packaging sold by NWCS under an exclusive license to use Company brands and recipes in the state of Washington. The packaging supply agreement had an initial term of three years and expired on January 1, 2021 and automatic renewal for additional three-year periods. The Company recognized total of $3,703 in revenue for the year ended December 31, 2019 under the packaging supply agreement.

As of December 31, 2019, the Company held three notes receivable from these related parties with a balance of $586.

As of December 31, 2020, $597 of the Company’s trade receivables were due from NWCS and 7Point (collected in the following year).

An officer of the Company is a part-owner of a LI Lending LLC which extended the Company a real estate improvement/development loan of $45,000 of which $43,000 was outstanding as of December 31, 2020.

An officer of the Company holds an interest in an online marketing company serving the online CBD market which provides online marketing services for Pure Ratios. Pure Ratios paid $4,875 (2019 - $1,101) for the year ended December 31, 2020 to this vendor for management fees, pass through marketing costs and customer service.

The Company has issued notes receivable to related parties that hold or have applied for cannabis licenses or that have secured real estate that can be used for a cannabis facility. The Company had $nil and $696 in such notes at December 31, 2020 and 2019, respectively.