The Company has operating leases for its retail stores, processing and cultivation facilities and corporate office space. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date.

The Company records real estate and equipment leases with an initial term of twelve months or more on the balance sheet. Lease agreements for some locations provide for rent escalations and renewal options. Certain real estate leases require payment for fixed and variable non-lease components, such as taxes, insurance and maintenance, as part of base rent. In those circumstances, the Company elected the practical expedient to not separate the lease components from non-lease components.

The Company determines if an arrangement is a lease at inception. The Company must consider whether the contract conveys the right to control the use of an identified asset. Certain arrangements require significant judgment to determine if an asset is specified in the contract and if the Company directs how and for what purpose the asset is used during the term of the contract. For the three and six months ended June 30, 2026, the Company recorded operating lease expense of $13,713 thousand and $27,161 thousand, respectively compared to operating lease expense of $12,804 thousand and $25,572 thousand for the three and six months ended June 30, 2025, respectively.

Other information related to operating leases as of June 30, 2026 and December 31, 2025 were as follows:


	June 30, 2026	December 31, 2025
Weighted average remaining lease term (years)	9.25	9.80
Weighted average discount rate	12.02%	12.16%

Maturities of lease liabilities for operating leases as of June 30, 2026 were as follows:


		Maturities of Lease Liability
Year Ending December 31,		Third-Party		Related Party		Total

		(in thousands)
Remainder of 2026	$	26,576	$	264	$	26,840
2027		53,871		491		54,362
2028		51,469		282		51,751
2029		48,032		287		48,319
2030		45,378		293		45,671
2031 and thereafter		257,956		475		258,431
Total lease payments		483,282		2,092		485,374
Less: interest		(207,633)		(546)		(208,179)
Present value of operating lease liability	$	275,649	$	1,546	$	277,195

In certain markets, the Company leases vehicles at its retail stores for residential delivery, where permitted. Many such leases are accounted for as finance leases. The terms of the vehicle leases are generally five years, do not contain renewal options, and expire at various dates through 2031. The Company's finance leases as of June 30, 2026 were not material and were included in Deposits and other assets and Other long-term liabilities on the Company's unaudited interim condensed consolidated balance sheets.

Mosaic Real Estate, LLC owns certain facilities leased by the Company and is owned in part by Benjamin Kovler, the Chairman and Chief Executive Officer of the Company (through KP Capital, LLC), and Anthony Georgiadis, the President and a director of the Company (through Three One Four Holdings, LLC). For the three and six months ended June 30, 2026, the Company recorded lease expense of $126 thousand and $252 thousand, respectively, compared to lease expense of $126 thousand and $252 thousand for the three and six months ended June 30, 2025, respectively, associated with these leasing arrangements.