Annual report pursuant to Section 13 and 15(d)

Leases

v3.23.1
Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases
Note 5 – Leases
The Company mainly leases office space and cannabis cultivation, processing and retail dispensary space. Leases with an initial term of less than 12 months are not recorded on the consolidated balance sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The Company has determined that it was reasonably certain that the renewal options on the majority of its cannabis cultivation, processing and retail dispensary space would be exercised based on previous history and knowledge, current understanding of future business needs and the level of investment in leasehold improvements, among other considerations. The incremental borrowing rate used in the calculation of the lease liability is based on the rate available to the parent company. The depreciable life of assets and leasehold improvements are limited by the expected lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Certain subsidiaries of the Company rent or sublease certain office space to/from other subsidiaries of the Company. These intercompany subleases are eliminated on consolidation and have lease terms ranging from less than 
1
 
year to 
15
 
years.
The components of lease expense are as follows:
 
 
  
 
  
Year Ended December 31,
 
 
  
 
  
2022
 
  
2021
 
Operating lease costs
(1)
    Selling, general and administrative expenses   
$
 
8,474
 
  
$
 
8,722
  
         
 
 
     
 
 
  
Total lease cost
        
$
8,474
 
  
$
8,722
 
         
 
 
     
 
 
  
 
(
1
)
Includes short-term leases and variable lease costs for the year ended December 31, 2022 and 2021.
Supplemental balance sheet information related to leases is as follows:
 
Balance Sheet Information
  
Classification
  
As of December 31,
 
  
2022
 
  
2021
 
Right-of-use
assets, net
    Operating leases   
$
  28,399      $  30,429  
Lease liabilities
                       
Current portion of lease liabilities
    Operating leases    $ 7,789      $ 7,342  
Long-term portion of lease liabilities
    Operating leases      28,836        27,814  
         
 
 
     
 
 
  
Total
        
$
36,625
 
  
$
35,156
 
         
 
 
     
 
 
  
Maturities of lease liabilities for operating leases as of December 31, 2022, were as follows:
 
 
  
Operating
Leases
 
2023
  
$
 
7,789		  
2024
      7,891  
2025
      8,007  
2026
      7,827  
2027
      7,211  
Thereafter
      54,834  
    
 
 
  
Total lease payments
   
$
 93,559  
Less: interest expense
      (56,934 ) 
    
 
 
  
Present value of lease liabilities
  
$
 36,625  
Weighted-average remaining lease term (years)
      11.1  
Weighted-average discount rate
      20 % 
    
 
 
  
The Company entered into multiple sublease agreements pursuant to which it serves as lessor to the sublessees. For the year ended December 31, 2022, the Company recorded sublease income of $
1.0
 million (December 31, 2021—$
0.6
 
million), which is included in the other income line on the consolidated statements of operations. For the year ended December 31, 2022, the Company recorded impairment loss of $
Nil
 (December 31, 2021—$
1.8
 million) related to subleased facilities. The sublease income to be earned over the sublease term was determined to be less than the costs associated with the primary lease held by the Company. As a result, the Company tested its ROU assets of related subleased facilities for impairment. 
As a result of declining performance of GMNV’s business during the year ended December 31, 2022, an impairment test was performed for GMNV’s long-lived assets as of December 31, 2022 (Refer to Note 2(k)). The Company concluded that the carrying amount of the long-lived assets exceeded the fair value and recorded an impairment loss on ROU assets of
 
$
3.0
 
million for the year ended December 31, 2022.
On November 1, 2022, the Company entered into a non-binding term sheet to sell its Vermont
business
. Subsequently, on February 6, 2023, the Company through its wholly-owned subsidiary, ICM, entered into the MIPA, pursuant to which the Company agreed to complete the sale of its Vermont
business
(refer to Note 18). As of December 31, 2022, the Company concluded that the asset group met the criteria for assets held for sale. In accordance with ASC Subtopic 360-10, the Company performed an impairment assessment prior to reclassifying the asset group as held for sale. During the year ended December 31, 2022, the Company recorded an impairment loss of
 
$0.7 million, of which less than $0.1 million was allocated to ROU assets for the year ended December 31, 2022 (
December 31, 2021- impairment
loss of less than $0.3 million was allocated to ROU asset related to the Company’s declining business performance of CBD business).