5. PROPERTY AND EQUIPMENT

A reconciliation of the beginning and ending balances of property and equipment and accumulated depreciation during the six months ended September 30, 2023 and property and equipment, net as of December 31, 2022, are as follows:

Construction in process represents assets under construction related to cultivation, manufacturing, and distribution facilities not yet completed or otherwise not placed in service.

Depreciation expense of $1,405 and $1,647 were recorded for the three months ended September 30, 2023 and 2022, respectively, of which $1,385 and $584 respectively, were included in cost of goods sold. Depreciation expense of $0 and $104 was also recorded in other income (expense) for the three months ended September 30, 2023 and 2022, respectively.

Depreciation expense of $3,846 and $4,917 were recorded for the nine months ended September 30, 2023 and 2022, respectively, of which $3,772 and $4,416 respectively, were included in cost of goods sold. Depreciation expense of $0 and $419 was also recorded in other income (expense) for the nine months ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023, the Company renegotiated the monthly payments on certain leases for its facilities. These revised leases resulted in a remeasurement of both the right of use asset and lease liability of $1,477.

In May 2023, the Company completed a sale leaseback of the Company’s drying and midstream processing facility. As a result of the transaction, the Company disposed of buildings, land and leasehold improvements with a net book value of $15,481. The Company additionally recorded a right of use asset and liability of $29,647 to reflect the value of the leased property.