☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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ITEM
Overview
MariMed Inc. (the “Company”) is
Upon its entry into
Over the last few years, the Company
To date, the acquisition
The transitionmanagement, and facility rental fees.
The Company has created its ownproducing and distributing our award-winning brands to qualified strategic partners or by acquiring production and distribution licenses.
The Company’s operations have improved significantly over the past year as reflected
1 Awards won by the Company’s Betty’s Eddies brand include LeafLink 2021 Best Selling Medical Product, Reddit Sparkie 2021 Best Edible, Respect My Region 2021 Hottest Edible, LeafLink 2020 Industry Innovator, and Explore Maryland Cannabis 2020 Edible of the Year. Awards won by the Company’s Nature’s Heritage brand include the Cultivators Cup 2021 Silver Medalareas provide us with certain competitive advantages and the High Times Cannabis Cup 2021 Bronze Medal.
2 Source: LeafLink Insights 2020.
3 Adjusted EBITDA is a non-GAAP financial measurement that is defined in Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations.
The Company’s strengths can be summarized as follows:
Professional Management
The Company’s
markets once permitted by state regulations.
Development of State-of-the-Art Cannabis Facilities and Operations
The Company has developed state-of-the-art cannabis cultivation, production, and dispensary facilities in multiple states utilizing the Company’s proprietary practices and implementing industry best practices. Its facilities are examples of operational excellence under the Company’s proven management policies and processes.
Cannabis Brand Creation
The Company has developed unique brands of precision-dosed cannabis-infused products which are currently licensed and distributed in cannabis-legal states. The Company intends to continue expanding both its brand portfolio and the licensing of its branded products into additional cannabis-legal states and overseas.
The Company is
FusionEducation and Knowledge SharingK Fusion
, chewable cannabis-infused mint tablets; and
As part of its education initiative, the Company intends to assemble a Scientific Advisory Board (the “SAB”) that will include knowledgeable medical practitioners and researchers focused on the scientific application of cannabis for health and wellness. The SAB’s goals will include the development of strategies to address the most widespread and debilitating medical and dietary conditions through the utilization of cannabis- and hemp-based therapies.
Consolidation Plan
The Company’s Consolidation Plan consists of the strategic decision to acquire and consolidate client cannabis businesses it developed, and in some instances managed and advised, in Massachusetts, Illinois, Maryland, Nevada, and Delaware. When completed, the businesses that are acquired and consolidated will be reported in the Company’s financial statements. The following is a summary of the Company’s progress towards its Consolidation Plan.
Massachusetts
In December 2018, the Massachusetts Cannabis Control Commission (the “MCCC”) approved the conversion of ARL Healthcare Inc. (“ARL”"CCC"), the Company’s cannabis-licensed client, fromstate’s cannabis market was expected to total over $1.8 billion in sales in 2022, a non-profit entitynumber that is expected to a for-profit corporation and the transfer of ownershipincrease to the Company. ARL holds cannabis licenses for cultivation, production and dispensing.$2.6 billion by 2025 (source: MJ Biz Factbook).
The Company operates (i)We operate a 10,000 square foot Panacea Wellness-branded dispensary developed within its 22,700 square foot property in Middleboro that received approval from the MCCC to commence operations in December 2019,Middleborough and (ii) a 70,000 square foot cultivation and production facility developed within its 138,000 square foot property in New Bedford.
The Company entered into an agreement to acquire a secondour new dispensary in Beverly, on Boston’s north shore, during the first half of 2023. This dispensary was the result of a 2022 asset purchase. In February 2023, we announced our intention to acquire the operating assets of Ermont, Inc. ("Ermont"), a medical-licensed vertical cannabis operator, located in early 2022, and expects to complete the buildout and commence operations,Quincy, MA. This acquisition, which is subject to approval by the MCCC,CCC, will provide us with our third dispensary in Massachusetts, substantially completing our buildout to the maximum allowable by state regulations. We also intend to apply for an adult-use license for this dispensary.
In October 2019, operates both adult-use and medical cannabis programs. According to the Illinois Department of Financial &and Professional Regulation, approved the Company’s acquisitionstate reported $1.8 billion in total legal cannabis sales in 2021, which was up more than 100% compared to 2020, when adult-use cannabis was first legalized in the state. With a population of KPGnearly 13 million, Illinois is one of Anna LLC and KPG of Harrisburg LLC, the Company’s two cannabis-licensed clients thatlargest, fastest-growing cannabis markets in the U.S.
Effective October 1, 2019, 100% of the operations of these entities have been consolidated into the Company’s financial statements. Additionally, on January 1, 2020, the state of Illinois legalized recreational adult-use cannabis, allowing the Company to operateAnna and Harrisburg that each serve both medical and recreational adult-use programscustomers. These four locations provide easy access for most residents in Southern Illinois and surrounding states, including Missouri, Kentucky, Indiana and Tennessee. Our fifth dispensary, located in Casey near the Anna and Harrisburg dispensaries. A third recreational dispensary was openedIndiana border, is projected to open in this state2023, the result of an August 2022 acquisition.
Maryland
In 2016, in 2022. First, we completed the Companyacquisition and the membersconsolidation of our client, Kind Therapeutics USA Inc. (“Kind”), the Company’s client in Maryland that holds licenses for theApril 2022. The acquired cultivation, production, and dispensingwholesale business sells our premium branded cannabis flower, concentrates, vapes, and edibles from a 180,000-square foot facility in Hagerstown. That business was subsequently augmented by the opening of our Panacea Wellness-branded medical dispensary in Annapolis, which commenced operations in October 2022.
In 2018, prior
In 2019, the members of Kind sought to renegotiate the terms of the MOU and subsequently sought to renege on both the original partnership/joint venture and the MOU. The Company engaged with the members of Kind in good faith in an attempt to reach updated terms acceptable to both parties, however the members of Kind failed to reciprocate in good faith, resulting in an impasse. Incrementally, both parties through counsel further sought to resolve the impasse, however such initiative resulted in both parties commencing legal proceedings.
In December 2021, the Company entered into a membership interest purchase agreement with the members of Kind to acquire 100% of the equity ownership of Kind in exchange for $13,500,000 payable in cash (subject to adjustment) and $6,500,000 payable by the issuance of four-year 6.0% promissory notesover 20,000 licensed patients, according to the membersDelaware Department of Kind.Health and Social Services. The notes shall be secured by a first priority lien on the Company’s propertyprogram generated approximately $37 million in Hagerstown, MD. Upon execution of the membership interest purchase agreement, the Company deposited,sales in escrow, the sum of $5,000,000 as a contract down-payment.
Simultaneously, the Company entered into a membership interest purchase agreement with one of the members of Kind2022, according to acquire such member’s entire equity ownership interest in (i) Mari Holdings MD LLC (“Mari-MD”), the Company’s majority owned subsidiary that owns production and retail cannabis facilities in Hagerstown, MD and Annapolis, MD, and (ii) Mia Development LLC (“Mia”), the Company’s majority owned subsidiary that owns production and retail cannabis facilities in Wilmington, DE. The purchase price for the interests in Mari-MD and Mia is $2,000,000 in the aggregate, payable in cash. Giving effect to the purchase of these interests, the Company will own approximately 99.7% and 94.3%, respectively, of Mari-MD and Mia.third-party industry data.
The closings under the foregoing agreements are subject to the fulfilment of closing conditions including, but not limited to, approval by the MMCC, which is pending. There is no assurance that the approval of the MMCC will be obtained or that the further closing conditions will be met. Simultaneous with the closing of the transactions contemplated by the foregoing agreements, the aforementioned litigation between the parties will be dismissed. For further information, see Part I, Item 3. Legal Proceedings in this report.
Nevada
In 2019, the Company entered into a purchase agreement to acquire 100% of the ownership interests of The Harvest Foundation LLC (“Harvest”), its cannabis-licensed client. Harvest holds both medical and adult-use cannabis cultivation licenses, and operates in a 10,000 square foot cannabis cultivation facility developed with the Company. Upon the approval of the transaction by the state authority, and the fulfillment of other closing conditions, the ownership of Harvest will be transferred to the Company, and the operations of Harvest will begin to be consolidated into the Company’s financial statements. There is no assurance that the closing conditions to the Company’s acquisition of Harvest, including approval by the state authority, will be achieved or that the acquisition will be consummated
Delaware
Delaware’s current cannabis program is for medical use only, and requires license holders to be not-for-profit entities. The Company provides
FSCC leases the Company-developed 47,000 square foot seed-to-sale facility in Wilmington and the Company’s 4,000 square foot leased retail location in Lewes which the Company developed into a cannabis dispensary. In 2019, the Company signed a lease with an option to purchase a 100,000 square foot building in Milford, which it is currently developing into a second cultivation and production facility for FSCC.
The Delaware medical program has grown to over 10,000 licensed medical patients. FSCC, under the Company’s management, is currently operating two of the sixonly eleven cannabis licenses in the state. The additional
The state is expected to allow “for-profit” ownership of cannabis licenses whenour top-selling edibles brands in the state legalizes recreational adult-use cannabis, at which time the Company will seek to acquire FSCC and obtain ownership of the licenses and operations, subject to state approval.in 2022.
Rhode Island
Rhode Island currently has
Corporate History
The Company was incorporated in the state of Delaware in January 2011 as a wholly-owned subsidiary of Worlds Inc. under the name Worlds Online Inc., which was later spun-off to its stockholders. At its inception, Worlds Online Inc. operated online virtual environments. In 2014, the Company transitioned its operational focusNovember 2022 ballot referendum. According to the emergingMissouri Department of Health and Senior Services (“DHSS”), $210 million in cannabis industry and ledsales were generated during 2021, the effort to win the cannabis license in Delaware on behalf of its client. To date, the Company has won a total of 17 cannabis licenses on behalf of itself and its cannabis clients.
The following is a summaryfirst full year of the Company’s history overstate’s medical cannabis program. With a population of more than six million, Missouri’s medical cannabis program has more than 160,000 registered medical cannabis patients. First-year adult-use sales are expected to reach $550 million, according to MJBizDaily estimates.
In June 2019, the Company acquired a 70% ownership interest of MediTaurus LLC, a company established by Jokubas Ziburkas PhD, a neuroscientist and leading authority on hemp-based CBD and the endocannabinoid system. MediTaurus operates in the United States and Europe and has developed proprietary CBD formulations sold under its Florance™ brand. In September 2021, the Company acquired the remaining 30% ownership interest of MediTaurus.
In October 2019, the Company closed on the purchaseresult of a 9,000 square foot building in Annapolis, MD which it is developing into a medical cannabis dispensary that the Company expects to be completed by June 2022.
In October 2019, the Illinois Department of Financial and Professional Regulation approved the Company’s acquisition of the KPGs and Mari-IL, and as of such date, the KPGs and Mari-IL became wholly-owned subsidiaries of the Company.
In January 2020, the Illinois legalized adult-use cannabis, which was added to the Company’s two existing cannabis licenses, thereby increasing the Company’s operations in Illinois to service both medical and recreational cannabis consumers.
In February 2020, the Company purchased a 4,800 square foot stand-alone retail building in Mt Vernon, IL which it developed into a state-approved adult-use cannabis dispensary that openedmanagement contract we announced in September 2020.
In July 2020, the Company refinanced a mortgage secured by its properties in Massachusetts generating proceeds of $13.0 million that were used2022, we expect to pay down the initial mortgage and short-term promissory notes.
In February 2021, the Company entered into a five-year lease agreement for a 12,000 square foot premises located in Wilmington, DE which the Company developed into a cannabis production facility with offices, and subleases to its cannabis-licensed client in this state.
In March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund with respect to a financing facility of up to $46.0 million in exchange for newly-designated Series C convertible preferred stock of the Company and warrants to purchase the Company’s common stock. The initial proceeds of $23.0 million from the facility were used to pay down debt, and is being used to upgrade certain of the Company’s owned and managed facilities. A portion of the balance of the facility is available to fund the Kind acquisition, provided such acquisition is consummated, including obtaining the necessary regulatory approvals, no later than the end of 2022.
In May 2021, the Company opened its fourth adult-use dispensary in Illinois in the city of Metropolis. The Company had been renting this 14,000 square foot premises since January 2021, which it developed into a state-approved cannabis dispensary in early 2021. In July 2021 the Company purchased the premises.
In August 2021, the Company entered into a manufacturing and royalty agreement with renown ice cream brand Emack & Bolio’s® whereby the companies will collaborate to create a line-updistribute our award-winning portfolio of cannabis-infused veganedibles in Missouri beginning mid-2023, which we plan to produce at a new production kitchen near Kansas City that we are developing and dairy ice cream containing the Company’s full spectrum of natural cannabinoids and terpenes. This new category of cannabis products is expectedintend to debut in Massachusetts during 2022, followed by launches in other cannabis-legal markets.
manage. In November 2021, in order to quality for applying to a cannabis dispensary license lottery in Ohio, the Company entered into short-term lease agreements for six retail properties in this state, each property between 4,000 and 6,000 square feet and with a lease term of eleven months. Should the Company be awarded one or more cannabis licenses, it can extend the term of one or more of the lease agreements to ten years (with options to further extend), and develop the premises of such extended leases into cannabis dispensaries. In early 2022, the Company was notified that it was awarded a license, and is awaiting the final verification process to be completed by the state.
In November 2021, the Company entered into an asset purchase agreement to acquire the cannabis license, property lease, and other assets and rights of, and to assume the liabilities and operating obligations associated with a cannabis dispensary that is currently operating in Beverly, MA. The purchase is contingent upon the approval of the Massachusetts Cannabis Control Commission, which is expected by the summer of 2022. Concurrent with the execution of this agreement, the parties entered into a consulting agreement pursuant to which the Company shall provide certain oversight services related to the development, staffing, and operation of the business in exchange for a monthly fee.
In December 2021, the Company entered into a membership interest purchase agreement to acquire 100% of the equity ownership of Kind, the Company’s cannabis-licensed client that holds licenses for the cultivation, production and dispensing of medical cannabis in Maryland. The Company is currently waiting for approval of this acquisition from the MMCC, which is pending. Upon approval, the acquisition of Kind will be consummated, Kind’s financial results will begin to be consolidated into the Company’s financial statements, and the pending litigation between the parties will be dismissed.
Simultaneous with the Kind membership interest purchase agreement, the Companyaddition, we have entered into an agreement to acquireobtain the license of a former ownerMissouri wholesaler and cultivator, contingent upon obtaining all requisite approvals from the State of Kind’s equity ownership interestsMissouri, which we expect to occur in (i) Mari Holdings MD LLC (“Mari-MD”), the Company’s majority owned subsidiary that owns production and retail2023.
Jay O’Malley joined us as Vice President of Marketing and Research & Development.
Recent Developments
InOn January 2022, the Company24, 2023, we entered into a stock purchase agreementLoan and Security Agreement (the “Credit Agreement”) with Chicago Atlantic Admin, LLC as administrative agent for the lenders. Proceeds from the Credit Agreement are designated to acquire 100%complete the build-out of a new cultivation and processing facility in Illinois, complete the ownership interestsbuildout of Green Growth Group Inc., an entity that has been awarded a craft grow cannabis license issued bynew processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and to repay in full the Illinois Department of Agriculture (“IDA”) for cultivation, production, and transporting of cannabis and cannabis-infused productsKind Therapeutics seller notes incurred in Illinois.connection with the Kind acquisition in April 2022. The purchase price of $3,400,000 shall be comprised of $1,900,000 in cash and shares of the Company’s common stock valued at $1,500,000. The acquisition is conditioned upon the approval by the IDA, among other closing conditions, whichremaining balance, if any, is expected to occur by July 2022.
Alsobe used to fund acquisitions, including, among others, the acquisitions in January 2022,Quincy, MA;, Casey, IL; and Tiffin, OH.
In February 2022, the Company was notified that it was awarded a cannabis dispensary licensebuilding our business organically from the state of Ohio, andground up is awaiting the final verification process to be completed by the state.
Competition
The Company’s goal is to become a fully integrated MSO of seed-to-sale cannabis operations. The Company is different than some of the other MSOs inkey factor that it has organically developed its client businessesdifferentiates us from the bottom up, built itsmajority of other MSOs. We successfully developed and managed our clients' businesses, which we subsequently acquired and consolidated, created our own brands and branded products, and hashave retained itsthe core management team fromsince inception. OtherWhile other MSOs have raised significantly more capital, including on the Canadian Securities Exchange,they have generally acquired licensed businesses from sellers with whom they had no prior direct operating relationship. We believe our approach is significantly more cost-efficient, carries less risks, and acquired assetsresults in a more states than the Company hasseamless integration of processes, personnel, operating philosophies, and culture.
Additionally, while the Company has a comprehensive suite of products and services for the cannabis industry, it facesMSOs, we face competition from companies of varying sizes and geographic reach, who producereach. Some, called Single State Operators, are fully vertical in just one state, others focus solely on producing and selling similar products and others solely operate dispensaries and sell similar products.the goods of other businesses. Some of these companies provide a subset of the Company’s productour competitors that create and service offerings, while otherssell their own products are able to provide an equivalent level of theproduce products and services offeredthat are on par with those we offer. We believe that by the Company. The Company, using itsutilizing our own best practices and operational expertise, iswe are able to produce premium cannabis products at one of the lowest cost structures in the industry, which enables the Companyus to remain competitive in itsour markets. That said, the Company’sHowever, our sales could be reduceddecline significantly if itsour competitors develop and market products that are more effective, more convenient, or are less expensive than itsour products.
Going forward, as
Vibations: High + Energy trademarks with the U.S. Patent and Trademark Office. new markets. licenses that one person or entity may own in that state. Such limitations on the acquisition of ownership of additional licenses within certain states may limit our ability to grow organically or to increase market share in such states. condition or results of operations. operate in certain markets. compete for market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased pricing of our products, our sales and operating results could be adversely affected. U.S. to trade our securities. In the event residents of the the public’s reaction to our press releases, announcements and filings with regulatory authorities and those of our competitors; 2023. property once the tenant vacates the premises. $0.504. We withheld 813,694 shares underlying such warrants to cover the aggregate exercise price of approximately $46,000. our licensed products. Marketing and promotion costs increased to our investments and other investment-related income (expense). interest income and interest expense; Stockholders of MariMed Inc. XX Consolidated Statements of Stockholders’ Equity thousands, except share amounts) 7,843,910 Identify the contract(s) with a customer; Product sales (retail and wholesale) – direct sales of cannabis and cannabis-infused products by the Company’s retail dispensaries and wholesale operations. This revenue is recognized when products are delivered or at retail points-of-sale. The estimated useful lives of property and equipment are generally as follows: buildings and building improvements, thirty-nine to forty years; tenant improvements, the lesser of the remaining duration of the related lease Impairment analyses are based on management’s current plans, asset holding periods, and currently available market information. If these criteria change, the Company’s evaluation of impairment losses may be different and could have a material impact to the consolidated financial statements. For the years ended December 31, grant. The fair value of stock option and warrant issuances In accordance with ASC 850, the Company’s financial statements include disclosures of aggregating $2.8 million. In September 2021, the Company acquired the remaining 30.0%ownership interest of MediTaurus in exchange for shares of the Company’s common stock, valued at approximately lessor under any finance leases. FSCC Initial Note approximate $10,000. At December 31, 2022 and 2021, the current portions of the FSCC Initial Note approximated $85,000 and receipt. The Company 7,843,910 3,830,129 Bank of New England – New Bedford, MA and Middleboro, MA properties Bank of New England – Wilmington, DE property DuQuoin State Bank – Anna, IL and Harrisburg, IL properties DuQuoin State Bank – Metropolis, IL property South Porte Bank – Mt. Vernon, IL property amount thereof. In March 2021, the Company paid interest on the $1.0M Note of Issue Date Maturity Date Interest Rate Issue Discount Warrant Discount Beneficial Conversion Feature If the sixty-day VWAP is less than or equal to $0.50 per share, the Company shall have the option to (i) convert all shares of Series B convertible preferred stock into common stock at a conversion price of $1.00 per share, and pay cash to the Series B Holders equal to the difference between the 60-day VWAP and $3.00 per share, or (ii) pay cash to the Series B Holders equal to $3.00 per share. If the sixty-day VWAP is greater than $0.50 per share, the Company shall have the option to (i) convert all shares of Series B convertible preferred stock into common stock at a conversion price per share equal to the quotient of $3.00 per share divided by the sixty-day VWAP, or (ii) pay cash to the Series B Holders equal to $3.00 per share, or (iii) convert all shares of Series B convertible preferred stock into common stock at a conversion price per share equal to the sixty-day VWAP per share and pay cash to the Series B Holders at the difference between $3.00 per share and the sixty-day VWAP per share. The transaction 46.0 46.0 (1,717,596 (999,739 (997,590 (23,882,033 Delaware – 4,000 square feet of retail space in a multi-use building under a five-year lease that expires in April 2027 that the Company has developed into a cannabis dispensary, which is subleased to a cannabis-licensed client. Operating Leases Finance Leases Should the Company be awarded one or more cannabis licenses by the state of Ohio prior to the end of the initial lease period, it DiPietro Lawsuit court. (the Levine Agreement, the Shaw Agreement and the Villare Agreement, collectively the "Employment Agreements"). full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submit to, the Commission and in other public communications the Company makes; Option Awards (3) All Other Compensation Number of Securities Underlying Unexercised Options Exercisable (#) Number of Securities Underlying Unexercised Options Unexercisable (#) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Fees Earned or Paid in Cash Stock Awards Option Awards (4) Amount & Nature of Beneficial Owner 3, 2023The Company ownsWe own registered trademarks for Betty’s Eddies, Kalm Fusion, Mari Meltsand Nature’s Heritage, and hashave filed to register the Bubby’s Baked and Vibations trademarks.The Company’sThe Company entersWe enter into and enforcesenforce confidentiality agreements with key employees and consultants to protect its IPour intellectual property, trade secrets, and general know-how.Employees2021, the Company2022, we had a total of 326681 employees, of which 260592 were full-time.The Company’sCommission.Commission, or as filed with the Canadian securities regulatory authorities on the SEDAR website.the Company’sour annual report will be made available, free of charge, on written request.ITEMRISK FACTORSRisk FactorsCompany’sconcepts of “medical cannabis,” “retail cannabis” and “adult-use cannabis” do not exist under U.S. federal law. While we believe that our business isactivities are compliant with applicable state and local laws, strict compliance with state and local cannabis laws would not provide a defense to any federal proceeding that may be brought against us. The enforcement of applicable U.S. federal laws poses a significant risk to us.numerous risks,criminal charges under the CSA and, if convicted, could face a variety of penalties including, but not limited to, those set forth below. disgorgement of profits, cessation of business activities, or divestiture. Any of these penalties could have a material adverse effect on our reputation and ability to conduct our business, our holding (directly or indirectly) of medical and adult-use cannabis licenses in the United States; our financial position; operating results; profitability; liquidity; or the market price of our publicly-traded shares. In addition, it is difficult for us to estimate the time or resources that would be needed for the investigation, settlement, or trial of any such proceedings or charges, and such time or resources could be substantial.Company’s operationscannabis industry is relatively new.performance could also bein a new market. We not only are subject to general business risks, that do not existbut we must also build brand awareness in this industry and market share through significant investments in our strategy, production capacity, quality assurance, and compliance with regulations. Research in Canada, the United States and internationally regarding the medical benefits, viability, safety, efficacy, and dosing of cannabis or isolated cannabinoids (such as cannabidiol, or “CBD,” and tetrahydrocannabinol, or “THC”) remains in early stages. Few clinical trials on the benefits of the date of this report but emerge thereafter as well as riskscannabis or isolated cannabinoids have been conducted. Although we believe that the Company does notarticles, reports and studies support our beliefs regarding the medical benefits, viability, safety, efficacy, and dosing of cannabis, future research and clinical trials may result in opposing conclusions to statements contained in articles, reports, and studies currently deem material.favored or could reach different or negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, or other facts and perceptions related medical cannabis, which could adversely affect social acceptance of cannabis and/or the demand for our products and dispensary services.Risks RelatedCompany’s OperationsThe Company’scannabis industry, such as the imposition of further restrictions on sales and marketing or further restrictions on sales in certain areas and markets, could have a material adverse effect on our business, operations, financial condition, and liquidity have been and may continue to be affected by the outbreakresults of COVID-19.operations.In March 2020, the World Health Organization declared the outbreakCOVID-19 a global pandemic. The spread of COVID-19cannabis in the United States is uncertain.measures to contain it—including business shutdowns, indoor capacity restrictions, social distancing, and diminished travel—have negatively impacted the economy and created significant volatility and disruption in financial markets. Business shutdowns in certain states in response to stay-at-home orders and related measures had temporarily eliminated access to the Company’s dispensaries by certain customers, principally non-medical use customers, impacting sales during this restricted period. Further, the volatilitysale of our products in the financialjurisdictions in which we operate. Any delays in obtaining or failure to obtain necessary regulatory approvals would significantly delay our development of markets and investor uncertainty has delayedproducts, which could have a material adverse effect on our business, results of operations, and financial condition. Furthermore, while we believe that our operations are currently carried out in accordance with all applicable state and local rules and regulations, new rules and regulations could be enacted or existing rules and regulations may be applied in a manner that could limit or curtail our ability to distribute or produce cannabis and cannabis products. Amendments to current laws and regulations governing the importation, distribution transportation and/or production of cannabis and cannabis products, or more stringent implementation thereof could have an adverse impact on us.the Company’s Consolidation Plan. Ascannabis or changes in U.S. controlled substance laws and regulations could have a result, the Company’smaterial adverse effect on our business, operations, financial condition, and liquidity have beenresults of operations.continuebe required to be impacted. Further,registered to perform these activities and have the disruptionsecurity, control, recordkeeping, reporting, and inventory mechanisms required by the DEA to prevent drug loss and diversion. Obtaining the necessary registrations may result in the delay in the manufacturing or distribution of our products. The DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance could have a material adverse effect on our business, financial condition, and results of operations. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to restrict, suspend, or revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.global economygrowth, cultivation, harvesting, and processing of medical cannabis. Clinical trials may be needed to verify efficacy and safety of our medical cannabis products. It is also possible that the Company’s business, alongFDA would require that facilities where medical-use cannabis is grown register with the decline in its stock price, may also negatively impactagency and comply with certain federally prescribed regulations. In the future carrying valuesevent that some or all of certain assets, including inventories, accounts receivables, intangibles, and goodwill.Cannabis remains illegal under federal law.Cannabis remains illegal under federal law. It is a Schedule I controlled substance. Even in those jurisdictions in whichthese regulations are imposed, the use of medical cannabis has been legalized at the state level, its prescription is a violation of federal law. The United States Supreme Court has ruled that it is the federal government that has the right to regulate and criminalize cannabis, even for medical purposes. Therefore, federal law criminalizing the use of cannabis trumps state laws that legalize its use for even medicinal purposes. At present the states are standing tall against the federal government, maintaining existing laws and passing new ones in this area. States continue to exert this freedom, with more states considering legalization. However, the Company continually faces election cycles, and a new administration or the United States Congress could introduce a less favorable policy. A change in the federal attitude towards enforcement could cripple the industry. There is currently broad support for changes in the federal law for improved banking, investing, and the potential legalization of cannabis. However, there is no certainty what will get changed or when. The medical and recreational cannabis industries are the Company’s primary markets, and if these industries were to be unable to operate, the Company would lose its potential clients and licenses, which would have a significantly negative impact on the Company’scannabis industry is uncertain and could include the imposition of new costs, requirements, and prohibitions. If we are unable to comply with the regulations and/or registration as required by the FDA, it may have an adverse effect on our business, operations,operating results, and financial condition.Futureuse.use of cannabis. Any number of factors could slow or halt the progress. Further,growth of the cannabis market. Additionally, progress, while encouraging, is not assured and the process to authorize the sale of cannabis at the state and local levels normally encounters set-backs before achieving success.success, if at all. While there may be ample public support for legislative proposal to legalize the sale of cannabis on a state level, key support must be created in the legislative committee, or a bill may never advance to a vote. Numerous factors impact the legislative process. Any one of these factors could slow or halt the progress and adoption of cannabis for medical and/or recreational purposes, which would limit the market for the Company’sour products and negatively impact itsour ability to growexpand into other states.The Company’sisare subject to regulatory hurdles.The Company’sitsour footprint into additional legal cannabis states through new applications and acquisitions of existing cannabis businesses is subject, in each respective jurisdiction, to the approval of a new license application or license transfer application. Such approvals are subject to numerous delays and uncertainties based upon administrative and legislative changes in what are typically, in light of the recent cannabis legalization status in most jurisdictions, new and untested rules and regulations. There is little interpretative guidance on how states will apply their respective licensing regulations and limited control over when an application will be acted upon. As a result, there is no assurance that the Company’sour expansion plan will not be frustrated by regulatory delays, and no assurance that any license application or transfer application will be approved.(7)Itbe difficultinevitably become direct competitors. We are likely to evaluatecontinue to face increasing and intense competition from these companies. Moreover, acquisitions and other consolidating transactions could harm us in a number of way, including losing customers, revenue and market share, or forcing us to expend greater resources to meet new or additional competitive threats all of which could harm our operating results. Increased competition by larger and better financed competitors could materially and adversely impact our business, financial condition and results of operations. Such competition could also intensify and place downward pressure on retail prices of our products and services, which could negatively impact our profitability.Company basednumber of users of adult-use and medical marijuana in the U.S. increases, the demand for products will increase. As a result, we believe that competition could become more intense as current and future competitors begin to offer an increasing number of diversified products to respond to such increased demand. To remain competitive, we will need to continue to invest in research and development, marketing, sales, and client support. We may not have sufficient resources to maintain sufficient levels of investment in these areas to remain competitive, which could materially and adversely affect our business, financial condition, and results of operations.itspast performance because it is transitioning itsour ability to own the licenses necessary to operate our business, into that of an ownerwhich could adversely affect our ability to grow our business and market share in certain states.and operatorissued as well as the number of cannabis operations.The Company has been actively engagedas an MSO for a relatively short period of time and, accordingly, has only limited financial results on which it can be evaluated. In addition, the components of the Company’s revenue and costs are changing as it continues to move away from a fee-based-only business to a multi-state seed-to-sale operation. The Company is subject to, and must be successful in addressing, the risks typically encountered by companies operating in the rapidly evolving cannabis marketplace, including those risks relating to:●the failure to develop brand name recognition and reputation;●the failure to achieve market acceptance of the Company’s services;●a slowdown in general consumer acceptance of legalized cannabis; and●an inability to grow and adapt the Company’s business to evolving consumer demand.The medical cannabis industry faces strong opposition from traditional medicines.It is believed by many that existing, entrenched, well-funded, businesses may have a strong economic opposition to the medical cannabis industry as currently formed. For example, the Company believes that the pharmaceutical industry does not want to cede control of any compound that could become a strong selling drug. Specifically, medical cannabis will likely adversely impact the existing market for Marinol, the current “cannabis pill” sold by mainstream pharmaceutical companies. Further, the medical cannabis industry could face a material threat from the pharmaceutical industry should cannabis displace other drugs or simply encroach upon the pharmaceutical industry’s market share for compounds such as cannabis and its component parts. The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical cannabis movement. Any inroads the pharmaceutical industry makes in halting or rolling back the medical cannabis movement could have a detrimental impactmaterial adverse effect on the market for the Company’s products and thus on itsour business, operations and financial condition.The Company’s clientssuch clientsus to purchase the Company’s products and services.Company’s clients.us. While there is pending legislation in the United States Senate that will allow banks to transact business with state-authorized medical cannabis businesses, there can be no assurance his legislation will be successful, that banks will decide to do business with medical cannabis retailers, or that in the absence of legislation state and federal banking regulators will not create issues on banks handling funds generated from an activity that is illegal under federal law. Notwithstanding, the Company haswe have been able to secure state-chartered banks that are in compliance with federal law and provide certain banking services to companies in the cannabis industry. TheOur inability of potential clients in the Company’s target market to open accounts in our target market and otherwise use the service of banks may make it difficult for themus to purchaseoperate in those markets.Company’sstates in which we operate have enacted strict regulations regarding marketing and sales activities on cannabis products. There may be restrictions on sales and marketing activities imposed by government regulatory bodies that could hinder the development of our business and operating results. Restrictions may include regulations that specify what, where and to whom product information and descriptions may appear and/or be advertised. Marketing, advertising, packaging, and labeling regulations also vary from state to state, potentially limiting the consistency and scale of consumer branding communication and product education efforts. The regulatory environment in the U.S. limits our ability to compete for market share in a manner similar to other industries. If we are unable to effectively market our products and services.The Companynot be able to economically comply with anyoffer in the future will gain acceptance. These existing and new government regulation thatproducts may be adoptedsubject to significant competition with offerings by new and existing competitors in the industry. The failure to successfully develop, manage, and market new products could seriously harm our business, prospects, revenue, results of operation and financial condition.industry.New legislation or regulation, or the application of existing laws and regulations to the medical and consumer cannabis industries could add additional costs and risks to doing business. the Company is subject to regulations applicable to businesses generally and laws or regulations directly applicable to communications over the Internet and access to e-commerce. Althoughindustry, there are currently few lawsexclusions and regulations regulating the cannabis products, it is reasonableadditional difficulties and complexities associated with our insurance coverage that could cause us to assume that as cannabis use becomes more mainstream that the FDA and or other federal, state and local governmental agencies will impose regulations covering the cultivation, purity, privacy, quality control, security and many other aspects of the industry, all ofsuffer uninsured losses, which will likely raise the cost of compliance thereby reducing profits or even making it more difficult to continue operations, either of which scenarios, if they occur, could have a negative impact on the Company’s business and operations.The Company’srelatively small size and limited resources may restrict its ability to manage any growth it may experience.Growth of the Company’s business may place a significant strain on its management systems and resources and may require the Company to implement new operating and financial systems, procedures and controls. the Company’s failure to manage its growth and expansion couldwould then adversely affect itsour business, results of operations, and financial condition. Failureprofitability. There is no assurance that we will be able to implement new systems effectivelyobtain insurance coverage at a reasonable cost or withinfully utilize such insurance coverage, if necessary.reasonablerelatively short period of time could adversely affectand, accordingly, have only limited financial results on which it can be evaluated. In addition, the Company’scomponents of our revenue and costs are changing as we continue to move away from a fee-based-only business results of operationsto a multi-state seed-to-sale operation. We are subject to, and financial condition. The Company is constantly looking to add additional qualified talent to the management team to support its growth, but there is no assurance it willmust be successful in identifying and/or hiring such people.The market may not readily acceptaddressing, the Company’s products.Demandrisks typically encountered by companies operating in the rapidlymarket acceptance for reputation;Company’s licensed branded new cannabis-infused products are subject to a high level of uncertainty. The successful introduction of any new product requires a focused, efficient strategy to create awareness of and desire for the products. For example, in orderfailure to achieve market acceptance forof our products;Company’s cannabis products it will need to gain market and patient acceptance. Despite management’s efforts to gather data before introducing new products as a means to minimize the risk of product non-acceptance, no assurance can be givenindustry, which we cannot control or predict.Company’s efforts will be successful.The Company’s marketing strategymedical marijuana industry is highly dependent upon consumer perception regarding the safety, efficacy, and quality of medical marijuana distributed to those consumers. Consumer perception of our products may be unsuccessfulsignificantly influenced by scientific research or findings, regulatory investigations, litigation, media, and is subject to change as a resultother publicity regarding the consumption of a number of factors, including changes in market conditions (including the emergence of new market segments which in the Company’s judgment can be readily exploited through the use of its technology), the nature of possible license and distribution arrangements and strategic alliances which may become available to us in the future and general economic, regulatory and competitive factors.medical marijuana products. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention or other research or publicity will be favorable to the Company’s strategy will result in successfulmedical marijuana market or any particular product, commercializationor consistent with earlier publicity. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that perceived as less favorable than, or that its efforts will result in initialquestion, earlier research reports, findings, or continued market acceptance for its proposed products.(8)If the Company is unable to protect its intellectual property rights, competitors may be able to use the Company’s technology or trademarks, which could weaken its competitive position.The Company relies on a combination of copyright, trademark, and trade secret laws and restrictions on disclosure to protect its intellectual property rights. The Company enters into confidentiality or license agreements with its employees, consultants and customers, and controls access to and distribution of its products, and other proprietary information. Despite the Company’s efforts to protect its proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use its products.If the Company loses its key employees or fails to hire and retain other talented employees when necessary, its operations could be harmed.The success of the Company’s business is currently dependent, in large part, on the personal efforts of Messrs. Robert Fireman, Jon R. Levine, and Timothy Shaw, the Company’s chief executive officer, chief financial officer, and chief operating officer, respectively. The loss of their services could have a material adverse effect on the Company’s business. The success of the Company’s business is currently dependent, in large part, upon its ability to hire and retain additional qualified management, marketing, technical, financial, and other personnel if and when its growth so requires. Competition for qualified personnel is intense and the Company may not be able to hire or retain such additional qualified personnel. Any inability to attract and retain qualified management and other personnel would have a material adverse effect on the Company’s ability to grow its business and operations.The Company faces competition from entities with greater resources.There is potential that the Company will face intense competition from other companies, some of which can be expected to have longer operating histories and more financial resources and experience than the Company. Increased competition by larger and better-financed competitors could materially and adversely affect the business, financial condition, results of operations or prospects of the Company.Because of the early stage of the industry in which the Company operates, the Company expects to face additional competition from new entrants. To become and remain competitive, the Company will require research and development, marketing, sales and support. The Company may not have sufficient resources to maintain research and development, marketing, sales and support efforts on a competitive basis which could materially and adversely affect the business, financial condition, results of operations or prospects of the Company.The introduction of a recreational model for cannabis production and distribution may impact the medical cannabis market. The impact of this potential development may be negative for the Company, and could result in increased levels of competition in its existing medical market and/or the entry of new competitors in the overall cannabis market in which the Company operates.A change in federal laws regarding the classification of cannabis as a controlled substance, interstate cannabis commerce, banking for entities in the cannabis industry, or other related regulations may have a significant impact on the Company’s business.Results of clinical research, if unfavorable, could have a negative impact on the industries in which the Company operates and consequently on its business model.Research in Canada, the United States and internationally regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis or isolated cannabinoids (such as CBD and THC) remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC). Although the Company believes that the articles, reports and studies support its beliefs regarding the medical benefits, viability, safety, efficacy, dosing and social acceptance of cannabis, future research and clinical trials may prove such statements to be incorrect, or could raise concerns regarding, and perceptions relating to, cannabis. Future research studies and clinical trials may reach negative conclusions regarding the medical benefits, viability, safety, efficacy, dosing, social acceptance or other facts and perceptions related to cannabis, whichpublicity could have a material adverse effect on the demand for the Company’sour products with the potential to lead to a material adverse effect on the Company’sand our business, financial condition, results of operations, or prospects.The Company faces the prospect of claimsfinancial condition and cash flows.itsthe use of our products.The Company’swillare designed to be ingested by humans and are produced for sale directly to end consumers, and therefore there isconsumers. As a result, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if the products are alleged to have caused or cause any significant loss or injury. In addition, the production and sale of the Company’sour products involves theinvolve risk of injury to end users due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human or animal consumption of the Company’sour products alone or in combination with other medications or substances could occur. The CompanyWe may be subject to various product liability claims, including, among others, that itsour products causedcause injury or illness, include inadequate instructions for use, or include inadequate warnings concerning possible side effects or interactions with other substances. While the Company haswe have product liability insurance coverage in place and works with third party providers to ensure they do as well, a product liability claim or regulatory action against the Companyus, whether or not successful, could exceed the Company’s insurance coverage, and couldresult in materially increases costs, adversely affect the Company’sour reputation with our clients and consumers generally, and/or exceed our insurance coverage. Any of these scenarios could have a material adverse effect on itsour business and operational results.The CompanyThe Company’sreclamation. Theyreclamation, and also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for affected companies and their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not adversely affect our operations.Company’s operations.Government environmental approvalsevent we require additional financing and permits are currently,access to capital, the covenants and restrictions in our existing debt agreement may limit our options.future, be required in connectioninstrument governing such loan include restrictive covenants that limit our discretion with the Company’s operations. To the extent such approvals are requiredrespect to certain business matters. These covenants place restrictions on, among other things, our ability to create liens or other encumbrances, to pay distributions, or to make certain other payments, and not obtained, the Company may be curtailedto sell or prohibited from implementing its proposed business activities or from proceeding with the developmentotherwise dispose of its operations as currently proposed.Failurecertain assets. A failure to comply with applicable environmental laws, regulations and permitting requirements maysuch obligations could result in a default, which, if not cured or waived, could permit acceleration of the relevant indebtedness. These restrictions could impair our ability to obtain additional financing for working capital, capital expenditures, or acquisitions; and all or part of our cash flow from operations may be dedicated to the payment of the principal of, and interest on, our indebtedness, thereby reducing funds available for operations. These factors may adversely affect our cash flow. If we are unable to satisfy our debt obligations due to insufficient cash flow or if we cannot refinance our indebtedness on commercially reasonable terms or at all, then our business, results of operations, and financial condition could be materially adversely affected.thereunder, including orders issued by regulatorythe U.S. Department of Justice, or judicial authorities causing operations to ceasethe “DOJ,” FinCEN, or be curtailed,other federal regulators. As a result of this guidance and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. The Companythe fact that such guidance may be requiredamended or revoked at any time, most banks and other financial institutions have not been willing to compensate those suffering lossprovide banking services to cannabis-related businesses. Additionally, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses. Accordingly, we may have only limited access to banking or damage due to its operationsother financial services in the U.S. and may have civilto rely solely upon state-chartered banks. If we are unable or criminal fineslimited in our ability to open or penalties imposedmaintain bank accounts, obtain other banking services, or accept credit card and debit card payments, it may be difficult for violationsus to operate and conduct our business as planned. While we are actively pursuing alternatives that ensure our operations will continue to be compliant with the FinCEN guidance, including requirements related to disclosures about cash management and U.S. federal tax reporting, we may not be able to meet all applicable requirements.applicable lawsthe Company’s business is currently dependent, in large part, on key managerial personnel, including Messrs. Jon R. Levine and Timothy Shaw, the Company’s chief executive officer and chief operating officer, respectively. Moreover, our anticipated growth may require additional expertise and the addition of new qualified personnel. Qualified individuals within the cannabis industry are in high demand and we may incur significant costs to attract and retain qualified managerial personnel, or regulations whichbe unable to attract or retain personnel necessary to operate or expand our business. The loss of the services of existing personnel or our failure to recruit additional key managerial personnel in a timely manner, or at all, could have a material adverse effect on our business and our ability to manage day-to-day operations, attract collaboration partners, attract and retain other employees, and generate revenues. Any inability to attract and retain qualified management and other key personnel could have a material adverse effect on the Company’s ability to grow its business and operational results.
operations.(9)The Companycompanies.The Company iscompanies or technologies.the process of acquiring several companies and intendspart, on our ability to acquire other companiesgrow our business in the future. There are risks inherent in any such acquisition. Specifically, there could be unknown or undisclosed risks or liabilities of such companies for which the Company is not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely affect the Company’s financial performance and results of operations. The Company could encounter additional transaction and integration related costs or other factors such as the failure to realize all of the benefits from such acquisitions. All of these factors could cause dilutionresponse to the Company’s earnings per share or decrease or delaydemands of consumers and other constituents within the anticipated accretive effect ofcannabis industry as well as competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming, and cause a decrease in the market price of the Company’s securities. The Companycostly, and we may not be able to successfully integratecomplete identified acquisitions. In addition, we may not realize the expected benefits from completed acquisitions.combinefocus from operating our business to addressing acquisition integration challenges; Coordination of research and development and sales and marketing functions;operations, personnel and technology infrastructure of any suchacquired company;its existing operations. If integration is not managed successfully by the Company’s management,acquired company, including claims from terminated employees, consumers, former stockholders, or other third parties.Company may experience interruptions in its business activities, deterioration in its employee and customer relationships, increased costsanticipated benefits of integrationthese acquisitions or investments, cause us to incur unanticipated liabilities, and harm to its reputation, allour business generally. Future acquisitions could also result in the incurrence of debt, contingent liabilities, amortization expenses, or the impairment of goodwill, any of which could have a material adverse effect onharm our financial condition.Company’s business, financial condition and resultsU.S.operations. The Companytrades for U.S. resident securityholders of companies with operations in the U.S. cannabis industry, which may experience difficultiesprohibit or significantly impair the ability of securityholders in combining corporate cultures, maintaining employee morale and retaining key employees. The integration of any such acquired companies may also impose substantial demands on the Company’s management. There is no assurance that these acquisitions will be successfully integrated in a timely or cost-efficient manner, or at all.Company is sued for any reason, it would face potential cost and interference with its business operations.The Company is, andU.S. are unable to settle trades of our securities, this may from time to time become, party to litigationaffect the pricing of such securities in the ordinary coursemarket, the transparency and availability of business which could adversely affect its business. Should any litigation in whichtrading prices and the Company is, or becomes, involved be determined against the Company, such a decision could adversely affect the Company’s ability to continue operating. Even if the Company is involved in litigation and wins, litigation can redirect significant Company resources. Litigation may also create a negative perceptionliquidity of the Company’s brand.
these securities.(10)Risks Related to the Company’s Common Stockthe Company’sour capital stock would cause dilution to itsour existing shareholders.stockholders.The Company currently has approximately 335.2it isare authorized to issue up to 700 million shares. Therefore, the Company will be ablewe are still authorized to issue a substantial number of additional shares of common stock without obtaining shareholder approval. In the event the Company elects to issue additional shares of common stock in connection with any financing, acquisition or otherwise, current shareholders could find their holdings substantially diluted, which means they will own a smaller percentage of the Company. In addition, the Companywe currently hashave outstanding approximately 4.9 million shares of Series B preferred stock (which convert on a one-for-one basis into shares of our common stock) and approximately 6.2 million shares of Series C preferred stock (which convert on a five-for-one basis into shares of our common stock). The Company’s boardOur Board of directorsDirectors is authorized to issue up to a total of 50 million shares of preferred stock (including the previously issued shares) with terms it designates without any further shareholder approval. In the event we elect to issue additional shares of common stock in connection with any financing, acquisition or otherwise or issue additional shares of preferred stock, current stockholders could find their holdings substantially diluted, which means they would own a smaller percentage of our company.the Company’sour other shareholders. Thestockholders. Additionally, the sale of such common stock or other common stock in the open market could adversely affect the market price of the Company’sour common stock.2021,2022, there were potentially dilutive securities convertible into shares of common stock comprised of stock options convertible into 39,821,67136,504,673 shares of common stock; warrants convertible into 26,351,57122,855,540 shares of common stock; shares of Series B preferred stock convertible into 4,908,333 shares of common stock; shares of Series C preferredpromissory notes,restricted stock units convertible into 1,142,857 shares. More1,599,999 shares of common stock. Additional convertible securities will likely be granted in the future to the Company’sour officers, directors, employees, or consultants and as part of futuretheir compensation and such convertible securities will likely be issued in connection with financings. The exercise of outstanding stock options and warrants and the conversion of our notes and debentures will dilute the percentage ownership of the Company’sour other shareholders.stockholders. Sales, or the expectation of sales, of a substantial number of shares of the Company’sour common stock in the private or public markets could adversely affect the prevailing market price of the Company’sour common stock.Potential Volatility of Common Share Pricethe Company’sour common stock has been historically volatile and could continue to be volatile.(a)the public’s reaction to the Company’s press releases, announcements and filings with regulatory authorities and those of its competitors;(b)fluctuations in broader stock market prices and volumes;(c)changes in market valuations of similar companies;(d)investor perception of the Company, its prospects or the industry in general;(e)additions or departures of key personnel;(f)commencement of or involvement in litigation;(g)changes in the regulatory landscape applicable to the Company, the dietary supplement and/or the cannabis and hemp industries;(h)media reports, publications or public statements relating to, or public perceptions of, the regulatory landscape applicable to the Company, the cannabis or the hemp industry, whether correct or not;(i)announcements by the Company or its competitors of strategic alliances, significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments;(j)variations in the Company’s quarterly results of operations or cash flows or those of other comparable companies;(k)revenues and operating results failing to meet the expectations of securities analysts or investors in a particular period;(11)(l)changes in the Company’s pricing policies or the pricing policies of its competitors;(m)future issuances and sales of the Company’s common stock;(n)sales of the Company’s common stock by insiders of the Company;(o)third party disclosure of significant short positions;(p)demand for and trading volume of the Company’s common stock;(q)changes in securities analysts’ recommendations and their estimates of the Company’s financial performance;(r)short-term fluctuation in stock price caused by changes in general conditions in the domestic and worldwide economies or financial markets; and(s)the other risk factors described in this section or other sections of this 10-K.the Company’sour control could cause the market price of theour common stock to decline significantly.the Company’sour common stock. Hence,Accordingly, the price of the common stock could fluctuate based upon factors that have little or nothing to do with the Company,us, and these fluctuations could materially reduce the price of theour common stock, regardless of the Company’sour operating performance. In the past, following a significant decline in the market price of a company’s securities, there have been instances of securities class action litigation having been instituted against that company. If the Companywe were involved in any similar litigation, it could incur substantial costs Management’s attention and resourcessignificant efforts of our management could be diverted, and itwhich in turn could harm the Company’sour business, operating results and financial condition.IneventJOBS Act and, for as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies, but not to emerging growth companies, including but not limited to, not being required to comply with the Company requires additional financing and access to capital, covenants and restrictions in existing agreements may limit the Company’s options.Certainauditor attestation requirements of Section 404 of the Company’s existing financing agreements contain covenantsSarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachuterestrict its abilitywe become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; or (c) the date on which we have issued more than $1 billion in non-convertible debt during the preceding fiscal year period. We expect to take advantage of these reporting exemptions described above until we are no longer an emerging growth company. Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies.additional debt, pay dividends or redeem sharesexpenses and, to a lesser extent, diversion of its stock. If the Company seeksmanagement of our management’s time in our effects to raise additional capital or financing, there can be no assurance that such capital or additional financing will be available on terms that comply with existing covenantsSection 404 of the Sarbanes-Oxley Act of 2002 regarding internal control over financial reporting. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are satisfactorydesigned to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Company.The Company has no plansSarbanes-Oxley Act of 2002, or the subsequent testing by our independent registered public accounting firm when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to pay dividends on its common stock.The Company does not expectbe material weaknesses or that may require prospective or retrospective changes to declareour consolidated financial statements or pay dividendsidentify other areas for further attention or improvement. Inferior internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock in the foreseeable future. In addition, the payment of cash dividends is limited by the terms of the Company’s financing agreements.
stock.(12)ITEMUNRESOLVED STAFF COMMENTS.Unresolved Staff CommentsNone.ITEMPROPERTIES.Properties2020,May 2023, provided it is not annually renewed by the bank, which the bank has done every year since inception of this mortgage (the “DSQ Mortgage”).2022. commenced in May 2021. The premises were purchased by the Company in July 2021, which property was secured under a second mortgage with DuQuoin State Bank that matures in July 2041.itwas developed into cannabis cultivation and production facility.property securesCompany also leases a $3 million promissory note2,700 square foot two-unit apartment that it uses for office space, which was paid downexpires in March 2021. This facility is leased to the company’s cannabis licensed client under a 20-year triple net lease expiring in 2038.July 2023.it is developingwas developed into a medical cannabis dispensary that is expected to openopened in October 2022.Clark County, Nevadaapproximately 10,000a 4,700 square feet of an industrialfoot building that was built intowhich it intends to open as a cannabis cultivation facility. This facility is subleased to the Company’s licensed cannabis client under a sub-lease which is coterminous with the Company’sdispensary, in 2023. The lease for 10 years expiringexpires in 2024.2033.21.95approximately 22 acres within the New Bedford Industrial Park. The property securesis secured by a mortgage with the Bank of New England that matures in 2027. The Company developed approximately half of the property into a cannabis cultivation and processing facility in which it conducts wholesale operations. The remaining portion of the property iswas leased to a non-cannabis manufacturing company whothrough February 2023, and the tenant is currently leasing the space on a month-to-month basis, and thebe vacatingdepart by the premises in 2022. Thereafter, theend of 2023. The Company intends to expand its cannabis wholesale operations throughoutto include the entire property.(13)ITEM 3. LEGAL PROCEEDINGS.Terminated Employment AgreementIn July 2019, Thomas Kidrin, the former chief executive officer and a former director of the Company, filed a complaint in the Massachusetts Superior Court which alleged the Company failed to pay all wages owed to him and breached his employment agreement, and requested multiple damages, attorney fees, costs, and interest. moved to dismiss certain counts of the complaint and asserted counterclaims against Mr. Kidrin which alleged breach of contract, breach of fiduciary duty, money had and received, and unjust enrichment.While the Company’s motion to dismiss was pending, the parties entered into a settlement agreement and general release in August 2021 whereby, among other conditions, (i) Mr. Kidrin’s complaint was dismissed with prejudice, (ii) the Company issued to Mr. Kidrin five-year warrants to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $0.50 per share, (iii) the Company irrevocably transferred intangible assets relating to the online virtual worlds business the Company had conducted in early 2014, prior to its pivot into the legal cannabis industry (such assets had zero carrying value on the Company’s balance sheet), and (iv) each party released and discharged the other from all claims, losses, and liabilities.Maryland LitigationAs previously discussed in Part I, Item 1. Business in this report, in 2019, the members of Kind had sought to renege on the parties’ original agreement to a partnership/joint venture made in 2016 and subsequent MOU. The Company engaged with the members of Kind in good faith in an attempt to reach updated terms acceptable to both parties; however, the members of Kind failed to reciprocate in good faith, resulting in an impasse. Incrementally, both parties through counsel further sought to resolve the impasse; however, such initiative resulted in both parties commencing legal proceedings.In November 2019, Kind commenced an action by filing a complaint against the Company in the Circuit Court for Washington County, MD captioned Kind Therapeutics USA, Inc. vs. MariMed, Inc., et al. (Case No. C-21-CV-19-000670) (the “Complaint”). The Complaint, as amended, alleges breach of contract, breach of fiduciary duty, unjust enrichment, intentional misrepresentation, rescission, civil conspiracy, and seeking an accounting and declaratory judgment and damages in excess of $75,000 (the Court has subsequently dismissed Kind’s claims for declaratory judgment onassumed the lease rescission of the lease, and civil conspiracy). On November 15, 2019, the Company filed counterclaims against Kind and a third-party complaint against the members of Kind (Jennifer DiPietro, Susan Zimmerman, and Sophia Leonard-Burns) and William Tham (the “Counterclaims”). The Counterclaims, as amended, allege breach of contract with respect to each of the partnership/joint venture agreement, the MOU, the MSA, the Lease, and the Licensing and Manufacturing Agreement (“LMA”), unjust enrichment, promissory estoppel/detrimental reliance, fraud in the inducement, breach of fiduciary duty, and seeks reformation of the MSA, a declaratory judgment regarding enforceability of the partnership/joint venture arrangement and/or the MOU, specific performance of the parties’ various contracts, and the establishment of a constructive trust for the Company’s benefit. The Counterclaims also seek damages.At the time the Complaint and Counterclaims were filed, both parties, the Company (including its subsidiaries Mari Holdings MD LLC and MariMed Advisors Inc.) and Kind, brought motions for a temporary restraining order and a preliminary injunction. By Opinion and Order entered on November 21, 2019, the Court denied both parties motions for a temporary restraining order. In its opinion, the Court specifically noted that, contrary to Kind’s allegations, the MSA and the Lease “appear to be independent, valid and enforceable contracts.”A hearing on the parties’ cross-motions for preliminary injunction was held2,700 square foot dispensary in September 2020 and November 2020. Also in November 2020, the Court granted the Company’s motion for summary judgment as to the Lease, determining that the Lease is valid and enforceable. Based on this ruling, the Company is seeking judgment at trial in the amount of approximately $5.4 million for past due rent and expenses owed by Kind under the Lease.In December 2020, the Court entered a Preliminary Injunction Order, accompanied by a Memorandum Opinion, denying Kind’s motion for a preliminary injunction (which Kind had withdrawn at the conclusion of the hearing) and granting the Company’s request for preliminary injunction. The Court determined that the Company is likely to succeedconnection with respect to the validity and enforceability of the MSA and the LMA, that the Company would suffer substantial and irreparable harm without the preliminary injunction, and that the balance of convenience and public interest both warranted the issuance of a preliminary injunction in the Company’s favor. The Court ordered, inter alia, that the MSA and LMA are in effect pending judgment after trial on the merits, and that Kind and its members, and their attorneys, agents, employees, and representatives, are prohibited from (a) interfering with the Company’s duties and responsibilities under the MSA and (b) withdrawing funds, making any distribution, paying any loans, returning any capital, or making any payment towards a debt from any Kind bank or other financial account(s) without written consent of the Company or Order of the Court, thereby preserving the Company’s control of Kind’s operations and finances at least through the jury trial currently scheduled to begin on March 28, 2022. Further, the Court ordered Kind to pay management and licensing fees to the Company beginning January 1, 2021. Kind has noted an appeal of the Order to the Maryland Court of Special Appeals, which the Court deniedasset purchase in December 2021, leaving2022. The lease expires in 2026, with an option to extend the preliminary injunction order in effect.In addition to the favorable rulings on the Lease, MSA, and LMA, the Company believes that its claimsterm for declaratory relief, specific performance, and/or breach of contract with respect to the partnership/joint venture agreement claims are meritorious. Further, the Company believes that Kind’s claims against the Company are without merit. On March 18, 2021, the Court issued an opinion and order on Kind’s motion for summary judgment finding that the MOU was not enforceable by the Company against Kind as a final binding agreement. The Company is evaluating an appeal of this ruling which under Maryland rules can only be pursued upon final judgment.three additional five-year periods through 2041.In March 2021, the Kind parties filed motions to modify the preliminary injunction order or, alternatively, for direction from the Court based on Kind’s claim to have terminated the MSA. In September 2021, the court denied the motion to modify the preliminary injunction and granted, in part, the motion for direction, but only with respect to Kind’s request to pay litigation costs. The preliminary injunction remains in full effect, and the Company filed a petition for civil contempt against the Kind parties for interfering with the Company’s management of Kind. The contempt petition remains pending.On December 31, 2021, the parties to the foregoing Maryland litigation entered into a global Confidential Settlement and Release Agreement, along with the parties to the DiPietro lawsuit (described below). Also on such date, as previously discussed in Part I, 1. Business in this report, the Company entered into (i) a membership interest purchase agreement with the members of Kind to acquire 100% of the equity ownership of Kind, and (ii) a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ownership interest Mari-MD and Mia.On January 4, 2022, the Maryland court entered an order staying the litigation and rescheduling the jury trial to October 24, 2022, to November 4, 2022, in the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated. Otherwise, simultaneous with the closing of the transactions contemplated by the Confidential Settlement and Release Agreement, the foregoing Maryland litigation will be dismissed with prejudice, along with the DiPietro lawsuit.In the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated, the Company intends to aggressively prosecute and defend the action.DiPietro LawsuitIn August 2020, Jennifer DiPietro, directly and derivatively on behalf of Mari-MD and Mia, commenced a suit against the Company’s CEO, CFO, and wholly-owned subsidiary MariMed Advisors Inc. (“MMA”), in Suffolk Superior Court, Massachusetts.
3. Legal Proceedings(14)In this action, DiPietro, a party to prior ongoing litigation in Maryland involving the Company and Kind as discussed above, brings claims for breach of fiduciary duty, breach of contract, fraud in the inducement, aiding and abetting the alleged breach of fiduciary duty, and also seeks access to books and records and an accounting related to her investments in Mari-MD and Mia. DiPietro seeks unspecified money damages and rescission of her interest in Mari-MD, but not of her investment in Mia, which has provided substantial returns to her as a member.The Company has answered the complaint and MMA filed counterclaims against DiPietro on its own behalf and derivatively on behalf of Mari-MD for breach of her fiduciary duties to each of those entities, and for tortious interference with Mari-MD’s lease and MMA’s management services agreement with Kind.On December 31, 2021, the parties to the foregoing Massachusetts litigation entered into a global Confidential Settlement and Release Agreement, along with the parties to the Maryland lawsuit described above. Because the Massachusetts litigation involves derivative claims, the Massachusetts Superior Court must approve the parties’ proposed dismissal of those claims. The parties to the Massachusetts litigation have filed a joint motion seeking to dismiss the derivative claims. Simultaneous with the closing of the transactions contemplated by the Confidential Settlement and Release Agreement, all direct claims in the foregoing Massachusetts litigation will be dismissed with prejudice, along with the Maryland lawsuit.In the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated, the Company believes that the allegations of the complaint in the foregoing Massachusetts litigation are without merit and intends to defend the case vigorously. The Company’s counterclaim seeks monetary damages from DiPietro, including the Company’s legal fees in the Maryland lawsuit.$29.0$29 million from the sale, which was fully reserved onat December 31, 2019.In FebruaryGenCanna USA, GenCanna’s wholly-owned operating subsidiary, under pressure from certain of its creditors including MGG Investment Group LP, GenCanna’s senior lender (“MGG”), agreed to convert a previously-filedan involuntary bankruptcy proceeding under Chapter 11 was filed against GenCanna and its wholly-owned subsidiary, OGGUSA Inc. (f/k/a GenCanna Global US, Inc.) ("OGGUSA" and together with GenCanna, the "OGGUSA Debtors") in the U.S. Bankruptcy Court in the Eastern District of Kentucky (the “Bankruptcy Court”"Bankruptcy Court"). In February 2020, the OGGUSA Debtors, under pressure from certain of its creditors including its senior lender MGG Investment Group LP (MGG"), agreed to convert the involuntary bankruptcy proceeding into a voluntary Chapter 11 proceeding. In addition, GenCanna and GenCanna USA’sThe OGGUSA Debtors' subsidiary, Hemp Kentucky LLC, (collectively with GenCanna and GenCanna USA, the “GenCanna Debtors”),also filed voluntary petitions under Chapter 11 in the Bankruptcy Court.GenCannaOGGUSA Debtors, which included the Company, entered an order authorizing the sale of all or substantially all of the assets of the GenCannaOGGUSA Debtors to MGG. After the consummation of the sale of all or substantially all of their assets and business, the GenCannaOGGUSA Debtors n/k/a OGGUSA, Inc. and OGG, Inc. (the “OGGUSA Debtors”) filed their liquidating plan of reorganization (the “Liquidating Plan”) to collect various prepetition payments and commercial claims against third parties, liquidate the remaining assets of the ODDUSAOGGUSA Debtors, and make payments to creditors. The Company and the unsecured creditors committee filed objections to such Liquidating Plan including opposition to the release of litigation against the OGGUSA Debtors’ senior lender, MGG, for lender liability, equitable subordination, and return of preference. As a part of such plan confirmation process, the OGGUSA Debtors filed various objections to proofs of claims filed by various creditors, including the proof of claim in the amount of approximately $33.6 million filed by the Company. Through intense and lengthy negotiations with the OGGUSA Debtors and the unsecured creditors committee regarding the objections to the Liquidating Plan, the Company reached an agreement with the OGGUSA Debtors to withdraw the objections to the Company’s claim and to have it approvedwas confirmed by the Bankruptcy Court as a general unsecured claim in the amount of $31.0 million.on November 12, 2020. administrator for the OGGUSA Debtors (the "Plan Administrator"), executed a written release of claims, if any, of the Company against Huron Consulting Group (“Huron”), a financial consulting and management company retained by the senior lender of the OGGUSA Debtors to perform loan management services for the lender and OGGUSA Debtors prior to and during their Chapter 11 bankruptcy cases. Such release was executed in connection with a comprehensive settlement agreement between the OGGUSA Debtors and Huron. In consideration for the Company’s execution of the release, Huron paid an additional $40,000 to the bankruptcy estates of the OGGUSA Debtors to be included in the funds to be distributed to creditors, including the Company.still insufficient information as to what portion,how much of the Company's allowed general unsecured claim, if any, of the Company’s allowed claim will be paid upon the completion of the liquidation of the remaining assets of the OGGUSA Debtors.ITEMMINE SAFETY DISCLOSURESMine Safety DisclosuresApplicable.
applicable.(15)ITEMMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesThe Company’sStockholdersMarch 16, 2022, the CompanyFebruary 28, 2023, we had 729approximately 733 stockholders of record and 335,183,206 outstanding shares of common stock.record.DividendsThe Company hasit doeswe do not anticipate paying cash or other dividends in the foreseeable future.In November 2021,Companythree months ended December 31, 2022, we issued 202,204the following unregistered securities:associatedas purchase consideration for an asset purchase with previously issued subscriptions on common stock with aan aggregate fair value of approximately $189,000.During the period October 2021 to January 2022, the holder of Company-issued promissory notes converted $875,000 of principal into 2,500,001$712,000;atissued as payment under a conversion priceroyalty agreement with an aggregate fair market value of $0.35 per share.During the period October 2021 to January 2022, options to purchase 55,000approximately $59,000;common stock were exercised by current and former employees at exercise prices of $0.14 and $0.30 per share. Additionally, in December 2021, the Company’s CEO and CFO each exercised options on a cashless basis to purchase common stock at an exercise price of $0.63 per share, each receiving 26,744 net shares of common stock.In December 2021, the Company granted 2,293 shares ofrestricted common stock to an employee in exchange for services rendered during the fourth quarter of 2021 atwith a grant date fair value of approximately $2,000.In December 2021, the Company issued 825,000$2,500; andexchange for consulting services.During the period October 2021 to December 2021, the Company granted five-year options to employees to purchase up to 2,972,500 shares of common stock at exercise prices ranging from $0.69 to $0.88 per share. Additionally, in October 2021, the Company granted five-year options to its CEO, CFO, and COO to purchase up to 11,250,000 shares of common stock in the aggregate ata cashless warrant exercise; such warrants had an exercise price of $0.90 per share.(16)Company Equity Compensation PlansThe following table sets forth information asDecember 31, 2021 with respect to compensation plans (including individual compensation arrangements) under which equity securitiesFinancial Condition and Results of the Company are authorized for issuance.OperationsPlan Category Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights Weighted-average
exercise price of
outstanding
options, warrants
and rights Number of
securities
remaining available
for future
issuance under equity compensation plans Equity compensation plans approved by stockholders (1) 39,821,671 $ 0.91 28,618,664 Equity compensation plans not approved by stockholders - $ - - Total 39,821,671 28,618,664 (1)Consist of options exercisable for (i) 39,821,671 shares granted under the Incentive Plan (hereinafter defined) of which 3,456,250 shares continue to be subject to the terms of the Company’s 2018 Stock Award and Incentive Plan.The Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “Incentive Plan”) provides incentives for the achievement of important performance objectives and promotes the long-term success of the Company. In September 2019, the Company’s stockholders approved the Incentive Plan. In September 2021, the stockholders approved an amendment to the Incentive Plan increasing the aggregate number shares reserved for issuance from 40,000,000 to 70,000,000.The Incentive Plan is an omnibus plan, authorizing a variety of equity award types as well as cash and long-term incentive awards. Each award under the Incentive Plan is subject to the Company’s claw back policy in effect at the time of grant of the award. Shares actually delivered in connection with an award will be counted against the aggregate number of reserved shares. Shares will remain available for new awards if an award under the Incentive Plan expires, is forfeited, canceled, or otherwise terminated without delivery of shares or is settled in cash.The board of directors may amend, suspend, discontinue, or terminate the Incentive Plan or the authority to grant awards thereunder without stockholder approval, except as required by law or regulation or under rules of the stock exchange, if any, on which the Company’s stock may then be listed. Unless earlier terminated, grants under the Incentive Plan will terminate ten years after stockholder approval of the Incentive Plan, and the Incentive Plan will terminate when no shares remain available, and the Company has no further obligation with respect to any outstanding award.ITEM 6. SELECTED FINANCIAL DATAThe Company is a “smaller reporting company” as defined by Regulations S-K and as such, is not required to provide the information contained in this item pursuant to Regulation S-K.ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.formAnnual Report on Form 10-K and in future filings by the Company with the U.S. Securities and Exchange Commission, words or phrases such as “anticipate,” “believe,” “could,” “would,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.cannabis relatedcannabis-related laws.reportAnnual Report on Form 10-K under Item 8.circumstances.
circumstances, unless required by law.(17)OverviewMariMed Inc. (the “Company”) isThe Company develops, operates, manages,We develop, operate, manage, and optimizes over 300,000 square feet ofoptimize state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medicinal and recreationaladult-use cannabis. The CompanyWe also licenses itslicense our proprietary brands of cannabis and hemp-infused products, along with other top brands, in several domestic marketsmarkets.overseas.on the Canadian Securities Exchange under the ticker symbol MRMD.Upon its entry intoindustry in 2014,license and assumed the Company was an advisory firm that procured state-issued cannabis licenses on behalf of its clients, developed cannabis facilities which it leased to these newly-licensed companies, and provided industry-leading expertise and oversight in all aspects of their cannabis operations. The Company also provided its clients with ongoing regulatory, accounting, real estate, human resources, and administrative services.Over the last few years, the Company made the strategic decision to transition from a consulting business to a direct owner and operator of cannabis licenses in high-growth states. Core to this transition is the acquisition and consolidation of the Company’s clients (the “Consolidation Plan”). Among several benefits, the Consolidation Plan would present a simpler, more transparent financial picture of the full breadth of the Company’s efforts,property lease associated with a clearer representation of the revenues, earnings, and other financial metrics the Company has generated for its clients. The Company has played a key rolecannabis dispensary in the successes of these entities, from the securing of their cannabis licenses,Beverly, Massachusetts by Greenhouse Naturals LLC that had never been operational.the development of facilities that are models of excellence, to funding their operations, and to providing operational and corporate guidance. Accordingly, the Company believes it is well suited to own these businesses and manage the continuing growth of their operations.To date, the acquisition and consolidation of the Company’s client businesses in Massachusetts and Illinois have been completed. The acquisition of a client business in Maryland has been contracted, and the Company is awaiting approval by the Maryland Cannabis Control Commission, which is pending. Upon approval, this entity will be consolidated. The acquisitions of the remaining businesses located in Nevada and Delaware are at various stages of completion and subject to each state’s laws governing the ownership transfer of cannabis licenses and other closing conditions. Delaware will require a modification of current cannabis ownership laws to permit for-profit ownership, which is expected to occur when the state legalizes recreational adult-use cannabis. Until the law changes and the acquisition is approved, the Company continues to generate revenue from rental income, management fees, and licensing royalties.The transition to a fully integrated muti-state cannabis operator (“MSO”) is part of aexecute our strategic growth plan, (the “Strategic Growth Plan”)with priority on activities described below:Company is implementingcannabis businesses that we have developed and managed.drive its revenuesqualified strategic partners or by acquiring production and profitability. The Strategic Growth Plan has four components: (i) completedistribution licenses.Consolidation Plan, (ii) increase revenuesdispensary in existing states, by spending capitalBeverly, Massachusetts discussed above, and, as recently announced, a dispensary in Quincy, Massachusetts. We also intend to increasesignificantly expand the Company’scapacity and capability of our manufacturing facility in New Bedford, MA.developwe intend to expand our manufacturing facility by 40,000 square feet. Under current Maryland cannabis laws, we have the potential to add three additional medical dispensaries, for a total of four.withinliabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements. We consider the following accounting policies to be both those states, (iii) expandmost important to the Company’s footprintportrayal of our financial condition and those that require the most subjective judgment: accounts receivable; valuation of inventory; estimated useful lives and depreciation and amortization of property and equipment and intangible assets; accounting for acquisitions and business combinations; loss contingencies and reserves; stock-based compensation; and accounting for income taxes.cannabis states through new applicationsclaims from time to time. We reserve for legal contingencies and acquisitionslegal fees when the amounts are probable and estimable.existing cannabis businesses,the award and (iv) optimizeis recognized over the Company’s brand portfoliorequisite service period, which is generally the vesting period. We use the Black-Scholes valuation model for estimating the fair value of stock options as of the date of grant. Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions, including the volatility of our stock price, expected term of the stock option, risk-free interest rate and licensingexpected dividends. Changes in such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes, however, would not impact our cash flows.by expanding into additional states with legal cannabis programs.are comprised of the following:The Company has created its own brandsProduct sales (retail and wholesale) - direct sales of cannabis flower, concentrates, and precision-dosedcannabis-infused products utilizing proprietary strainsprimarily by our retail dispensaries and formulations. Thesewholesale operations in Massachusetts, Illinois, and, as of the Kind Acquisition Date, Maryland. We recognize this revenue when products are developeddelivered or at retail points-of-sale.Company in cooperationpurchaser.state-licensed operators who meet the Company’s strict quality standards, including all natural—not artificial or synthetic—ingredients. The Company licenses its brandscomprehensive oversight of their cannabis cultivation, production and product formulations only to certified manufacturing professionals who follow state cannabis laws and adheredispensary operations. Prior to the Company’s precise scientific formulationsthird quarter of 2022, these fees were based on a percentage of such clients' revenue and product recipes.were recognized after services have been performed; these fees were eliminated in connection with new contract negotiations with our client.The Company markets its high-quality cannabis flowers and concentrates underLicensing fees - revenue from the award-winning1 Nature’s Heritage brand; cannabis-infused chewable tableslicensing of our branded products, including Betty's Eddies, Bubby's Baked, Vibations, and powder drink mixes under the brand names Kalm Fusion, to wholesalers and K Fusion; all natural fruit chews underregulated dispensaries throughout the award-winning1 Betty’s Eddies brand;United States and brownies, cookies, and other social sweets underPuerto Rico. We recognize this revenue when the Bubby’s Baked brand. The Company’s cannabis-infused brands have been top-selling products in Maryland and Massachusetts.2 The Company intendsare sold to introduce additional product lines under these brands in the foreseeable future.end customer.The Company also has strategic alliances with prominent brands. The Company has partnered with renowned ice cream maker Emack & Bolio’s® to create a line-up of cannabis-infused vegan and dairy ice cream. Additionally, the Company has secured distribution rightsBinske® line of cannabis products crafted from premium artisan ingredients, the Healer line of medical full-spectrum cannabis tinctures,years ended December 31, 2022 and the clinically-tested medicinal cannabis strains developed in Israel by global medical cannabis research pioneer Tikun Olam.1 Awards won by the Company’s Betty’s Eddies brand include LeafLink 2021 Best Selling Medical Product, Reddit Sparkie 2021 Best Edible, Respect My Region 2021 Hottest Edible, LeafLink 2020 Industry Innovator, and Explore Maryland Cannabis 2020 Edible of the Year. Awards won by the Company’s Nature’s Heritage brand include the Cultivators Cup 2021 Silver Medal and the High Times Cannabis Cup 2021 Bronze Medal.2 Source: LeafLink Insights 2020.(18)RevenuesThe Company’s revenues are primarilywas comprised of the following categories:●Product Sales – direct sales of cannabis and cannabis-infused products by the Company’s dispensary and wholesale operations in Massachusetts and Illinois, and sales of hemp and hemp-infused products. Future product sales are expected to include the Company’s planned cannabis-licensee acquisitions in Maryland, Nevada, and Delaware (upon this state’s amendment to permit for-profit ownership of cannabis entities).●Real Estate – rental income and additional rental fees generated from leasing of the Company’s state-of-the-art, regulatory-compliant cannabis facilities to its cannabis-licensed clients.●Management – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production, and dispensary operations. Along with this oversight, the Company provides human resources, regulatory, marketing, and other corporate services.●Supply Procurement – resale of cultivation and production resources, supplies, and equipment, acquired by the Company from top national vendors at volume discounted prices, to its clients and third-parties within the cannabis industry.●Licensing – revenue from the sale of precision-dosed, cannabis-infused products—such as Betty’s Eddies, Kalm Fusion, and Nature’s Heritage—to regulated dispensaries throughout the United States and Puerto Rico.ExpensesThe Company classifies its expenses into three general categories:●Cost of Revenues – the direct costs associated with the generation of the Company’s revenues.●Operating Expenses – comprised of the sub-categories of personnel, marketing and promotion, general and administrative, and bad debts.●Non-operating Income and Expenses – comprised of the sub-categories of interest expense, interest income, losses on obligations settled with equity, equity in earnings of investments, changes in the fair value of non-consolidated investments, and other non-recurring gains or losses.
(in thousands, except percentages):(19)Year ended December 31, Increase (decrease) from prior year 2022 2021 $ % Product revenue: Product sales - retail $ 92,836 $ 82,127 $ 10,709 13.0 % Product sales - wholesale 32,865 26,119 6,746 25.8 % Total product revenue 125,701 108,246 17,455 16.1 % Other revenue: Real estate rentals 3,526 6,548 (3,022) (46.2) % Supply procurement 3,353 2,108 1,245 59.1 % Management fees 848 3,079 (2,231) (72.5) % Licensing fees 582 1,483 (901) (60.8) % Total other revenue 8,309 13,218 (4,909) (37.1) % Total revenue $ 134,010 $ 121,464 $ 12,546 10.3 % Liquidity and Capital ResourcesThe Company produced significant improvements to its liquidityreported periods:●Cash and cash equivalents increased nearly ten-fold to $29.7 million at December 31, 2021, from $3.0 million at December 31, 2020.●In 2021, the Company’s operating activities provided positive cash flow of $35.9 million,year ended December 31, 2022 ("2022") compared to $3.4 million in 2020.●At December 31, 2021, working capital increased to $17.4 million from a working capital deficit of $2.2 million at December 31, 2020, a positive swing of $19.6 million.●The Company generated net income of $7.6 million in 2021, an increase of 214% from net income of $2.4 million in 2020.The aforementioned improvements to the Company’s liquidity wereyear ended December 31, 2021 ("2021"). Our total product revenue increased $17.5 million, or 16.1%, primarily the result of increasesattributable to higher retail sales in revenues and profitability generated by the Company’s cannabis operationsour Metropolis, IL dispensary, which we opened in the statessecond quarter of Illinois2021, and Massachusetts. These operations launched as part of the Company’s aforementioned Consolidation Plan to transition from a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations. The liquidity improvements were also attributable to $23.0 million of equity capital raised from Hadron Healthcare Master Fund (“Hadron”), further discussed under the Financing Activities section below.In additionhigher wholesale revenue due to the above, the Company evaluates liquidity using the financial measurement of Adjusted EBITDA, a commonly used metricKind Acquisition. This increase was partially offset by lower retail sales in Massachusetts due to assess liquidity that is not defined by generally accepted accounting principles. increased competition.section below entitled Non-GAAP Measurement discusses the components of this measurementdecrease in further detail.Operating ActivitiesNet cash provided by operating activities was $35.9 million in 2021, compared to $3.4 million in 2020. The year-over-year improvementour other revenue was primarily attributable to rent and management fee reductions in connection with one of our cannabis-licensed clients, and the increaseKind Acquisition, after which we no longer recognized rental, management fees and related revenue. These decreases were partially offset by higher supply procurement revenue primarily attributable to revenue generated from our cannabis-licensed client in cannabis-derived profitsDelaware.Year ended December 31, Increase (decrease) from prior year 2022 2021 $ % Cost of revenue $ 70,053 $ 55,201 $ 14,852 26.9 % Gross profit $ 63,957 $ 66,263 $ (2,306) (3.5) % Gross margin 47.7 % 54.6 % 2021 generated by the Company’s four active dispensaries in Illinois, and its retail and wholesale operations in Massachusetts.Investing ActivitiesNet cash used in investing activities was $16.6 million in 2021,2022 compared to $4.5 million in 2020. The year-over-year increase was2021, primarily attributable to an increase in propertyhigher manufacturing and equipment expenditures in 2021 for the Company’s facilities in Delaware, Illinois, Maryland, and Massachusetts, offset by $1.2 million of proceeds from the asset sale of a Company-owned investment.Financing ActivitiesNet cash provided by financing activities was $7.5 million in 2021, compared to $3.3 million in 2020. In March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) whereby Hadron will provide funding of up to $46.0 million to repay existing non-mortgage debt, to fund expansion plans of existing operations,employee-related costs and, to finance planned acquisitions. In March 2021, Hadron funded $23.0a lesser extent, higher supply procurement and facility-related expenses. These increases aggregated approximately $17 million, under this facility. The Company also raised $2.7 million from a new mortgage. These proceedsand were offset by the repayment of $17.0 million of debt in 2021.In 2020, the Company raised $21.4 million from debt financings, offset by $17.4 million of promissory note and mortgage repayments during the year.The proceeds from the aforementioned financings were used to execute on the Company’s strategy to become a fully integrated multistate operator of seed-to-sale cannabis operations, to continue the development of its regulated facilities, to pay down its debt, to expand its branded licensing business, and for working capital purposes.(20)Results of OperationsYear ended December 31, 2021 compared to year ended December 31, 2020Revenues grew to $121.5 million in 2021, an increase of $70.6 million or 139%, compared to $50.9 million in 2020. The year-over-year increase was primarily due to the nearly three-fold expansionour increased headcount in connection with our recent acquisitions and in-process expansions. We have negotiated with certain of the Company’s cannabis salesour suppliers to $108.2 millionreduce our costs for future purchases of ingredients, nutrients and packaging, all of which have increased significantly as a result of current economic conditions.Year ended December 31, Increase (decrease) from prior year 2022 2021 $ % Personnel $ 14,404 $ 8,352 $ 6,052 72.5 % Marketing and promotion 3,736 1,625 2,111 129.9 % General and administrative 20,735 27,561 (6,826) (24.8) % Acquisition-related and other 961 — 961 100.0 % Bad debt 3,752 1,862 1,890 101.5 % Total operating expenses $ 43,588 $ 39,400 $ 4,188 10.6 % 2021,our personnel expenses in 2022 compared to $39.4 million in 2020. This growth was primarily attributable to sales increases of (i) $38.3 million generated by the Company’s dispensaries in Illinois, where one new dispensary commenced operations in May 2021 and three ongoing dispensaries experienced an 80% year-over-year increase in customer visits, (ii) $14.0 million generated from the Company’s dispensary in Massachusetts, which experienced a nearly six-fold year-over-year increase in customer visits, and (iii) $15.7 million generated by the Company’s wholesale operations in Massachusetts, which experience a 151% increase in customers in 2021 compared to 2020.The year-over-year increase in revenues was also the result of the continued growth of rental income, management fees, and supply procurement revenue, generated primarily from the Company’s cannabis clients in Delaware and Maryland.Cost of revenues were $55.2 million in 2021 compared to $19.6 million in 2020, an increase of $35.6 million. The year-over-year variance was primarily attributable to the higher level of revenues as these costs are largely variable in nature and fluctuate in-step with revenues. As a percentage of revenues, these costs increased to 45.4% in 2021 from 38.5% in the same period in 2020, primarily due to the change in the relative mix of revenue categories in each period. Specifically, in 2021, (a) 88.2% of revenues were comprised of product sales, which historically have had corresponding costs of revenue of in the range of 45.0% to 50.0%, and (b) 8.6% of revenues were comprised of real estate and management revenue, which have no corresponding cost of revenue. This compares to revenues in 2020 that were comprised of (x) 77.4% of product sales and (y) 16.2% of real estate and management revenues. While the cost rate is higher for product sales, the level of product sales able to be generated by the Company is several multiples higher than the level of real estate and management revenues able to be generated, resulting in significantly higher gross profit dollars to be generated by the Company.Accordingly, gross profit grew to $66.3 million in 2021 from $31.3 million in 2020.Personnel expenses increased to $8.4 million in 2021 from $5.5 million in 2020. The increase was primarily due to the hiring of additional staff to support (i) higher levels of projected revenue from existing operations, as well as increased headcount arising from the Kind Acquisition. Personnel costs increased to approximately 11% of revenue in 2022, compared to approximately 7% of revenue in 2021.(ii) the Company’s expansion into a direct ownerpromotion expenses in 2022 compared to 2021 was primarily attributable to our focused efforts to upgrade our marketing initiatives in order to expand branding and operatordistribution of seed-to-sale cannabis businesses, offset by the reversal of an approximate $1.0 million accrual related to the settlement in August 2021 of an employment-related complaint. As a percentage of revenues, personnel expenses decreased to 6.9% in 2021 from to 10.8% in 2020.$1.6 millionapproximately 3% of revenue in 2021 from $411,0002022, compared to approximately 1% of revenue in 2020. 2021.increase is primarily the result of increased spending on branding and design consulting, customer loyalty programs, social media, and local outdoor advertising. As a percentage of revenues, these costs increased to 1.3%decrease in 2021 from 0.8% in 2020.Generalour general and administrative expenses in 2022 compared to 2021 was primarily attributable to lower costs increasedin connection with our equity programs and professional fees (i.e., accounting, legal and consulting fees). These decreases were partially offset by higher facilities-related and depreciation expenses.$27.6acquisitions and other significant transactions that we would otherwise not have incurred, and include professional and services fees, such as legal, audit, consulting, paying agent and other fees. We incurred $1.0 million of acquisition-related and other expenses in 2022, primarily related to the Kind Acquisition in April 2022 and the July 2022 listing of our common stock on the Canadian Securities Exchange. We did not record any acquisition-related and other expenses in 2021. from approximately $9.9 million in 2020. This change is primarily due to increases of (i) $13.2 million in non-cash equity compensation expense associated with option grants and warrant issuances, (ii) $1.2 million in credit card processing fees from a significant increase in credit card sales at the Company’s cannabis dispensaries, (iii) $1.1 million in facility costs on additional properties in service in 2021, (iv) $965,000 in net professional fees primarily due to the hiring of investment bankers,higher reserve balances that were required in 2021 for aged trade receivable balances.a reductionour lower general and administrative and bad debt expense.legal costs, and (v) $514,000 in depreciation and amortization expenses from higher levels of property, equipment, and intangibles.Bad debtconnection with our notes receivable. Other expense, increased to $1.9 million in 2021 from $982,000 in 2020. The change is due to the increase of reserves recorded against aging trade accounts receivable and against the working capital balance of the Company’s client in Nevada. As a percentage of revenues, this expense decreased to 1.5% in 2021 from 1.9% in 2020.As a result of the foregoing, the Company generated operating income of $26.9 million in 2021 compared to $14.5 million in 2020.Net non-operating expenses decreased to $3.0 million in 2021 from $10.0 million in 2020. The change is primarily due to a $7.5 million reduction of interest expense from lower levels of outstanding debt, coupled with a $309,000 gainnet, includes gains (losses) on a nonconsolidated private company investment, offset by a $757,000 decreasechanges in the fair value of nonconsolidated public company investment.As aforegoing,additionalCompany generated income before income taxespayoff in 2021 of $23.8certain outstanding indebtedness.$4.5was primarily comprised of losses from the changes in the fair value of our investments. The current year amount is comprised of $1.0 million of non-cash income from the sale of an investment, virtually offset by a $1.1 million loss from the change in 2020. Afterfair value of other investments. The prior year amount is comprised of a $1.1 million loss from the change in fair value of our investments and a nominal loss on the extinguishment of debt. These losses were partially offset by a gain of $0.3 million on an asset sale.provisionprovisions of $5.9 million and $16.2 million in 2022 and 2021, respectively. The provision recorded for 2022 was due in part to the impact of Section 280E of the Internal Revenue Code, which prohibits the deduction of certain ordinary business expenses, and $2.1true-ups from changes that occurred between the 2021 provision and 2021 income tax return that was filed.2020, net incomethe same prior year period, coupled with higher expenses arising from expanding our sales activities, facilities and geographic footprint, both in the states where we currently operate and into other states.$7.6primarily attributable to $12.8 million of aggregate cash consideration paid for the Kind Acquisition and Green Growth Acquisition in 2020April 2022 and $2.4May 2022, respectively.2020.
2022 and provided $7.5 million of cash in 2021.(21)generally accepted accounting principles in the United States (“GAAP”), the Company isGAAP, we are providing a non-GAAP financial measurement of profitability – Adjusted EBITDA – as a supplement to the preceding discussion of the Company’sour financial results.Management-interest income and interest expense;-income taxes;-depreciation of fixed assets and amortization of intangibles;-non-cash expenses on debt and equity issuances;-impairment or write-downs of intangible assets;-unrealized gains and losses on investments and currency translations;-legal settlements;-gains or losses from the extinguishment of debt via the issuance of equity;-discontinued operations; and-merger- and acquisition-related transaction expenses.theour performance and liquidity, of the Company as it provides meaningful operating results by excluding the effects of expenses that are not reflective of itsour operating business performance. In addition, the Company’sour management uses Adjusted EBITDA to understand and compare operating results across accounting periods, and for financial and operational decision making.decision-making. The presentation of Adjusted EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP.the Company’sour financial results and itsour ongoing business, as it allows for meaningful comparisons and analysis of trends in the business. Adjusted EBITDA is used by many investors and analysts themselves, along with other metrics, to compare financial results across accounting periods and to those of peer companies.the Company’sour calculations may differ from those used by analysts, investors, and other companies, even those within the cannabis industry, and therefore may not be directly comparable to similarly titled measures used by others.Incomeincome to Adjusted EBITDA for the years ended December 31, 2022 and 2021 and 2020: 2021 2020 (Unaudited) Net income $ 7,623,551 $ 2,429,267 Interest expense, net 2,247,685 9,654,130 Income taxes 16,192,327 2,067,049 Depreciation and amortization 2,788,029 2,182,092 Earnings before interest, taxes, depreciation, and amortization 28,851,592 16,332,538 Amortization of stock grants 235,353 21,459 Amortization of option grants 12,494,209 969,136 Amortization of stand-alone warrant issuances 55,786 2,179 Amortization of warrants issued with stock 654,681 - Loss on equity issued to settle obligations 2,546 44,678 Equity in earnings of investments - (98,813 ) Asset write-down - 84,708 Legal settlement (266,717 ) - Change in fair value of investments 1,106,593 349,638 Adjusted EBITDA $ 43,134,043 $ 17,705,523
(in thousands):(22)2022 PlansDuring 2022, the Company’s focus will be on the following key areas:1)Subject to the applicable state approvals, continue the execution of its Consolidation Plan.2)Identify and open two new dispensary locations in Massachusetts that can service both the medical and adult-use marketplaces. Additionally, the Company plans to begin expansion of its New Bedford, MA cultivation and processing facility in the fourth quarter of 2022 and complete the project in 2023.3)Build and open a cultivation and processing facility in Mt. Vernon, Illinois and begin the production and sale of MariMed’s award-winning branded products in both their retail dispensaries and through wholesale channels.4)Increase fees paid by its managed services client in Delaware by expanding cultivation and processing facilities.5)Complete the acquisition in Maryland and proceed with a plan to expand the cultivation and processing facilities as well as adding a dispensary location.6)Drive licensing fees through the expansion of the Company’s Nature’s Heritage branded flower and popular infused-product brands Betty’s Eddies and Kalm Fusion into the Company’s owned and managed facilities, and with strategic partners into additional markets. Expand the licensed Tropizen® and Binske® brands.7)Identify acquisition opportunities in other states.No assurances can be given that any of these plans will come to fruition or that if implemented will necessarily yield positive results.The following transactions occurred in early 2022:In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the ownership interests of Green Growth Group Inc., an entity that has been awarded a craft grow cannabis license issued by the Illinois Department of Agriculture (the “IDA”) for cultivation, production, and transporting of cannabis and cannabis-infused products in Illinois. The purchase price of $3,400,000 shall be comprised of $1,900,000 in cash and shares of the Company’s common stock valued at $1,500,000. The acquisition is conditioned upon the approval by the IDA, among other closing conditions, which is expected to occur by July 2022.Also in January 2022, the Company entered into an agreement to purchase a 30-acre parcel of land located in Mt. Vernon, IL containing a 33,000 square foot manufacturing facility and a 13,000 square foot storage warehouse, in exchange for $1,495,000 in cash. Upon execution of the agreement, the Company provided a deposit of $100,000 to the seller. The transaction is expected to close in the second quarter of 2022, after the Company has performed a complete inspection and feasibility review. If such review determines that the premises will not satisfy the Company’s requirements, the Company shall have the right to terminate the agreement with no other obligation other than the loss of the deposit.(23)Year ended December 31, 2022 2021 GAAP Net income (loss) $ 13,614 $ 7,624 Interest expense, net 734 2,247 Income tax (benefit) provision 5,894 16,192 Depreciation 3,432 2,098 Amortization of acquired intangible assets 1,282 690 EBITDA 24,956 28,851 Stock-based compensation 6,338 13,440 Settlement of litigation — (266) Acquisition-related and other 961 — Other expense, net 127 800 Adjusted EBITDA $ 32,382 $ 42,825 Inflationnot hadimpacted the Company through increased costs of ingredients, nutrients and packaging. The Company recently negotiated with certain of our suppliers to reduce our costs for future purchases of ingredients, nutrients and packaging, all of which have increased significantly as a material effect on the Company’s financial condition or resultsresult of its operations.current economic conditions.SeasonalityITEMQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk(24)ITEM 8. FINANCIAL STATEMENTS.CONTENTS(25)
20212022 and 2020,2021, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021,2022, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212022 and 2020,2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021,2022, in conformity with accounting principles generally accepted in the United States of America.(26)Revenue RecognitionNote 2the notes to the financial statements, when another party is involved in providing goods or services to the Company’s clients, a determination is made as to who is acting in the capacity as the principal in the sales transaction.Auditing management’s evaluation of agreements with customers involves significant judgment, given the fact that some agreements require management’s evaluation of principal versus agent.To evaluate the appropriateness and accuracy of the assessment by management, we evaluated management’s assessment in relationship to the relevant agreements. InventoryAs discussed in Notes 2 & 7, the Company allocates a certain percentage of overhead cost to its manufactured inventory.Mezzanine EquityAs discussed in Notes 13, the Company has issued and outstanding Series B Convertible Preferred Shares that contain redemption rights, cumulative fixed rate interest, voting rights and conversion rights.Auditing management’s evaluation of the preferred shares involves significant judgements and estimates in determining the proper classification of the preferred shares that include both debt and equity qualities.To evaluate the appropriateness and accuracy of the classification of the preferred shares, we evaluated management’s assessment of the debt and equity like characteristics.16, 2022
, 2023(27)December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 9,737 $ 29,683 Accounts receivable, net of allowances of $4,603 and $41,401 at December 31, 2022 and 2021, respectively 4,157 1,666 Deferred rents receivable 704 1,678 Note receivable, current portion 2,637 127 Inventory 19,477 9,768 Investments, current 123 251 Due from related parties 29 — Other current assets 7,282 1,440 Total current assets 44,146 44,613 Property and equipment, net 71,641 62,150 Intangible assets, net 14,201 162 Goodwill 8,079 2,068 Note receivable, net of current 7,467 8,987 Operating lease right-of-use assets 4,931 5,081 Finance right-of-use assets 713 46 Other assets 1,024 98 Total assets $ 152,202 $ 123,205 Liabilities, mezzanine equity and stockholders’ equity Current liabilities: Mortgages and notes payable, current portion $ 3,774 $ 1,410 Accounts payable 6,626 5,099 Accrued expenses and other 3,091 3,149 Income taxes payable 11,489 16,467 Operating lease liabilities, current portion 1,273 1,071 Finance lease liabilities, current portion 237 27 Total current liabilities 26,490 27,223 Mortgages and notes payable, net of current 25,943 17,262 Operating lease liabilities, net of current 4,173 4,574 Finance lease liabilities, net of current 461 22 Other liabilities 100 100 Total liabilities 57,167 49,181 December 31, 2022 2021 Mezzanine equity: Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at December 31, 2022 and 2021 14,725 14,725 Series C convertible preferred stock, $0.001 par value; 12,432,432 shares authorized; 6,216,216 shares issued and outstanding at December 31, 2022 and 2021 23,000 23,000 Total mezzanine equity 37,725 37,725 Stockholders’ equity: Undesignated preferred stock, $0.001 par value; 32,659,235 shares authorized; zero shares issued and outstanding at December 31, 2022 and 2021 — — Common stock, $0.001 par value; 700,000,000 shares authorized; 341,474,728 and 334,030,348 shares issued and outstanding at December 31, 2022 and 2021, respectively 341 334 Common stock subscribed but not issued; 70,000 and zero shares at December 31, 2022 and 2021, respectively 39 — Additional paid-in capital 142,365 134,920 Accumulated deficit (83,924) (97,392) Noncontrolling interests (1,511) (1,563) Total stockholders’ equity 57,310 36,299 Total liabilities, mezzanine equity, and stockholders’ equity $ 152,202 $ 123,205 December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 29,683,014 $ 2,999,053 Accounts receivable, net 1,666,248 6,675,512 Deferred rents receivable 1,677,715 1,940,181 Note receivable, current portion 126,713 658,122 Inventory 9,767,856 6,830,571 Investments 250,600 1,357,193 Other current assets 1,440,831 582,589 Total current assets 44,612,977 21,043,221 Property and equipment, net 62,150,146 45,636,529 Intangibles, net 2,230,303 2,228,560 Investments - 1,165,788 Note receivable, less current portion 8,986,557 965,008 Right-of-use assets under operating leases 5,081,230 5,247,152 Right-of-use assets under finance leases 45,737 78,420 Other assets 97,951 80,493 Total assets $ 123,204,901 $ 76,445,171 Liabilities, mezzanine equity, and stockholders’ equity Current liabilities: Accounts payable $ 5,098,533 $ 5,044,918 Accrued expenses 1,348,673 2,725,544 Income taxes payable 16,467,264 895,725 Sales and excise taxes payable 1,797,755 1,053,693 Debentures payable - 1,032,448 Notes payable, current portion 9,891 8,859,175 Mortgages payable, current portion 1,400,331 1,387,014 Operating lease liabilities, current portion 1,071,079 1,008,227 Finance lease liabilities, current portion 27,123 38,412 Due to related parties - 1,157,815 Other current liabilities 1,920 23,640 Total current liabilities 27,222,569 23,226,611 Notes payable, less current portion 448,341 10,682,234 Mortgages payable, less current portion 16,813,466 14,744,136 Operating lease liabilities, less current portion 4,573,857 4,822,064 Finance lease liabilities, less current portion 22,455 44,490 Other liabilities 100,200 100,200 Total liabilities 49,180,888 53,619,735 Mezzanine equity: Series B convertible preferred stock, $ par value; shares authorized, issued and outstanding at December 31, 2021 and 2020 14,725,000 14,725,000 Series C convertible preferred stock, $ par value; and shares authorized, issued and outstanding at December 31, 2021 and 2020, respectively 23,000,000 - Total mezzanine equity 37,725,000 14,725,000 Stockholders’ equity: Undesignated preferred stock, $ par value; and shares authorized at December 31, 2021 and 2020, respectively; shares issued and outstanding at December 31, 2021 and 2020 - - Common stock, $ par value; and shares authorized at December 31, 2021 and 2020, respectively; and shares issued and outstanding at December 31, 2021 and 2020, respectively 334,030 314,419 Common stock subscribed but not issued; and shares at December 31, 2021 and 2020, respectively - 5,365 Additional paid-in capital 134,920,382 112,974,329 Accumulated deficit (97,392,017 ) (104,616,538 ) Noncontrolling interests (1,563,382 ) (577,139 ) Total stockholders’ equity 36,299,013 8,100,436 Total liabilities, mezzanine equity, and stockholders’ equity $ 123,204,901 $ 76,445,171 Year Ended December 31, 2022 2021 Revenue $ 134,010 $ 121,464 Cost of revenue 70,053 55,201 Gross profit 63,957 66,263 Operating expenses: Personnel 14,404 8,352 Marketing and promotion 3,736 1,625 General and administrative 20,735 27,561 Acquisition-related and other 961 — Bad debt 3,752 1,862 Total operating expenses 43,588 39,400 Income from operations 20,369 26,863 Interest and other (expense) income: Interest expense (1,693) (2,356) Interest income 959 109 Other expense, net (127) (800) Total interest and other expense, net (861) (3,047) Income before income taxes 19,508 23,816 Provision for income taxes 5,894 16,192 Net income 13,614 7,624 Less: Net income attributable to noncontrolling interests 146 399 Net income attributable to common stockholders $ 13,468 $ 7,225 Net income per share attributable to common stockholders: Basic $ 0.04 $ 0.02 Diluted $ 0.04 $ 0.02 Weighted average common shares outstanding: Basic 337,697 326,467 Diluted 380,289 372,397 (28)Consolidated Statements of Operations Year Ended December 31, 2021 2020 Revenues $ 121,464,158 $ 50,895,151 Cost of revenues 55,201,078 19,570,257 Gross profit 66,263,080 31,324,894 Operating expenses: Personnel 8,351,397 5,501,756 Marketing and promotion 1,625,111 410,626 General and administrative 27,560,665 9,899,367 Bad debts 1,862,417 982,488 Total operating expenses 39,399,590 16,794,237 Operating income 26,863,490 14,530,657 Non-operating income (expenses): Interest expense (2,355,904 ) (9,810,475 ) Interest income 108,219 156,345 Loss on obligations settled with equity (2,546 ) (44,678 ) Equity in earnings of investments - 98,813 Change in fair value of investments (1,106,593 ) (349,638 ) Other 309,212 (84,708 ) Total non-operating expenses, net (3,047,612 ) (10,034,341 ) Income before income taxes 23,815,878 4,496,316 Provision for income taxes 16,192,327 2,067,049 Net income $ 7,623,551 $ 2,429,267 Net income attributable to noncontrolling interests $ 399,030 $ 285,278 Net income attributable to MariMed Inc. $ 7,224,521 $ 2,143,989 Net income per share Basic $ 0.02 $ 0.01 Diluted $ 0.02 $ 0.01 Weighted average common shares outstanding Basic 326,466,794 266,980,197 Diluted 372,396,731 324,160,525 See accompanying notes to consolidated financial statements.(29)MariMed Inc. Common Stock Common Stock
Subscribed
But Not Issued Additional
Paid-In Accumulated Non-
Controlling Total
Stockholders’ Shares Par Value Shares Amount Capital Deficit Interests Equity Balances at December 31, 2019 228,408,024 $ 228,408 3,236,857 $ 1,168,074 $ 112,245,730 $ (106,760,527 ) $ (553,465 ) $ 6,328,220 Issuance of subscribed shares 3,236,857 3,237 (3,236,857 ) (1,168,074 ) 1,164,837 - - - Stock grants 97,797 98 11,413 5,365 15,996 - - 21,459 Stock forfeitures (1,297,447 ) (1,297 ) - - 1,297 - - - Exercise of stock options 550,000 550 - - 75,450 - - 76,000 Exercise of warrants Exercise of warrants, shares Amortization of option grants - - - - 969,136 - - 969,136 Issuance of stand-alone warrants - - - - 2,179 - - 2,179 Issuance of warrants attached to debt - - - - 708,043 - - 708,043 Issuance of warrants with stock Discount on debentures payable - - - - 28,021 - - 28,021 Beneficial conversion feature on debentures payable - - - - 379,183 - - 379,183 Conversion of debentures payable 77,766,559 77,766 - - 9,997,522 - - 10,075,288 Conversion of common stock to preferred stock (4,908,333 ) (4,908 ) - - (14,720,092 ) - - (14,725,000 ) Conversion of promissory notes 2,525,596 2,525 - - 457,525 - - 460,050 Extinguishment of promissory notes 3,639,759 3,640 - - 910,302 - - 913,942 Common stock issued to settle obligations 4,400,000 4,400 - - 739,200 - - 743,600 Purchase of property and equipment with stock Purchase of property and equipment with stock, shares Fees paid with stock Fees paid with stock, shares Return of stock Return of stock, shares Equity issuance costs Acquisition of 30% interest in subsidiary Acquisition of 30% interest in subsidiary, shares Distributions - - - - - - (308,952 ) (308,952 ) Net income - - - - - 2,143,989 285,278 2,429,267 Balances at December 31, 2020 314,418,812 $ 314,419 11,413 $ 5,365 $ 112,974,329 $ (104,616,538 ) $ (577,139 ) $ 8,100,436 Balances 314,418,812 $ 314,419 11,413 $ 5,365 $ 112,974,329 $ (104,616,538 ) $ (577,139 ) $ 8,100,436 Issuance of subscribed shares 11,413 11 (11,413 ) (5,365 ) 5,354 - - - Stock grants 256,591 257 - - 235,096 - - 235,353 Exercise of stock options 277,373 277 - - 38,323 - - 38,600 Exercise of warrants 980,062 980 - - 91,795 - - 92,775 Amortization of option grants - - - - 12,494,209 - - 12,494,209 Issuance of stand-alone warrants - - - - 832,105 - - 832,105 Issuance of warrants with stock - - - - 654,681 - - 654,681 Conversion of debentures payable 4,610,645 4,611 - - 1,351,841 - - 1,356,452 Conversion of promissory notes 11,399,268 11,399 - - 3,810,046 - - 3,821,445 Common stock issued to settle obligations 71,691 72 - - 53,474 - - 53,546 Purchase of property and equipment with stock 750,000 750 - - 704,250 - - 705,000 Fees paid with stock 1,234,308 1,234 - - 1,106,459 - - 1,107,693 Return of stock (79,815 ) (80 ) - - (9,857 ) - - (9,937 ) Equity issuance costs - - - (386,983 ) - - (386,983 ) Acquisition of 30% interest in subsidiary 100,000 100 - - 965,260 - (975,360 ) (10,000 ) Distributions - - - - - - (409,913 ) (409,913 ) Net income - - - - - 7,224,521 399,030 7,623,551 Balances at December 31, 2021 334,030,348 $ 334,030 - $ - $ 134,920,382 $ (97,392,017 ) $ (1,563,382 ) $ 36,299,013 Balances 334,030,348 $ 334,030 - $ 134,920,382 (97,392,017 ) (1,563,382 ) $ 36,299,013 The above statement does not show columns for shares and par value of undesignatedpreferred stock as the balances were zero and there was no activity the reported periods.Common stock Common stock subscribed but not issued Additional paid-in capital Accumulated deficit Non-controlling interests Total stockholders' equity Shares Par Value Shares Amount Balances at January 1, 2021 314,418,812 $ 314 11,413 $ 5 $ 112,975 $ (104,617) $ (577) $ 8,100 Issuance of subscribed shares 11,413 (11,413) (5) 5 — Release of shares under stock grants 256,591 235 235 Exercise of stock options 277,373 38 38 Exercise of warrants 980,062 1 92 93 Amortization of option grants 12,494 12,494 Issuance of stand-alone warrants 832 832 Issuance of warrants with stock 655 655 Conversion of debentures payable to equity 4,610,645 5 1,352 1,357 Conversion of promissory notes to equity 11,399,268 11 3,810 3,821 Common stock issued to settle obligations 71,691 54 54 Common stock issued to purchase property and equipment 750,000 1 704 705 Fees paid with stock 1,234,308 2 1,106 1,108 Common stock returned to the Company (79,815) (10) (10) Equity issuance costs (387) (387) Acquisition of interest in subsidiary 100,000 965 (975) (10) Distributions to noncontrolling interests (410) (410) Net income 7,225 399 7,624 Balances at December 31, 2021 334,030,348 $ 334 — $ — $ 134,920 $ (97,392) $ (1,563) $ 36,299 Release of shares under stock grants 402,203 — Exercise of stock options 55,000 10 10 Cashless exercise of stock options 200,000 — Cashless exercise of warrants 317,298 — Forfeiture of restricted shares (32,609) — Conversion of promissory notes to common stock 1,142,858 1 399 400 Common stock issued to settle obligations 375,000 — 275 275 Common stock issued under licensing agreement 218,345 121 121 Common stock issued to purchase property and equipment 422,535 1 299 300 Common stock issued as purchase consideration - Green Growth Group Inc. 2,343,750 3 1,497 1,500 Common stock issued as purchase consideration - Greenhouse Naturals LLC 2,000,000 2 710 712 Purchase of minority interests in certain of the Company's subsidiaries (2,165) 165 (2,000) Distributions to noncontrolling interests (259) (259) Stock-based compensation 70,000 39 6,299 6,338 Net income 13,468 146 13,614 Balances at December 31, 2022 341,474,728 $ 341 70,000 $ 39 $ 142,365 $ (83,924) $ (1,511) $ 57,310 (30) Year Ended December 31, 2021 2020 Cash flows from operating activities: Net income attributable to MariMed Inc. $ 7,224,521 $ 2,143,989 Net income attributable to noncontrolling interests 399,030 285,278 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,097,702 1,791,610 Asset writeoff - 84,708 Amortization of intangibles 690,327 390,481 Amortization of stock grants 235,353 21,459 Amortization of option grants 12,494,209 969,136 Amortization of stand-alone warrant issuances 832,105 2,179 Amortization of warrants attached to debt 539,272 1,090,754 Amortization of warrants issued with stock 654,681 - Amortization of beneficial conversion feature 176,522 3,243,446 Amortization of original issue discount 51,753 339,791 Bad debt expense 1,862,417 982,488 Fees paid with stock 1,107,693 - Loss on obligations settled with equity 2,546 44,678 Equity in earnings of investments - (98,813 ) Gain on investment (309,212 ) - Change in fair value of investments 1,106,593 349,638 Changes in operating assets and liabilities: Accounts receivable (4,697,063 ) (5,988,861 ) Deferred rents receivable 262,466 (143,356 ) Due from third parties - 9,937 Inventory (2,937,285 ) (5,611,142 ) Other current assets (868,179 ) (390,221 ) Other assets (17,458 ) 95,412 Accounts payable 104,615 1,071,660 Accrued expenses (1,433,723 ) 472,237 Income taxes payable 15,571,539 895,725 Sales and excise taxes payable 744,062 1,051,193 Operating lease payments (19,433 ) 53,706 Finance lease interest payments 1,504 4,034 Other current liabilities (21,720 ) 219,157 Net cash provided by operating activities 35,854,837 3,380,303 Cash flows from investing activities: Purchase of property and equipment (17,873,636 ) (4,687,795 ) Purchase of cannabis licenses (692,070 ) (255,000 ) Return on investment 1,475,000 - Acquisition of 30% interest in subsidiary (10,000 ) - Proceeds from notes receivable 476,868 479,630 Net cash used in investing activities (16,623,838 ) (4,463,165 ) Cash flows from financing activities: Issuance of preferred stock 23,000,000 - Equity issuance costs (386,983 ) - Issuance of promissory notes 35,096 6,549,763 Payments on promissory notes (15,806,617 ) (12,371,149 ) Proceeds from issuance of debentures - 935,000 Proceeds from mortgages 2,700,000 13,897,282 Payments on mortgages (617,353 ) (5,102,862 ) Exercise of stock options 38,600 76,000 Exercise of warrants 92,775 - Due to related parties (1,157,815 ) (296,898 ) Finance lease principal payments (34,828 ) (34,957 ) Distributions (409,913 ) (308,952 ) Net cash provided by financing activities 7,452,962 3,343,227 Net change to cash and cash equivalents 26,683,961 2,260,365 Cash and cash equivalents at beginning of period 2,999,053 738,688 Cash and cash equivalents at end of period $ 29,683,014 $ 2,999,053 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,975,193 $ 3,267,199 Cash paid for income taxes $ 620,788 $ 1,171,324 Non-cash activities: Trade receivables converted to notes receivable $ $ - Conversion of promissory notes $ 3,821,445 $ 460,050 Conversion of debentures payable $ 1,356,452 $ 10,075,288 Acquisition of 30% interest in subsidiary $ 975,360 $ - Purchase of property with stock $ 705,000 $ - Operating lease right-of-use assets and liabilities $ 466,105 $ - Common stock issued to settle obligations $ 51,000 $ 698,922 Return of stock $ 9,937 $ - Issuance of common stock associated with subscriptions $ 5,365 $ 1,168,074 Cashless exercise of warrants $ 180 $ - Cashless exercise of stock options $ 106 $ - Exchange of common stock to preferred stock $ - $ 14,725,000 Conversion of accrued interest to promissory notes $ - $ 3,908,654 Common stock issued to settle debt $ - $ 913,942 Discount on promissory notes $ - $ 708,043 Beneficial conversion feature on debentures payable $ - $ 379,183 Discount on debentures $ - $ 28,021 Year Ended December 31, 2022 2021 Cash flows from operating activities: Net income attributable to common stockholders $ 13,468 $ 7,225 Net income attributable to noncontrolling interests 146 399 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 3,432 2,098 Amortization of intangible assets 1,282 690 Stock-based compensation 6,338 13,440 Amortization of standalone warrant issuances — 776 Amortization of warrants attached to debt — 539 Amortization of beneficial conversion feature — 177 Amortization of original issue discount — 52 Bad debt expense 3,752 1,862 Obligations settled with common stock 696 1,108 Loss on obligations settled with equity — 3 Gain on sale of investment — (309) Loss on changes in fair value of investments 1,082 1,107 Other investment income (954) — Changes in operating assets and liabilities: Accounts receivable (6,902) (4,697) Deferred rents receivable 132 262 Inventory (5,383) (2,937) Other current assets (5,219) (868) Other assets (126) (17) Accounts payable 1,027 105 Accrued expenses and other (482) (732) Income taxes payable (4,978) 15,572 Net cash provided by operating activities 7,311 35,855 Cash flows from investing activities: Purchases of property and equipment (12,140) (17,874) Business acquisitions, net of cash acquired (12,847) — Advances toward future business acquisitions (800) — Acquisition of interest in subsidiary — (10) Purchases of cannabis licenses (601) (692) Proceeds from sale of investment — 1,475 Proceeds from notes receivable 173 477 Due from related parties (29) — Net cash used in investing activities (26,244) (16,624) Cash flows from financing activities: Proceeds from issuance of preferred stock — 23,000 Equity issuance costs — (387) Proceeds from issuance of promissory notes — 35 Principal payments of mortgages and promissory notes (1,537) (16,424) Proceeds from mortgages 3,000 2,700 Proceeds from exercise of stock options 10 39 Proceeds from exercise of warrants — 93 Repayment of loans from related parties — (1,158) Principal payments of finance leases (227) (35) Redemption of minority interests (2,000) — Distributions (259) (410) Net cash (used in) provided by financing activities (1,013) 7,453 Net (decrease) increase to cash and cash equivalents (19,946) 26,684 Cash and cash equivalents at beginning of year 29,683 2,999 Cash and cash equivalents at end of year $ 9,737 $ 29,683 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,744 $ 1,975 Cash paid for income taxes $ 14,567 $ 621 Non-cash activities: Trade receivables converted to notes receivable $ 750 $ 7,844 Purchases of property and equipment with common stock $ 300 $ 705 Conversion of promissory notes $ 400 $ 3,821 Promissory note issued as purchase consideration $ 4,348 $ — Entry into new operating leases $ 661 $ 466 Entry into new finance leases $ 794 $ — Conversion of debentures payable $ — $ 1,356 Common stock issued as purchase consideration $ 2,212 $ 975 Common stock issued to settle obligations $ 275 $ 51 Common stock issued under licensing agreement $ 121 $ — Issuance of common stock associated with subscriptions $ — $ 5 Return of common stock to the Company $ — $ 10 (31)NOTE 1 – ORGANIZATION AND DESCRIPTIONThe CompanyMariMed develops, operates, manages and optimizes over 300,000 square feet of state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of medicinalmedical and recreationaladult-use cannabis. The CompanyMariMed also licenses its proprietary brands of cannabis and hemp-infused products along with other top brands in several domestic markets and overseas.Upon its entry into the cannabis industry in 2014, the Company was an advisory firm that procured state-issued cannabis licenses on behalf of its clients, developed cannabis facilities which it leased to these newly-licensed companies, and provided industry-leading expertise and oversight in all aspects of their cannabis operations. The Company also provided its clients with ongoing regulatory, accounting, real estate, human resources, and administrative services.Over the last few years, the Company made the strategic decision to transition from a consulting business to a direct owner and operator of cannabis licenses in high-growth states. Core to this transition is the acquisition and consolidation of the Company’s clients (the “Consolidation Plan”). Among several benefits, the Consolidation Plan would present a simpler, more transparent financial picture of the full breadth of the Company’s efforts, with a clearer representation of the revenues, earnings, and other financial metrics the Company has generated for its clients. The Company has played a key role in the successes of these entities, from the securing of their cannabis licenses, to the development of facilities that are models of excellence, to funding their operations, and to providing operational and corporate guidance. Accordingly, the Company believes it is well suited to own these businesses and manage the continuing growth of their operations.To date, the acquisition and consolidation of the Company’s client businesses in Massachusetts and Illinois have been completed. The acquisition of a client business in Maryland has been contracted, and the Company is awaiting approval by the Maryland Cannabis Control Commission, which is pending. Upon approval, this entity will be consolidated. The acquisitions of the remaining businesses located in Nevada and Delaware are at various stages of completion and subject to each state’s laws governing the ownership transfer of cannabis licenses and other closing conditions. Delaware will require a modification of current cannabis ownership laws to permit for-profit ownership, which is expected to occur when the state legalizes recreational adult-use cannabis. Until the law changes and the acquisition is approved, the Company continues to generate revenue from rental income, management fees, and licensing royalties.The transition to a fully integrated muti-state cannabis operator (“MSO”) is part of a strategic growth plan (the “Strategic Growth Plan”) the Company is implementing to drive its revenues and profitability. The Strategic Growth Plan has four components: (i) complete the Consolidation Plan, (ii) increase revenues in existing states, by spending capital to increase the Company’s cultivation and production capacity, and develop additional assets within those states, (iii) expand the Company’s footprint in additional legal cannabis states through new applications and acquisitions of existing cannabis businesses, and (iv) optimize the Company’s brand portfolio and licensing revenue by expanding into additional states with legal cannabis programs.The Company has created its own brands of cannabis flower, concentrates, and precision-dosed products utilizing proprietary strains and formulations. These products are developed by the Company in cooperation with state-licensed operators who meet the Company’s strict quality standards, including all natural—not artificial or synthetic—ingredients. The Company licenses its brands and product formulations only to certified manufacturing professionals who follow state cannabis laws and adhere to the Company’s precise scientific formulations and product recipes.The Company markets its high-quality cannabis flowers and concentrates under the award-winning1 Nature’s Heritage brand; cannabis-infused chewable tables and powder drink mixes under the brand names Kalm Fusion and K Fusion; all natural fruit chews under the award-winning1 Betty’s Eddies brand; and brownies, cookies, and other social sweets under the Bubby’s Baked brand. The Company’s cannabis-infused brands have been top-selling products in Maryland and Massachusetts.2 The Company intends to introduce additional product lines under these brands in the foreseeable future.The Company also has strategic alliances with prominent brands. The Company has partnered with renowned ice cream maker Emack & Bolio’s® to create a line-up of cannabis-infused vegan and dairy ice cream. Additionally, the Company has secured distribution rights for the Binske® line of cannabis products crafted from premium artisan ingredients, the Healer line of medical full-spectrum cannabis tinctures, and the clinically-tested medicinal cannabis strains developed in Israel by global medical cannabis research pioneer Tikun Olam.The Company’s stock is quoted on the OTCQX market under the ticker symbol MRMD.The Company was incorporated in Delaware in January 2011 under the name Worlds Online Inc. Initially, the Company developed and managed online virtual worlds. By early 2014, this line of business effectively ceased operating, and the Company pivoted into the legal cannabis industry.1 Awards won by the Company’s Betty’s Eddies brand include LeafLink 2021 Best Selling Medical Product, Reddit Sparkie 2021 Best Edible, Respect My Region 2021 Hottest Edible, LeafLink 2020 Industry Innovator, and Explore Maryland Cannabis 2020 Edible of the Year. Awards won by the Company’s Nature’s Heritage brand include the Cultivators Cup 2021 Silver Medal and the High Times Cannabis Cup 2021 Bronze Medal.2 Source: LeafLink Insights 2020.
markets.(32)NOTE 2 — prior periods’ datathe previously issued financial statements to conform to the current period presentation. These reclassifications had no effect on reported income (losses) or cash flows.the followingits majority-owned subsidiaries at December 31, 2021:subsidiaries. All intercompany transactions and balances have been eliminated.SCHEDULE OF MAJORITY OWNED SUBSIDIARIESSubsidiary:Percentage
OwnedSubsidiary Percentage
OwnedMariMed Advisors Inc. 100.0%100.0 % Mia Development LLC 89.5%94.3 % Mari Holdings IL LLC 100.0%100.0 % Mari Holdings MD LLC 97.4%99.7 % Mari Holdings NJ LLC 100.0 100.0%%Mari Holdings NV LLC 100.0%100.0 % Mari Holdings Metropolis LLC 70.0%70.0 % Mari Holdings Mt. Vernon LLC 100.0%100.0 % Mari Mfg LLC 100.0 100.0%%Hartwell Realty Holdings LLC 100.0%100.0 % iRollie LLC 100.0%100.0 % ARL Healthcare Inc. 100.0%100.0 % KPG of Anna LLC 100.0%100.0 % KPG of Harrisburg LLC 100.0%100.0 % MariMed OH LLC 100.0 100.0%%MariMed Hemp Inc. 100.0%100.0 % MediTaurus LLC 100.0%100.0 % MMMO LLC 100.0 % Green Growth Group Inc. 100.0 % Intercompany accountstransactions have been eliminated.the value of net assets owned by noncontrolling interests are presented as a component of equity within the balance sheets.withinof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and disclosures thereof.the reporting amounts of revenue and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these consolidated financial statements include accounting for business combinations, inventory valuations, assumptions used to determine the fair value of stock-based compensation, and intangible assets and goodwill. The Company regularly assesses these estimates and records change in estimates in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from thesethose estimates or assumptions.and 2020,the Company had $5.1 million of cash of approximately $5,101,000 and $101,000, respectively, was held in escrow. The 2021 balanceescrow related to planned business acquisitions, which was primarily comprised of a $5,000,000$5.0 million escrow deposit in connection with the acquisition of Kind Therapeutics USA Inc. as further discussed inAcquisition (see Note 3 – Acquisitions3).approximately $41.4 $4.6 million and $40.0 $41.4 million at December 31, 2022 and 2021, respectively. The amount recorded at December 31, 2021 was comprised of $29.0 million to fully reserve a related party trade receivable from GenCanna Global Inc. ("GenCanna") (see Note 21), $11.3 million reserved against a related party trade receivable from Kind (the "Kind Reserve") and 2020, respectively. For further discussion on$1.1 million reserved against the Company's other trade accounts receivable. The Company wrote off the trade receivable reserves, please refer to Note 18 – Bad Debts from GenCanna against the reserve in 2022, and the Bankruptcy Claim sectionKind Reserve was eliminated as part of the purchase accounting related to the Kind Acquisition (see Note 21 – Commitments and Contingencies3).(33)Inventory (FIFO) basis. The Company allocates a certain percentage of overhead cost to its manufactured inventory; such allocation is based on square footage and other industry-standard criteria. The Company reviews physical inventory for obsolescence and/or excess and will record a reserve if necessary. As of the date of this report, no reserve was deemed necessary.Investmentsholdingholdings of public and private companies. These investments are recorded at fair value on the Company’s consolidated balance sheet, with changes to fair value included in income. Investments are evaluated for permanent impairment and are written down if such impairments are deemed to have occurred.This revenue standardASC 606 requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The recognition of revenue is determined by performing the following consecutive steps:●Identify the contract(s) with a customer;●Identify the performance obligations in the contract(s);●Determine the transaction price;●Allocate the transaction price to the performance obligations in the contract(s); and●Recognize revenue as the performance obligation is satisfied.●Product Sales – direct sales of cannabis and cannabis-infused products by the Company’s retail dispensaries and wholesale operations in Massachusetts and Illinois, and sales of hemp and hemp-infused products. This revenue is recognized when products are delivered or at retail points-of-sale.●Real Estate – rental income and additional rental fees generated from leasing of the Company’s state-of-the-art, regulatory-compliant cannabis facilities to its cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms, while additional rental fees are based on a percentage of tenant revenues that exceed specified amounts.●Management – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production, and dispensary operations. These fees are based on a percentage of such clients’ revenue and are recognized after services have been performed.●Supply Procurement – the Company maintains volume discounts with top national vendors of cultivation and production resources, supplies, and equipment, which the Company acquires and resells to its clients or third parties within the cannabis industry. The Company recognizes this revenue after the delivery and acceptance of goods by the purchaser.●Licensing – royalties from the licensed distribution of the Company’s branded products including Kalm Fusion and Betty’s Eddies, and from sublicensing of contracted brands including Healer and Tikun Olam, to regulated dispensaries throughout the United States and Puerto Rico. The recognition of this revenue occurs when the products are delivered.(34); or the asset useful life; furniture and fixtures, seven to ten years; machinery and equipment, seven to ten years. Land is not depreciated.20212022 and 2020,2021, based on the results of management’s impairment analyses, there were 0no impairment losses.Leasesconsolidated financial statements reflectCompany's intangible assets are comprised of trade names and trademarks, license and customer and non-compete agreements. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable based upon the Company’s adoptionestimated undiscounted cash flows. Recoverability of ASC 842, Leases, as amendedintangible assets with estimated lives and other long-lived assets is measured by subsequent accounting standards updates. Under ASC 842, arrangementsa comparison of the carrying amount of an asset or asset group to future net undiscounted cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset. The Company amortizes its intangible assets over their respective useful lives. For the years ended December 31, 2022 and 2021, there was no impairment of goodwill.Company’sCompany's right to use an underlying asset for the lease term, and lease liabilities that represent the Company’sCompany's obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately.Fair Value of Financial InstrumentsCompany followsCompany's stock-based compensation cost is measured at the provisions of ASC 820, Fair Value Measurement, to measure the fair value of its financial instruments, and ASC 825, Financial Instruments, for disclosuresgrant date based on the fair value of its financial instruments. To increase consistencythe award and comparability inis recognized as expense over the requisite service period, which generally corresponds with the vesting period. The Company uses the Black-Scholes valuation model for estimating the fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizesof stock options on the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levelsdate of fair value hierarchy defined by ASC 820 are:Level 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.Level 2Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.Level 3Pricing inputs that are generally observable inputs and not corroborated by market data.(35)The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values due to the short maturity of these instruments.are determined usingis affected by the Black-Scholes pricing model and employing several inputs suchCompany's stock price on the issuance date as well as valuation assumptions, including the volatility of the Company's common stock price, expected lifeterm of instrument, the exercise price, the expectedoption, risk-free interest rate theand expected dividend yield, the value of the Company’s common stock on issuance date, and the expected volatility of such common stock. The following table summarizes the range of inputs used by the Company during the prior two fiscal years:dividends.SCHEDULE OF ASSUMPTIONS USED 2021 2020 Life of instrument to years to years Volatility factors to to Risk-free interest rates % to % % to % Dividend yield % % pursuant to Staff Accounting Bulletin Topic 14, Share-Based Payment, which allows for using the mid-point between the vesting date and expiration date. The volatility factors are based on the historical two-year movement of the Company’s common stock prior to an instrument’s issuance date. The risk-free interest rate is based on U.S. Treasury rates with maturity periods similar to the expected instruments life on the issuance date.and warrant issuances and restricted stock units on a straight-line basis over the requisite service period of each instrument.The Company accounts for stock-based compensation using the fair value method as set forth in ASC 718, Compensation—Stock Compensation, which requires a public entity to measure the cost of employee services received in exchange for an equity award based on the fair value of the award on the grant date, with limited exceptions. Such value will be incurred as compensation expense over the period an employee is required to provide service in exchange for the award, usually the vesting period. No compensation cost is recognized for equity awards for which employees do not render the requisite service.(36)did not takerecognizes in the financial statements the benefit of a tax position which is "more likely than not" to be sustained under examination based solely on the technical merits of the position, assuming a review by tax authorities having all relevant information. Tax positions that meet the recognition threshold are measured using a cumulative probability approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. The Company's policy is to recognize interest and penalties related to the unrecognized tax benefits, if any, uncertain tax positions and had 0 adjustments to unrecognizedas a component of income tax liabilities or benefits for the years ended December 31, 2021 and 2020.expense.periodperiods covered in the financial statements.Earnings per common share is computed pursuant to ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus the weighted average number of potentially dilutive securities during the period.At December 31, 2021 and 2020, there were potentially dilutive securities convertible into shares of common stock comprised of (i) stock options – convertible into and shares, respectively, (ii) warrants – convertible into and shares, respectively, (iii) Series B preferred stock – convertible into shares in both periods, (iv) Series C preferred stock – convertible into and shares, respectively, (v) debentures payable – convertible into and shares, respectively, and (vi) promissory notes – convertible into and shares, respectively.For the years ended December 31, 2021 and 2020, the aforementioned potentially dilutive securities increased the number of weighted average common shares outstanding on a diluted basis by approximately million and million net shares of common stock, respectively. Such share amounts were reflected in the calculation of diluted net income per share for the years ended December 31, 2021 and 2020.follows ASC 450, Contingencies, which requires the Company to assessregularly assesses the likelihood that a loss will be incurred from the occurrence or non-occurrence of one or more future events. Such assessment inherently involves an exercise of judgment. In assessing possible loss contingencies from legal proceedings or unasserted claims, the Company evaluates the perceived merits of such proceedings or claims, and of the relief sought or expected to be sought.aany loss contingency will have material adverse effect on the Company’s financial position, results of operations or cash flows.(37)Noncontrolling InterestsNoncontrolling interests represent third-party minority ownership of the Company’s consolidated subsidiaries. Net income attributable to noncontrolling interests is shown in the consolidated statements of operations; and the value of net assets owned by noncontrolling interests are presented as a component of equity within the balance sheets.(38)NOTE 3 – ACQUISITIONSThe Harvest Foundation LLCIn 2019, the Company entered into a purchase agreement to acquire 100%Table of the ownership interests of The Harvest Foundation LLC (“Harvest”), the Company’s cannabis-licensed client in the state of Nevada. The acquisition is conditioned upon state regulatory approval of the transaction and other closing conditions. Upon approval, and the fulfillment of other closing conditions, the ownership of Harvest will be transferred to the Company, and the operations of Harvest will begin to be consolidated into the Company’s financial statements. ContentsThere is no assurance that the closing conditions to the Company’s acquisition of Harvest, including regulatory approval, will be achieved or that the acquisition will be consummated.The purchase price is comprised of the issuance of (i) shares of the Company’s common stock, in the aggregate, to two owners of Harvest, which as a good faith deposit, were issued upon execution of the purchase agreement, (ii) $1.2 million of the Company’s common stock at closing, based on the closing price of the common stock on the day prior to legislative approval of the transaction, and (iii) warrants to purchase 400,000 shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock on the day prior to legislative approval of the transaction. The issued shares were recorded at par value. Such shares are restricted and will be returned to the Company in the event the transaction does not close.Kind Therapeutics USA Inc.In 2016, the Company and the members of Kind Therapeutics USA Inc., the Company’s client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (“Kind”), agreed to a partnership/joint venture whereby Kind would be owned 70.0% by the Company and 30.0% by the members of Kind, subject to approval by the Maryland Medical Cannabis Commission (“MMCC”). In reliance thereon, the Company purchased, designed, and developed a 180,000 square foot cultivation and production facility in Hagerstown, MD for occupancy and use by Kind, which became operational in late 2017, and the Company further agreed to manage and finance all aspects of Kind’s cannabis business, as Kind had no background or experience in the industry.In 2018, prior to finalizing the documents confirming the partnership/joint venture the Company and the members of Kind negotiated and entered into a memorandum of understanding (“MOU”) for the Company to acquire 100% of the membership interests of Kind. Also at that time, the parties entered into a management services agreement for the Company to provide Kind with comprehensive management services in connection with the business and operations of Kind, and a 20-year lease agreement for Kind’s utilization of the Company’s 180,000 square foot cultivation and production facility in Hagerstown, MD. Additionally, in 2019, the Company purchased a 9,000 square foot building in Anne Arundel County, MD, which is currently under construction, for the development of a dispensary which would be leased to Kind.In 2019, the members of Kind sought to renegotiate the terms of the MOU and subsequently sought to renege on both the original partnership/joint venture and the MOU. The Company engaged with the member of Kind in good faith in an attempt to reach updated terms acceptable to both parties, however the members of Kind failed to reciprocate in good faith, resulting in an impasse. Incrementally, both parties through counsel further sought to resolve the impasse, however such initiative resulted in both parties commencing legal proceedings.100%100% of the equity ownership of Kind. Kind was the Company's client in exchangeMaryland that holds licenses for $13,500,000 payable inthe cultivation, production, and dispensing of medical cannabis. Upon execution of the membership interest purchase agreement, the Company deposited $5.0 million into escrow as a contract down payment. In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the acquisition was completed on the Kind Acquisition Date (the “Kind Acquisition”). As consideration for Kind, the Company paid the Kind Sellers $13.1 million, which amount was reduced by $2.3 million of cash (subject to adjustment)acquired (together, the "Kind Cash Consideration"), and $6,500,000 payable by the issuance ofissued four-year 6.0% promissory notes in the aggregate principal amount of $6.5 million to the members of Kind. The notes shall beKind Sellers, secured by a first priority lien on the Company’s property in Hagerstown, MD. Upon executionMD (the "Kind Notes" and, together with the "Kind Cash Consideration, the "Kind Consideration"). The Kind Acquisition has allowed the Company to expand its operations into the Maryland cannabis industry and marketplace.Fair value of consideration transferred: Cash consideration: Cash paid at closing $ 10,128 Release of escrow 2,444 Severance paid from escrow 556 Less cash acquired (2,310) Net cash consideration 10,818 Note payable 5,634 Write-off of accounts receivable 658 Write-off of deferred accounts receivable 842 Total fair value of consideration transferred $ 17,952 Fair value of assets acquired and (liabilities assumed): Current assets, net of cash acquired $ 5,047 Property and equipment 622 Intangible assets: Trade name and trademarks 2,041 Licenses and customer base 4,700 Non-compete agreements 42 Goodwill 6,011 Current liabilities (511) Fair value of net assets acquired $ 17,952 interest purchase agreement, the Company deposited, in escrow, the sum of $5,000,000 as a contract down-payment.Simultaneously, the Company entered into a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ownership interest in (i) Mari Holdings MD LLC (“Mari-MD”), the Company’s majority ownedmajority-owned subsidiary that owns production and retail cannabis facilities in Hagerstown, MD and Annapolis, MD, and (ii) Mia Development LLC (“Mia”), the Company’s majority ownedmajority-owned subsidiary that owns production and retail cannabis facilities in Wilmington, DE. Upon the dismissal in September 2022 of the derivative claims in the DiPietro lawsuit (see Note 21), the Company paid the aggregate purchase consideration of $2.0 million, and the transaction was completed, increasing the Company’s ownership of Mari-MD and Mia to 99.7% and 94.3%, respectively.Year ended December 31, 2022 2021 (unaudited) Revenue 136,078 131,658 Net income 15,823 16,627 interests in Mari-MDremaining $5.0 million of the cash purchase price (the "Greenhouse Naturals Note"), and Mia is $2,000,000has recorded the Greenhouse Naturals Note at present value of $4.3 million. The difference between the face value of the Greenhouse Naturals Note and the net present value recorded will be amortized to interest expense over the term of the note. Upon final inspection by the State of Massachusetts, the dispensary will be able to open, and the Company hopes that this will occur in the aggregate, payable in cash. Giving effect tofirst half of 2023. The Company has allocated the purchase price to a licenses/customer base intangible asset, which has an estimated useful life of these interests, the Company will own approximately 10 years.99.7% and 94.3%, respectively, of Mari-MD and Mia.The closings under the foregoing agreements are subject to the fulfilment of closing conditions including, but not limited to, approval by the MMCC, which is pending. There is no assurance that the approval of the MMCC will be obtained or that the further closing conditions will be met. Simultaneous with the closing of the transactions contemplated by the foregoing agreements, the aforementioned litigation between the parties will be dismissed. For further information, see Note 21 – Commitment and Contingencies.(“MediTaurus”)("MediTaurus), a company formed by Jokubas Ziburkas PhD, a neuroscientist and leading authority on cannabidiol (“CBD”) anddeveloper of CBD products sold under the endocannabinoid system,Florance brand name, in exchange for $2.8 million ofstock and cash and stock. The Company currently sells CBD products developed by MediTaurus under its Florance™ brand.$94,000,$94,000, and $10,000 $10,000 in cash. The carrying value of the noncontrolling interest of approximately $975,000 $975,000 was eliminated on the date such remaining ownership interest was acquired, and sinceas there was no change in control of MediTaurus from this transaction, the resulting gain on the bargain purchase was recognized in Additional Paid-In Capital onpaid-in capital in the September 30, 2021consolidated balance sheet. The shares and cash were issued and paid in November 2021.sheets. As part of this transaction, the initial purchase agreement was amended, whereby any andeliminating all future license fees and payments to the prior owners of MediTaurus. The Company has since discontinued sales of its MediTaurus were eliminated.products.Beverly Asset PurchaseNovember 2021,August 2022, the Company entered into an assetagreement to purchase 100% of the membership interests in Allgreens Dispensary, LLC (the "Allgreens Agreement"), a conditional adult-use cannabis dispensary license in Illinois for $2,250,000 of cash. Completion of the acquisition is dependent upon certain conditions, including resolution of any remaining legal challenges affecting nearly 200 social equity dispensary licenses, and regulatory approval of the acquisition. Once the acquisition is complete, which the Company expects to occur in 2023, the Company will have five adult-use dispensaries operating in Illinois.cannabis license, property lease, and other assets and rightsownership interests of and to assumeThe Harvest Foundation LLC (“Harvest”), the liabilities and operating obligations associated with, a cannabis dispensary that is currently operatingCompany’s cannabis-licensed client in Beverly, MA.the State of Nevada. The purchase price iswas comprised of the issuance of (i) 1,000,000 shares of the Company’s common stock, in the aggregate, to two owners of$a portion of these shares could be returned to the Company in the event the transaction did not close. In addition, $1.2 million of the Company’s common stock would be issued at closing and warrants to purchase 400,000 shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock would be granted on the day prior to legislative approval of the transaction.5.1 million,cash amountCCB to be paidresolve these violations, which would have allowed it to proceed with the sale. In October 2022, the CCB issued an order approving the placement of a receiver to oversee Harvest and its licenses. The Company monitored the status of these regulatory matters, and ultimately determined that it should withdraw from the agreement to purchase Harvest, and submitted such request to the CCB. The CCB accepted the request by the Company, releasing the Company from the liabilities related to this cancelled transaction.Year ended December 31, 2022 2021 Weighted average shares outstanding - basic 337,697 326,467 Potential dilutive common shares 42,592 45,930 Weighted average shares outstanding - diluted 380,289 372,397 a monthly basis as a percentage of monthly tenant revenues. The Company is not the business’ monthly gross sales.purchaseCompany recognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term. Differences between amounts received and amounts recognized are recorded in Deferred rents receivable in the consolidated balance sheets. Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.contingent uponleased to a cannabis-licensed client under a triple net lease that expires in 2035.approvalKind Acquisition Date.Massachusetts Cannabis Control Commission,available square footage was leased to a non-cannabis manufacturing company (the "Tenant") under a lease that expired inexpected bysubleased to a cannabis-licensed client under a under a sublease that expires in April 2027.summer of 2022. Concurrent with the execution of this agreement, the parties enteredCompany developed 60,000 square feet into a consulting agreement pursuant wherebycultivation facility that is subleased to a cannabis-licensed client. The sublease expires in March 2030, with an option to extend the term for three additional five-year periods. The Company intends to develop the remaining space into a processing facility.Year ending December 31, 2023 $ 1,406 2024 1,349 2025 1,349 2026 1,218 2027 1,132 Thereafter 4,537 Total $ 10,991 December 31 2022 2021 First State Compassion Center (FSCC Initial Note) $ 328 $ 403 First State Compassion Center (FSCC Secondary Notes) 8,160 7,845 First State Compassion Center (FSCC New Note) 750 — Healer LLC 866 866 Total notes receivable 10,104 9,114 Less: Notes receivable, current portion (2,637) (127) Notes receivable, net of current $ 7,467 $ 8,987 shall provide certain oversight services related toin May 2016 for $0.7 million, bearing interest at a rate of 12.5% per annum and maturing in April 2026, as amended (the "FSCC Initial Note"). The monthly payments on the development, staffing, and operation of the business in exchange for a monthly fee.(39)NOTE 4 – INVESTMENTS2020,$75,000, respectively, and were included in Notes receivable, current, in the Company’sconsolidated balance sheets.December 31, 2022 2021 Plants $ 2,653 $ 1,015 Ingredients and other raw materials 3,255 262 Work-in-process 7,635 4,661 Finished goods 5,934 3,830 Total inventory $ 19,477 $ 9,768 following:following (in thousands):December 31, 2022 2021 Flowr Corp. $ — $ 251 WM Technology Inc. 123 — Total investments $ 123 $ 251 SCHEDULE OF INVESTMENTS 2021 2020 Current investments: Flowr Corp. (formerly Terrace Inc.) $ 250,600 $ 1,357,193 Non-current investments: MembersRSVP LLC - 1,165,788 Total investments $ 250,600 $ 2,522,981 2020,2021, Terrace Inc., a Canadian cannabis entity in which the Company had an ownership interest of 8.95%8.95% (“Terrace”), was acquired by Flowr Corp. (TSX.V: FLWR; OTC: FLWPF), a Toronto-headquartered cannabis company with operations in Canada, Europe, and Australia (“Flowr”). Under the terms of the transaction, each shareholder of Terrace received of a share in Flowr for each Terrace share held.held (the "Flowr Investment").Thisisin Flowr was carried at fair value. The decreasevalue, with changes in fair value recorded as a component of this investment duringOther expense, net, in the consolidated statements of operations. The Company recorded losses of $0.3 million and $1.1 million in the years ended December 31, 2022 and 2021, and 2020 of approximately $1,107,000 and $92,000, respectively, was reflectedrespectively. The loss recorded in the Change In Fair Value Of Investments year ended December 31, 2022 is comprised of the loss on the statementchange in the Flowr Investment for the year, plus the $61,000 write-off of operations.the remaining fair value of the Flowr Investment in December 31, 2022 arising from Flowr's bankruptcy filing and delisting from the exchanges on which it traded. The loss recognized in the year ended December 31, 2021 represented the change in the fair value of the investment in Flowr for that year.LLCLLC)During 2020, the Company owned a 23.0% member interest in MembersRSVP LLC (“MRSVP”), an entity that developed cannabis-specific customer relationship management software, which was accounted for under the equity method. Based on the Company’s equity in MRSVP’s net income during this period, the Company recorded earnings in 2020 of approximately $99,000, which comprised the balance of Equity in Earnings of Investments on the statement of operations.MRSVPMembersRSVP LLC, an entity that develops cannabis-specific software ("MRSVP), in which the Company owned a 23.0% membership interest, entered into an agreement wherebyunder which the Company assigned and transferred 11.0% of its memberreturned membership interests tocomprising 11.0% ownership in MRSVP in exchange for a release of the Company from allany further obligation by the Company to make futureany incremental investments or payments to MRSVP and certain other non-monetary consideration.Company’sCompany's ownership interest to 12.0%12.0%, the Company relinquished its right to appoint a member to theMSRVP's board of MRSVP. In light ofdirectors. As a result, the Company no longer havinghad the ability to exercise significant influence over MRSVP, and accordingly, as of January 1, 2021, the Company discontinued accounting for this investment under the equity method as of January 1, 2021.method.$1,475,000,$1.5 million, representing the Company’s pro rata share of the cash consideration received by MRSVP upon the closing of the transaction. As an ongoing memberThe cash proceeds reduced the Company's MRSVP investment balance to zero and resulted in a gain of MRSVP,$0.3 million, which was reported as a component of Other expense, net, in the Company's consolidated statement of operations for the year ended December 31, 2021.will receive itsreceived 121,698 shares of common stock of WM Technology Inc. (the "MAPS Shares"), a technology and software infrastructure provider to the cannabis industry, which represented the Company's pro rata share of anythe additional consideration received by MRSVP pursuant to the asset purchase agreement, which may include securities or other forms of non-cash or in-kind consideration and holdback amounts, if and when it is received and distributed by MRSVP.Upon receipt of the cash consideration, the Company reduced the investment balance to zero and recordedhad a gainfair value of approximately $309,000 which comprised Other non-operating expenses on$953,000 at the statementtime of operations.In February 2022, the Company received its pro rata share of additional consideration received by MRSVP pursuant to the asset purchase agreement which is further discussed in Note 22 – Subsequent Events.(40)NOTE 5 – DEFERRED RENTS RECEIVABLEis the lessor under operating leases which contain rent holidays, escalating rents over time, options to renew, requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based onrecognized a percentageloss of monthly tenant revenues. The Company is not the lessor under any finance leases.The Company recognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term. Differences between amounts received and amounts recognized are recorded under Deferred Rents Receivable on the balance sheet. Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.The Company leases the following owned properties:●Delaware – a 45,000 square foot cannabis cultivation, processing, and dispensary facility which is leased to a cannabis-licensed client under a triple net lease that expires in 2035.●Maryland – a 180,000 square foot cultivation and processing facility which is leased to a licensed cannabis client under a triple net lease that expires in 2037.●Massachusetts – a 138,000 square foot industrial property of which approximately half of the available square footage is leased to a non-cannabis manufacturing company under a lease that expires in October 2022.The Company subleases the following properties:●Delaware – a 4,000 square foot cannabis dispensary which is subleased to its cannabis-licensed client under a under a sublease expiring in April 2027.●Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility, and is developing the remaining space into processing facility, subleased to its cannabis-licensed client. The sublease expires in March 2030, with an option to extend the term for three additional five-year periods.●Delaware – a 12,000 square foot cannabis production facility with offices which is subleased to its cannabis-licensed client. The sublease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.As of December 31, 2021 and 2020, cumulative fixed rental receipts under such leases approximated $18.7 million and $13.9 million, respectively, compared to revenue recognized on a straight-line basis of approximately $20.4 million and $15.8 million, respectively. Accordingly, the deferred rents receivable balance approximated $1.7 million and $1.9 million at December 31, 2021 and 2020, respectively.Future minimum rental receipts for non-cancellable leases and subleases as of December 31, 2021 were:SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON-CANCELABLE LEASES AND SUBLEASES2022 $ 4,854,549 2023 4,563,372 2024 4,625,608 2025 4,695,107 2026 3,915,790 Thereafter 35,829,822 Total $ 58,484,248 (41)NOTE 6 – NOTES RECEIVABLEAt December 31, 2021 and 2020, notes receivable, including accrued interest, consisted of the following:SCHEDULE OF RECEIVABLES AND ACCRUED INTEREST 2021 2020 First State Compassion Center (initial note) $ 402,992 $ 468,985 First State Compassion Center (secondary note) - Healer LLC 866,368 899,226 High Fidelity Inc. - 254,919 Total notes receivable 9,113,270 1,623,130 Notes receivable, current portion 126,713 658,122 Notes receivable, less current portion $ 8,986,557 $ 965,008 First State Compassion CenterThe Company’s cannabis-licensed client in Delaware, First State Compassion Center (“FSCC”), issued a 10-year promissory note to the Company in May 2016 in the amount of $700,000 bearing interest at a rate of 12.5% per annum, as amended. The monthly payments of approximately $10,000 will continue through April 2026, at which time the note will be paid in full. At December 31, 2021 and 2020, the current portion of this note approximated $75,000 and $66,000, respectively, and was included in Notes Receivable, Current Portion on the respective balance sheets.In December 2021, financed trade accounts receivable balances from FSCC of approximately $7.8$0.8 million in the aggregate were converted into notes receivable whereby FSCC issued promissory notes to the Company in the aggregate amount of approximately $7.8 million bearing interest at a rate of 6.0% per annum. The promissory notes call for the payment of principal and interest throughout the term of the note which matures in December 2025. At December 31, 2021, the entire balance of the note was long-term.Healer LLCIn 2018 and 2019, the Company loaned an aggregate of $800,000 to Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak, an integrative medicine physician and nationally renowned cannabis practitioner (“Healer”). Healer issued promissory notes to the Company for the aggregate amount loaned that bear interest at a rate of 6.0% per annum, with principal and interest payable on maturity dates three years from the respective loan dates.In March 2021, the Company was issued a revised promissory note from Healer in the principal amount of approximately $894,000 representing the previous loans extended to Healer by the Company plus accrued interest through the revised promissory note issuance date. The revised promissory note bears interest at a rate of 6.0% per annum and requires quarterly payments of interest through the maturity date in April 2026.Additionally, the Company has the right to offset any licensing fees owed to Healer by the Company in the event Healer fails to make any payment when due. In March 2021, the Company offset approximately $28,000 of licensing fees payable to Healer against the principal balance of the revised promissory note, reducing the principal amount to approximately $866,000.At December 31, 2021 and 2020, the total amount of principal and accrued interest due under the aforementioned promissory notes approximated $866,000 and $899,000, respectively, of which approximately $52,000 and $337,000, respectively, was current.High FidelityIn August 2021, the Company was fully repaid on a loan to High Fidelity Inc., an entity with cannabis operations in the state of Vermont. The loan had a principal balance of $250,000 and bore interest at a rate of 10.0% per annum,(42)NOTE 7 – INVENTORYAt December 31, 2021 and 2020, inventory was comprised of the following:SCHEDULE OF INVENTORY 2021 2020 Plants $ 1,014,576 $ 3,352,425 Ingredients and other raw materials 261,609 176,338 Work-in-process 4,661,542 468,377 Finished goods 2,833,431 Total inventory $ 9,767,856 $ 6,830,571 NOTE 8 – PROPERTY AND EQUIPMENTAt and December 31, 2021 and 2020, property and equipment consisted of the following:SCHEDULE OF PROPERTY AND EQUIPMENT 2021 2020 Land $ 4,449,810 $ 3,988,810 Buildings and building improvements 35,231,277 29,309,856 Tenant improvements 9,744,860 8,844,974 Furniture and fixtures 1,887,796 619,880 Machinery and equipment 7,220,962 4,620,924 Construction in progress 10,569,182 3,140,807 69,103,887 50,525,251 Less: accumulated depreciation (6,953,741 ) (4,888,722 ) Property and equipment, net $ 62,150,146 $ 45,636,529 During the year ended December 31, 2022, which is included as a component of Other (expense) income, net, in the consolidated statement of operations. This amount represents the decrease in the fair value of the MAPS Shares for the period from the Company's receipt of such shares in February 22, 2022 through December 31, 2022.December 31, 2022 2021 Land $ 4,450 $ 4,450 Buildings and building improvements 43,542 35,231 Tenant improvements 17,016 9,745 Furniture and fixtures 2,009 1,888 Machinery and equipment 10,087 7,221 Construction in progress 4,761 10,569 81,865 69,104 Less: accumulated depreciation (10,224) (6,954) Property and equipment, net $ 71,641 $ 62,150 2020,2021, additions to property and equipment approximated $18,579,000totaled $12.4 million and $4,688,000,$18.6 million, respectively.The 2021 Of the additions were primarily comprised of (i) the development of facilities in Metropolis, IL and Milford, DE, and (ii) purchases of building improvements, machinery,to property and equipment, at the facilities in Hagerstown, MD and New Bedford, MA. The 2020 additions consisted primarily of (i) the commencement of construction in Mt. Vernon, IL, and (ii) machinery and equipment purchases for facilities in Massachusetts, Maryland, Illinois, and Delaware.The construction in progress balances of approximately $10,569,000$0.3 million and $3,141,000 at$0.7 million of such additions in the years ended December 31, 2022 and 2021, and 2020, respectively, consistedwere paid for by the issuance of the commencement of construction of properties in Milford, DE and Annapolis, MD.Company common stock.yearyears ended December 31, 2022 and 2021 was $3.4 million and 2020 approximated $2,098,000 and $1,792,000,$2.1 million, respectively.(43)NOTE 9 – INTANGIBLESAt2021 and 2020,2022 consisted of the following (in thousands):Weighted
average
amortization
period (years)Cost Accumulated
amortizationNet
carrying
valueTrade name and trademarks 3.00 $ 2,041 $ 453 $ 1,588 Licenses and customer base 8.94 13,260 675 12,585 Non-compete agreements 2.00 42 14 28 8.13 $ 15,343 $ 1,142 $ 14,201 were comprisedat December 31, 2022 was as follows (in thousands):Year ending December 31, 2023 $ 2,228 2024 2,214 2025 1,755 2026 1,527 2027 1,527 Thereafter 4,950 Total $ 14,201 cannabis license fees, and (ii) goodwill arising from the Company’s acquisitions.The Company’s cannabis licenses are issued fromgoodwill in the states of Illinois and Massachusetts and require the payment of annual fees. These fees, comprised of a fixed component and a variable component based on the level of operations, are capitalized and amortized over the respective twelve-month periods. Atyears ended December 31, 2022 and 2021 and 2020, the carrying value of these cannabis licenses approximated $were as follows (in thousands):Year ended December 31, 2022 2021 Balance at January 1, $ 2,068 $ 2,068 Kind Acquisition 6,011 — Balance at December 31, $ 8,079 $ 2,068 163,000 and $161,000, respectively.The goodwill associated with acquisitionsa quarterlyan annual basis for impairment. Based on this reviewthese reviews and other factors, the Company determined there was no goodwill of approximately $2,068,000impairment in the years ended December 31, 20212022 and 2020 was deemed to be unimpaired.2021.NOTE 10 – MORTGAGESAt20212022 and 2020, mortgage balances, including accrued interest,2021 were comprised of the following:following (in thousands):December 31, 2022 2021 Bank of New England
New Bedford, MA and Middleborough, MA properties$ 12,141 $ 12,499 Bank of New England
Wilmington, DE property1,345 1,463 DuQuoin State Bank
Anna, IL and Harrisburg, IL properties750 778 DuQuoin State Bank
Metropolis, IL property2,508 2,658 DuQuoin State Bank
Mt. Vernon, IL property2,974 — South Porte Bank
Mt. Vernon, IL property801 816 Total mortgages payable 20,519 18,214 Less: Mortgages payable, current portion (1,491) (1,400) Mortgages payable, net of current $ 19,028 $ 16,814 SCHEDULE OF MORTGAGE AND ACCRUED INTEREST 2021 2020 $ 12,498,900 $ 12,834,090 1,462,949 1,575,658 778,084 814,749 2,657,600 - 816,264 906,653 Total mortgages payable 18,213,797 16,131,150 Mortgages payable, current portion (1,400,331 ) (1,387,014 ) Mortgages payable, less current portion $ 16,813,466 $ 14,744,136 10-year10-year mortgage agreement with Bank of New England in the amount of $4,895,000 (the$4.9 million (the “Initial Mortgage”) for the purchase of a 138,000 square foot industrial property in New Bedford, MA, within which the Company has built a 70,000 square foot cannabis cultivation and processing facility. Pursuant to the Initial Mortgage, the Company made monthly payments of (i) interest-only from the mortgage date through May 2019 at a rate equal to the prime rate plus 2.0%2.0%, with a floor of 6.25%6.25% per annum, and (ii) principal and interest payments from May 2019 to July 2020 at a rate equal to the prime rate on May 2, 2019 plus 2.0%2.0%, with a floor of 6.25%6.25% per annum.approximately $4.8$4.8 million, the parties consummated an amended and restated mortgage agreement, secured by the Company’s properties in New Bedford, MA and MiddleboroMiddleborough, MA in the amount of $13.0$13.0 million and bearing interest at a rate of 6.5%6.5% per annum that matures in August 2025 (the “Refinanced Mortgage”). Proceeds from the Refinanced Mortgage were used to pay down the Initial Mortgage and approximately $7.2$7.2 million of promissory notes as further in Note 11 – Promissory Notes. At December 31, 2021 and 2020, thedescribed below. The outstanding principal balance of the Refinanced Mortgage approximated $12,499,000was $12.1 million and $12,834,000,$12.5 million, respectively, at December 31, 2022 and 2021, of which approximately $358,000$382,000 and $335,000,$358,000, respectively, was current.fromfor the 2016 purchase of a 45,070 square foot building in Wilmington, DE, which was developed into a cannabis seed-to-sale facility and is currently leased to the Company’s cannabis-licensed client in that state. The mortgage matures in 2031,with monthly principal and interest payments at a rate of 5.25%5.25% per annum through September 2021, and thereafterwith the rate adjusting every five years to the then prime1.5%1.5% with a floor of 5.25%5.25% per annum. For the remainder of 2021,2022, the interest rate on this mortgage remained at 5.25%5.25%. At December 31, 20212022 and 2020,2021, the outstanding principal balance on this mortgage approximated $1,463,000 was $1.3 million and $1,576,000,$1.5 million, respectively, of which approximately $130,000 $126,000 and $114,000,$130,000, respectively, was current.(44)20212022 at a rate of 6.75%6.75% per annum. At December 31, 20212022 and 2020,2021, the outstanding principal balance on this mortgage approximated $778,000$750,000 and $815,000$778,000 respectively, of which approximately $33,000$36,000 and $31,000,$33,000, respectively, was current.$705,000 $0.7 million in the aggregate on the date of the transaction, and payoff of the seller’s remaining mortgage of approximately $1.6 $1.6 million. In connection with this purchase, the Company entered into another mortgage agreement with DSB in the amount of $2.7 $2.7 million that matures in July 2041and initially bears interest at a rate of 6.25%6.25% per annum, which rate is adjusted each year based on a certain interest rate index plus a margin. As part of this transaction, the seller was provided with a 30.0% 30.0% ownership interest in Mari Holdings Metropolis LLC (“Metro”), the Company’s subsidiary that owns the property and related mortgage obligation, reducing the Company’s ownership interest in Metro to 70.0%70.0%. At December 31, 2022 and 2021, the outstanding principal balance on this mortgage approximated $2,658,000,was $2.5 million and $2.7 million, respectively, of which approximately $73,000 $77,000 and $73,000, respectively, was current.$6,000$6,000 which began in August 2021 and continues through its maturity in June 2022,2023, at which time all remaining principal, interest and fees shall be due.NOTE 11 – PROMISSORY NOTES$10.0 $10.0 million promissory note (the $10.0M“$10.0M Note”) issued to an unaffiliated party (the “Noteholder”) earlier in 2019.2020. The $10.0M Note, which provided for the repayment of principal plus a payment of $1.5 $1.5 million (the “$1.5M Payment”), was amended, whereby the Company and MMH issued a restated promissory note maturing in June 2020in the principal amount of $11.5 $11.5 million (the “$11.5M Note”), comprised of the principal amount of the $10.0M Note and the $1.5M Payment. The $11.5M Note bore interest at a rate of 15.0% 15.0% per annum, requiring periodic interest payments and minimum amortization payments of $3,000,000 $3.0 million in the aggregate, which the Company made in the first half of 2020.2021.$352,000 $352,000 of outstanding principal of the $11.5M Note was converted into shares of the Company’s common stock (which did not result in a material extinguishment gain or loss as the conversion price approximated the price of the Company’s common stock on the second amendment agreement date), and (ii) the Company and MMH issued a second amended and restated promissory note in the principal amount of approximately $8.8 $8.8 million, comprised of the outstanding principal and unpaid interest balances of the $11.5M Note, plus an extension fee of approximately $330,000,$330,000, bearing interest at a rate of 15.0% 15.0% per annum and maturingwhich matured in June 2022(the (the “$8.8M Note”). In addition, the Company issued three-yearthree-year warrants to the Noteholder to purchase up to 750,000 shares of common stock at an exercise price of $0.50 $0.50 per share. The fair value of these warrants on the issuance date of approximately $66,000 $66,000 was recorded as a discount to the $8.8M Note, and amortized to interest expense over the life of the $8.8M Note.$4,000,000$4.0 million in July 2020, with a portion of proceeds of the Refinanced Mortgage previously discussed in Note 10 – Mortgages,above, and additional principal payments of $600,000aggregating $0.6 million in the aggregate in calendaryear ended December 31, 2020. Accordingly, the carrying value of the $8.8M Note was approximately $4.2$4.2 million at December 31, 2020.$0.30$0.30 per share, subject to certain conversion limitations. This non-detachable conversion feature of the $8.8M Note had no intrinsic value on the agreement date, and therefore no beneficial conversion feature arose. In March 2021, the Noteholder converted $1,000,000$1.0 million of principal and approximately $10,000$10,000 of accrued interest into shares of the Company’s common stock, reducing the carrying value of the $8.8M Note to approximately $$3.2 million.3.2 million.approximately $3.2$3.2 million (the “$3.2M Note”), which bearsbore interest at athe rate of 0.12%0.12% per annum and matureswhich would mature in April 2023.2023. The Noteholder hashad the option to convert, subject to certain conversion limitations, all or a portion of the $3.2M Note into shares of the Company’s common stock at a conversion price of $0.35$0.35 per share, such conversion price subject to adjustment in the event of certain transactions by the Company.adjustment. The third amended agreement resulted in a decrease in the fair value of the embedded conversion feature of the $3.2M Note, and thereforeaccordingly, no accounting was required for such conversion feature.canhad the right to prepay all of the outstanding principal and unpaid interest of the $3.2M Note, along with a prepayment premium equal to 10.0% 10.0% of the principal amount being prepaid. The Noteholder shall remainremained entitled to convert the $3.2M Note during such notice period. On or after the one-year anniversary of the $3.2M Note issuance date, the Noteholder has the right to require the redemption in cash of up to $125,000 $125,000 of principal and unpaid interest thereon per calendar month.approximately $2.8$2.8 million of principal on the $3.2M Note into shares of the Company’s common stock, reducing the carrying value of the $3.2M Note to approximately $400,000$0.4 million at December 31, 2021. All note conversions were effected in accordance with the terms of their respective note agreements, and thereforeaccordingly, the Company was not required to record a gain or loss on such conversions.(45)as further described in(see Note 13 – Mezzanine Equity13), the Company issued two promissory notes in the aggregate principal amount of approximately $4.4$4.4 million, bearing interest at 16.5%16.5% per annum and maturing in August 2021 (the “$4.4M Notes”), in exchange for a loan in the same amount. At December 31, 2020,2021, the principal and accrued interest balance of the $4.4M Notes approximated $4.6was $4.6 million. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in(see Note 13 – Mezzanine Equity,13), the $4.4M Notes were fully paid down,in full, along with accrued interest through the repayment date.$6.0$6.0 million promissory note (the “$6.0M Note”) issued by the Company in 2019.2020. The $6.0M Note bore interest at a rate of 13.0%13.0% per annum and required the payment of a service fee of $900,000$0.9 million (the “Service Fee”).$845,000$845,000 through the modification date and interest at a rate of 10.0%10.0% per annum (the “$6.8M Note”), and (iii) a new convertible note in the amount of $900,000$900,000 (the “$900k Note”) was issued evidencing the Service Fee, bearing interest at a rate of 12.0%12.0% per annum. The Company satisfied the $900k Note and accrued interest of $20,100$20,100 in full as of the June 2020 maturity date by the payment in July 2020 of $460,050$460,050 in cash, representing one-half of the principal and accrued interest, and the issuance in June 2020 of shares of the Company’s common stock, in payment of the other half of the principal and accrued interest.$3.0 $3.0 million from the issuance of a secured promissory note to the Holding Party in 2018,2019, bearing interest at a rate of 10.0%10.0% per annum (the “$3.0M Note”). The maturity date of the $3.0M Note, initially in March 2020, was extended for an additional six months in accordance with its terms, with the interest rate increasing to 12.0% per annum during the extension period. Pursuant to the Initial Extension Agreement, the maturity date of the $3.0M Note was extended to December 2020.(46)$1$1.0 million of principal and all outstanding accrued interest of approximately $333,000$333,000 on the $6.8M Note; (ii) issued an amended and restated senior secured promissory note in the principal amount of $5,845,000$5.8 million (the “$5.8M Note”) to replace the $6.8M Note; and (iii) amended and restated the $3M$3.0M Note (the “New $3.0M Note”, and together with the $5.8M Note, the “Amended Notes”). The Amended Notes bore interest at a rate of 12.0%12.0% per annum with initial maturity dates in September 20222022..four-yearfour-year warrants to the Holding Party’s designees to purchase up to 5,000,000 shares of the Company’s common stock at an exercise price of $0.25$0.25 per share; (ii) paid the Holding Party a fee of $100,000;$100,000; and (iii) extended the security interest in certain Company properties and the pledge of certain equity interests to secure the Amended Notes. The Company recorded a discount on the Amended Notes of approximately $573,000$573,000 based on the fair value of such warrants on the issuance date, of which approximately $75,000$75,000 was amortized as of the end of 2020, and2021, with the remainder to be amortized over the life of the Amended Notes. Accordingly, the carrying value of the Amended Notes approximated $8.3 million at December 31, 2020, of which $1.9 million was current.$400,000$400,000 on the $5.8M Note in February 2021. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in(see Note 13 – Mezzanine Equity,13), the Amended Notes were fully paid down,in full, along with accrued interest through the repayment date. In addition,Additionally, the remaining discount of approximately $450,000$450,000 on this notethese notes was fully amortized on the payment date.at a rate of 5.74%5.74% per annum and matures in July 2026.2026. At December 31, 20212022 and 2020,2021, the balance of this note approximated $26,000 $20,000 and $30,000,$26,000, respectively, of which approximately $5,000 $5,000 was current in both periods.at each date.at the rate of 10.0% 10.0% per annum and matures in May 2027. At December 31, 2022 and 2021, the balance of this note approximated $33,000,$28,000 and $33,000, respectively, of which approximately $5,000 $7,000 and $5,000, respectively, was current.In September 2020, the Company paid down $500,000 of principal on$1,000,000$1.0 million promissory note (the “$1.0M Note”) issued by MMH in 20192020 to an unaffiliated party. At December 31, 2020, $500,000party and paid $0.5 million of principal on the $1.0M Note remained outstanding.$200,000,$0.2 million and paid off the remaining principal balance of $0.5 million utilizing a portion of the proceeds from the Hadron transaction discussed in(see Note 12 – Mezzanine Equity, paid off remaining principal of $13).500,000.At December 31, 2021, the Company was carrying an accrued interest balance of approximately $125,000 to cover interest due on the $1.0M Note as of such date.at the start of 2020, the Company was carrying $3,190,000 of principal on promissory notes bearing interest at rates ranging from 6.5% to 18.0% per annum (the “Existing Notes”). During 2020, the Company (i) raised approximately $2,147,000 from the issuance of new promissory notes bearing interest at interest rates of 12.0% and 15.0% per annum (the “New 2020 Notes”), (ii) repaid $2,100,000 of the Existing Notes, (iii) retired $500,000 of the Existing Notes through the issuance of common stock at a conversion price equal to the market price of the Company’s common stock on the conversion date of $0.32 per share, and (iv) repaid $700,000 of the New 2020 Notes. Accordingly, the remaining balance on the Existing Notes and New 2020 Notes approximated $2,037,000 in the aggregate at December 31, 2020. This balance along with accrued interest through the repayment date of approximately $200,000 were fully paid down in March 2021, utilizing a portionthe Company repaid in full promissory notes entered into in prior years. The payments aggregated $2.3 million, comprised of the proceeds from the Hadron transaction discussed in Note 13 – Mezzanine Equity.
$2.0 million of principal and $0.3 million of accrued interest.(47)Debt MaturitiesAs of December 31, 2021, the aggregate scheduled maturities of the Company’s total debt outstanding were:SCHEDULE OF MATURITY TABLES 2022 $ 1,410,222 2023 1,032,523 2024 670,613 2025 717,209 2026 760,988 Thereafter 14,080,474 Total $ 18,672,029 NOTE 12 – from the periodbetween October 2018 throughand February 2020, the Company sold an aggregate of $21.0$21.0 million of convertible debentures (the “$21M Debentures”) to an unaffiliated investor pursuant to an amended securities purchase agreement. The following table asAs of December 31, 2021 summarizes the purchase dates and selected terms2020, $1.0 million of each debenture agreement that comprised the $21M Debentures:SCHEDULE OF DEBENTURE TRANSACTION Initial Principal 10/17/18 10/16/20 $ 5,000,000 6.0% 1.0% $ 457,966 $ 1,554,389 11/07/18 11/06/20 5,000,000 6.0% 1.0% 599,867 4,015,515 05/08/19 05/07/21 5,000,000 6.0% 1.0% 783,701 2,537,235 06/28/19 06/27/21 2,500,000 0.0% 7.0% 145,022 847,745 08/20/19 08/19/21 2,500,000 0.0% 7.0% 219,333 850,489 02/21/20 02/20/21 1,000,000 6.5% 6.5% 28,021 379,183 AsDebentures had not been previously converted into the Company's common stock (the "Remaining Debenture Balance"). December 31, 2021, the holder of the $21M Debentures (the “Holder”) had converted all of the $21M DebenturesRemaining Debenture Balance into the Company’s common stock at conversion prices equal to 80.0% of a calculated average of the daily volume-weighted price preceding the date of conversion. Specifically, over the life of the $21M Debentures, the Holder converted, in several transactions,conversion, and an aggregate of $21.0 $1.3 million of principal and approximately $836,000 of accrued interest into shares of common stock at conversion prices ranging from $0.11 to $3.06 per share. Of these conversions, (i) during 2020, an aggregate of $9.7 million of principal and approximately $365,000 $56,000 of accrued interest was converted into 4,610,645 shares of common stock at conversion prices ranging from $0.11 and $0.34 per share, and (ii) during 2021, an aggregate of $1.3 million of principal and approximately $56,000 of accrued interest was converted into shares ofthe Company's common stock at a conversion price of $0.29 $0.29 per share.All of the aforementionedIn conjunction with the issuance of the $21M Debentures, the Company issued the Holder three-year warrants to purchase an aggregate of 1,354,675 shares of the Company’s common stock at exercise prices ranging from $0.75 to $5.50 per share, of which warrants to purchase 180,000 shares of common stock at an exercise price of $0.75 were issued in 2020. The fair value of the warrants of approximately $2.2 million was recorded as a discount to the carrying amount of the $21M Debentures and are amortized to interest expense over the respective term of the individual debentures comprising the $21M Debentures.(48)Based on the conversion prices of the $21M Debentures in relation to the market value of the Company’s common stock, the $21M Debentures provided the Holder with a beneficial conversion feature, as the embedded conversion option was in-the-money on the commitment date. The aggregate intrinsic value of the beneficial conversion feature of approximately $10.2 million was recorded as a discount to the carrying amount of the $21M Debentures, and amortized to interest expense over the respective term of the individual debentures comprising the $21M Debentures.During 2020, amortization of the beneficial conversion features, after adjustment for the aforementioned conversions, approximated $3.2 million; amortization of the warrant discounts approximated $805,000; amortization of original issue discounts approximated $321,000; and interest expense approximated $224,000. At December 31, 2020, the aggregate outstanding principal balance of the $21M Debentures was $1.3 million. Also on such date, the unamortized balances of the beneficial conversion features, the warrant discounts, and original issue discounts were approximately $177,000, $39,000, and $52,000, respectively. Accordingly, at December 31, 2020, the carrying value of the $21M Debentures approximated $1,032,000, all of which was current.During 2021, amortization of the beneficial conversion features, after adjustment for the aforementioned conversions, approximated $177,000; amortization of the warrant discounts approximated $39,000; amortization of original issue discounts approximated $52,000; and interest expense approximated $1,000.(49)NOTE 13 – previously discussed in(see Note 11 – Promissory Notes11).at the time of filing, to the status of authorized and unissued shares of undesignated preferred stock.$,$3.00, plus any dividends declared but unpaid thereon, with any remaining assets distributed pro-rata among the holders of the shares of Series B convertible preferred stock and common stock, based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock.$3.00$3.00 per share, without the payment of additional consideration, and (ii) the Company has the option to convert all, but not less than all, of the shares of Series B convertible preferred stock into the Company's common stock at a conversion price of $3.00 if the daily volume weighted average price of common stock (the “VWAP”) exceeds $4.00 per share for at least twenty consecutive trading days prior to the date on which the Company gives notice of such conversion to the Series B Holders.outenough of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B convertible preferred stock, such number of its duly authorized shares of common stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B convertible preferred stock.(50)$$46.0 million in exchange for newly-designated Series C convertible preferred stock of the Company and warrants to purchase the Company’s common stock.stock (the "Hadron Facility").$23.0$23.0 million of Units (as defined below) at a price of $$3.70 per Unit. Each Unit is comprised of one share of Series C preferred stock and a four-yearfour-year warrant to purchase two and one-half shares of common stock. Accordingly, the Company issued to Hadron shares of Series C preferred stock and warrants to purchase up to an aggregate of 15,540,540 shares of common stock. Each share of Series C preferred stock is convertible, at Hadron’s option, into five shares of MariMed common stock, and each warrant is exercisable at an exercise price of $1.087$1.087 per share. The warrants shall be subject to early termination if certain milestones are attained, and the market value of the Company’s common stock reaches certain predetermined levels. The fair value of the warrants of approximately $9.5$9.5 million on the issuance date was allocated to the proceeds and recorded as additional paid-in capital. The Company incurred costs of approximately $387,000 relative$387,000 related to the issuance of the aforementioned shares to Hadron, which was recorded as a reduction to additional paid-in capital in March 2021.non-voting.non-voting, and has a liquidation preference equal to its investment amount plus declared but unpaid dividends. Holders of Series C convertible preferred stock are entitled to receive dividends on an as-converted basis.$23.0$23.0 million of proceeds received by the Company in March 2021, approximately (i) $7.8$7.8 million was designated to fund construction and upgrades of certain of the Company’s owned and managed facilities which was expended induring 2021 and (ii) $15.2$15.2 million was used to pay down debt and obligations, comprised of principal and interest on the $4.4M Notes, the $1.0Mvarious notes outstanding (see Note the New $3.0M11) and payments of certain amounts due to related parties (see Note the $5.8M Note, the Existing Notes, the New 2020 Notes (all referred to in Note 11 – Promissory Notes), and a portion of the Due To Related Parties balance discussed in Note 19 – Related Party Transactions19).A portion of the balance of the facility is available to fund the Kind acquisition previously discussed in Note 3 – Acquisitions, provided such acquisition is consummated, including obtaining the necessary regulatory approvals, no later than the end of 2022. Such funds shall be provided by Hadron on the same aforementioned terms as the initial proceeds.as at least 50.0% of the shares of Series C convertible preferred stock remainremained outstanding, the holders shall havehad the right to appoint one observer to the Company’s board and to each of its board committees, and appoint a member to the Company’s board if and when a seat becomesbecame available, at which time the observer roles shallwould terminate.imposesalso imposed certain covenants on the Company with respect to the incurrence of new indebtedness, the issuance of additional shares of any designation of preferred stock, and the payment of distributions.(51)NOTE 14 – Year ended December 31, 2022 2021 Product sales - retail $ 92,836 $ 82,127 Product sales - wholesale 32,865 26,119 Total product revenue 125,701 108,246 Other revenue: Real estate rentals 3,526 6,548 Supply procurement 3,353 2,108 Management fees 848 3,079 Licensing fees 582 1,483 Total other revenue 8,309 13,218 Total revenue $ 134,010 $ 121,464 “Annual“2021 Annual Meeting”), stockholders approved an amendment to the Company’s certificate of incorporation, increasing the number of authorized shares of common stock from 500 million to 700 million.700,000,000.“Plan”“2018 Plan”), increasing the aggregate number of shares reservedavailable for issuance under the Plan from 40 million to 70 million.70,000,000.Undesignated Preferred StockIn February 2020,Company filed a certificateaward of eliminationoptions to return allpurchase the Company's common stock ("stock options"), restricted stock units ("RSUs"), stock appreciation rights, restricted stock, deferred stock, dividend equivalents, performance shares of formerly designated Series A convertible preferred stock to the status of authorized and unissued shares of undesignated preferred stock.Common StockIn February 2020, pursuant to the TIS Exchange Agreement discussed in Note 13 – Mezzanine Equity, the or other stock-based performance awards, as well as other stock- or cash-based awards. At December 31, 2022, there were 29,969,580 total shares of common stock exchangedavailable for future issuance under the 2018 Plan.Shares Weighted average exercise price Outstanding at January 1, 2022 39,821,671 $ 1.10 Granted 805,500 $ 0.61 Exercised (367,248) $ 0.22 Forfeited (1,455,250) $ 1.00 Expired (2,300,000) $ 2.24 Outstanding at December 31, 2022 36,504,673 $ 0.82 Series B convertible preferred stock were treated as an increase to treasury stockcash.$ ($ per share), and then immediately cancelled, thereby reducing treasury stock to zero, with corresponding reductions to common stockgrant. At December 31, 2022, the options outstanding had a weighted average remaining life of approximately $three years.5,000 (the parEstimated life (in years) 5.0 Weighted average volatility 93.24 % Weighted average risk-free interest rate 3.18 % Dividend yield — exchanged common shares)Company's shares on the date of grant.additional paid-in capitalits President, 666,667 RSUs were granted to the Company's Chief Operating Officer, and 33,333 RSUs were granted to each of approximately $the three independent members of its Board of Directors. Each of these RSUs had a grant date fair value of $0.53.14,720,000.2021 and 2020,April 2022, 750,000 warrants were exercised in a cashless transaction under which the Company granted withheld 515,039 shares underlying such warrants and issued 234,961 shares of common stock. In October 2022, 896,031 warrants were exercised in a cashless transaction under which the Company withheld 813,694 shares underlying such warrants and issued 82,337 shares of common stock.109,210 respectively,were outstanding, with a weighted average exercise price of $0.85.employee for services in lieu of salary. Theaggregate fair value of these$2.2 million (see Note 3);approximately $in 2021 and $in 2020 was charged to compensation expense. Of the shares granted in 2020, shares,restricted common stock with a fair value of approximately $$300,000 to purchase property and equipment;5,000•, were yet375,000 shares of restricted common stock with a fair value of approximately $275,000 in exchange for consulting services;bethe Company’s Chief Financial Officer in connection with her appointment;at December 31, 2020,in connection with the vesting of restricted stock units with a grant date fair value of approximately $19,000 (see "Extension of Exercise Period and were included in Common Stock Subscribed But Not Issued on the balance sheet at that date.Accelerated Vesting of RSUs" below); andIn 2021, the Company granted 17,227 shares of restricted common stock to three employees. Thean employee with an aggregate grant date fair value of these restricted sharesapproximately $9,000.approximately $ was charged to compensation expense. No sharesExercise Period and Accelerated Vesting of restricted common stock were issued in 2020.RSUs2021 and 2020,connection with the death of the Company's former Chief Executive Officer Robert Fireman ("Mr. Fireman") on December 11, 2022, the Company, issued and sharesin accordance with the 2018 Plan, extended the exercise period for Mr. Fireman's outstanding stock options, which were fully vested, to the earlier of common stock, respectively, to settle obligationsthree years from the date of $51,000 and approximately $699,000, respectively. Based ondeath or the pricecontractual expiration date of the Company’s commonrespective stock options. Accordingly, Mr. Fireman's stock options will remain exercisable until December 11, 2025. Additionally, the Compensation Committee of the Company's Board of Directors, as prescribed in the 2018 Plan, accelerated the vesting, on a prorated basis, of Mr. Fireman's RSUs, which had been granted to him on October 27, 2022, such that 34,976 RSUs were accelerated and the settlement dates, the Company incurred non-cash losses of approximately $2,500underlying shares were released in 2021trust to Mr. Fireman's estate on December 30, 2022. The remaining 798,357 unvested RSUs that had been granted to Mr. Fireman on October 27, 2022 were forfeited and $45,000 in 2020, which were reflected under Loss On Obligations Settled with Equity on the statement of operations for each period.In 2021, the Company issued (i) shares of common stock valued at approximately $1,016,000 in exchange for consulting services, and (ii) shares valued at approximately $92,000 to pay for licensing fees. No such services or fees were paid with common stock in 2020.In 2021, shares of common stock were returned to the 2018 Plan. These amounts are included in the information related to RSUs above.fromrecorded stock-based compensation expense of $6.3 million and $13.4 million for the adjustment of a previously converted debenture. In 2020, shares of common stock granted to employeesyears ended December 31, 2022 and shares of common stock issued from the exercise of stock options by a related party, were returned by the holders of such common stock.In 2021, the Company issued respectively.750,000 shares of common stock as part of the purchase price for land and buildings located in Metropolis, IL. stock was issued to purchased fixed assets in 2020.In 2021 and 2020, the Company issued and shares of common stock, respectively, associated with previously issued subscriptions on common stock with a value of approximately $5,000 and $1,168,000, respectively.As previously disclosed in Note 3 – Acquisitions, the Company issued shares of common stock as part of the purchase price to acquire the remaining 30.0% ownership interest of MediTaurus.As previously disclosed in Note 11 – Promissory Notes, the Company issued (i) shares of common stock in 2020 to extinguish $352,000 of principal on the $11.5M Note, (ii) shares common stock in 2020 upon the conversion of $460,050 of principal and interest on the $900k Note, (iii) shares of common stock in 2020 to retire $500,000 of the Existing Notes, (iv) shares of common stock in 2021 upon the conversion of approximately $1,010,000 of principal and interest on the $8.8M Note, (v) shares of common stock in 2021 upon the conversion of approximately $2,812,000 of principal on the $3.2M Note,As previously disclosed in Note 12 – Debentures Payable, the holder of the $21M Debentures converted (i) approximately $10.1 million of principal and interest in 2020 into shares of common stock, and (ii) approximately $1.4 million of principal and interest in 2021 into shares of common stock.As further disclosed in Note 15 – Options, in 2021 and 2020, and shares of common stock, respectively, were issued in connection with the exercise of stock options.As further disclosed in Note 16 – Warrants, warrants to purchase shares of common stock were exercised in 2021. warrants were exercised in 2020.2020,2022, the Company was obligated to issue 70,000 shares of common stock valued atin the aggregate, with an aggregate grant date fair value of approximately $, in connection with stock grants$39,000, to an employee. These shares were issued in February 2021.two employees. The Company had no such obligation at December 31, 2021.(52)NOTE 15 – STOCK OPTIONSDuring 2021, thegranted - and -year options to purchase up to sharesdid not have any customers that contributed 10% or more of common stock at exercise prices ranging from $ to $ per share. The fair value of these options of approximately $18,690,000total revenue in the aggregate is being amortized to compensation expense over the respective option vesting periods, of which approximately $ was amortized in 2021. Additionally, compensation expense in 2021 for options issued in previous years, and continuing to be amortized over their respective vesting periods, approximated $.During 2020, -year options to purchase up to shares of common stock were issued to employees at exercise prices ranging from $ to $ per share. The fair value of these options of approximately $501,000 in the aggregate is being amortized to compensation expense over their respective vesting periods, of which approximately $ was amortized in 2020. Additionally, compensation expense in 2020 for options issued in previous years, and continuing to be amortized over their respective vesting periods, approximated $.During 2021, options to purchase shares of common stock were exercised at prices ranging from $ to $ per share. Of these exercised options, were exercised on a cashless basis with the exercise prices paid via the surrender of shares of common stock.During 2019, options to purchase shares of common stock were exercised at prices ranging from $ to $ per share. Of these exercised options, were exercised on a cashless basis with the exercise prices paid via the surrender of shares of common stock.During 2021 and 2020, options to purchase and shares of common stock, respectively, were forfeited or expired, resulting in an aggregate reduction of amortized compensation expense of approximately $42,000 in 2021 and $113,000 in 2020.SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLEExercise Price Shares Under Option Remaining Life per Share Outstanding Exercisable in Years $ 0.140 80,000 80,000 $ 0.149 500,000 500,000 $ 0.169 200,000 200,000 $ 0.225 2,000,000 1,437,500 $ 0.250 50,000 50,000 $ 0.250 20,000 20,000 $ 0.250 50,000 25,000 $ 0.250 800,000 800,000 $ 0.250 80,000 80,000 $ 0.300 398,000 398,000 $ 0.417 900,000 900,000 $ 0.505 100,000 75,000 $ 0.505 800,000 300,000 $ 0.590 15,000 15,000 $ 0.690 15,000 - $ 0.693 500,000 - $ 0.700 650,000 50,000 $ 0.740 520,000 425,625 $ 0.755 1,050,000 550,000 $ 0.770 200,000 200,000 $ 0.800 25,000 - $ 0.830 287,000 215,250 $ 0.830 600,000 150,000 $ 0.840 878,921 600,000 $ 0.840 99,000 39,600 $ 0.850 90,000 41,250 $ 0.850 72,500 - $ 0.870 250,000 - $ 0.880 11,550,000 5,925,000 $ 0.880 15,000 625 $ 0.880 410,000 - $ 0.890 10,000 2,500 $ 0.892 40,000 20,000 $ 0.895 25,000 18,750 $ 0.898 11,250,000 5,625,000 $ 0.900 50,000 50,000 $ 0.910 50,000 50,000 $ 0.920 300,000 18,750 $ 0.928 500,000 100,000 $ 0.950 50,000 50,000 $ 0.970 100,000 75,000 $ 0.983 145,000 36,250 $ 0.990 500,000 - $ 0.992 300,000 300,000 $ 1.000 15,000 15,000 $ 1.000 125,000 125,000 $ 1.350 100,000 100,000 $ 1.950 375,000 375,000 $ 2.320 100,000 100,000 $ 2.450 2,000,000 2,000,000 $ 2.500 100,000 100,000 $ 2.650 200,000 200,000 $ 2.850 56,250 56,250 $ 2.850 100,000 100,000 $ 3.000 25,000 25,000 $ 3.725 100,000 100,000 39,821,671 22,720,350 (53)NOTE 16 – WARRANTSDuring 2021, the Company issued warrants to Hadron to purchase up to 15,540,540 shares of common stock at an exercise price of $1.087 per share, expiring four years from issuance, as part of the Hadron transaction previously discussed in Note 13 – Mezzanine Equity. The fair value of these warrants on the issuance date of approximately $9.5 million was allocated to the warrant of the $23.0 million of proceeds from the Hadron transaction and recorded in additional paid in capital. Also during 2021, the Company issued warrants to purchase up to 2,100,000 shares of common stock at exercise prices ranging from $0.50 to $0.83 per share, expiring three and five years from issuance. The fair value of these warrants on their issuance dates approximated $1,487,000 in the aggregate which was charged to compensation expense.During 2020, in conjunction with the $21M Debentures discussed in Note 12 – Debentures Payable, the Company issued three-year warrants to purchase up to 180,000 shares of common stock at an exercise price of $0.75 per share. Also during 2020, as discussed in Note 11– Promissory Notes, (i) in conjunction with the $8.8M Note, the Company issued three-year warrants to purchase up to 750,000 shares of common stock at an exercise price of $0.50 per share, and (ii) in consideration of the Second Extension Agreement, the Company issued four-year warrants to purchase up to 5,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share. The fair value of these warrants on their issuance dates approximated $639,000 in the aggregate, of which approximately $10,000 was amortized to interest expense in the period and the remainder to be amortized over the terms of the respective debt instruments.During 2021, warrants to purchase 1,237,500 shares of common stock were exercised at exercise prices ranging from $0.11 to $0.55 per share. Of these exercised warrants, were exercised on a cashless basis with the exercise prices paid via the surrender of shares of common stock. No warrants were exercised in 2020.During 2021, warrants to purchase 6,968,637 shares of common stock with exercise prices ranging from $0.90 to $5.50 per share were forfeited or expired. During 2020, warrants to purchase 817,939 shares of common stock with exercise prices ranging from $0.40 to $2.25 per share were forfeited or expired.At December 31, 2021 and 2020, warrants to purchase up to 26,351,571 and 16,917,168 shares of common stock, respectively, were outstanding with exercise prices ranging from $0.11 to $5.50 per share across both periods.NOTE 17 – REVENUESFor the years ended December 31, 2021 and 2020, the Company’s revenues2022 or 2021.comprisedno customers that accounted for 10% or more of the following major categories:SCHEDULE OF REVENUES COMPRISED OF MAJOR CATEGORIES 2021 2020 Product sales - retail $ 82,127,513 $ 28,980,763 Product sales - wholesale 26,118,751 10,419,963 Real estate rentals 6,548,047 6,776,697 Management fees 3,078,925 1,481,897 Supply procurement 2,107,969 1,549,856 Licensing fees 1,482,648 1,684,792 Other 305 1,183 Total revenues $ 121,464,158 $ 50,895,151 For the years endedCompany' accounts receivable balance. At December 31, 2021, and 2020, revenues from two clients represented 11% and 20%, respectively,one customer accounted for 10% or more of the Company's accounts receivable balance, representing approximately 28% of total revenues.
accounts receivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable.(54)NOTE 18 – Table of ContentsDEBTSDEBTtwo types of reserves to address uncertain collections of amounts due—an allowance against trade accounts receivable (the “AR Allowance”), and a reservepreviously also reserved against cash advanced by the Company to itsa cannabis-licensed clientsclient for working capital purposes (the WC"WC Reserve”). 2021, the Company increased (i) the AR Allowance by $1,400,000, as a general reserves against aging receivable balances, and (ii) the WC Reserve by approximately $462,000, to reserve the working capital balance of Harvest. During 2020, the Company increased (i) the AR Allowance by $500,000, which was comprised of increases to the specific allowances against Kind and Harvest receivables of approximately $790,000 and $76,000, respectively, offset by a reduction to the general allowance of approximately $366,000, and (ii) the WC Reserve by approximately $482,000, to reserve the working capital balance of Harvest. The increases to the AR Allowance and WC Reserve were charged to Bad Debts on the statement of operations for the year ended December 31, 2020NOTE 19 – INCOME TAXESAt December 31, 2021 and 2020,2022, the Company’s cumulative federal net operating losses were approximately $24.0Company recorded $3.8 million and $10.6million, respectively. Atof expense to increase its AR Allowance. During the year ended December 31, 2021, the Company recorded a provision for income taxes of approximately $16.2increased the AR Allowance and the WC Reserve by $1.4 million due in partand $0.5 million, respectively. The increase to the aforementioned impact of Section 280E ofWC Reserve in the Internal Revenue Code, which prohibits the deduction certain ordinary business expenses. At December 31, 2020, no income tax provision was recorded.The reconciliations between the Company’s effective tax rates and the statutory tax rate for the yearsyear ended December 31, 2021 and 2020 were as follows:SCHEDULE OF RECONCILIATION OF INCOME TAXES 2021 2020 U.S federal taxes at the statutory rate 21.0 % 21.0 % State taxes net of federal benefit 16.5 % % Section 280E adjustment 14.7 % 43.6 % Stock based compensation 10.5 % 30.0 % Other 0.9 % (1.0 )% Valuation allowance 0.0 % (93.6 )% Total 63.6 % % The approximate income tax effect of the Company’s loss carryforwards and temporary differences at December 31, 2021 and 2020 were as follows:SCHEDULE OF DEFERRED TAX ASSET 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 6,981,492 2,235,987 Allowance for doubtful accounts 11,810,425 11,400,555 Stock compensation 2,556,946 2,758,541 Loss on equity investments 8,632,902 8,629,490 Goodwill writeoffs 1,262,877 1,138,419 Change in fair value of investments 598,957 282,291 Lease payments 170,543 151,936 Reserves 147,982 - Deferred tax liabilities: Depreciation (2,520,188 ) ) Real estate revenue ) ) Net deferred tax asset 28,642,197 23,882,033 Valuation allowance (28,642,197 ) ) Total $ - $ - (55)Federal net operating losses carryforward indefinitely, subjectwas related to an annual limitation of 80% of taxable income, while state net operating losses expire at various dates beginning in 2031Harvest's working capital balance (see Note 3). These tax attributesamounts are subject to an annual limitation from equity shifts, which constitute a change of ownershipreported as defined under IRC Section 382. The Company recorded a valuation allowance against its net deferred tax assets at December 31, 2021 and 2020 due to the uncertainty regarding the realization of such assets. The Company’s assessment of the realization of its deferred tax assets of future periods may differ in light of changing circumstances.The Company files income tax returnsBad debt in the U.S. federal tax jurisdiction and various state jurisdictions. The Company is currently open to examination under the statuteconsolidated statements of limitations by the Internal Revenue Service and state jurisdictionsoperations for the tax years ended 2017 through 2020.
respective years.(56)NOTE 20 – RELATED PARTY TRANSACTIONSEffective July 1, 2021, the Company entered into employment agreements with its CEO, CFO, and COO, expiring in June 2024, that provide for an annual base salary of $350,000, $325,000, and $300,000, respectively, and the ability to receive annual bonuses of up to 75% of the executive’s annual base salary for each year during the term, based on reaching certain performance goals established by the Company.Pursuant to the agreements, the CEO, CFO, and COO were granted (i) on the effective date, options to purchase up to , , and shares, respectively, of the Company’s common stock, at an exercise price of $ per share, that vest over and expire in , and (ii) in October 2021, options to purchase up to , , and shares, respectively, of the Company’s common stock, at an exercise price of $ per share, that vest over and expire in .Additionally, the agreements (i) provide these officers with additional grants on each anniversary of the effective date of the agreements in the sole discretion of the Company’s Compensation Committee, and contain covenants not to compete, non-solicitation provisions, and termination obligations, among other terms and conditions.In July 2021, the Company granted -year options to purchase up to shares of common stock to each of the Company’s three independent board members at an exercise price of $ per share.In December 2021, the CEO and CFO each exercised options to purchase shares of common stock on a cashless basis. The exercise price of $ per share was paid via the surrender by each individual of 73,256 shares of common stock. Also in this month, an independent board member allowed to expire options to purchase up to of commons stock at an exercise price of $ per share.In April 2020, the Company issued options to purchase up to shares of common stock to its COO, with an exercise price of $ per share and expiring three years from grant date. The fair value of these options of approximately $6,000 was charged to compensation expense over the annual vesting period. No options were issued to related parties in 2021.In 2020, options to purchase an aggregate of shares of common stock were exercised by the Company’s CEO, CFO, and an independent board member at exercise prices of $ and $ per share.The Company’s corporate offices are leased from an entity in which the Company’s CFO has an investment interest. This lease expires in October 2028 and contains a five-year extension option. In 2021 and 2020, expenses incurred under this lease approximated $156,000 in both years.The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s COO. The aggregate purchases from this entity in 2021 and 2020 approximated $4.9 million and $2.5 million, respectively.The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the Company’s COO and its SVP of Sales under a royalty agreement. This agreement was amended effective January 1, 2021 whereby, among other modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies products to (i) 3.0% and 10.0% of wholesale sales of existing products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively, and (ii) 0.5% and 1.0% of wholesale sales of future developed products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively.The aggregate royalties due to this entity in 2021 and 2020 approximated $266,000 and $615,000, respectively.In 2021 and 2020, one of the Company’s majority owned subsidiaries paid aggregate distributions of approximately $44,000 and $30,000, respectively, to the Company’s CEO and CFO, who own minority equity interests in such subsidiary. In 2021, another of the Company’s majority owned subsidiaries paid distributions of approximately $7,000 to a current employee who owns a minority equity interest in such subsidiary.In 2021 and 2020, the Company purchased fixed assets and consulting services of approximately $836,000 and $938,000, respectively, in the aggregate from two entities owned by two of the Company’s general managers.In 2021 and 2020, the Company purchased fixed assets of approximately $642,000 and $182,000 from an entity owned by an employee.The balance of Due To Related Parties at December 31, 2020 of approximately $1.2 million was comprised of amounts owed of approximately (i) $460,000 to the Company’s CEO, (ii) $653,000 to entities owned by the Company’s CEO and CFO, and (iii) $45,000 to a stockholder of the Company. All amounts owed were repaid in March 2021.The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the Company’s CEO and CFO.(57)NOTE 21 – COMMITMENTS AND CONTINGENCIESfourseven finance leases.leases. These leases contain rent holidays and customary escalations of lease payments for the type of facilities being leased. 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.●Delaware – 4,000 square feet of retail space in a multi-use building under a five-year lease that expires in April 2027 that the Company has developed into a cannabis dispensary which is subleased to its cannabis-licensed client.●Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility, and is developing the remaining space into processing facility, subleased to its cannabis-licensed client. The lease expires in March 2030, with an option to extend the term for three additional five-year periods.●Delaware – a 12,000 square foot premises which the Company developed into a cannabis production facility with offices, and is subleases to its cannabis-licensed client. The lease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.●Nevada – 10,000 square feet of an industrial building that the Company has built-out into a cannabis cultivation facility and plans to rent to its cannabis-licensed client under a sublease which will be coterminous with this lease expiring in 2024.●Massachusetts – 10,000 square feet of office space which the Company utilizes as its corporate offices under a lease with a related party expiring in 2028, with an option to extend the term for an additional five-year period.●Maryland – a 2,700 square foot two-unit apartment under a lease that expires in July 2022.February 2022July 2023 through June 2024January 2028 with such terms being a major part of the economic useful life of the leased property.20212022 were as follows:follows (in thousands):Operating lease expense $ 1,160 Finance lease expense: Amortization of right-of-use assets $ 169 Interest on lease liabilities 47 Total finance lease expense $ 216 SCHEDULE OF COMPONENTS OF LEASE EXPENSETable of Contents 2021 Operating lease cost $ 1,097,620 Finance lease cost: Amortization of right-of-use assets $ 32,683 Interest on lease liabilities 5,088 Total finance lease cost $ 37,771 is 7.4 years, and for the finance leases is 2.0 years.6.3 years and 3.7 years, respectively. The weighted average discount rate used to determine the right-of-use assets and lease liabilities was between 7.5%7.50% to 12.0%12.75% for all leases.20212022 under all non-cancelable leases having an initial or remaining term of more than one year were:were as follows (in thousands):Year ending December 31, Operating
leasesFinance
leases 2023 $ 1,153 237 2024 1,158 216 2025 1,178 215 2026 1,127 95 2027 1,066 46 Thereafter 2,143 2 Total lease payments 7,825 811 Less: imputed interest (2,379) (125) Present value of lease liabilities $ 5,446 686 SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER ALL NON-CANCELABLE OPERATING LEASES 2021 $ 1,132,909 $ 27,123 2022 1,119,003 23,201 2023 1,049,635 3,229 2024 1,025,054 - 2025 969,584 - Thereafter 2,611,297 - Total lease payments 7,907,482 $ 53,553 Less: imputed interest (2,262,546 ) (3,975 ) $ 5,644,936 $ 49,578 stateState of Ohio (each an “Ohio Lease” and collectively the “Ohio Leases”). Each Ohio Lease hashad an initial lease period of eleven months, with a minimum rent of $31.00$31.00 per square foot, which increasesincreased 3.0% annually.cancould extend the term of one or more of the Ohio Leases to ten years (with two additional five-year options to extend) upon the payment of $50,000$50,000 for eachthe extended Ohio Lease, and developwhich the premises of such extended lease(s)Company is building out into a medical use dispensary.dispensary.dispensary license from the State of Ohio. The Company is awaiting the final verification process to be completed by the state. In April 2022 the Company extended the term of one of the Ohio Leases to February 2023 (the "Extended Ohio Lease"), and the remaining five Ohio Leases were terminated. The Company intends to enter into a ten-year lease on the Extended Ohio Lease property, which will become effective upon the completion of the final verification process by the state, which is expected to occur in the first half of 2023. As of December 31, 2021,2022, the lease termsterm of the Extended Ohio Leases were allLease was less than one year, and accordingly the Company was not required to record a right-of-use asset and corresponding lease liability on its balance sheet. TheAccordingly, the future lease payments of the Extended Ohio LeasesLease are excluded from the table of future minimum lease payments shown above.(58)Terminated Employment AgreementAn employment agreementcommencedthe Company’s President and Chief Executive Officer ("Mr. Levine") has an investment interest. This lease expires in 2012 with Thomas Kidrin, the former CEOOctober 2028 and contains a five-year extension option. Expenses under this lease in both of the years ended December 31, 2022 and 2021 approximated $156,000.was terminatedprocures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the Company in 2017. Since the termination date, the Company had maintained an accrual of approximately $1,043,000 for any amounts that may be owed under this agreement.In July 2019, Mr. Kidrin, also a former directorfamily of the Company, filed a complaintCompany’s Chief Operating Officer (the "COO"). Purchases from this entity totaled $4.8 million and $4.9 million in the Massachusetts Superior Court, which alleged the Company failed to pay all wages owed to himyears ended December 31, 2022 and breached the employment agreement, and requested multiple damages, attorney fees, costs, and interest. 2021, respectively.movedpays royalties on the revenue generated from its Betty’s Eddies product line to dismiss certain counts ofan entity owned by the complaintCOO and asserted counterclaims against Mr. Kidrin alleging breach of contract, breach of fiduciary duty, money had and received, and unjust enrichment.While the Company’s motion to dismissCompany's Chief Revenue Officer (the "CRO") under a royalty agreement. This agreement was pending, the parties entered into a settlement agreement and general release in Augustamended effective January 1, 2021 whereby, among other conditions, (i) Mr. Kidrin’s complaint was dismissed with prejudice, (ii)modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies products to 3.0% if sold directly by the Company issuedand between 1.3% and 2.5% if licensed by the Company for sale by third parties. Future developed products (i.e., ice cream) have a royalty rate of 0.5% if sold directly by the Company and between 0.125% and 0.135% if licensed by the Company for sale by third parties. The aggregate royalties due to Mr. Kidrin five-year warrants to purchase up to this entity for the years ended December 31, 2022 and 2021 approximated $219,000 and $266,000, respectively.1,000,000 sharescommon stock at an exercise pricemajority-owned subsidiaries paid distributions aggregating approximately $27,300 and $44,000, respectively, to Mr. Fireman and Mr. Levine, who own$0.50Contents per share, (iii)irrevocably transferred intangibleaccrued $1,800 in the aggregate at December 31, 2022 for payments relate to the fourth quarter of 2022.Year ended December 31, 2022 2021 U.S federal taxes at the statutory rate 21.0 % 21.0 % State taxes net of federal benefit 12.8 % 16.5 % Section 280E adjustment 11.6 % 14.7 % Stock-based compensation 2.2 % 10.5 % FIN 48 reserve 19.5 % — % Return to Provision adjustments (48.7) % (19.8) % Other 8.2 % 0.9 % Valuation allowance 2.0 % 19.5 % Effective tax rate 28.6 % 63.3 % Year ended December 31, 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 6,947 6,981 Allowance for doubtful accounts 256 11,810 Stock compensation 2,557 2,557 Loss on equity investments 8,602 8,633 Goodwill write-offs 1,188 1,263 Change in fair value of investments 616 599 Lease payments 525 171 Reserves 225 148 Other 95 — Deferred tax liabilities: Depreciation (4,758) (2,520) Real estate revenue (500) (1,000) Net deferred tax asset 15,753 28,642 Valuation allowance (15,753) (28,642) Total $ — $ — Year ended December 31, 2022 2021 Balance at January 1, $ — $ — Additions based on tax positions related to prior years 4,014 — Balance at December 31, $ 4,014 $ — online virtual worlds businessprovision of Section 280E of the Internal Revenue Code. The Company believes that its reserves for uncertain tax positions are appropriate, and that it has meritorious defenses for its tax filings and will vigorously defend them during any audit process, appellate process and through litigation in courts, as necessary.had conductedrecorded a receivable for income taxes of $3.1 million, comprised of $1.3 million of overpayments that will be applied to future periods and $1.8 million that was requested for refund from the Internal Revenue Service. This receivable is reported as a component of Other current assets in early 2014, prior to its pivot into the legal cannabis industry (such assets had zero carrying value on the Company’sCompany's consolidated balance sheet), and (iv) each party released and discharged the other from all claims, losses, and liabilities.sheet at December 31, 2022.In August 2021, the fair valueTable of the warrants of approximately $Contents776,000 was charged to compensation expense, and the Company reversed its accrual of approximately $1,043,000As previously disclosed in Note 3 – Acquisitions, the members of Kind had sought to renege on the parties’ original agreement to a partnership/joint venture made in 2016 and subsequent MOU. The Company engaged with the members of Kind in good faith in an attempt to reach updated terms acceptable to both parties, however the members of Kind failed to reciprocate in good faith, resulting in an impasse. Incrementally, both parties through counsel further sought to resolve the impasse, however such initiative resulted in both parties commencing legal proceedings.commenced an action by filingTherapeutics USA Inc. ("Kind") filed a complaint against the Company in the Circuit Court for Washington County, MDMaryland, captioned Kind Therapeutics USA, Inc. vs. MariMed Inc., et al. (Case No. C-21-CV-19-000670) (the “Complaint”"Maryland Litigation"). The Complaint, as amended, alleges breachcontract, breach of fiduciary duty, unjust enrichment, intentional misrepresentation, rescission, civil conspiracy,Mari Holdings MD LLC ("Mari-MD") and seeking an accounting and declaratory judgment and damages in excess of $75,000 (the Court has subsequently dismissed Kind’s claims for declaratory judgment on the lease, rescission of the lease, and civil conspiracy). On November 15, 2019, the Company filed counterclaims against Kind andMia Development LLC ("Mia") commenced a third-party complaintsuit against the members of Kind (Jennifer DiPietro, Susan Zimmerman,Company's then-Chief Executive Officer and Sophia Leonard-Burns)then-Chief Financial Officer and William Thamits wholly-owned subsidiary MariMed Advisors Inc., in Suffolk Superior Court, Massachusetts (the “Counterclaims”"DiPietro Lawsuit"). The Counterclaims, as amended, allege breach of contract with respect to each ofpartnership/joint venture agreement,parties in the MOU, the MSA, the Lease,Maryland Litigation and the Licensing and Manufacturing Agreement (“LMA”), unjust enrichment, promissory estoppel/detrimental reliance, fraud in the inducement, breach of fiduciary duty, and seeks reformation of the MSA, a declaratory judgment regarding enforceability of the partnership/joint venture arrangement and/or the MOU, specific performance of the parties’ various contracts, and the establishment of a constructive trust for the Company’s benefit. The Counterclaims also seek damages.At the time the Complaint and Counterclaims were filed, both parties, the Company (including its subsidiaries Mari-MD and MariMed Advisors Inc.) and Kind, brought motions for a temporary restraining order and a preliminary injunction. By Opinion and Order entered on November 21, 2019, the Court denied both parties motions for a temporary restraining order. In its opinion, the Court specifically noted that, contrary to Kind’s allegations, the MSA and the Lease “appear to be independent, valid and enforceable contracts.”A hearing on the parties’ cross-motions for preliminary injunction was held in September 2020 and November 2020. Also in November 2020, the Court granted the Company’s motion for summary judgment as to the Lease, determining that the Lease is valid and enforceable. Based on this ruling, the Company is seeking judgment at trial in the amount of approximately $5.4 million for past due rent and expenses owed by Kind under the Lease.In December 2020, the Court entered a Preliminary Injunction Order, accompanied by a Memorandum Opinion, denying Kind’s motion for a preliminary injunction (which Kind had withdrawn at the conclusion of the hearing) and granting the Company’s request for preliminary injunction. The Court determined that the Company is likely to succeed with respect to the validity and enforceability of the MSA and the LMA, that the Company would suffer substantial and irreparable harm without the preliminary injunction, and that the balance of convenience and public interest both warranted the issuance of a preliminary injunction in the Company’s favor. The Court ordered, inter alia, that the MSA and LMA are in effect pending judgment after trial on the merits, and that Kind and its members, and their attorneys, agents, employees, and representatives, are prohibited from (a) interfering with the Company’s duties and responsibilities under the MSA and (b) withdrawing funds, making any distribution, paying any loans, returning any capital, or making any payment towards a debt from any Kind bank or other financial account(s) without written consent of the Company or Order of the Court, thereby preserving the Company’s management of Kind’s operations and finances at least through the jury trial currently scheduled to begin on March 28, 2022. Further, the Court ordered Kind to pay management and licensing fees to the Company beginning January 1, 2021. Kind has noted an appeal of the Order to the Maryland Court of Special Appeals, which the Court denied in December 2021, leaving the preliminary injunction order in effect.In addition to the favorable rulings on the Lease, MSA, and LMA, the Company believes that its claims for declaratory relief, specific performance, and/or breach of contract with respect to the partnership/joint venture agreement claims are meritorious. Further, the Company believes that Kind’s claims against the Company are without merit. On March 18, 2021, the Court issued an opinion and order on Kind’s motion for summary judgment finding that the MOU was not enforceable by the Company against Kind as a final binding agreement. The Company is evaluating an appeal of this ruling which under Maryland rules can only be pursued upon final judgment.In March 2021, the Kind parties filed motions to modify the preliminary injunction order or, alternatively, for direction from the Court based on Kind’s claim to have terminated the MSA. In September 2021, the court denied the motion to modify the preliminary injunction and granted, in part, the motion for direction, but only with respect to Kind’s request to pay litigation costs. The preliminary injunction remains in full effect, and the Company filed a petition for civil contempt against the Kind parties for interfering with the Company’s management of Kind. The contempt petition is currently pending.On December 31, 2021, the parties to the foregoing Maryland litigationDiPietro Lawsuit entered into a global Confidential Settlement and Release Agreement along with the parties to the DiPietro lawsuit (described below). Also on such date, as previously discussed(the "Settlement Agreement") in Note 3 -- Acquisitions in this report,resolution of both litigation matters and (ii) the Company entered into (i)(a) a membership interest purchase agreement with the members of Kind to acquire 100%100% of the equity ownership of Kind (the "Kind Acquisition") and (ii)(b) a membership interest purchase agreement with one of the members of KindJennifer DiPietro to acquire such member’sher entire equity ownership interest Mari-MD and Mia.On January 4, 2022, the Maryland court entered an order staying the litigation and rescheduling the jury trial to October 24, 2022, to November 4, 2022, in the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated. Otherwise, simultaneous with the closing of the transactions contemplated by the Confidential Settlement and Release Agreement, the foregoing Maryland litigation will be dismissed with prejudice, along with the DiPietro lawsuit.In the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated, the Company intends to aggressively prosecute and defend the action.DiPietro Lawsuit In August 2020, Jennifer DiPietro, directly and derivatively on behalf of Mari-MD and Mia commenced a suit against(the "DiPietro Acquisition").Company’s CEO, CFO,consummation of the Kind Acquisition, the Maryland Litigation was dismissed in its entirety with prejudice, and wholly-owned subsidiary MariMed Advisors Inc. (“MMA”), in Suffolk Superior Court, Massachusetts.
the parties released each other from any and all claims between them.(59)this action, DiPietro, a party to prior ongoing litigation in Maryland involvingJune 2022, upon the Company and Kind as discussed above, brings claims for breachapproval of fiduciary duty, breach of contract, fraudthe court in the inducement, aidingDiPietro Lawsuit, the DiPietro Acquisition was consummated and abetting the alleged breach of fiduciary duty, and also seeks access to books and records and an accounting related to her investments in Mari-MD and Mia. DiPietro seeks unspecified money damages and rescission of her interest in Mari-MD, but not of her investment in Mia, which has provided substantial returns to her as a member.The Company has answered the complaint and MMA filed counterclaims against DiPietro on its own behalf and derivatively on behalf of Mari-MD for breach of her fiduciary duties to each of those entities, and for tortious interference with Mari-MD’s lease and MMA’s management services agreement with Kind.On December 31, 2021, the parties to the foregoing Massachusetts litigation entered intoreleased each other from any and all direct and derivative claims, and a global Confidential Settlementstipulation dismissing all claims and Release Agreement, alongcounterclaims with prejudice was filed with the parties to the Maryland lawsuit described above. Because the Massachusetts litigation involves derivative claims, the Massachusetts Superior Court must approve the parties’ proposed dismissal of those claims. The parties to the Massachusetts litigation have filed a joint motion seeking to dismiss the derivative claims. Simultaneous with the closing of the transactions contemplated by the Confidential Settlement and Release Agreement, all direct claims in the foregoing Massachusetts litigation will be dismissed with prejudice, along with the Maryland lawsuit.In the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated, the Company believes that the allegations of the complaint in the foregoing Massachusetts litigation are without merit and intends to defend the case vigorously. The Company’s counterclaim seeks monetary damages from DiPietro, including the Company’s legal fees in the Maryland lawsuit.33.5%33.5% ownership interest in GenCanna. The Company recorded a related party receivable of approximately $29.0$29 million from the sale, which was fully reserved on December 31, 2019.In FebruaryGenCanna USA, GenCanna’s wholly-owned operating subsidiary, under pressure from certain of its creditors including MGG Investment Group LP, GenCanna’s senior lender (“MGG”), agreed to convert a previously-filedan involuntary bankruptcy proceeding under Chapter 11 was filed against GenCanna and its wholly-owned subsidiary, OGGUSA Inc. (f/k/a GenCanna Global US, Inc.) ("OGGUSA" and together with GenCanna, the "OGGUSA Debtors") in the U.S. Bankruptcy Court in the Eastern District of Kentucky (the “Bankruptcy Court”"Bankruptcy Court"). In February 2020, the OGGUSA Debtors, under pressure from certain of its creditors including its senior lender MGG Investment Group LP (MGG"), agreed to convert the involuntary bankruptcy proceeding into a voluntary Chapter 11 proceeding. In addition, GenCanna and GenCanna USA’sThe OGGUSA Debtors' subsidiary, Hemp Kentucky LLC, (collectively with GenCanna and GenCanna USA, the “GenCanna Debtors”),also filed voluntary petitions under Chapter 11 in the Bankruptcy Court.GenCannaOGGUSA Debtors, which included the Company, entered an order authorizing the sale of all or substantially all of the assets of the GenCannaOGGUSA Debtors to MGG. After the consummation of the sale of all or substantially all of their assets and business, the GenCannaOGGUSA Debtors n/k/a OGGUSA, Inc. and OGG, Inc. (the “OGGUSA Debtors”) filed their liquidating plan of reorganization (the “Liquidating Plan”) to collect various prepetition payments and commercial claims against third parties, liquidate the remaining assets of the ODDUSAOGGUSA Debtors, and make payments to creditors. The Company and the unsecured creditors committee filed objections to such Liquidating Plan including opposition to the release of litigation against the OGGUSA Debtors’ senior lender, MGG, for lender liability, equitable subordination, and return of preference. As a part of such plan confirmation process, the OGGUSA Debtors filed various objections to proofs of claims filed by various creditors, including the proof of claim in the amount of approximately $33.6 million filed by the Company. Through intense and lengthy negotiations with the OGGUSA Debtors and the unsecured creditors committee regarding the objections to the Liquidating Plan, the Company reached an agreement with the OGGUSA Debtors to withdraw the objections to the Company’s claim and to have it approvedwas confirmed by the Bankruptcy Court as a general unsecured claim in the amount of $on November 12, 2020.31.0 million. administrator for the OGGUSA Debtors (the "Plan Administrator"), executed a written release of claims, if any, of the Company against Huron Consulting Group (“Huron”), a financial consulting and management company retained by the senior lender of the OGGUSA Debtors to perform loan management services for the lender and OGGUSA Debtors prior to and during$40,000$40,000 to the bankruptcy estates of the OGGUSA Debtors to be included in the funds to be distributed to creditors, including the Company.still insufficient information as to what portion,how much of the Company's allowed general unsecured claim, if any, of the Company’s allowed claim will be paid upon the completion of the liquidation of the remaining assets of the OGGUSA Debtors.(60)NOTE 22 – AcquisitionIn2022,24, 2023, the Company entered into a stock purchase agreement to acquire 100% Loan and Security Agreement (the “Credit Agreement”), by and among the Company, subsidiaries of the ownership interestsCompany from time-to-time party thereto (together with the Company, collectively, the “Borrowers”), lenders from time-to-time party thereto (the “Lenders”), and Chicago Atlantic Admin, LLC (“Chicago Atlantic”), as administrative agent for the Lenders.Green Growth Group Inc.a new cultivation and processing facility in Illinois, complete the buildout of a new processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and to repay in full the Kind Therapeutics seller notes incurred in connection with the Kind acquisition in April 2022. The remaining balance, if any, will be used to fund acquisitions.entityevent of default or 7.50% upon a material event of default as provided in the Credit Agreement.has been awardedare otherwise not permitted, among others. Additionally, the Credit Agreement requires the Borrowers to meet certain financial tests.craft grow cannabis license20% premium to the trailing 20-day average price on the closing date of each such funding. At the initial closing, upon funding of the initial $30.0 million under the facility, the Company issued byto the Illinois DepartmentLenders an aggregate of Agriculture (“IDA”) for cultivation, production, and transporting of cannabis and cannabis-infused products in Illinois. The19,148,936 warrants to purchase price of $3,400,000 shall be comprised of $1,900,000 in cash and shares of the Company’s common stock valued at $1,500,000. The acquisition is conditioned$0.47 per share, exercisable for a five-year period following issuance. Incremental warrants are issuable upon further draw-downs under the approval byfacility.IDA, among other closing conditions, which is expected to occur by July 2022.Property PurchaseIn January 2022,Company's Credit Agreement described above, the Company entered into an agreement to purchase a 30-acre parcel of land locatedrepaid in Mt. Vernon, IL containing a 33,000 square foot manufacturing facility and a 13,000 square foot storage warehouse, in exchange for $1,495,000 in cash. Upon execution offull the agreement, the Company provided a deposit of $100,000 to the seller. The transaction is expected to close in the second quarter of 2022, after the Company has performed a complete inspection and feasibility review. If such review determines that the premises will not satisfy the Company’s requirements, the Company shall have the right to terminate the agreement with no other obligation other than the loss of the deposit.Return on InvestmentIn February 2022, the Company received shares of common stock of WM Technology, Inc. (Nasdaq: MAPS), a technology and software infrastructure provider to the cannabis industry. The shares were received for no consideration, and represent the Company’s pro rata share of additional consideration received by MRSVP pursuant to the asset purchase agreement previously discussed inKind Notes (see Note 4 – Investments11).Promissory Note ConversionIn February 2022, the noteholder of the $3.2M Note converted $400,000 of principal into shares of the Company’s common stock. Such conversion was effected in accordance with the terms of the note agreement, and therefore the Company was not required to record a gain or loss upon conversion. Upon this conversion, the $3.2M Note no longer had an outstanding balance and was fully retired.Cannabis LicenseIn February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio, and is awaiting the final verification process to be completed by the state.2021, (i) options to purchase 2022, the following equity transaction occurred:10,000were exercised atissued as payment under a royalty agreement with an exercise priceaggregate fair market value of $ per share.(61)CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREChanges in and Disagreements with Accountants on Accounting and Financial DisclosureNone.ITEMCONTROLS AND PROCEDURES.Controls and ProceduresThe Company’sitsour CEO and CFO, evaluated the effectiveness of the Company’sour disclosure controls and procedures (defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)Act of 1934, as amended (the "Exchange Act")) as of December 31, 20212022 (the “Evaluation Date”). Based upon that evaluation, theour CEO and CFO concluded that, as of the Evaluation Date, the Company’sour disclosure controls and procedures are effective to ensure that information required to be disclosed by the Companyus in the reports that it fileswe file or submitssubmit under the Exchange Act (i) are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to the Company’sour management, including itsour CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.The Company’stheour CEO and CFO, and effected by theour board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.The Company’sitsour management and the board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations which may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.The Company’sOur CEO and CFO assessed the effectiveness of itsour internal control over financial reporting as of December 31, 2021.2022. In making this assessment, theour CEO and CFO used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on that assessment and using the COSO criteria, theour CEO and CFO have concluded that, as of December 31, 2021, its2022, our internal control over financial reporting was not effective due to the lack of a formalized and complete set of policy and procedure documentation evidencing theour Company’s system of internal controls over financial reporting (“Lack of Formal Documentation”). Such Lack of Formal Documentation is not uncommon inour a company of the Company’sour size due to personnel and financial limitations.The Company’sthe Company’sour financial position could make it difficult for it to implement this remediation.the Companywe implemented significant measures to remediate past instances of ineffectiveness of the Company’sour internal control over financial reporting, The remediation measures consisted of the engagement of accounting consultants as needed to provide expertise on specific areas of the accounting guidance, the hiring of individuals with appropriate experience in internal controls over financial reporting, and the modification to the Company’sour accounting processes and enhancement to the Company’sour financial control. Further, the Companywe expanded itsour board of directors to include a majority of independent disinterested directors; established an audit, compensation, and corporate governance committee of the board of directors; and adopted a formal policy with respect to related party transactions.the Company’sour internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or20212022 that has materially affected, or is reasonably likely to materially affect, the Company’sour internal control over financial reporting.the Companyus to provide only itsour management’s report in this annual report on Form 10-K, an attestation report of the Company’sour independent registered public accounting firm regarding internal control over financial reporting is not included in this Annual Report on Form 10-K.ITEMOTHER INFORMATION.None.
Other Information(62)PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.The following table sets forthname, age and position of to the Company’s directors and executive officers. to the Company’s directors are elected annually and serve until the next annual meeting of stockholders.NameAgePositionRobert Fireman73President, Chief Executive Officer, and ChairmanBoard appointed Jon R. Levine 57Chief Financial Officer, Treasurer, Secretary, and DirectorEva Selhub, M.D. (4) (5)54DirectorDavid Allen (1) (5)67DirectorEdward Gildea (2) (3)70Director(1)Chairman of the Audit Committee.(2)Member of the Audit Committee.(3)Chairman of the Compensation Committee and the Nominating and Corporate Governance Committee.(4)Member of the Compensation Committee.(5)Member of the Nominating and Corporate Governance Committee.Set forth below is a brief description of the background and business experience of to the Company’s executive officers and directors:Robert Fireman has served as the Company’s president and chief executive officer since 2017 and as a director since its formation. Mr. Fireman, and is a seasoned executive and an early pioneer and visionary in the cannabis industry. Under his leadership, the Company has applied for and been awarded legal cannabis licenses in multiple states and has overseen the development of state of the art, regulatory compliant cannabis cultivation, production, and retail facilities. Mr. Fireman was a founder and director of Consumer Card Marketing, Inc., a pioneer in the development of retail loyalty marketing programs for the supermarket and drug store industries that was sold to News America Marketing, a division of News Corp. Mr. Fireman has been a practicing attorney for over 30 years. Mr. Fireman’s legal acumen and entrepreneurial experience in diverse industries serve as tremendous assets in navigating the Company through the complex, regulated emerging cannabis industry. In addition, he draws on his experience in direct marketing and loyalty programs, identity security, hydroponic farming, medical billing, and many other consumer facing applications to benefit the challenges and issues facing the Company’s growth and success. Mr. Fireman’s experience in the emerging cannabis industry and his professional background make him well-qualified to serve as chairman of the Company’s board of directors (the “Board”).Jon R. Levine has served as the Company’s chief financial officer, treasurer, and secretary since 2017 and has been a director since 2016. Mr. Levine has over ten years of experience in the cannabis industry. He possesses over 20 years of experience in commercial real estate development, management, and financial services. Mr. Levine was a partner at Equity Industrial Partners, a national commercial real estate management group. He also has past experience in banking at US Trust Bank as an asset-based lender, in the leasing industry with AT&T Financial Services, and with New Court Financial as a senior credit officer. Mr. Levine’s experience in the cannabis industry and his professional background make him an important part of the Company’s management team and make him well-qualified to serve as a member of the Board.Eva Selhub, M.D. has been a director since September 2019. Dr. Selhub is a board-certified physician, speaker, scientist, executive leadership and performance coach, consultant in the field of corporate wellness and resilience, and an author. From August 1997 to November 2016, she served as an instructor and lecturer of medicine at Harvard Medical School. During this period, Dr. Selhub simultaneously held other positions at Tufts University, Massachusetts General Hospital, as well as other professional healthcare/medical organizations. From October 2006 to October 2017, she was a senior physician at Benson Henry Institute for Mind/Body Medicine at Massachusetts General Hospital. From August 2016 to present, she has been an adjunct scientist of neuroscience at Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts University, one of six human nutrition research centers supported by the United States Department of Agriculture. Dr. Selhub received a Bachelor of Arts degree in anthropology from Tufts University in 1989 and her M.D. degree from Boston University School of Medicine in 1994. Dr. Selhub’s professional experience and background as a physician, scientist and in mind-body medicine allow her to make valuable contributions to the Board and provide expertise to serve as one of the Company’s directors.(63)David Allen has been a director since June 2019. He brings over 24 years of experience as a director, CEO and CFO of public companies. Mr. Allen presently serves as Chief Financial Officer of Iconic Brands, Inc. From April 2019 to November 2021, Mr. Allen served as Chief Financial Officer, board member, and audit committee chair of Iconic Brands, Inc. From May 2018 to April 2019, Mr. Allen served as Chief Financial Officer of Iconic Brands, Inc. From December 2014 to January 2018, Mr. Allen served as the Chief Financial Officer of WPCS International, Inc. From 2004 to 2017, Mr. Allen served as Chief Financial Officer of Bailey’s Express, Inc., a privately held trucking corporation, which filed for Chapter 11 bankruptcy in July 2017. Mr. Allen served as the Chapter 11 Plan Administrator for the bankruptcy case until December 2020, at which time the proceeding was closed. From June 2006 to June 2013, Mr. Allen served as the Chief Financial Officer and Executive Vice President of Administration at Converted Organics, Inc., after serving as audit committee chair of Converted Organics. Mr. Allen is currently an Assistant Professor of Accounting at Southern Connecticut State University (“SCSU”), a position he has held since 2017. For the 12 years prior, he was an Adjunct Professor of Accounting at SCSU and Western Connecticut State University. Mr. Allen is a licensed CPA and holds a bachelor’s degree in Accounting and a master’s degree in Taxation from Bentley College. Mr. Allen’s background as a director, CEO and CFO of public companies allows him to make valuable contributions to the Board.Edward Gildea has been a director since the Company’s formation. Mr. Gildea is currently a partner in the law firm Fisher Broyles LLP, a position he has held since 2014. From 2006 to 2013, Mr. Gildea was President,Company's Chief Executive Officer and Chairman of Converted Organics Inc., a publicly held green technology company that manufactured and sold an organic fertilizer made from recycled food waste. Mr.Edward Gildea contributes expertise in the areas of mergers & acquisitions, strategic planning, funding, business development, and executive leadership. Mr. Gildea received a B.A. from The College of the Holy Cross and a J.D. from Suffolk University Law School. Mr. Gildea’s executive business experience was instrumental in his selection as a memberChairman of the Board.Family RelationshipsNoneUpon termination of an Executive’s employment by the Company without Cause or by an Executive for Good Reason (each as defined in the Employment Agreements), each Executive is entitled to severance payments equal to: (i) 12 months of his/her base salary, payable over 12 months following termination; (ii) the aggregate sum of the directorsCompany’s share of medical, dental, and vision insurance premiums for such Executive and his/her dependents for a 12 month period, payable over 12 months following termination; (iii) in the event such termination occurs less than six months following the commencement of the fiscal year, such Executive shall be entitled to receive a prorated target bonus, prorated based on the number of days actually employed in such fiscal year (the “Pro Rata Bonus”), payable on the severance commencement date; and (iv) in the event such termination occurs six months or executive officerslater following the commencement of the fiscal year, an amount equal to the target bonus (the “Target Bonus”), payable on the severance commencement date.In addition, upon such termination, the Executive’s equity awards that are relatedsubject to vesting based solely upon such Executive’s continued service with the Company and would have vested during the 12 month period following the date of termination of employment will vest.blood, marriage,the Company without Cause or adoption.by an Executive for Good Reason during a Change in Control Protection Period (as defined in the Employment Agreements), each Executive is entitled to receive a cash lump sum payment equal to: (a) the sum of 24 months of the Executive’s base salary; (b) two times the Executive’s target bonus for the calendar year in which the date of termination occurs; (c) the aggregate sum of the Company’s share of medical, dental, and vision insurance premiums for the Executive and his/her dependents for a 24 month period; (d) if in the event such termination occurs less than six months following the commencement of the fiscal year, such Executive shall be entitled to receive the Pro Rata Bonus, payable on the severance commencement date; and (e) in the event such termination occurs six months or later following the commencement of the fiscal year, an amount equal to the Target Bonus, payable on the severance commencement date.Legal ProceedingsNone.CodeIn addition, upon such termination, any of Ethicsthe Executive’s unvested equity awards outstanding immediately prior to the date of termination will automatically become fully vested and exercisable as of the date of termination.Company hasforegoing description of each Employment Agreement is qualified in its entirety by reference to the respective Employment Agreement, which are filed as Exhibits 10.18, 10.19, and 10.20 hereto and are incorporated herein by reference.“Code of Ethics”“Code”) that applies to itsour Board of Directors executive officers, including our principal chief executive officer, principal financial officer, principal accounting officer or controller, or personsindividuals performing similar functions.functions, as well as our employees. A copy of the Code of Ethics can be found on the Company’sour website at https://bit.ly/MRMDethics.ir.marimedinc.com/corporate-governance/governance-documents. The Code of Ethics was designed with the intent to deter wrongdoing, and to promote the following:●Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships●Full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submit to, the Commission and in other public communications the Company makes●Compliance with applicable governmental laws, rules and regulations●The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code●Accountability for adherence to the code(64)Director Independencehonest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;Board has determined that Messrs. David Allen and Edward Gildea, and Dr. Eva Selhub are independent and represent a majority of its members. In determining director independence, the Board applies the independence standards setinformation required by the Nasdaq Stock Market (“NASDAQ”). In applying these standards, the Company’s Board considers all transactionsthis Item 10 is incorporated herein by reference to our definitive included in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the independent directors and the impact of such transactions, if any, on any of the independent directors’ ability to continue to serve on the Company’s Board.Board CommitteesThe Board has three standing committees: an audit committee (the “Audit Committee”), a compensation committee (the “Compensation Committee”) and a nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”). Each committee is made up entirely of independent directors as defined under section 5605(a)(2) of the NASDAQ rules. The members of the Audit Committee are Messrs. Allen and Gildea. Mr. Allen is also the chairman of the Audit Committee and qualifies as the “audit committee financial expert” pursuant to Item 407(d)(5) of Regulation S-K. The members of the Compensation Committee are Mr. Gildea and Dr. Selhub, and the members of the Nominating and Corporate Governance Committee are Messrs. Allen and Gildea and Dr. Selhub. Mr. Gildea is the chairman of both of these committees.The Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee have, the responsibilities described below.Audit Committee.The Audit Committee oversees the Company’s accounting and financial reporting processes, internal systems of accounting and financial controls, relationships with auditors and audits of financial statements. Specifically, the Audit Committee’s responsibilities include the following:●selecting, hiring and terminating the Company’s independent auditors;●evaluating the qualifications, independence, and performance of the Company’s independent auditors;●approving the audit and non-audit services to be performed by the independent auditors;●reviewing the design, implementation and adequacy and effectiveness of the Company’s internal controls and critical policies;●overseeing and monitoring the integrity of the Company’s financial statements and its compliance with legal and regulatory requirements as they relate to its financial statements and other accounting matters;●with management and the Company’s independent auditors reviewing any earnings announcements and other public announcements regarding its results of operations; and●preparing the report that the SEC requires in the Company’s annual proxy statement.A copy of the Audit Committee charter is available on the Company’s website at www.marimedinc.com.Compensation Committee.The Compensation Committee assists the Board in determining the compensation of the Company’s officers and directors. The Compensation Committee is comprised entirely of directors who satisfy the standards of independence applicable to Compensation Committee members established under 162(m) of the Code and Section 16(b) of theU.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Specific responsibilities includeCommission not later than 120 days after the following:● approving the compensation and benefits of its executive officers;● reviewing the performance objectives and actual performance of its officers; and● administering its stock option and other equity and incentive compensation plans.(65)Nominating and Corporate Governance Committee.The Nominating and Corporate Governance Committee assists the Board by identifying and recommending individuals qualified to become membersend of the Board. Specific responsibilities include the following:●evaluating the composition, size and governance of the Board and its committees and making recommendations regarding future planning and the appointment of directors to the Company’s committees;●establishing a policy for considering stockholder nominees to the Board;●reviewing the Company’s corporate governance principles and making recommendations to the Board regarding possible changes; and●reviewing and monitoring compliance with the Company’s code of ethics and insider trading policy.Board NominationsPrior to the establishment of the Nominating and Corporate Governance Committee, the entire Board acted as the nominating committee for the purposes of identifying and recommending director candidates. The Board was responsible for nominating director candidates for the annual meeting of stockholders each year and considered director candidates recommended by stockholders. These responsibilities have largely been assumed by the Nominating and Corporate Governance Committee.In considering candidates submitted by stockholders, the Nominating and Corporate Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate. The Nominating and Corporate Governance Committee may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. To have a candidate considered by the Nominating and Corporate Governance Committee for recommendation to the Board for nomination as a director candidate, a stockholder must submit the recommendation in writing and must include the following information: (i) the name of the stockholder and evidence of the person’s ownership of Company stock, (including the number of shares owned and the length of time of ownership); (ii) the name of the candidate; (iii) the candidate’s resume or a listing of his or her qualifications to be a director of the Company; and (iv) the person’s consent to be named as a director if selected and nominated by the Board.The information described above must be sent to the Company’s Secretary at 10 Oceana Way, Norwood, Massachusetts 02062, on a timely basis in order to be considered by the Nominating and Corporate Governance Committee, within the time period prescribed by Rule 14a-8 under the Exchange Act.Section 16(a) Beneficial Ownership Reporting ComplianceUnder Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash-only rights) and any changes in that ownership with the Commission. Specific due dates for these reports have been established, and the Company is required to report, in this Form 10-K, any failure to comply therewith during theCompany's fiscal year ended December 31, 2021 or prior fiscal years.2022.Otheras set forth in120 days after the Delinquent Section 16(a) Reports section below, the Company believes that all of these filing requirements were satisfied by its executive officers, directors and by the beneficial owners of more than 10%end of the Company’s common stock. In making this statement, the Company has relied solely on copies of any reporting forms it has received, and upon any written representations received from reporting persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership) was required to be filed under applicable rules of the Commission.Delinquent Section 16(a) ReportsEach of Robert Fireman and Jon Levine was not timely in the filing of one Form 4 during theCompany's fiscal year ended December 31, 20212022.report an option exerciseour definitive included in December 2021.(66)ITEM 11. EXECUTIVE COMPENSATION.The following table sets forthour definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the compensation paid byU.S. Securities and Exchange Commission not later than 120 days after the Company duringend of the Company's fiscal periods ended December 31, 2021 and 2020 to its chief executive officer and other most highly compensated executive officers whose compensation exceeded $100,000 for the year ended December 31, 2021.2022.Summary Compensation Table (1) (2)Name and principal position Year Salary Bonus Stock Awards Total Robert Fireman 2021 $ 250,192 $ - $ 23,000 $ 6,253,226 $ - $ 6,526,418 President and CEO 2020 $ 31,486 $ - $ - $ - $ - $ 31,486 Jon R. Levine 2021 $ 237,981 $ - $ 23,000 $ 6,253,226 $ - $ 6,514,207 Chief Financial Officer 2020 $ 37,486 $ - $ - $ - $ - $ 37,486 Timothy Shaw 2021 $ 223,269 $ - $ - $ 1,563,307 $ - $ 1,786,576 Chief Operating Officer 2020 $ 158,139 $ 1,751 $ - $ 5,967 $ - $ 165,857 (1)The compensation reported on the table does not include other personal benefits, the total value of which do not exceed $10,000.(2)Pursuant to the regulations promulgated by the SEC, the table omits columns reserved for types of compensation not applicable to us.(3)Amounts represent the fair value of option awards valued on grant date using the Black-Scholes pricing model and recognized over the vesting period for financial reporting purposes.Stock Option Grantsfollowing table sets forth information as of December 31, 2021 concerning unexercised options, unvested stockrequired by this Item 13 is incorporated herein by reference to our definitive included in our definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the U.S. Securities and equity incentive plan awards forExchange Commission not later than 120 days after the officers named in the Summary Compensation Table.Outstanding Equity Awards at Year Ended December 31, 2021Name Robert Fireman 2,500,000 2,500,000 - $ 0.90 10/01/26 Robert Fireman 2,500,000 2,500,000 - $ 0.88 07/09/26 Jon R. Levine 2,500,000 2,500,000 - $ 0.90 10/01/26 Jon R. Levine 2,500,000 2,500,000 - $ 0.88 07/09/26 Timothy Shaw 625,000 625,000 - $ 0.90 10/01/26 Timothy Shaw 625,000 625,000 - $ 0.88 07/09/26 Timothy Shaw 50,000 - - $ 0.30 03/31/25 (67)Compensation of DirectorsThe compensation package for eachend of the three non-employee members of the Board is comprised of an annual grant of stock options to purchase up to 100,000 shares of the Company’s common stock with a five-year term at an exercise price equal to the fair value the Company’s common stock on the grant date, and cash compensation of $6,250 per quarter.The following table sets forth information concerning the compensation paid to each of to the Company’s non-employee directors during 2021 for their services rendered as directors.Name Total Eva Selhub, M.D. (1) $ 25,000 $ 0 $ 60,890 $ 85,890 David Allen (2) $ 25,000 $ 0 $ 60,890 $ 85,890 Edward Gildea (3) $ 25,000 $ 0 $ 60,890 $ 85,890 (1)Dr. Selhub held 200,000 stock options at December 31, 2020.(2)Mr. Allen held 200,000 stock options at December 31, 2020.(3)Mr. Gildea held 300,000 stock options at December 31, 2020.(4)Amounts represent the fair value of option awards valued on grant date using the Black-Scholes pricing model and recognized over the vesting period for financial reporting purposes.(68)ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.The following table sets forth as of March 16, 2022, certain information with respect to the beneficial ownership of common stock by (i) each of to the Company’s directors and executive officers; (ii) each person known to us who owns beneficially more than 5% of the common stock; and (iii) all directors and executive officers as a group.Name and Address of Beneficial Owner (1) % of Class (2) Robert Fireman 28,581,962 (3) 8.40% Jon R. Levine 31,696,727 (4) 9.32% Timothy Shaw 11,149,508 (5) 3.31% Eva Selhub, M.D. 200,000 (6) * David Allen 200,000 (6) * Edward Gildea 529,391 (7) * All directors and executive officers as a group (six persons) 72,357,588 (8) 20.84% *Less than one percent.(1)The business address for each person named is c/o MariMed Inc., 10 Oceana Way, Norwood, MA 02062.(2)Calculated pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934 whereby shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by a person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. The Company believes that each individual or entity named has sole investment and voting power with respect to the shares of common stock indicated as beneficially owned by them (subject to community property laws where applicable) and except where otherwise noted. All percentages are determined based on 335,183,206 shares of common stock outstanding as of March 16, 2022.(3)Includes 5,000,000 currently exercisable stock options.(4)Includes 5,000,000 currently exercisable stock options and 6,684,640 shares of common stock held in a trust for the benefit of the Mr. Levine’s children. Mr. Levine’s spouse is the trustee of the trust. Mr. Levine disclaims beneficial ownership of the 6,684,640 shares held in trust for the purposes of section 13(d) or 13(g) of the Exchange Act.(5)Includes 1,300,000 currently exercisable stock options and 2,000,000 shares of common stock held in a trust for the benefit of Mr. Shaw’s children. Mr. Shaw’s spouse is the trustee of the trust. Mr. Shaw disclaims beneficial ownership of the 2,000,000 shares held in the trust for the purposes of section 13(d) or 13(g) of the Exchange Act.(6)Includes 200,000 currently exercisable stock options.(7)Includes 300,000 currently exercisable stock options(8)Includes 12,000,000 currently exercisable stock options(69)ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.Effective July 1, 2021, the Company entered into employment agreements with its CEO, CFO, and COO, expiring in June 2024, that provide for an annual base salary of $350,000, $325,000, and $300,000, respectively, and the ability to receive annual bonuses of up to 75% of the executive’s annual base salary for eachCompany's fiscal year during the term, based on reaching certain performance goals established by the Company.Pursuant to the agreements, the CEO, CFO, and COO were granted (i) on the effective date, options to purchase up to 5,000,000, 5,000,000, and 1,250,000 shares, respectively, of the Company’s common stock, at an exercise price of $0.88 per share, that vest over one year and expire in July 2026, and (ii) in October 2021, options to purchase up to 5,000,000, 5,000,000, and 1,250,000 shares, respectively, of the Company’s common stock, at an exercise price of $0.90 per share, that vest over one year and expire in September 2026.Additionally, the agreements (i) provide these officers with additional grants on each anniversary of the effective date of the agreements in the sole discretion of the Company’s Compensation Committee, and contain covenants not to compete, non-solicitation provisions, and termination obligations, among other terms and conditions.In July 2021, the Company granted five-year options to purchase up to 100,000 shares of common stock to each of the Company’s three independent board members at an exercise price of $0.88 per share.In December 2021, the CEO and CFO each exercised options to purchase 100,000 shares of common stock on a cashless basis. The exercise price of $0.63 per share was paid via the surrender by each individual of 73,256 shares of common stock. Also in this month, an independent board member allowed to expire options to purchase up to 100,000 of commons stock at an exercise price of $0.63 per share.In April 2020, the Company issued options to purchase up to 50,000 shares of common stock to its COO, with an exercise price of $0.30 per share and expiring three years from grant date. The fair value of these options of approximately $6,000 was charged to compensation expense over the annual vesting period. No options were issued to related parties in 2021.In 2020, options to purchase an aggregate of 550,000 shares of common stock were exercised by the Company’s CEO, CFO, and an independent board member at exercise prices of $0.13 and $0.14 per share.The Company’s corporate offices are leased from an entity in which the Company’s CFO has an investment interest. This lease expires in October 2028 and contains a five-year extension option. In 2021 and 2020, expenses incurred under this lease approximated $156,000 in both years.The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s COO. The aggregate purchases from this entity in 2021 and 2020 approximated $4.9 million and $2.5 million, respectively.The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the Company’s COO and its SVP of Sales under a royalty agreement. This agreement was amended effective January 1, 2021 whereby, among other modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies products to (i) 3.0% and 10.0% of wholesale sales of existing products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively, and (ii) 0.5% and 1.0% of wholesale sales of future developed products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively. The aggregate royalties due to this entity in 2021 and 2020 approximated $266,000 and $615,000, respectively.In 2021 and 2020, one of the Company’s majority owned subsidiaries paid aggregate distributions of approximately $44,000 and $30,000, respectively, to the Company’s CEO and CFO, who own minority equity interests in such subsidiary. In 2021, another of the Company’s majority owned subsidiaries paid distributions of approximately $7,000 to a current employee who owns a minority equity interest in such subsidiary.The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the Company’s CEO and CFO.(70)ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.Fees Billed for Audit and Non-Audit ServicesThe following table represents the aggregate fees billed for professional audit services rendered by the independent registered public audit firm of M&K CPAs PLLC for the audit of the annual financial statements for the years ended December 31, 20212022.2020.Services Year Ended December 31, 2021 2020 Audit fees (1) $ 128,000 $ 97,279 Audit-related fees (2) - - Tax fees (3) - - All other fees (4) 2,500 1,500 Total accounting fees and services $ 130,500 $ 98,779 (1)Fees for professional services for the audit of the Company’s annual financial statements, and for the review of the financial statements included in the Company’s filings on Form 10-Q, and for services that are normally provided in connection with statutory and regulatory filings or engagements.(2)Fees for assurance and related services in connection with the performance of the audit or the review of the Company’s financial statements.(3)Fees for professional services with respect to tax compliance, tax advice, and tax planning.(4)Fees for permissible work that does not fall within any of the aforementioned categories of audit fees, audit-related fees, or tax fees.Pre-Approval Policy for AuditNon-Audit ServicesThe audit committee pre-approves all audit and non-audit services before an accountant is engaged. AllExchange Commission not later than 120 days after the end of the services rendered to the Company by its independent registered public auditors were pre-approved by the audit committee, and prior to the establishmentCompany's fiscal year ended December 31, 2022.ITEMEXHIBITS, FINANCIAL STATEMENT SCHEDULES.The Company has filed the following documents as part of this Form 10-K:1. Consolidated Financial StatementsSee Index to ConsolidatedExhibits, Financial Statement on page 28.Schedules2.Statement SchedulesStatementsNo financial statement schedules are included because the information is either provided in theor isof the Company are listed in the index under Part II, Item 8, of this Annual Report on Form 10-K.related instructions, or the information is inapplicable, and therefore such schedules have been omitted.3. Exhibits
contained in the consolidate financial statements or notes thereto, included herein.(72)(73)101.INS XBRLInstance Document *101.SCH XBRLTaxonomy Extension Schema *101.CAL XBRLTaxonomy Extension Calculation Linkbase *101.DEF XBRLTaxonomy Extension Definition Linkbase *101.LAB XBRLTaxonomy Extension Label Linkbase *101.PRE XBRLTaxonomy Extension Presentation Linkbase *104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) ** Filed herewith.** Furnished herewithaccordance with the Exhibit Index immediately preceding the signature page of this Annual Report, which Exhibit Index is incorporated herein by reference.601 (32)(ii)16. Form 10-K SummaryRegulation S-K.Contents*** This exhibit is a management contract or compensatory plan or arrangement.(a)Previously filed as an exhibit to the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011 and incorporated herein by reference.(b)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017 and incorporated herein by reference.(c)Intentionally omitted.(d)Previously filed as Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A, filed on August 26, 2019 and incorporated herein by reference.(e)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019 and incorporated herein by reference.(f)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.(g)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.(h)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 27, 2020 and incorporated herein by reference.(i)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed on May 28, 2020 and incorporated herein by reference.(j)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.(k)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.(l)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.(m)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.(n)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.(o)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 29, 2013 and incorporated herein by reference.(p)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 2, 2021 and incorporated herein by reference.(q)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2021 filed on November 15, 2021 and incorporated herein by reference.(r)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 23, 2021 and incorporated herein by reference.(s)Previously filed as an exhibit to the Current Report on Form 8-K filed on July 9, 2021 and incorporated herein by reference.ITEM 16. FORM 10-K SUMMARYNone.(74)SIGNATURESIn accordance with16, 2022MARIMED INC. (Registrant) By: /s/ Robert FiremanJon R. LevineName: Robert FiremanJon R. LevineTitle: President and Chief Executive OfficeOfficerIn accordance withSignature Title Date /s/ Robert FiremanJon R. LevinePresident and Chief Executive Officer March 16, 2022Robert Fireman(Principal Executive Officer)/s/ Jon R. LevineChief Financial OfficerMarch 16, 20223, 2023Jon R. Levine (Principal Executive Officer) /s/ Susan M. Villare Chief Financial Officer March 3, 2023 Susan M. Villare (Principal Financial Officer) /s/ Edward Gildea Director and Chairman of the Board March 3, 2023 Edward Gildea /s/ Eva SelhubDavid AllenDirector March 16, 20223, 2023David Allen /s/ Eva Selhub Director March 3, 2023 Eva Selhub Exhibit No. /s/ Edward GildeaDirectorMarch 16, 2022Edward Gildea/s/ David AllenDirectorMarch 16, 2022David Allen(75)INDEX TO EXHIBITSExhibit No.Description 3.1 3.1.1 3.1.2 3.1.3 3.1.3Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 (h)SEC).3.1.4 3.1.5 3.1.6 3.2 4.1 4.1.1 4.1.2 4.1.3 4.2 4.3 4.4 Exhibit No. Description 4.5 (76)Exhibit No. Description 21.1 23.1* (77)101.INS XBRLXBRL*Instance Document *101.SCH XBRLXBRL*Taxonomy Extension Schema *101.CAL XBRLXBRL*Taxonomy Extension Calculation Linkbase *101.DEF XBRLXBRL*Taxonomy Extension Definition Linkbase *101.LAB XBRLXBRL*Taxonomy Extension Label Linkbase *101.PRE XBRLXBRL*Taxonomy Extension Presentation Linkbase *104* 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *(a)Previously filed as an exhibit to the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011 and incorporated herein by reference.(b)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017 and incorporated herein by reference.(c)Intentionally omitted.(d)Previously filed as Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A, filed on August 26, 2019 and incorporated herein by reference.(e)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019 and incorporated herein by reference.(f)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.(g)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.(h)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 27, 2020 and incorporated herein by reference.(i)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed on May 28, 2020 and incorporated herein by reference.(j)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.(k)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.(l)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.(m)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.(n)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.(o)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 29, 2013 and incorporated herein by reference.(p)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 2, 2021 and incorporated herein by reference.(q)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2021 filed on November 15, 2021 and incorporated herein by reference.(r)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 23, 2021 and incorporated herein by reference.(s)Previously filed as an exhibit to the Current Report on Form 8-K filed on July 9, 2021 and incorporated herein by reference.
(1,563,382(78)