UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended ~~September~~June 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File number 0-54433

MARIMED INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		27-4672745
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

10 Oceana Way

Norwood, MA 02062

(Address of Principal Executive Offices)

617-795-5140

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class		Ticker symbol(s)		Name of each exchange on which registered
Not ~~Applicable.~~Applicable		Not ~~Applicable.~~Applicable		Not ~~Applicable.~~Applicable

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ☐	Accelerated filer ☐ ☒
Non-accelerated filer ☒ ☐	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 15, 2021,~~August 5, 2022, ~~333,144,567~~338,693,855 shares of the registrant’s common stock were outstanding.

MariMed Inc.

Table of Contents

		Page
	PART I – FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements		3

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021 (Unaudited)~~2022 and December 31, ~~2020~~2021 (unaudited)	34

	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, 2022 and 2021 ~~and 2020 (Unaudited)~~(unaudited)	46

	Condensed Consolidated Statements of Stockholders’ Equity for the ~~Nine~~Six Months Ended ~~September~~June 30, 2022 and 2021 ~~and 2020 (Unaudited)~~(unaudited)	57

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, 2022 and 2021 ~~and 2020 (Unaudited)~~(unaudited)	68

	Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~(unaudited)	710

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3630

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	4337

Item 4.	Controls and Procedures	4337

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	4438

Item 1A.	Risk Factors	4438

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4438

Item 3.	Defaults Upon Senior Securities	4438

Item 4.	Mine Safety Disclosures	4438

Item 5.	Other Information	4439

Item 6.	Exhibits	4539

~~Signatures~~Signature		4941

~~MariMed Inc.~~

~~Condensed Consolidated Balance Sheets~~CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

September 30, December 31,
2021 2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 25,580,508 $ 2,999,053
Accounts receivable, net 8,706,467 6,675,512
Deferred rents receivable 1,747,803 1,940,181
Notes receivable, current portion 124,426 658,122
Inventory 10,993,963 6,830,571
Investments 419,803 1,357,193
Other current assets 2,213,348 582,589
Total current assets 49,786,318 21,043,221

Property and equipment, net 59,516,169 45,636,529
Intangibles, net 2,348,948 2,228,560
Investments - 1,165,788
Notes receivable, less current portion 1,188,478 965,008
Right-of-use assets under operating leases 5,245,577 5,247,152
Right-of-use assets under finance leases 53,908 78,420
Other assets 97,951 80,493
Total assets $ 118,237,349 $ 76,445,171

Liabilities, mezzanine equity, and stockholders’ equity
Current liabilities:
Accounts payable $ 7,092,073 $ 5,044,918
Accrued expenses 11,094,752 3,621,269
Sales and excise taxes payable 1,725,618 1,053,693
Debentures payable - 1,032,448
Notes payable, current portion 9,705 8,859,175
Mortgages payable, current portion 1,412,545 1,387,014
Operating lease liabilities, current portion 1,097,008 1,008,227
Finance lease liabilities, current portion 30,288 38,412
Due to related parties - 1,157,815
Other current liabilities - 23,640
Total current liabilities 22,461,989 23,226,611

Notes payable, less current portion 925,871 10,682,234
Mortgages payable, less current portion 16,974,749 14,744,136
Operating lease liabilities, less current portion 4,717,933 4,822,064
Finance lease liabilities, less current portion 27,856 44,490
Other liabilities 100,200 100,200
Total liabilities 45,208,598 53,619,735

Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020 14,725,000 14,725,000
Series C convertible preferred stock, $0.001 par value; 6,216,216 and 0 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively 23,000,000 -
Total mezzanine equity 37,725,000 14,725,000

Stockholders’ equity:
Undesignated preferred stock, $0.001 par value; 38,875,451 and 45,091,667 shares authorized at September 30, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020 - -
Common stock, $0.001 par value; 700,000,000 and 500,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively; 331,545,220 and 314,418,812 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively 331,545 314,419
Common stock subscribed but not issued; 202,204 and 11,413 shares at September 30, 2021 and December 31, 2020, respectively 189,184 5,365
Additional paid-in capital 127,231,090 112,974,329
Accumulated deficit (90,883,748 ) (104,616,538 )
Noncontrolling interests (1,564,320 ) (577,139 )
Total stockholders’ equity 35,303,751 8,100,436
Total liabilities, mezzanine equity, and stockholders’ equity $ 118,237,349 $ 76,445,171

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to MariMed Inc. that is based on the beliefs of MariMed Inc.’s management, as well as assumptions made by and information currently available to the Company. In some cases, you can identify these statements by forward-looking words such as “anticipates,” “believes,” “could,” “should,” “estimates,” “expects,” “intends,” “may,” “plans,” “predicts,” “projects,” “will,” or other similar or comparable words. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. Such statements reflect the current views of the Company with respect to future events, including consummation of pending transactions, launch of new products, expanded distribution of existing products, obtaining new licenses, estimates and projections of revenue, EBITDA and Adjusted EBITDA and other information about its business, business prospects and strategic growth plan which are based on certain assumptions of its management, including those described in this Quarterly Report on Form 10-Q. These statements are not a guarantee of future performance and involve risk and uncertainties that are difficult to predict, including, among other factors, changes in demand for the Company’s services and products, changes in the law and its enforcement, timing and outcome of regulatory processes and changes in the economic environment.

~~See accompanying notes~~Additional important factors that could cause actual results to ~~condensed consolidated financial statements.~~differ materially from those in these forward-looking statements are also discussed in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Any forward-looking statement made by the Company in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

MariMed Inc.

Condensed Consolidated ~~Statements of Operations~~Balance Sheets

~~(Unaudited)~~(in thousands, except per share amounts)

(unaudited)

2021 2020 2021 2020
Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020

Revenues $ 33,208,060 $ 13,461,504 $ 90,420,280 $ 30,537,829

Cost of revenues 15,027,521 4,781,677 39,647,473 10,831,763

Gross profit 18,180,539 8,679,827 50,772,807 19,706,066

Operating expenses:
Personnel 1,481,350 1,354,644 5,266,745 4,075,168
Marketing and promotion 563,193 103,327 1,057,892 281,329
General and administrative 9,481,030 2,931,684 16,933,758 7,515,721
Bad debts 35,583 892,029 1,854,869 1,342,029
Total operating expenses 11,561,156 5,281,684 25,113,264 13,214,247

Operating income 6,619,383 3,398,143 25,659,543 6,491,819

Non-operating income (expenses):
Interest expense (299,969 ) (1,921,312 ) (2,076,587 ) (7,581,648 )
Interest income 25,739 34,818 95,534 121,712
Loss on obligations settled with equity - - (2,546 ) (44,678 )
Equity in earnings of investments - 51,511 - 18,553
Change in fair value of investments (522,106 ) 217,374 (937,390 ) (704,172 )
Other 309,212 (84,708 ) 309,212 (84,708 )
Total non-operating income (expenses), net (487,124 ) (1,702,317 ) (2,611,777 ) (8,274,941 )

Income (loss) before income taxes 6,132,259 1,695,826 23,047,766 (1,783,122 )
Provision for income taxes 4,009,111 - 9,026,016 -
Net income (loss) $ 2,123,148 $ 1,695,826 $ 14,021,750 $ (1,783,122 )

Net income (loss) attributable to noncontrolling interests $ 103,113 $ 36,959 $ 288,960 $ 193,492
Net income (loss) attributable to MariMed Inc. $ 2,020,035 $ 1,658,867 $ 13,732,790 $ (1,976,614 )

Net income (loss) per share
Basic $ 0.01 $ 0.01 $ 0.04 $ (0.01 )
Diluted $ 0.01 $ 0.00 $ 0.04 $ (0.01 )

Weighted average common shares outstanding
Basic 329,454,104 281,535,212 324,340,006 254,387,761
Diluted 378,934,045 346,091,840 370,203,937 254,387,761

~~See accompanying notes to condensed consolidated financial statements.~~

	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	7,911		29,683
Accounts receivable, net		5,297		1,666
Deferred rents receivable		737		1,678
Notes receivable, current portion		132		127
Inventory		15,889		9,768
Investments, current		525		251
Other current assets		3,059		1,440
Total current assets		33,550		44,613
Property and equipment, net		69,132		62,150
Intangible assets, net		9,898		162
Goodwill		8,079		2,068
Notes receivable, net of current		9,116		8,987
Operating lease right-of-use assets		5,071		5,081
Finance lease right-of-use assets		541		46
Other assets		491		98
Total assets	$	135,878	$	123,205

Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Mortgages and notes payable, current portion	$	2,734	$	1,410
Accounts payable		7,624		5,099
Accrued expenses and other		3,473		3,149
Income taxes payable		10,001		16,467
Operating lease liabilities, current portion		1,201		1,071
Finance lease liabilities, current portion		180		27
Total current liabilities		25,213		27,223
Mortgages and notes payable, net of current		20,629		17,262
Operating lease liabilities, net of current		4,420		4,574
Finance lease liabilities, net of current		338		22
Other liabilities		100		100
Total liabilities		50,700		49,181

Commitments and contingencies		-		-

MariMed Inc.

Condensed Consolidated Balance Sheets (continued)

(in thousands, except per share amounts)

(unaudited)

	June 30,			December 31,
	2022			2021
Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at June 30, 2022 and December 31, 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 June 30, 2022 and December 31, 2021		23,000			23,000
Total mezzanine equity		37,725			37,725

Stockholders’ equity
Undesignated preferred stock, $0.001 par value; 38,875,451 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021
Common stock, $0.001 par value; 700,000,000 shares authorized; 338,693,855 and 334,030,348 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		339			334
Additional paid-in capital		139,951			134,920
Accumulated deficit		(91,381	)		(97,392	)
Noncontrolling interests		(1,456	)		(1,563	)
Total stockholders’ equity		47,453			36,299
Total liabilities, mezzanine equity and stockholders’ equity	$	135,878		$	123,205

See accompanying notes to the unaudited condensed consolidated financial statements.

MariMed Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

	2022			2021			2022			2021
	Three months ended						Six months ended
	June 30,			June 30,			June 30,			June 30,
	2022			2021			2022			2021

Revenue	$	32,986		$	32,569		$	64,268		$	57,212
Cost of revenue		17,981			13,163			32,287			24,620
Gross profit		15,005			19,406			31,981			32,592

Operating expenses:
Personnel		3,382			2,058			6,424			3,785
Marketing and promotion		809			270			1,452			495
General and administrative		5,565			4,282			11,793			7,453
Acquisition-related and other		754			-			754			-
Bad debt		-			794			14			1,819
Total operating expenses		10,510			7,404			20,437			13,552

Income from operations		4,495			12,002			11,544			19,040

Interest and other (expense) income:
Interest expense		(440	)		(265	)		(753	)		(1,777	)
Interest income		318			36			481			70
Other (expense) income, net		(727	)		(371	)		275			(417	)
Total interest and other (expense) income		(849	)		(600	)		3			(2,124	)

Income before income taxes		3,646			11,402			11,547			16,916
Provision for income taxes		1,750			3,813			5,410			5,017

Net income		1,896			7,589			6,137			11,899
Net income attributable to noncontrolling interests		73			96			126			186
Net income attributable to common stockholders	$	1,823		$	7,493		$	6,011		$	11,713

Net income per share attributable to common stockholders:
Basic	$	0.01		$	0.02		$	0.02		$	0.04
Diluted	$	0.00		$	0.02		$	0.02		$	0.03

Weighted average common shares outstanding:
Basic		337,497			324,267			336,137			321,741
Diluted		379,626			370,257			379,225			365,324

See accompanying notes to the unaudited condensed consolidated financial statements.

MariMed Inc.

Condensed Consolidated Statements of Stockholders’ Equity

~~(Unaudited)~~(in thousands, except share amounts)

(unaudited)

Shares Par Value Shares Amount Capital Deficit Interests Equity
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 64,478 64 33,319 5,365 10,665 - - 16,094
Stock forfeiture (40,000 ) (40 ) - - 40 - - -
Exercise of options
Exercise of options, shares
Exercise of warrants
Exercise of warrants, shares
Amortization of option grants - - - - 707,003 - - 707,003
Issuance of stand-alone warrants - - - - 2,179 - - 2,179
Issuance of warrants attached to debt - - - - 638,927 - - 638,927
Discount on debentures payable - - - - 28,021 - - 28,021
Beneficial conversion feature on debentures payable - - - - 379,183 - - 379,183
Issuance of warrants with stock
Conversion of debentures payable 54,143,232 54,144 - - 7,111,897 - - 7,166,041
Conversion of common stock to preferred stock (4,908,333 ) (4,908 ) - - (14,720,092 ) - - (14,725,000 )
Conversion of promissory note 2,525,596 2,525 - - 457,525 - - 460,050
Extinguishment of promissory note 1,900,000 1,900 - - 350,100 - - 352,000
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 - - - - - - (229,329 ) (229,329 )
Net income (loss) - - - - - (1,976,614 ) 193,492 (1,783,122 )
Balances at September 30, 2020 289,729,854 $ 289,730 33,319 $ 5,365 $ 109,115,215 $ (108,737,141 ) $ (589,302 ) $ 83,867

	Shares		Par value		Shares		Amount		capital			deficit			interests			equity
	Six months ended June 30, 2022
					Common stock subscribed but				Additional						Non-			Total
	Common stock				not issued				paid-in			Accumulated			controlling			stockholders’
	Shares		Par value		Shares		Amount		capital			deficit			interests			equity
Balances at January 1, 2022		334,030,348	$	334		-	$	-	$	134,920		$	(97,392	)	$	(1,563	)	$	36,299
Exercise of stock options		10,000				-		-		3									3
Cashless exercise of stock options		200,000																	-
Cashless exercise of warrants		234,961																	-
Release of shares under stock grants		356,938																	-
Shares issued as purchase consideration - business acquisition		2,343,750		3		-		-		1,497									1,500
Purchase of minority interests in certain of the Company’s subsidiaries						-		-		(2,165	)					165			(2,000	)
Stock issued as payment of fees		375,000		1						273									274
Conversion of promissory notes to stock		1,142,858		1						399									400
Distributions to non-controlling interests																(184	)		(184	)
Stock-based compensation						-		-		5,024									5,024
Net income													6,011			126			6,137
Balances at June 30, 2022		338,693,855	$	339		-	$	-	$	139,951		$	(91,381	)	$	(1,456	)	$	47,453

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, 2020 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 152,094 152 102,204 95,284 137,932 - - 233,368
Exercise of options 178,885 179 - - 31,321 - - 31,500
Exercise of warrants 980,062 980 - - 91,795 - - 92,775
Amortization of option grants - - - - 6,208,376 - - 6,208,376
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 10,042,125 10,042 - - 3,336,403 - - 3,346,445
Common stock issued to settle obligations 71,691 72 - - 53,473 - - 53,545
Purchase of property and equipment with stock 750,000 750 - - 704,250 - - 705,000
Fees paid with stock 409,308 409 - - 374,610 - - 375,019
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 93,900 871,460 - (975,360 ) (10,000 )
Distributions - - - - - - (300,781 ) (300,781 )
Net income - - - - - 13,732,790 288,960 14,021,750
Balances at September 30, 2021 331,545,220 $ 331,545 202,204 $ 189,184 $ 127,231,090 $
(90,883,748
) $ (1,564,320 ) $ 35,303,751

	Shares		Par value		Shares			Amount			capital			deficit			interests			equity
	Six months ended June 30, 2021
					Common stock subscribed but						Additional						Non-			Total
	Common stock				not issued						paid-in			Accumulated			controlling			stockholders’
	Shares		Par value		Shares			Amount			capital			deficit			interests			equity
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									-
Exercise of stock options		82,885										9									9
Exercise of warrants		698,812		1								60									61
Release of shares under stock grants		6,877																			-
Conversion of debentures payable to equity		4,610,645		5								1,352									1,357
Conversion of promissory notes to equity		6,937,400		7								2,253									2,260
Stock issued to settle obligations		71,691										53									53
Equity issuance costs												(387	)								(387	)
Distributions to non-controlling interests						-			-									(183	)		(183	)
Stock-based compensation												1,600									1,600
Net income															11,713			186			11,899
Balances at June 30, 2021		326,838,535	$	327		-		$	-		$	117,920		$	(92,904	)	$	(574	)	$	24,769

~~The above statements do not show columns for undesignated preferred stock~~

~~as the balances were zero and there was no activity in the reported periods.~~

See accompanying notes to the unaudited condensed consolidated financial statements.

MariMed Inc.

Condensed Consolidated Statements of Cash Flows

~~(Unaudited)~~(in thousands)

(unaudited)

2021 2020
Nine Months Ended September 30,
2021 2020
Cash flows from operating activities:
Net income (loss) attributable to MariMed Inc. $
13,732,790
$ (1,976,614 )
Net income (loss) attributable to noncontrolling interests 288,960 193,492
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 1,499,318 1,340,649
Asset writeoff - 84,708
Amortization of intangibles 518,182 307,861
Amortization of stock grants 233,368 16,094
Amortization of option grants 6,208,376 707,003
Amortization of stand-alone warrant issuances 832,105 2,179
Amortization of warrants attached to debt 539,272 631,895
Amortization of warrants issued with stock 654,681 -
Amortization of beneficial conversion feature 176,522 2,552,933
Amortization of original issue discount 51,753 286,353
Bad debt expense 1,854,869 1,342,029
Fees paid with stock 375,019 -
Loss on obligations settled with equity 2,546 44,678
Equity in earnings of investments - (18,553 )
Change in fair value of investments 937,390 704,172
Gain on sale of investment (309,212 ) =
Changes in operating assets and liabilities:
Accounts receivable, net (3,885,824 ) (3,750,792 )
Deferred rents receivable 192,378 (171,675 )
Inventory (4,163,392 ) (5,582,862 )
Other current assets (1,640,696 ) (57,677 )
Other assets (17,458 ) 95,412
Accounts payable 2,098,155 2,272,810
Accrued expenses 7,432,580 1,263,976
Sales and excise taxes payable 671,925 608,716
Operating lease payments, net (13,775 ) 58,559
Finance lease interest payments 1,504 4,033
Other current liabilities (23,640 ) 646,832
Net cash provided by operating activities 28,247,696 1,606,211

Cash flows from investing activities:
Purchase of property and equipment (14,649,446 ) (4,116,053 )
Purchase of cannabis licenses (638,570 ) (255,000 )
Return on investment 1,475,000 -
Interest on notes receivable 407,374 443,150
Net cash used in investing activities (13,405,642 ) (3,927,903 )

Cash flows from financing activities:
Proceeds from issuance of preferred stock 23,000,000 -
Equity issuance costs (386,983 ) -
Proceeds from issuance of promissory notes 35,096 5,249,763
Repayments of promissory notes (15,804,273 ) (10,770,011 )
Proceeds from issuance of debentures - 935,000
Proceeds from mortgages 2,700,000 13,897,282
Payments on mortgages (443,856 ) (4,989,661 )
Proceeds from exercise of options 31,500 -
Proceeds from exercise of warrants 92,775 -
Due to related parties (1,157,815 ) (221,705 )
Finance lease principal payments (26,262 ) (27,008 )
Distributions (300,781 ) (229,329 )
Net cash provided by financing activities 7,739,401 3,844,331

Net change to cash and cash equivalents 22,581,455 1,522,639
Cash and cash equivalents at beginning of period 2,999,053 738,688
Cash and cash equivalents at end of period $ 25,580,508 $ 2,261,327

Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,705,029 $ 1,236,464
Cash paid for income taxes $ 419,070 $ 488,772

Non-cash activities:
Conversion of promissory notes $ 3,346,445 $ 460,050
Conversions of debentures payable $ 1,356,452 $ 7,166,041
Acquisition of 30% interest in subsidiary $ 975,360 $ -
Purchase of property and equipment 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 $ 53 $ -
Exchange of common stock to preferred stock $ - $ 14,725,000
Conversion of accrued interest to promissory notes $ - $ 3,908,654
Discount on promissory notes $ - $ 638,927
Beneficial conversion feature on debentures payable $ - $ 379,183 ��
Extinguishment of promissory note $ - $ 352,000
Discount on debentures payable $ - $ 28,021

~~See accompanying notes to condensed consolidated financial statements.~~

	June 30,			June 30,
	Six months ended June 30,
	2022			2021
Cash flows from operating activities:
Net income attributable to common stockholders	$	6,011		$	11,713
Net income attributable to noncontrolling interests		126			186
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of property and equipment		1,552			963
Amortization of intangible assets		425			346
Stock-based compensation		5,024			1,600
Amortization of warrants attached to debt		-			539
Amortization of beneficial conversion feature		-			177
Amortization of original issue discount		-			52
Bad debt expense		14			1,819
Fees paid with stock		274			-
Loss on obligations settled with equity		-			3
(Gain) loss on changes in fair value of investments		679			415
Other investment income		(954	)		-
Changes in operating assets and liabilities:
Accounts receivable, net		(3,554	)		(3,230	)
Deferred rents receivable		99			125
Inventory		(1,795	)		(2,398	)
Other current assets		(1,267	)		(1,373	)
Other assets		(392	)		(17	)
Accounts payable		2,024			1,699
Accrued expenses and other		180			4,973
Income taxes payable		(6,467	)		-
Net cash provided by operating activities		1,979			17,592

Cash flows from investing activities:
Purchases of property and equipment		(7,854	)		(7,976	)
Business acquisitions, net of cash acquired		(12,746	)		-
Purchases of cannabis licenses		(330	)		(638	)
Proceeds from notes receivable		73			-
Interest on notes receivable		-			119
Net cash used in investing activities		(20,857	)		(8,495	)

MariMed Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

	Six months ended June 30,
	2022			2021
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		(611	)		(16,098	)
Proceeds from exercise of stock options		3			9
Proceeds from exercise of warrants		-			61
Repayment of loans from related parties		-			(1,158	)
Principal payments of finance leases		(102	)		(18	)
Redemption of minority interests		(2,000	)		-
Distributions		(184	)		(183	)
Net cash (used in) provided by financing activities		(2,894	)		5,261

Net (decrease) increase in cash and cash equivalents		(21,772	)		14,358
Cash and equivalents, beginning of year		29,683			2,999
Cash and cash equivalents, end of period	$	7,911		$	17,357

Supplemental disclosure of cash flow information:
Cash paid for interest	$	647		$	1,405
Cash paid for income taxes	$	11,877		$	419

Non-cash activities:
Stock issued as purchase consideration	$	1,500		$	-
Conversion of promissory notes	$	400		$	2,260
Conversions of debentures payable	$	-		$	1,356
Operating lease right-of-use assets and liabilities	$	322		$	466
Finance lease right-of-use assets and liabilities	$	519		$	-
Common stock issued to settle obligations	$	-		$	51
Issuance of common stock associated with subscriptions	$	-		$	5
Cashless exercise of warrants	$	-		$	180
Cashless exercise of stock options	$	-		$	53

See accompanying notes to the unaudited condensed consolidated financial statements.

MariMed Inc.

Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(unaudited)

~~NOTE 1 –~~(1) ~~ORGANIZATION AND DESCRIPTION~~BASIS OF ~~BUSINESS~~PRESENTATION

Business

MariMed Inc. ~~(the~~(“MariMed” or the “Company”) is a multi-state operator in the United States cannabis industry. ~~The Company~~MariMed 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 medicinal and recreational cannabis. ~~The Company~~MariMed 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~~Basis 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.

More recently, 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 facilities and manage the continuing growth of their operations.

To date, acquisitions of its client businesses in Massachusetts and Illinois have been completed and establish the Company as a fully integrated seed-to-sale multi-state operator (“MSO”). The acquisitions of the remaining entities located in Maryland, Nevada, and Delaware are at various stages of completion and subject to each state’s laws governing the ownership transfer of cannabis licenses, which in the case of Delaware requires a modification of current cannabis ownership laws to permit for-profit ownership. Meanwhile, the Company continues to expand these businesses and maximize the Company’s revenue from rental income, management fees, and licensing royalties.

The transition to a fully integrated 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 creating products that meet specific customer needs, and distributing these products in states where cannabis has been legalized.

As to its products, 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 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 trademarked product recipes.

~~The Company utilizes proprietary cannabis genetics to produce high-quality flowers and concentrates under the award-winning~~³~~Nature’s Heritage™ brand, and cannabis-infused products under the brand names Kalm Fusion®, in the form of chewable tablets and drink powder mixes, and the award-winning~~¹~~Betty’s Eddies® brand of all natural fruit chews. Both cannabis-infused brands are top-selling products in Maryland and Massachusetts~~²~~and the Company intends to continue to introduce additional product lines under these brands in the foreseeable future.~~

The Company also has exclusive alliances with prominent brands. The Company has partnered with renown 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	~~LeafLink 2021 Best Selling Medical Product, LeafLink 2020 Industry Innovator, Explore Maryland Cannabis 2020 Edible of the Year, LeafLink 2019 Best Selling Medical Product.~~

²	~~Sources: BDSA 2021 and LeafLink Insights 2020.~~

³	~~LeafLink 2021 Fastest-Selling Concentrate.~~

~~NOTE 2 —~~ ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Presentation

~~Basis~~In the opinion of ~~Presentation~~

~~The~~management, the accompanying unaudited condensed consolidated financial statements ~~have been prepared~~include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in ~~conformity~~accordance with accounting principles generally accepted in the United States of America (“GAAP”).

~~In accordance with GAAP, interim~~On April 27, 2022 (the “Kind Acquisition Date”), the Company acquired Kind Therapeutics USA (“Kind”). The financial results of Kind are included in the Company’s condensed consolidated financial statements for the period subsequent to the Kind Acquisition Date.

Interim results are not ~~required to contain all of the disclosures normally required in annual financial statements. In addition, the results of operations of interim periods may not~~ necessarily be indicative of ~~the~~ results ~~of operations to be expected~~ for the full ~~year. Accordingly, these~~fiscal year or any future interim ~~financial statements~~period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s ~~most recent audited annual financial statements and accompanying notes~~Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021 (the “Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2022.

Certain reclassifications, not affecting previously reported net income or cash flows, have been made to ~~prior periods’ data~~the previously issued financial statements to conform to the current period presentation. ~~These reclassifications had no effect on reported income (losses) or cash flows.~~

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in the Annual Report. There were no material changes to the significant accounting policies during the three- or six-month periods ended June 30, 2022.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of MariMed ~~Inc.~~ and ~~the following~~its wholly- and majority-owned ~~subsidiaries at September 30, 2021:~~

~~SCHEDULE OF MAJORITY OWNED SUBSIDIARIES~~

~~Subsidiary:~~	~~Percentage~~ ~~Owned~~
~~MariMed Advisors Inc.~~		~~100.0~~%
~~Mia Development LLC~~		~~89.5~~%
~~Mari Holdings IL LLC~~		~~100.0~~%
~~Mari Holdings MD LLC~~		~~97.4~~%
~~Mari Holdings NV LLC~~		~~100.0~~%
~~Mari Holdings Metropolis LLC~~		~~70.0~~%
~~Mari Holdings Mt. Vernon LLC~~		~~100.0~~%
~~Hartwell Realty Holdings LLC~~		~~100.0~~%
~~iRollie LLC~~		~~100.0~~%
~~ARL Healthcare Inc.~~		~~100.0~~%
~~KPG of Anna LLC~~		~~100.0~~%
~~KPG of Harrisburg LLC~~		~~100.0~~%
~~MariMed Hemp Inc.~~		~~100.0~~%
~~MediTaurus LLC~~		~~100.0~~%

subsidiaries. Intercompany ~~accounts~~transactions and ~~transactions~~balances have been ~~eliminated.~~eliminated in consolidation.

Noncontrolling interests represent third-party minority ownership interests in the Company’s majority-owned consolidated subsidiaries. Net income attributable to noncontrolling interests is reported in the condensed consolidated statements of operations, and the value of minority-owned interests are presented as a component of equity within the condensed consolidated balance sheets.

Use of Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts ~~within~~of 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 condensed consolidated financial statements include accounting for business combinations, inventory valuations, assumptions used to determine the fair value of stock-based compensation, and intangible asset and goodwill. Actual results could differ from ~~these estimates or assumptions.~~those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity date of three months or less to be cash equivalents. The fair values of these investments approximate their carrying values.

~~The Company’s cash~~At June 30, 2022 and ~~cash equivalents are maintained with recognized financial institutions located in the United States. In the normal course of business,~~December 31, 2021, the Company ~~may carry balances~~had cash of $0.1 million and $5.1 million held in escrow, respectively. The amount recorded at December 31, 2021 included a $5.0 million escrow deposit in connection with ~~certain financial institutions that exceed federally insured limits. The Company has not experienced losses on balances in excess~~the acquisition of ~~such limits and management believes the Company is not exposed to significant risks in that regard.~~Kind.

Fair Value of Financial Instruments

~~Accounts Receivable~~The carrying amounts of the Company’s financial instruments approximate their fair values and include cash equivalents, accounts receivable, deferred rents receivable, notes receivable, mortgages and notes payable, and accounts payable.

~~Accounts receivable consist~~Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tier fair value hierarchy is based on the level of ~~trade receivables and~~independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1. Level 1 applies to assets or liabilities for which there are ~~carried at their estimated collectible amounts.~~quoted prices in active markets for identical assets or liabilities.

Level 2. Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).

Level 3. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Recent Accounting Pronouncements

The Company ~~provides credit~~has reviewed all recently issued, but not yet effective, Accounting Standards Updates (“ASUs”) and does not believe that the future adoption of any such ASUs will have a material impact on its financial condition or results of operations.

(2) ACQUISITIONS

Kind

In December 2021, the Company entered into a membership interest purchase agreement with the members of Kind, the Company’s client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis, to acquire 100% of the equity ownership of Kind in exchange for $13.5 million payable in cash (subject to certain adjustments) and $6.5 million payable by the issuance of four-year 6.0% promissory notes to the members of Kind, secured by a first priority lien on the Company’s property in Hagerstown, MD (collectively, the “Kind Consideration”). 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”). Following the Kind Acquisition, the Maryland litigation between the Company and the members of Kind was dismissed (see Note 18).

The Company believes that the Kind Acquisition allows it to expand its ~~clients~~operations into the Maryland cannabis industry and marketplace.

The Kind Acquisition has been accounted for as a business combination and the financial results of Kind have been included in the ~~form~~Company’s condensed consolidated financial statement for the period subsequent to the Kind Acquisition Date. The Company’s financial results for the three and six months ended June 30, 2022 include $1.7 million of ~~payment terms. The Company limits its credit risk by performing credit evaluations~~revenue and a net loss of its clients and maintaining a reserve, if deemed necessary, for potential credit losses. Such evaluations include the review of a client’s outstanding balances with consideration towards such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Based on such evaluations, the Company maintained a reserve of approximately $~~41.4~~ 0.3million ~~and $40.0~~ ~~million at September 30, 2021 and December 31, 2020, respectively. For further discussion on receivable reserves, please refer~~attributable to ~~Note 18 –~~ ~~Bad Debts~~ ~~and the~~ ~~Bankruptcy Claim~~ ~~section of Note 20~~ ~~– Commitments and Contingencies.~~Kind.

811

~~Inventory~~A summary of the preliminary allocation of Kind Consideration to the acquired assets, identifiable intangible assets and certain assumed liabilities is as follows (in thousands):

~~Inventory~~SCHEDULE OF ACQUIRED ASSETS IDENTIFIABLE INTANGIBLE ASSETS AND CERTAIN ASSUMED LIABILITIES

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 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:
Tradename and trademarks 2,041
Licenses and customer base 4,700
Non-compete agreements 42
Goodwill 6,011
Current liabilities (511 )
Total fair value of assets acquired and (liabilities assumed) $ 17,952
The valuation of the acquired intangible assets is ~~carried at the lower of cost or net realizable value, with the cost being determined~~inherently subjective and relies on ~~a first-in, first-out (FIFO) basis.~~significant unobservable inputs. The Company ~~allocates a certain percentage~~used an income approach to value the acquired tradename/trademarks, licenses/customer base, and non-compete intangible assets. The valuation for each of ~~overhead cost to its manufactured inventory; such allocation is~~these intangible assets was based on ~~square footage~~estimated projections of expected cash flows to be generated by the assets discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of new markets, products and customers and its outcome through key assumptions driving asset values, including sales growth, royalty rates and other ~~industry-standard criteria. The Company reviews physical inventory for obsolescence and/or excess and will record a write-down if necessary.~~related costs.

The Company is amortizing the identifiable intangible assets arising from the Kind Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of ~~Investments~~5.77 years (see Note 9). Goodwill results from assets that are not separately identifiable as part of the transaction and is not deductible for tax purposes.

~~Investments are comprised~~Concurrent with entering into the Kind membership purchase agreement, the Company entered into a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ~~holdings~~ownership interest in ~~public and private companies. These investments are recorded at fair value on~~(i) Mari Holdings MD LLC (“Mari-MD”), the Company’s ~~consolidated balance sheet, with changes~~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. Upon the dismissal in June 2022 of the derivative claims in the DiPietro lawsuit (see Note 18), 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 ~~fair value included in income. Investments are evaluated for permanent impairment~~99.7% and ~~are written down if such impairments are deemed to have occurred.~~94.3%, respectively.
12
Green Growth Group Inc.

In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the equity ownership of Green Growth Group Inc. (“Green Growth”), an entity that holds a craft cultivation and production cannabis license issued by the Illinois Department of Agriculture, in exchange for $~~Revenue Recognition~~1.9 million in cash and shares of the Company’s common stock valued at $1.5 million. Concurrently, the Company made a good faith deposit of $100,000.
In April 2022, the Illinois Department of Agriculture approved the Company’s acquisition of Green Growth, and the purchase transaction (the “Green Growth Acquisition”) was completed on May 5, 2022 (the “Green Growth Acquisition Date”). The Company paid the remaining $1.8 million in cash and issued 2,343,750 shares of common stock to the sellers on the Green Growth Acquisition Date. With this license, the Company can cultivate up to 14,000 square feet of cannabis flowers and produce cannabis concentrates. The Company believes that the acquisition of this cannabis license will allow it to be vertically integrated in Illinois by growing cannabis and producing cannabis products that can be distributed and sold at the Company-owned Thrive dispensaries and sold into the robust wholesale cannabis marketplace.
The Company has allocated the purchase price to its licenses/customer base intangible asset on a preliminary basis. The Company recorded approximately $57,000 of amortization expense in the three months ended June 30, 2022 for the intangible asset acquired based on an estimated ten-year life for such assets.
Meditaurus LLC
In September 2021, the Company acquired the remaining 30.0% ownership interest of Meditaurus LLC, a developer of CBD products sold under the Florance brand name (“Meditaurus”), in exchange for 100,000 shares of the Company’s common stock, valued at approximately $94,000, and $10,000 in cash. In 2019, the Company had acquired a 70.0% ownership interest in Meditaurus in exchange for stock and cash aggregating $2.8 million.
The carrying value of the noncontrolling interest of approximately $975,000 was eliminated on the date such interest was acquired, and as there was no change in control of Meditaurus from this transaction, the resulting gain on bargain purchase was recognized in Additional paid-in capital in the condensed consolidated balance sheet. As part of this transaction, the initial purchase agreement was amended, eliminating all future license fees and payments to the prior owners of Meditaurus.
Pending Transactions
Beverly Asset Purchase
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 price is comprised of 2,000,000 shares of the Company’s common stock and $5.1 million in cash, with the cash amount to be paid on a monthly basis as a percentage of the business’ monthly gross sales.
The purchase is contingent upon the approval of the Massachusetts Cannabis Control Commission, which is expected prior to the end of 2022. Concurrent with the execution of this agreement, the parties entered into a consulting agreement under which the Company provides certain oversight services related to the development, staffing, and operation of the business in exchange for a monthly fee.
The Harvest Foundation LLC
In 2019, the Company entered into a purchase agreement to acquire 100% of the ownership interests of The Harvest Foundation LLC (“Harvest”), the holder of a cannabis cultivation license in the state of Nevada. The acquisition is conditioned upon state regulatory approval of the transaction and other closing conditions. The regulatory approval process for license transfers in Nevada has experienced significant delays as a result of multiple factors including the impact of Covid. Additionally, the progress of this acquisition has been delayed as a result of actions taken by the Nevada Cannabis Control Board (“CCB”) relating to regulatory operating violations by Harvest and its current ownership. Harvest is in process of negotiating a settlement with the CCB to resolve these violations which will allow it to proceed with the sale. The Company is monitoring the status of Harvest matters which may require adjustments to the purchase agreement.
The purchase agreement provides for a purchase price comprised of the issuance of (i) 1,000,000 shares of the Company’s common stock in the aggregate to the two owners of Harvest, which were issued as a good faith deposit 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 regulatory 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 regulatory approval of the transaction. The issued shares were recorded at par value. Such shares are restricted and are to be returned to the Company in the event the transaction does not close.
13
Upon approval of the transfer, and the fulfillment of other closing conditions, if achieved, 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 regulatory approval, will be achieved or that the acquisition will be consummated.
(3) EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted net earnings per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period, unless the effect is antidilutive.
The calculations of shares used to compute net earnings per share were as follows (in thousands):
SCHEDULE OF EARNINGS PER SHARE
2022 2021 2022 2021
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021

Weighted average shares outstanding - basic 337,497 324,267 336,137 321,741
Potential dilutive common shares 42,129 45,990 43,088 43,583
Weighted average shares outstanding - diluted 379,626 370,257 379,225 365,324
(4) DEFERRED RENTS RECEIVABLE
The Company is the lessor under operating leases which contain escalating rents over time, rent holidays, options to renew, requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based on a percentage of monthly tenant revenues. The Company is not the lessor under any finance leases.

The Company recognizes ~~revenue~~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 condensed consolidated balance sheets. 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 its cannabis-licensed client under a triple net lease that expires in 2035.
● Maryland – a 180,000 square foot cultivation and processing facility that expires in 2037. This facility had been leased to Kind prior to the Kind Acquisition Date.
● 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 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 that is 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. The Company intends to develop the remaining space into a processing facility.
● 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.
14
The Company received rental payments aggregating $0.8 million and $2.0 million in the three and six months ended June 30, 2022, respectively, and $1.2 million and $2.4 million in the three and six months ended June 30, 2021, respectively. Revenue from these rental receipts was recognized on a straight-line basis and aggregated $0.8 million and $1.9 million in the three and six months ended June 30, 2022, respectively, and $1.1 million and $2.3 million in the six months ended June 30, 2021, respectively.
Future minimum rental receipts for non-cancellable leases and subleases as of June 30, 2022 were as follows (in thousands):
SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON-CANCELABLE LEASES AND SUBLEASES
Year ending December 31,
Remainder of 2022 $ 1,085
2023 1,911
2024 1,925
2025 1,946
2026 1,868
Thereafter 11,366
Total $ 20,101
(5) NOTES RECEIVABLE
Notes receivable, including accrued interest, at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
SCHEDULE OF NOTES RECEIVABLES
June 30,
2022 December 31,
2021
First State Compassion Center (initial note) $ 367 $ 403
First State Compassion Center (secondary note) 8,002 7,845
Healer LLC 879 866
Total notes receivable 9,248 9,114
Notes receivable, current portion 132 127
Notes receivable, less current portion $ 9,116 $ 8,987
First State Compassion Center
The Company’s cannabis-licensed client in Delaware, First State Compassion Center (“FSCC”), issued a 10-year promissory note to the Company in 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 FSCC Initial Note approximate $10,000. At June 30, 2022 and December 31, 2021, the current portions of the FSCC Initial Note were approximately $80,000 and $75,000, respectively, and were included in Notes receivable, current, in the condensed consolidated balance sheets.
In December 2021, the Company converted financed trade accounts receivable balances from FSCC aggregating $7.8 million into notes receivable, whereby FSCC issued promissory notes aggregating $7.8 million to the Company (the “FSCC Secondary Notes”). The FSCC Secondary Notes bear interest of 6.0% per annum and mature in December 2025. FSCC is required to make periodic payments of principal and interest throughout the term of the FSCC Secondary Notes. At June 30, 2022, the FSCC Secondary Notes balance included approximately $54,000 of unpaid accrued interest.
15
Healer LLC
In March 2021, the Company was issued a promissory note in the principal amount of approximately $0.9 million from Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak (“Healer”). The principal balance of the note represents previous loans extended to Healer by the Company of $0.8 million, plus accrued interest through the revised promissory note issuance date of approximately $94,000 (the “Revised Healer Note”). The Revised Healer Note bears interest at a rate of 6.0% per annum and requires quarterly payments of interest through the April 2026 maturity date.
The Company has the right to offset any licensing fees payable by the Company to Healer 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 Healer Note, reducing the principal amount to approximately $866,000. Of the outstanding Revised Healer Note balance at both June 30, 2022 and December 31, 2021, approximately $52,000 was current.
High Fidelity
In August 2021, a $250,000 loan to High Fidelity Inc., an entity with cannabis operations in the state of Vermont, which bore interest at a rate of 10.0% per annum, was repaid in full.
(6) INVENTORY
Inventory at June 30, 2022 and December 31, 2021 consisted of the following (in thousands):
SCHEDULE OF INVENTORY
June 30,
2022 December 31,
2021
Plants $ 1,430 $ 1,015
Ingredients and other raw materials 498 262
Work-in-process 8,262 4,661
Finished goods 5,699 3,830
Total inventory $ 15,889 $ 9,768
(7) INVESTMENTS
The Company’s investments at June 30, 2022 and December 31, 2021 were comprised of the following (in thousands):
SCHEDULE OF INVESTMENTS
June 30,
2022 December 31,
2021
Investments – current:
Flowr Corp. (formerly Terrace Inc.) $ 124 $ 251
WM Technology Inc. 401 -
Total current investments $ 525 $ 251
The Company did 0t have any noncurrent investments at June 30, 2022 or December 31, 2021.
Flowr Corp. (formerly Terrace Inc.)
In December 2020, Terrace Inc., a Canadian cannabis entity in which the Company had an ownership interest of 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”). In accordance with the purchase agreement for this transaction, each shareholder of Terrace received 0.4973 shares in Flowr for each Terrace share held (the “Flowr Investment”).
The Flowr Investment is recorded at fair value, with changes in fair value recorded as a component of Other (expense) income, net, in the condensed consolidated statements of operations. The Company recorded losses of $0.2 million and $0.1 million in the three and six months ended June 30, 2022, respectively, and a loss of $0.4 million in both of the three- and six-month periods ended June 30, 2021. These amounts represent the changes in the fair value of the Flowr Investment in the respective periods.
16
MembersRSVP LLC
In January 2021, the Company and MembersRSVP LLC, an entity that develops cannabis-specific software (“MRSVP”) in which the Company owned a 23.0% membership interest, entered into an agreement under which the Company returned membership interests comprising 11.0% ownership in MRSVP in exchange for a release of the Company from any further obligation to make any incremental investments or payments to MRSVP, and certain other non-monetary consideration.
In addition to the reduction of the Company’s ownership interest to 12.0%, the Company relinquished its right to appoint a member to the board of MRSVP. As a result, the Company no longer had 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.
In September 2021, MRSVP sold substantially all of its assets pursuant to an asset purchase agreement. In connection with this transaction, the Company received cash proceeds of $1.5 million, which represented the Company’s pro rata share of the cash consideration received by MRSVP at the closing of the transaction. The cash proceeds reduced the Company’s MRSVP investment balance to zero and resulted in a gain of $0.3 million, which gain was reported as a component of Other (expense) income, net.
As an ongoing member of MRSVP, the Company was entitled to its pro rata share of any additional consideration received by MRSVP pursuant to the asset purchase agreement, which could include securities or other forms of non-cash or in-kind consideration and holdback amounts, if and when received and distributed by MRSVP. In February 2022, the Company received 121,968 shares of common stock of WM Technology Inc. (Nasdaq: MAPS), a technology and software infrastructure provider to the cannabis industry, which represented the Company’s pro rata share of the additional consideration received by MRSVP pursuant to the asset purchase agreement. The Company recognized a loss of $0.6 million in both of the three- and six-month periods ended June 30, 2022, which are included as components of Other (expense) income, net, in the condensed consolidated statements of operations for those periods. This amount represents the change in the fair value of the MAPS shares in the respective periods.
(8) PROPERTY AND EQUIPMENT, NET
The Company’s property and equipment, net, at June 30, 2022 and December 31, 2021 was comprised of the following (in thousands):
SCHEDULE OF PROPERTY AND EQUIPMENT
June 30,
2022 December 31,
2021
Land $ 4,450 $ 4,450
Buildings and building improvements 38,672 35,231
Tenant improvements 16,990 9,745
Furniture and fixtures 1,973 1,888
Machinery and equipment 9,466 7,221
Construction in progress 5,897 10,569
Property and equipment, gross 77,448 69,104
Less: accumulated depreciation (8,316 ) (6,954 )
Property and equipment, net $ 69,132 $ 62,150
The amounts reported as construction in progress primarily relate to the development of facilities in Annapolis, MD, Beverly, MA and Milford, DE.
17
(9) INTANGIBLE ASSETS AND GOODWILL
The Company’s acquired intangible assets at June 30, 2022 consisted of the following (in thousands):
SCHEDULE OF ACQUIRED INTANGIBLE ASSETS
Weighted
average Net
amortization Accumulated carrying
period (years) Cost amortization value

Tradename and trademarks 3.00 $ 2,041 $ 113 $ 1,928
Licenses and customer base 8.26 8,100 169 7,931
Non-compete agreements 2.00 42 3 39
7.18 $ 10,183 $ 285 $ 9,898
Estimated future amortization expense for the Company’s intangible assets at June 30, 2022 was as follows:
SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE OF INTANGIBLE ASSETS
Year ending December 31,
Remainder of 2022 $ 856
2023 1,712
2024 1,699
2025 1,239
2026 1,011
Thereafter 3,381
Total $ 9,898
The changes in the carrying value of the Company’s goodwill in the three months ended June 30, 2022 and 2021 were as follows (in thousands):
SCHEDULE OF GOODWILL
2022 2021
Balance at January 1, $ 2,068 $ 2,068
Kind Acquisition 6,011 -
Balance at June 30, $ 8,079 $ 2,068
(10) MORTGAGES AND NOTES PAYABLE
The Company’s mortgages and notes payable are reported in the aggregate on the condensed consolidated balance sheets under the captions Mortgages and notes payable, current, and Mortgages and notes payable, net of current.
Mortgages
The Company’s mortgage balances, including accrued interest, at June 30, 2022 and December 31, 2021 were comprised of the following (in thousands):
SCHEDULE OF MORTGAGES
June 30,
2022 December 31,
2021
Bank of New England – New Bedford, MA and Middleboro, MA properties $ 12,319 $ 12,499
Bank of New England – Wilmington, DE property 1,404 1,463
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties 767 778
DuQuoin State Bank – Metropolis, IL property 2,574 2,658
South Porte Bank – Mt. Vernon, IL property 814 816
Total mortgages payable 17,878 18,214
Less: Mortgages payable, current (1,417 ) (1,400 )
Mortgages payable, less current portion $ 16,461 $ 16,814
18
The Company maintains an amended and restated mortgage agreement with the Bank of New England with an interest rate of 6.5% per annum which matures in August 2025 (the “Amended BNE Mortgage”). The Amended BNE Mortgage is secured by the Company’s properties in New Bedford, MA and Middleboro, MA. Proceeds from the Amended BNE Mortgage were used to pay down a previous mortgage of $4.8 million with the Bank of New England on the New Bedford property, and $7.2 million of outstanding promissory notes as discussed below. The current portions of the outstanding principal balance under the Amended BNE Mortgage at June 30, 2022 and December 31, 2021 were approximately $370,000 and $358,000, respectively.
The Company maintains a second mortgage with Bank of New England that is secured by the Company’s property in Wilmington, DE (the “BNE Delaware Mortgage”). The mortgage matures in 2031, with monthly principal and interest payments. The interest rate is 5.25% per annum, with the rate adjusting every five years to the then-prime rate plus 1.5%, with a floor of 5.25% per annum. The next interest rate adjustment will occur in September 2026. The current portions of the outstanding principal balance under the BNE Delaware Mortgage at June 30, 2022 and December 31, 2021 were approximately $123,000 and $120,000, respectively.
The Company maintains a mortgage with DuQuoin State Bank (“DSB”) in connection with its purchase of properties in Anna, IL and Harrisburg, IL (the “DuQuoin Mortgage”). On May 5 of each year, the DuQuoin Mortgage becomes due unless it is renewed for another year at a rate determined by DSB’s executive committee. The DuQuoin Mortgage was renewed in May 2021 at a rate of 6.75% per annum. The current portions of the outstanding principal balance under the DuQuoin Mortgage at June 30, 2022 and December 31, 2021 were approximately $32,000 and $33,000, respectively.
In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, IL. The purchase price consisted of 750,000 shares of the Company’s common stock, which were valued at $705,000 on the date of the transaction, and payoff of the seller’s remaining mortgage balance of $1.6 million. In connection with this purchase, the Company entered into a second mortgage agreement with DSB for $2.7 million that matures in July 2041 and which initially bears interest at a rate of 6.25% per annum (the “DuQuoin Metropolis Mortgage”). The interest rate on the DuQuoin Metropolis Mortgage 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% ownership interest in Mari Holdings Metropolis LLC (“Metro”), the Company’s subsidiary that owns the property and holds the related mortgage obligation, reducing the Company’s ownership interest in Metro to 70.0%. The current portions of the outstanding balance of the DuQuoin Metropolis Mortgage at June 30, 2022 and December 31, 2021 were approximately $78,000 and $73,000, respectively.
In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, IL, (the “South Porte Bank Mortgage”). Beginning in August 2021, pursuant to the amendment of the South Porte Bank Mortgage, the monthly payments of principal and interest aggregated approximately $6,000, with such payment amounts effective through June 2023, at which time all remaining principal, interest and fees are due.
Promissory Notes
Promissory Note Retirements
In March 2021, utilizing a portion of the proceeds from the Hadron Transaction (defined below; see Note 12), the Company retired $15.2 million of principal and interest on promissory notes issued in previous fiscal years to accredited individual and institutional investors. Concurrently, the remaining debt discount of approximately $450,000 on one of the retired promissory notes (such discount having arisen from the issuance of warrants attached to such promissory note) was fully amortized.
Promissory Note Conversions
During the three months ended March 31, 2021, the holder of a note issued by the Company in June 2020, with an outstanding balance of $4.2 million, converted $1.0 million of principal and approximately $10,000 of accrued interest into 3,365,972 shares of the Company’s common stock. The Company issued the holder an amended and restated promissory note simultaneous with the conversion transaction representing the $3.2 million remaining balance due.
19
During 2021, in a series of transactions, the noteholder converted $2.8 million of principal into 8,033,296 shares of the Company’s common stock. At December 31, 2021, the outstanding balance on the amended and restated promissory note was $400,000.
During the three months ended March 31, 2022, the noteholder converted the remaining principal balance of $400,000 into 1,142,858 shares of the Company’s common stock and the note was retired. The Company did not record any gains or losses arising from these conversions.
Promissory Notes Issued as Purchase Consideration – Kind Acquisition
In connection with the Kind Acquisition (see Note 2), the Company issued four-year promissory notes aggregating $6.5 million at the rate of 6.0% per annum to the members of Kind (the “Kind Notes”). The Company paid $0.3 million of principal during the period since the Kind Acquisition Date. At June 30, 2022, the current portions of the Kind Notes aggregated $1.5 million.
Promissory Notes Issued to Purchase Commercial Vehicles
In August 2020, the Company entered into a note agreement with First Citizens’ Federal Credit Union for the purchase of a commercial vehicle (the “First Citizens’ Note”). The First Citizens’ Note bears interest at the rate of 5.74% per annum and matures in July 2026. The current portions of the outstanding balance under the First Citizens’ Note at both June 30, 2022 and December 31, 2021 was approximately $5,000.
In June 2021, the Company entered into a note agreement with Ally Financial for the purchase of a second commercial vehicle (the “Ally Financial Note”). The Ally Financial note bears interest at the rate of 10.0% per annum and matures in May 2027. The current portions of the outstanding balance under the Ally Financial Note at both June 30, 2022 and December 31, 2021 were approximately $5,000.
Promissory Note Issued by MariMed Hemp Inc.
In September 2020, the Company paid $0.5 million of principal on a $1.0 million promissory note issued in 2019 by MariMed Hemp Inc., one of the Company’s wholly-owned subsidiaries. In March 2021, utilizing a portion of the proceeds from the Hadron Transaction, the Company made an interest payment of $0.2 million and paid the remaining principal of $0.5 million.
At each of June 30, 2022 and December 31, 2021, the Company was carrying an accrued interest balance of approximately $125,000, representinginterest due on this note.
Future Payments
The future principal amounts due under the Company outstanding mortgages and notes payable at June 30, 2022 are as follows (in thousands):
SCHEDULE OF MATURITIES OF OUTSTANDING DEBT
Year ending December 31,
Remainder of 2022 $ 1,042
2023 2,999
2024 2,323
2025 2,471
2026 1,183
Thereafter 14,025
Total 24,043
Less: discount (680 )
Total debt gross $ 23,363
20
(11) DEBENTURES PAYABLE
In a series of transactions from October 2018 through February 2020, the Company sold an aggregate of $21.0 million of convertible debentures (the “$21M Debentures”) to an unaffiliated institutional investor pursuant to an amended securities purchase agreement.
As of March 31, 2021, the holder of the $21M Debentures had converted the entire $21.0 million of principal and related accrued interest into the Company’s common stock in a series of conversions, at conversion prices equal to 80.0% of a calculated average of the daily volume-weighted price preceding the date of conversion. Of these conversions, $1.3 million of principal and approximately $56,000 of accrued interest were converted into 4,610,645 shares of common stock at a conversion price of $0.29 per share during the three months ended March 31, 2021. Additionally, a remaining (i) original issue discount of approximately $52,000, (ii) debt discount of approximately $39,000 (such discount having arisen from the issuance of warrants attached to the $21M Debentures), and (iii) beneficial conversion feature of approximately $177,000 (such conversion feature having arisen from an in-the-money embedded conversion option on the commitment date), were fully amortized upon the final conversion of the $21M Debentures. All conversions were effected within the terms of the debenture agreements, and accordingly, the Company did not record any gains or losses in connection with these conversions.
(12) MEZZANINE EQUITY
Series B Convertible Preferred Stock
In 2020, the Company entered into an exchange agreement with two unaffiliated institutional shareholders (the “Exchange Agreement”) whereby the Company (i) issued $4.4 million of promissory notes to the two institutional shareholders (such notes were retired in March 2021 as part of the promissory note retirements described above (see Note 11), and (ii) exchanged 4,908,333 shares of the Company’s common stock previously acquired by the two institutional shareholders for an equal number of shares of newly designated Series B convertible preferred stock (the “Series B Stock”).
In connection with the Exchange Agreement, the Company filed (i) a certificate of designation with respect to the rights and preferences of the Series B Stock, and (ii) a certificate of elimination to return all shares of the Series A convertible preferred stock, of which no shares were issued or outstanding at the time of filing, to the status of authorized and unissued shares of undesignated preferred stock.
The holders of Series B Stock (the “Series B Holders”) are entitled to cast the number of votes equal to the number of shares of common stock into which the shares of Series B Stock are convertible, together with the holders of common stock as a single class, on most matters. However, the affirmative vote or consent of the Series B Holders voting separately as a class is required for certain acts taken by the Company, including the amendment or repeal of certain charter provisions, liquidation or winding up of the Company, creation of stock senior to the Series B Stock, and/or other acts defined in the certificate of designation.
The Series B Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the Company’s common stock. The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company unless the Series B Holders then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Stock in an amount calculated pursuant to the certificate of designation.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holder of Series B Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share of Series B Stock equal to $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 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.
At any time on or prior to the six-year anniversary of the issuance date of the Series B Stock, (i) the Series B Holders have the option to convert their shares of Series B Stock into common stock at a conversion price of $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, shares of Series B Stock into 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.
21
On the day following the six-year anniversary of the issuance of the Series B convertible preferred stock, all outstanding shares of Series B Stock shall automatically convert into common stock as follows:
● 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 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 sixty-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 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 Stock into common stock at a conversion price per share equal to the sixty-day VWAP and pay cash to the Series B Holders equal to the difference between $3.00 per share and the sixty-day VWAP.
The Company shall at all times when the Series B Stock is outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B 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 Stock.
Series C Convertible Preferred Stock
In March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) with respect to a financing facility of up to $46.0 million (the “Hadron Facility”) in exchange for newly-designated Series C convertible preferred stock of the Company (the “Series C Stock”) and warrants to purchase the Company’s common stock (the “Hadron Transaction”).
At the closing of the Hadron Transaction in March 2021, Hadron purchased $23.0 million of Units at a price of $3.70 per Unit. Each Unit is comprised of one share of Series C Stock and a four-year warrant to purchase two and one-half shares of common stock. The Company issued to Hadron 6,216,216 shares of Series C Stock and warrants to purchase up to an aggregate of 15,540,540 shares of its common stock. Each share of Series C Stock is convertible, at Hadron’s option, into five shares of common stock, and each warrant is exercisable at an exercise price of $1.087 per share. The warrants are subject to early termination if certain milestones are achieved and the market value of the Company’s common stock reaches certain predetermined levels. The fair value of the warrants on the issuance date was $9.5 million, which amount was recorded in Additional paid-in capital. The Company incurred costs of $0.4 million related to the issuance of these securities, which was recorded as a reduction to Additional paid-in capital in March 2021.
In connection with the closing of the Hadron Transaction, the Company filed a certificate of designation with respect to the rights and preferences of the Series C Stock. Such stock is zero coupon, non-voting, and has a liquidation preference equal to its original issuance price plus declared but unpaid dividends. Holders of Series C Stock are entitled to receive dividends on an as-converted basis.
Of the $23.0 million of proceeds received by the Company in March 2021, $7.3 million was used to fund construction and upgrades of certain of the Company’s owned and managed facilities, and $15.7 million was used to pay down debt and related interest (see Note 10).
No further funding has occurred under the Hadron Facility and, on August 4, 2022, the Company and Hadron entered into a Second Amendment to the Purchase Agreement pursuant to which, inter alia, (a) Hadron’s obligation to provide any further funding to the Company and the Company’s obligation to issue any further securities to Hadron was terminated, (b) Hadron’s right to appointment a designee to the Company’s board of directors was eliminated, and (c) certain covenants restricting the Company’s incurrence of new indebtedness were eliminated.
22
(13) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION
Common Stock
During 2021 and 2022, the Company issued an aggregate of 12,542,126 shares of common stock in a series of conversions of a promissory note in the original principal amount of $8.8 million, of which 1,142,858 shares were issued in the first quarter of 2022, resulting in the promissory note being fully paid and retired (see Note 11).
During the three months ended June 30, 2022, the Company issued 2,717 shares of restricted common stock associated with previously issued subscriptions for common stock with a grant date fair value of approximately $2,000.
In May 2022, the Company issued 350,000 shares of restricted common stock with a grant date fair value of approximately $217,000 in connection with the appointment of the Company’s new Chief Financial Officer.
In March 2022, the Company issued 375,000 shares of restricted common stock with a grant date fair value of approximately $274,000 in exchange for consulting services.
Amended and Restated 2018 Stock Award and Incentive Plan
The Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “2018 Plan”) provides for the award of options to purchase the Company’s common stock (“stock options”), stock appreciation rights (“SARs”), restricted stock, deferred stock, dividend equivalents, performance shares or other stock-based performance awards and other stock- or cash-based awards. Awards can be granted under the 2018 Plan to the Company’s employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries.
Warrants
At June 30, 2022, warrants to purchase up to 24,676,571 shares of common stock were outstanding, with a weighted average exercise price of $0.89.
In April 2022, 750,000 warrants were exercised in a cashless transaction, under which the Company withheld 515,039 shares underlying such warrants and issued 234,961 shares of common stock.
Stock Options
In June 2022, 312,248 stock options were exercised in a cashless transaction, under which the Company withheld 112,248 shares underlying such stock options and issued 200,000 shares of common stock.
At June 30, 2022, options to purchase up to 39,899,423 shares of common stock were outstanding, with a weighted average exercise price of $0.91 and a weighted average remaining life of approximately four years.
The grant date fair values of options to purchase common stock granted in the three and six months ended June 30, 2022 were estimated using the Black-Scholes valuation model with the following assumptions:
SCHEDULE OF STOCK OPTIONS ESTIMATED USING THE BLACK-SCHOLES VALUATION MODEL WITH ASSUMPTIONS
Three months Six months
ended ended
June 30, June 30,
2022 2022
Estimated life (in years) 5.0 5.0
Volatility 98.4 % 98.4 %
Risk-free interest rates 3.0 % 3.0 %
Dividend yield - -
23
Stock-Based Compensation
The Company recorded stock-based compensation of $2.6 million and $5.0 million in the three and six months ended June 30, 2022, respectively, and $1.2 million and $1.6 million in the three and six months ended June 30, 2021, respectively.
(14) REVENUE
The Company’s main sources of revenue are comprised of the following:
● Product sales (retail and wholesale) – direct sales of cannabis and cannabis-infused products primarily by the Company’s retail dispensaries and wholesale operations in Massachusetts, Illinois and, as of the Kind Acquisition Date, Maryland. This revenue is recognized when products are delivered or at retail points-of-sale.
● Real estate rentals – 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 – 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 – resale of cultivation and production resources, supplies and equipment, acquired by the Company from top national vendors at discounted prices, to its clients and third parties within the cannabis industry. The Company recognizes this revenue after the delivery and acceptance of goods by the purchaser.
● Licensing fees – revenue from the sale of the Company’s branded products, including Betty’s Eddies and Kalm Fusion, and from the sublicensing or contracted brands, including Healer and Tikum Olam, to regulated dispensaries throughout the United States and Puerto Rico. This revenue is recognized when the products are delivered.
The Financial Accounting Standards ~~Board’s~~Board Accounting Standards Codification ~~(“ASC”)~~ 606, Revenue from Contract with Customers, as amended by subsequently issued Accounting Standards ~~Updates. This revenue standard~~Updates, 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.

Additionally, when another party is involved in providing goods or services to the Company’s clients, a determination is made as to who—the Company or the other party—is acting in the capacity as the principal in the sale transaction, and who is ~~merely~~ the agent arranging for goods or services to be provided by the other party.

The Company is typically considered the principal if it controls the specified good or service before such good or service is transferred to its client. The Company may also be deemed to be the principal even if it engages another party (an agent) to satisfy some of the performance obligations on its behalf, provided the Company (i) takes on certain responsibilities, obligations, and risks, (ii) possesses certain abilities and discretion, or (iii) other relevant indicators of the sale. If deemed an agent, the Company would not recognize revenue for the performance obligations it does not satisfy.

~~The Company’s main sources of revenue are comprised of the following:~~
● 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. An increase in product sales is expected from 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). 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.
924

~~Research~~Revenue for the three and ~~Development Costs~~six months ended June 30, 2022 and 2021 was comprised of the following (in thousands):
SCHEDULE OF REVENUES COMPRISED OF MAJOR CATEGORIES
2022 2021 2022 2021
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021

Product revenue:
Product sales - retail $ 23,087 $ 20,552 $ 44,528 $ 35,776
Product sales - wholesale 7,958 8,178 14,020 13,903
Total product sales 31,045 28,730 58,548 49,679
Other revenue:
Real estate rentals 846 1,862 2,433 3,671
Supply procurement 820 398 2,010 918
Management fees 81 981 834 1,877
Licensing fees 194 598 443 1,067
Total other revenue 1,941 3,839 5,720 7,533
Total revenue $ 32,986 $ 32,569 $ 64,268 $ 57,212

~~Research and development costs are charged to operations as incurred.~~(15) MAJOR CUSTOMERS
~~Property and Equipment~~
Property and equipment are stated at cost less accumulated depreciation, with depreciation recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term, if applicable. When assets are retired or disposed, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Repairs and maintenance are charged to expense in the period incurred.
~~The estimated useful lives of property and equipment are generally as follows: buildings and building improvements,~~ ~~forty years; tenant improvements,~~ ~~the remaining duration of the related lease; furniture and fixtures,~~ ~~seven~~ to ~~ten~~ ~~years; machinery and equipment,~~ ~~ten years. Land is not depreciated.~~
The Company’s property and equipment are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from the undiscounted future cash flows of such asset over the anticipated holding period. An impairment loss is measured by the excess of the asset’s carrying amount over its estimated fair value.
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 nine months ended September 30, 2021 and 2020, based on the results of management’s impairment analyses, there were no impairment losses.~~
~~Leases~~
~~The consolidated financial statements reflect the Company’s adoption of ASC 842,~~ ~~Leases~~~~, as amended by subsequent accounting standards updates, utilizing the modified retrospective transition approach.~~
ASC 842 is intended to improve financial reporting of leasing transactions. The most prominent change from previous accounting guidance is the requirement to recognize right-of-use assets and lease liabilities on the consolidated balance sheet representing the rights and obligations created by operating leases that extend more than twelve months in which the Company is the lessee. The Company elected the package of practical expedients permitted under ASC 842. Accordingly, the Company accounted for its existing operating leases that commenced before the effective date as operating leases under the new guidance without reassessing (i) whether the contracts contain a lease, (ii) the classification of the leases, and (iii) the accounting for indirect costs as defined in ASC 842.

The Company ~~determines if~~did not have any customers that contributed 10% or more of total revenue in any of the three- and six-month periods ended June 30, 2022 and 2021.
At June 30, 2022, one customer accounted for 10% or more of the Company’s accounts receivable balance, representing approximately 26% of the total accounts receivable in the aggregate. At December 31, 2021, one customer accounted for 10% or more of the Company’s accounts receivable balance, representing approximately 28% of total accounts receivable in the aggregate. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. The Company maintains an ~~arrangement is~~allowance for doubtful accounts and historical losses have been within management’s expectations.
(16) LEASES
Arrangements that are determined to be leases with a ~~lease at inception. Right-of-use~~term greater than one year are accounted for by the recognition of right-of-use assets that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities, that represent the Company’s obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately.
Right-of-use assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term, utilizing the Company’s incremental borrowing rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

~~Impairment of Long-Lived Assets~~
~~The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15,~~ ~~Impairment or Disposal of Long-Lived Assets~~. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.
~~Fair Value of Financial Instruments~~
~~The Company follows the provisions of ASC 820,~~ ~~Fair Value Measurement~~~~, to measure the fair value of its financial instruments, and ASC 825,~~ ~~Financial Instruments,~~ for disclosures on the fair value of its financial instruments. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes 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 levels of fair value hierarchy defined by ASC 820 are:
~~Level 1~~ ~~Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.~~
~~Level 2~~ ~~Pricing 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 3~~ ~~Pricing inputs that are generally observable inputs and not corroborated by market data.~~
10
~~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.~~
The fair value of option and warrant issuances are determined using the Black-Scholes pricing model and employing several inputs such as the expected life of instrument, the exercise price, the expected risk-free interest rate, the 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 nine months ended September 30, 2021 and 2020:
~~SCHEDULE OF ASSUMPTIONS USED~~
Nine Months Ended
September 30,
2021 2020
Life of instrument 3.0 to 5.0 years 2.7 to 4.3 years
Volatility factors 1.230 to 1.266 1.059 to 1.180
Risk-free interest rates 0.36% to 0.90% 0.26% to 1.30%
Dividend yield 0% 0%
~~The expected life of an instrument is calculated using the simplified method 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.
~~The Company amortizes the fair value of option and warrant issuances on a straight-line basis over the requisite service period of each instrument.~~
~~Extinguishment of Liabilities~~
~~The Company accounts for extinguishment of liabilities in accordance with ASC 405-20,~~ ~~Extinguishments of Liabilities.~~ ~~When the conditions for extinguishment are met, the liabilities are written down to zero and a gain or loss is recognized.~~
~~Stock-Based Compensation~~
~~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.
11
~~Income Taxes~~
~~The Company uses the asset and liability method to account for income taxes in accordance with ASC 740,~~ ~~Income Taxes~~. Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date.
ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. The Company did not take any uncertain tax positions and had 0 ~~adjustments to unrecognized income tax liabilities or benefits for the nine months ended September 30, 2021 or 2020.~~
~~Related Party Transactions~~
~~The Company follows ASC 850,~~ ~~Related Party Disclosures~~~~, for the identification of related parties and disclosure of related party transactions.~~
In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.
~~Comprehensive Income~~
~~The Company reports comprehensive income and its components following guidance set forth by ASC 220,~~ ~~Comprehensive Income~~, which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. There were no items of comprehensive income applicable to the Company during the period covered in the financial statements.
~~Earnings Per Share~~
~~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.
~~As of September 30, 2021 and 2020, there were potentially dilutive securities convertible into shares of common stock comprised of (i) stock options – convertible into~~ ~~26,054,171~~ ~~and~~ ~~7,125,750~~ ~~shares, respectively, (ii) warrants – convertible into~~ ~~27,802,734~~ ~~and~~ ~~17,735,107~~ ~~shares, respectively, (iii) Series B preferred stock – convertible into~~ ~~4,908,333~~ ~~shares in both periods, (iv) Series C preferred stock – convertible into~~ ~~31,081,080~~ ~~and~~ ~~zero~~ ~~shares, respectively, (v) debentures payable – convertible into~~ 0 ~~and~~ ~~28,233,972~~ ~~shares, respectively, and (vi) promissory notes – convertible into~~ ~~2,500,268~~ ~~and~~ ~~17,503,282~~ ~~shares, respectively.~~
~~For the three and nine months ended September 30, 2021, the aforementioned potentially dilutive securities increased the number of weighted average common shares outstanding on a diluted basis by~~ ~~49,479,941~~ ~~shares and~~ ~~45,863,932~~ shares, respectively. For the three months ended September 30, 2020, the aforementioned potentially dilutive securities increased the number of weighted average common shares outstanding on a diluted basis by ~~64,556,628~~ shares. Such shares were reflected in the calculation of diluted net income per share for such periods. For the nine months ended September 30, 2020, the potentially dilutive securities had an anti-dilutive effect on earnings per share, and pursuant to ASC 260, were excluded from the diluted net income per share calculations, resulting in identical basic and fully diluted net income per share for that period.
~~Commitments and Contingencies~~
~~The Company follows ASC 450,~~ ~~Contingencies~~, which requires the Company to assess 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.
If the assessment of a contingency indicates that it is probable that a material loss will be incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
While not assured, management does not believe, based upon information available at this time, that a loss contingency will have material adverse effect on the Company’s financial position, results of operations or cash flows.
12
~~Beneficial Conversion Features on Convertible Debt~~
~~Convertible instruments that are not bifurcated as a derivative pursuant to ASC 815,~~ ~~Derivatives and Hedging~~, and not accounted for as a separate equity component under the cash conversion guidance are evaluated to determine whether their conversion prices create an embedded beneficial conversion feature at inception, or may become beneficial in the future due to potential adjustments.
A beneficial conversion feature is a nondetachable conversion feature that is “in-the-money” at the commitment date. The in-the-money portion, also known as the intrinsic value, is recorded in equity, with an offsetting discount to the carrying amount of convertible debt to which it is attached. The discount is amortized to interest expense over the life of the debt with adjustments to amortization upon full or partial conversions of the debt.
~~Risk and Uncertainties~~
The Company is subject to risks common to companies operating within the legal and medical marijuana industries, including, but not limited to, federal laws, government regulations and jurisdictional laws.
~~Noncontrolling Interests~~
Noncontrolling 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.
~~Off Balance Sheet Arrangements~~
~~The Company does not have any off-balance sheet arrangements.~~
13
~~NOTE 3 –~~ ~~ACQUISITIONS~~
~~The Harvest Foundation LLC~~
~~In 2019, the Company entered into a purchase agreement to acquire~~ ~~100~~% 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 legislative approval of the transaction. During 2019, the state paused the processing of cannabis license transfers, without indicating when it will resume. Upon the resumption of these activities and the ensuing approval by the state, the Company expects to consummate this transaction whereby the operations of Harvest will be consolidated into the Company’s financial statements.
~~The purchase price is comprised of the issuance of (i)~~ ~~1,000,000~~ ~~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 the fall of 2016, the members of Kind Therapeutics USA Inc., the Company’s cannabis-licensed client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (“Kind”), and the Company agreed to a partnership/joint venture whereby Kind would be owned 70~~% by the Company and~~ 30% by the members of Kind, subject to approval by the Maryland Medical Cannabis Commission (“MMCC”). Prior to finalizing the documents confirming the partnership/joint venture, in December 2018, 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. The MOU provides for a total purchase price of $6.3~~ ~~million in cash,~~ ~~2,500,000~~ shares of the Company’s common stock, and other consideration. The acquisition is subject to approval by the MMCC, which will be applied for following the resolution of the litigation with Kind discussed below.
Also in December 2018, (i) MariMed Advisors Inc., the Company’s wholly owned subsidiary, and Kind entered into a management services agreement to provide Kind with comprehensive management services in connection with the business and operations of Kind (“the MSA”), and (ii) Mari Holdings MD LLC, the Company’s majority-owned subsidiary, entered into a 20~~-year lease with Kind for Kind’s utilization of the Company’s~~ ~~180,000~~ square foot cultivation and production facility in Hagerstown, MD (“the Lease”), which the Company purchased, designed, and developed for occupancy and use by Kind commencing in late 2017. Additionally, in October 2019, Mari Holdings MD LLC 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 have subsequently sought to renege on both the original partnership/joint venture and the MOU. The Company engaged with Kind in good faith in an attempt to reach updated terms acceptable to both parties, however 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. As a result, the consummation of this acquisition has been delayed and may not ultimately be completed. The litigation is further discussed in Note 20 – ~~Commitments and Contingencies~~.
~~MediTaurus LLC~~
~~In 2019, the Company acquired a~~ 70% ownership interest in MediTaurus LLC (“MediTaurus”), a company formed by Jokubas Ziburkas PhD, a neuroscientist and leading authority on cannabidiol (“CBD”) and the endocannabinoid system, in exchange for $~~2.8~~ ~~million of cash and stock.~~ ~~The Company currently sells CBD products developed by MediTaurus under its Florance™ brand~~.
~~In September 2021, the Company acquired the remaining~~ 30~~% ownership interest of MediTaurus in exchange for~~ ~~100,000~~ ~~shares of the Company’s common stock, valued at approximately $94,000, and $10,000~~ ~~in cash. The carrying value of the noncontrolling interest of approximately $975,000~~ ~~was eliminated, and since there was no change in control of MediTaurus from this transaction, the resulting gain on bargain purchase was recognized in~~ ~~Additional Paid-In Capital~~ ~~on the September 30, 2021 balance sheet. The shares and cash were issued and paid in November 2021, and were included in~~ ~~Common Stock Subscribed But Not Issued~~ ~~and~~ ~~Accrued Expenses~~, respectively, on the September 30, 2021 balance sheet. As part of this transaction, the initial purchase agreement was amended whereby any and all future license fees and payments to MediTaurus were eliminated.
14
~~NOTE 4 –~~ ~~INVESTMENTS~~
~~At September 30, 2021 and December 31, 2020, the Company’s investments were comprised of the following:~~
~~SCHEDULE OF INVESTMENTS~~

September 30,
2021

December 31,
2020

Current investments:
Flowr Corp. (formerly Terrace Inc.) $ 419,803 $ 1,357,193

Non-current investments:
MembersRSVP LLC - 1,165,788

Total investments $ 419,803 $ 2,522,981
~~Flowr Corp. (formerly Terrace Inc.)~~
~~In December 2020, Terrace Inc., a Canadian cannabis entity in which the Company had an ownership interest of~~ ~~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 ~~0.4973~~ ~~of a share in Flowr for each Terrace share held.~~
~~This investment is carried at fair value. During the nine months ended September 30, 2021 and 2020, the decrease in fair value of this investment of approximately $937,000~~ ~~and $446,000, respectively, was reflected in~~ ~~Change In Fair Value Of Investments~~ ~~on the statement of operations.~~
~~MembersRSVP LLC~~
~~In August 2018, the Company invested $300,000~~ ~~and issued~~ ~~378,259~~ ~~shares of its common stock, valued at approximately $915,000, in exchange for a~~ 23~~% ownership in MembersRSVP LLC (“MRSVP”), an entity that has developed cannabis-specific customer relationship management software, branded under the name Sprout.~~
During the nine months ended September 30, 2020, the investment was accounted for under the equity method. Based on the Company’s equity in MRSVP’s net loss during such period, the Company recorded earnings for the three months and nine month ended September 30, 2020 of approximately $~~52,000~~ ~~and $19,000, respectively. Such earnings comprised the balance of~~ ~~Equity in Earnings of Investments~~ ~~on the statement of operations for such periods.~~
~~In January 2021, the Company and MRSVP entered into an agreement whereby the Company assigned and transferred membership interests comprising an~~ 11% ownership in MRSVP in exchange for a release from all further obligation by the Company to make future investments or payments and certain other non-monetary consideration. Following the interest transfer, the Company’s ownership interest in MRSVP was reduced to 12~~% on a fully diluted basis.~~
As part of the agreement, the Company relinquished its right to appoint a member to the board of MRSVP. In light of the Company no longer having the ability to exercise significant influence over MRSVP, the Company discontinued accounting for this investment under the equity method as of January 1, 2021. The Company’s share of MRSVP’s net losses recorded under the equity method prior to January 1, 2020 of approximately $~~50,000~~ ~~remained part of the carrying amount of the investment.~~
In September 2021, MRSVP sold substantially all of its assets pursuant to an asset purchase agreement dated as of August 31, 2021, and entered into several related agreements. In furtherance of the transaction, the Company received cash proceeds of $~~1,475,000~~, representing the Company’s pro rata share of the cash consideration received by MRSVP upon the closing of the transaction. As an ongoing member of MRSVP, the Company will receive its pro rata share of any 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.
~~As of September 30, 2021, the Company had received the cash consideration, and accordingly, reduced the investment balance to zero and recorded a gain of approximately $309,000~~ ~~which was reflected in~~ ~~Other~~ ~~non-operating expenses on the statement of operations. The Company had not received any of the non-cash consideration as of the report date.~~
15
~~NOTE 5 –~~ ~~DEFERRED RENTS RECEIVABLE~~
The Company is 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 on a percentage 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 facility purchased in September 2016 and developed into a cannabis cultivation, processing, and dispensary facility which is leased to a cannabis-licensed client under a triple net lease that commenced in 2017 and ~~expires in 2035~~.
● ~~Maryland – a~~ ~~180,000~~ square foot former manufacturing facility purchased in January 2017 and developed by the Company into a cultivation and processing facility which is leased to a licensed cannabis client under a triple net lease that commenced 2018 and ~~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 commenced in 2017 and~~ ~~expires in 2022~~.
~~The Company subleases the following properties:~~
● ~~Delaware –~~ ~~4,000~~ ~~square feet of retail space in a multi-use building space which the Company developed into a cannabis dispensary and is subleased to its cannabis-licensed client under a under a triple net~~ ~~lease expiring in December 2021 with a five-year option to extend~~.
● ~~Delaware – a~~ ~~100,000~~ ~~square foot warehouse which the Company is developing into a cultivation and processing facility to be 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 subleased 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~~.
~~As of September 30, 2021 and December 31, 2020, cumulative fixed rental receipts under such leases approximated $17.5~~ ~~million and $13.9~~ ~~million, respectively, compared to revenue recognized on a straight-line basis of approximately $19.2~~ ~~million and $15.8~~ ~~million, respectively. Accordingly, the deferred rents receivable balance approximated $1.7~~ ~~million and $1.9~~ ~~million at September 30, 2021 and December 31, 2020, respectively.~~
~~Future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2021 were:~~
~~SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON-CANCELABLE LEASES AND SUBLEASES~~

2021 $ 1,207,136
2022 4,740,130
2023 4,446,410
2024 4,506,585
2025 4,574,023
Thereafter 39,591,553
Total $ 59,065,837
16
~~NOTE 6 –~~ ~~NOTES RECEIVABLE~~
~~At September 30, 2021 and December 31, 2020, notes receivable, including accrued interest, consisted of the following:~~
~~SCHEDULE OF NOTES RECEIVABLE~~

September 30,
2021

December 31,
2020

First State Compassion Center $ 420,267 $ 468,985
Healer LLC 892,637 899,226
High Fidelity Inc. - 254,919
Total notes receivable 1,312,904 1,623,130
Notes receivable, current portion 124,426 658,122
Notes receivable, less current portion $ 1,188,478 $ 965,008
~~First State Compassion Center~~
~~The Company’s cannabis-licensed client in Delaware, First State Compassion Center, 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 fully paid down. At September 30, 2021 and December 31, 2020, the current portion of this note approximated $72,000~~ ~~and $64,000, respectively, and was included in~~ ~~Notes Receivable, Current Portion~~ ~~on the respective balance sheets.~~
~~Healer LLC~~
~~In 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~~% 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~~% per annum and~~ ~~requires quarterly payments of interest from April 2021 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 September 30, 2021 and December 31, 2020, the total amount of principal and accrued interest due under the aforementioned promissory notes approximated $893,000~~ ~~and $899,000, respectively, of which approximately $52,000~~ ~~and $337,000, respectively, was current.~~
~~High Fidelity~~
~~In August 2019, the Company loaned $250,000~~ to High Fidelity Inc., an entity that owns and operates two seed-to sale medical marijuana facilities in the state of Vermont and produces its own line of CBD products. The loan bore interest at a rate of ~~10.0% per annum, and was repaid in full in August 2021.~~
17
~~NOTE 7 –~~ ~~INVENTORY~~
~~At September 30, 2021 and December 31, 2020, inventory was comprised of the following:~~
~~SCHEDULE OF INVENTORY~~

September 30,
2021

December 31,
2020

Plants $ 1,490,314 $ 3,352,425
Ingredients and other raw materials 256,331 176,338
Work-in-process 3,434,208 468,377
Finished goods 5,813,110 2,833,431
Total inventory $ 10,993,963 $ 6,830,571
~~NOTE 8 –~~ ~~PROPERTY AND EQUIPMENT~~
~~At September 30, 2021 and December 31, 2020, property and equipment consisted of the following:~~
~~SCHEDULE OF PROPERTY AND EQUIPMENT~~

September 30,
2021

December 31,
2020

Land $ 4,449,810 $ 3,988,810
Buildings and building improvements 34,343,369 29,309,856
Tenant improvements 9,295,691 8,844,974
Furniture and fixtures 1,868,571 619,880
Machinery and equipment 6,983,256 4,620,924
Construction in progress 8,938,997 3,140,807
65,879,694 50,525,251
Less: accumulated depreciation (6,363,525 ) (4,888,722 )
Property and equipment, net $ 59,516,169 $ 45,636,529
~~During the nine months ended September 30, 2021 and December 31, 2020, additions to property and equipment approximated $15,354,000~~ ~~and $1,876,000, respectively.~~
The 2021 additions were primarily comprised of (i) the development of the facility in Metropolis, IL, and (ii) purchases of building improvements, machinery, 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 $8.9~~ ~~million and $3.1~~ ~~million at September 30, 2021 and December 31, 2020, respectively, consisted of the commencement of construction of properties in Milford, DE and Annapolis, MD.~~
~~Depreciation expense for the nine months ended September 30, 2021 and 2020 approximated $1,499,000~~ ~~and $1,341,000, respectively.~~
18
~~NOTE 9 –~~ ~~INTANGIBLES~~
~~At September 30, 2021 and December 31, 2020, intangible assets were comprised of (i) the carrying value of cannabis license fees, and (ii) goodwill arising from the Company’s acquisitions.~~
The Company’s cannabis licenses are issued from 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. At September 30, 2021 and December 31, 2020, the carrying value of these cannabis licenses approximated $~~281,000~~ ~~and $161,000, respectively.~~
~~The goodwill associated with acquisitions is reviewed on a quarterly basis for impairment. Based on this review and other factors, the goodwill of approximately $2.1~~ ~~million at September 30, 2021 and December 31, 2020 was deemed to be unimpaired.~~
~~NOTE 10 –~~ ~~MORTGAGES~~
~~At September 30, 2021 and December 31, 2020, mortgage balances, including accrued interest, were comprised of the following:~~
~~SCHEDULE OF MORTGAGES PAYABLE~~

September 30,
2021

December 31,
2020

Bank of New England
– New Bedford, MA and Middleboro, MA properties
$ 12,583,053 $ 12,834,090
Bank of New England
– Wilmington, DE property
1,491,525 1,575,658
DuQuoin State Bank
– Anna, IL and Harrisburg, IL properties
786,046 814,749
DuQuoin State Bank
– Metropolis, IL property
2,688,230 -
South Porte Bank
– Mt. Vernon, IL property
838,440 906,653
Total mortgages payable 18,387,294 16,131,150
Mortgages payable, current portion (1,412,545 ) (1,387,014 )
Mortgages payable, less current portion $ 16,974,749 $ 14,744,136
~~In November 2017, the Company entered into a~~ 10~~-year mortgage agreement with Bank of New England in the amount of $4,895,000~~ ~~(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~~%, with a floor of~~ ~~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~~%, with a floor of~~ ~~6.25% per annum. In July 2020, at which time the Initial Mortgage had a remaining principal balance of approximately $4.8~~ ~~million, the parties consummated an amended and restated mortgage agreement, secured by the Company’s properties in New Bedford and Middleboro in the amount of $13.0~~ ~~million bearing interest at a rate of~~ ~~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~~ ~~million of promissory notes as further described below. At September 30, 2021 and December 31, 2020, the outstanding principal balance of the Refinanced Mortgage approximated $12.6~~ ~~million and $12.8~~ ~~million, respectively, of which approximately $352,000~~ ~~and $335,000, respectively, was current.~~
~~The Company maintains another mortgage with Bank of New England for 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% per annum through September 2021, and thereafter the rate adjusting every five years to the then prime rate plus~~ ~~1.5% with a floor of~~ ~~5.25% per annum. At September 30, 2021 and December 31, 2020, the outstanding principal balance on this mortgage approximated $1.5~~ ~~million and $1.6~~ ~~million, respectively, of which approximately $118,000~~ ~~and $114,000, respectively, was current.~~
19
~~In May 2016, the Company entered into a mortgage agreement with DuQuoin State Bank (“DSB”) for the purchase of properties in Anna, IL and Harrisburg, IL which the Company developed into two~~ ~~3,400~~ ~~square foot free-standing retail dispensaries. On May 5~~^th~~of each year, this mortgage is due to be repaid unless it is renewed for another year at a rate determined by DSB’s executive committee. The mortgage was renewed in May 2021 at a rate of~~ ~~6.75% per annum. At September 30, 2021 and December 31, 2020, the outstanding principal balance on this mortgage approximated $793,000~~ ~~and $815,000~~ ~~respectively, of which approximately $32,000~~ ~~and $31,000, respectively, was current.~~
~~In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, IL. The purchase price consisted of~~ ~~750,000~~ ~~shares of the Company’s common stock, which was valued at $705,000~~ ~~on the date of the transaction, and payoff of the seller’s remaining mortgage of approximately $1.6~~ ~~million. In connection with this purchase, the Company entered into another mortgage agreement with DSB in the amount of $2.7~~ ~~million that matures in July 2041 and initially bears interest at a rate of~~ ~~6.25% per annum which 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% 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~~%. At September 30, 2021, the outstanding principal balance on this mortgage approximated $2.7~~ ~~million, of which approximately $71,000~~ ~~was current.~~
In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, IL. Pursuant to the amended mortgage agreement, the mortgage shall be repaid in monthly installments of principal and interest of approximately $~~6,000~~ ~~which began in August 2021 and continues through its maturity in June 2022, at which time all remaining principal, interest and fees shall be due.~~
~~NOTE 11 –~~ ~~PROMISSORY NOTES~~
~~Promissory Notes Issued by the Company and its MariMed Hemp Inc. Subsidiary~~
~~In June 2019, the Company and MariMed Hemp Inc., its wholly-owned subsidiary (“MMH”), issued a secured promissory note in the principal amount of $10.0~~ ~~million (the “$10M Note”) to an unaffiliated party (the “Noteholder”). The $10M Note provided for the repayment of principal plus a payment of $1.5~~ ~~million (the “$1.5M Payment”) on the maturity date of~~ ~~January 31, 2020. Such payment was charged to interest expense over the life of the $10M Note.~~
~~As part of the $10M Note transaction, the Company issued~~ ~~three-year warrants to purchase up to~~ ~~375,000~~ ~~shares of common stock at an exercise price of $4.50~~ ~~per share to the Noteholder. The fair value of these warrants on the issuance date of approximately $601,000~~ ~~was recorded as a discount to the $10M Note. Approximately $523,000~~ ~~of the warrant discount was amortized to interest expense in 2019, with the remainder in January 2020.~~
~~The Company entered into an amendment agreement with the Noteholder in February 2020, whereby the Company and MMH issued an amended and restated promissory note~~ ~~maturing in June 2020~~ ~~in the principal amount of $11,500,000~~ ~~(the “$11.5M Note”), comprised of the principal amount of the $10M Note and the $1.5M Payment. The $11.5M Note bore interest at a rate of~~ 15~~% per annum, requiring periodic interest payments and minimum amortization payments of $3,000,000~~ ~~in the aggregate, which the Company made in the first half of 2020.~~
~~The Company entered into a second amendment agreement with the Noteholder in June 2020, whereby (i) $352,000~~ ~~of outstanding principal of the $11.5M Note was converted into~~ ~~1,900,000~~ 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 agreement date), and (ii) the Company and MMH issued a second amended and restated promissory note in the principal amount of approximately $~~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, bearing interest at a rate of~~ 15~~% per annum and~~ ~~maturing in June 2022~~ ~~(the “$8.8M Note”). In addition, the Company issued~~ ~~three-year warrants to the Noteholder to purchase up to~~ ~~750,000~~ ~~shares of common stock at an exercise price of $0.50~~ ~~per share. The fair value of these warrants on the issuance date of approximately $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.~~
~~The Company made a required principal payment of $4,000,000~~ ~~in July 2020 with a portion of proceeds of the Refinanced Mortgage discussed earlier in this footnote, and additional principal payments of $600,000~~ ~~in the aggregate in calendar 2020. Accordingly, the carrying value of the $8.8M Note was approximately $4.2~~ ~~million at December 31, 2020.~~
~~The Noteholder had the option to convert the $8.8M Note, in whole or in part, into shares of the Company’s common stock at a conversion price of $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~~ ~~of principal and approximately $10,000~~ ~~of accrued interest into~~ ~~3,365,972~~ ~~shares of the Company’s common stock, reducing the carrying value of the $8.8M Note to approximately $3.2~~ ~~million.~~
The Company entered into a third amendment agreement with the Noteholder in April 2021 whereby the Company and MMH issued a third amended and restated promissory note in the principal amount of approximately $~~3.2~~ ~~million (the “$3.2M Note”) which bears interest at a rate of~~ ~~0.12% per annum and~~ ~~matures in April 2023. The Noteholder has 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~~ per share, such conversion price subject to adjustment in the event of certain transactions by the Company. The third amended agreement resulted in a decrease in the fair value of the embedded conversion feature of the $3.2M Note and therefore no accounting was required for such conversion feature.
On or after the one-year anniversary of the $3.2M Note, upon twenty days prior written notice to the Noteholder, the Company can prepay all of the outstanding principal and unpaid interest of the $3.2M Note, along with a prepayment premium equal to 10% of the principal amount being prepaid. The Noteholder shall remain entitled to convert the $3.2M Note during such notice period. On or after the one-year anniversary of the $3.2M Note, the Noteholder has the right to require the redemption in cash of up to $~~125,000~~ ~~of principal and unpaid interest thereon per calendar month.~~
~~In 2021, the Noteholder converted approximately $2.3~~ ~~million of principal on the $3.2M Note into~~ ~~6,676,153~~ ~~shares of the Company’s common stock, reducing the carrying value of the $3.2M Note to approximately $875,000~~ at September 30, 2021. All note conversions were effected in accordance with the terms of their respective note agreements, and therefore the Company was not required to record a gain or loss on such conversions.
20
~~Promissory Notes Issued Pursuant to an Exchange Agreement~~
~~In February 2020, pursuant to an exchange agreement as further described in Note 13 –~~ ~~Mezzanine Equity~~~~, the Company issued two promissory notes in the aggregate principal amount of approximately $4.4~~ ~~million, bearing interest at~~ ~~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, the principal and accrued interest balance of the $4.4M Notes approximated $4.6~~ ~~million. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 13 –~~ ~~Mezzanine Equity,~~ ~~the $4.4M Notes were fully paid down, along with accrued interest through the repayment date.~~
~~Promissory Note Issued by MMH~~
~~In April 2019, MMH issued a secured promissory note in the principal amount of $1,000,000~~ ~~(the “$1M Note”) to an unaffiliated party. The principal balance plus a payment of $180,000, initially due in December 2019, was continued on a month-to-month basis. In September 2020, the Company paid down $500,000~~ ~~of principal on the $1M Note, reducing the carrying value of the $1M Note to $500,000~~ ~~at December 31, 2020. In March 2021, the Company paid interest on the $1M Note of $200,000. Also in March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 12 –~~ ~~Mezzanine Equity,~~ ~~the remaining principal of $500,000~~ ~~was paid down. At September 30, 2021, the Company is carrying an accrued interest balance of approximately $200,000~~ ~~to cover the payment of any additional interest on the $1M Note, which the Company does not believe is required to be paid.~~
~~Promissory Notes Issued for Operating Liquidity~~
~~In March 2019, the Company raised $6.0~~ ~~million through the issuance of a secured promissory note (the “$6M Note”) to an unaffiliated party (the “Holding Party”) bearing interest at a rate of~~ 13~~% per annum and a service fee of $900,000~~ ~~(the “Service Fee”).~~ ~~The $6M Note’s initial maturity date in December 2019 was extended to April 2020~~ ~~in accordance with its terms.~~
The Company and the Holding Party entered into a note extension agreement in April 2020 (the “Initial Extension Agreement”) pursuant to which (i) the $6M Note’s due date was extended to September 2020, and the $6M Note was modified to include unpaid accrued interest of $~~845,000~~ ~~through the modification date and interest at a rate of~~ 10~~% per annum (the “$6.8M Note”), and (iii) a new convertible note in the amount of $900,000~~ ~~(the “$900k Note”) was issued evidencing the Service Fee, bearing interest at a rate of~~ 12~~% per annum. The Company satisfied the $900k Note and accrued interest of $20,100~~ ~~in full as of the June 2020 maturity date by the payment in July 2020 of $460,050~~ ~~in cash, representing one-half of the principal and accrued interest, and the issuance in June 2020 of~~ ~~2,525,596~~ ~~shares of the Company’s common stock, in payment of the other half of the principal and accrued interest.~~
~~Previous to the $6M Note, the Company raised $3.0~~ ~~million from the issuance of a secured promissory note to the Holding Party in September 2018, bearing interest at a rate of~~ 10~~% per annum (the “$3M Note”). The maturity date of the $3M Note, initially in~~ ~~March 2020, was~~ extended for an additional six months in accordance with its terms, with the interest rate increasing to 12% per annum during the extension period. Pursuant to the Initial Extension Agreement, the maturity date of the $3M Note was extended to December 2020.
21
~~The Company and the Holding Party entered into a second note extension agreement in October 2020 (the “Second Extension Agreement”) whereby the Company (i) paid $~~1 ~~million of principal and all outstanding accrued interest of approximately $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~~ (the “$5.8M Note”) to replace the $6.8M Note; and (iii) amended and restated the $3M Note (the “New $3M Note”, and together with the $5.8M Note, the “Amended Notes”). The Amended Notes bore interest at a rate of 12~~% per annum with initial~~ ~~maturity dates in September 2022~~.
~~In consideration of the Second Extension Agreement, the Company (i) issued four-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~~ ~~per share; (ii) paid the Holding Party a fee of $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~~ ~~based on the fair value of such warrants on the issuance date, of which approximately $75,000~~ ~~was amortized as of the end of 2020, and 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.~~
~~The Company made a required principal payment of $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 Note 13 –~~ ~~Mezzanine Equity,~~ ~~the Amended Notes were fully paid down, along with accrued interest through the repayment date. In addition, the remaining discount of approximately $450,000~~ ~~on this note was fully amortized on the payment date.~~
~~Promissory Notes Issued to Purchase Commercial Vehicles~~
~~In August 2020, the Company entered into a note agreement with First Citizens’ Federal Credit Union for the purchase of a commercial vehicle. The note bears interest at a rate of~~ ~~5.74% per annum and matures in July 2026. At September 30, 2021 and December 31, 2020, the balance of this note approximated $27,000~~ ~~and $30,000, respectively, of which approximately $5,000~~ ~~was current in both periods.~~
~~In June 2021, the Company entered into a note agreement with Ally Financial for the purchase of a second commercial vehicle. The note bears interest at the rate of~~ 10~~% per annum and matures in May 2027. At September 30, 2021, the balance of this note approximated $33,000, of which approximately $5,000~~ ~~was current.~~
~~Other Promissory Note Issuances~~
~~In addition to the above transactions, at the start of 2020, the Company was carrying $3,190,000~~ ~~of principal on promissory notes issued to accredited investors bearing interest at rates ranging from~~ ~~6.5% to~~ 18~~% per annum (the “Existing Notes”). During 2020, the Company (i) raised approximately $2,147,000~~ ~~from the issuance of new promissory notes to accredited investors bearing interest at~~ 12~~% and~~ 15~~% 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 portion of the proceeds from the Hadron transaction discussed in Note 13 –~~ ~~Mezzanine Equity~~.
22
~~Debt Maturities~~
~~As of September 30, 2021, the aggregate scheduled maturities of the Company’s total debt outstanding were:~~
~~SCHEDULE OF AGGREGATE MATURITIES OF DEBT OUTSTANDING~~

2021 $ 1,253,995
2022 593,112
2023 1,231,622
2024 669,650
2025 716,186
Thereafter 14,859,046
Total 19,323,611
Less discounts (741 )
Long-term debt, net $ 19,322,870
~~NOTE 12 –~~ ~~DEBENTURES PAYABLE~~
~~In a series of transactions from the period October 2018 through February 2020, the Company sold an aggregate of $21.0~~ million of convertible debentures (the “$21M Debentures”) to an accredited investor pursuant to an amended securities purchase agreement (the “SPA”). The following table as of September 30, 2021 summarizes the purchase dates and selected terms of each debenture agreement that comprised the $21M Debentures:
~~SCHEDULE OF DEBENTURE TRANSACTION~~
Issue
Date

Maturity
Date
Initial Principal Interest
Rate
Issue
Discount
Warrant
Discount Beneficial
Conversion
Feature Converted
To
Common
Stock
10/17/18 10/16/20 $5,000,000 6.0% 1.0% $ 457,966 $1,554,389 $ 5,000,000
11/07/18 11/06/20 5,000,000 6.0% 1.0% 599,867 4,015,515 5,000,000
05/08/19 05/07/21 5,000,000 6.0% 1.0% 783,701 2,537,235 5,000,000
06/28/19 06/27/21 2,500,000 0.0% 7.0% 145,022 847,745 2,500,000
08/20/19 08/19/21 2,500,000 0.0% 7.0% 219,333 850,489 2,500,000
02/21/20 02/20/21 1,000,000 6.5% 6.5% 28,021 379,183 1,000,000
As of September 30, 2021, the holder of the $21M Debentures (the “Holder”) had converted all of the $21M Debentures, along with accrued interest, into the Company’s common stock at conversion prices equal to 80% of a calculated average, pursuant to the terms of the debenture agreements, of the daily volume-weighted price during the ten consecutive trading days preceding the date of conversion. Specifically, over the life of the $21M Debentures, the Holder converted, in several transactions, an aggregate of $~~21.0~~ ~~million of principal and approximately $836,000~~ ~~of accrued interest into~~ ~~92,704,035~~ ~~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~~ ~~of accrued interest was converted into~~ ~~77,766,559~~ ~~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~~ ~~4,610,645~~ ~~shares of common stock at a conversion price of $0.29~~ ~~per share.~~
All of the aforementioned conversions were effected in accordance with the terms of the debenture agreements, and therefore the Company was not required to record a gain or loss on such conversions. The conversions were limited in any given month to certain agreed-upon amounts based on the conversion price, and the Holder was also limited from beneficially owning more than ~~4.99% of the Company’s outstanding common stock.~~
~~In 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.
23
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.
Pursuant to the terms of a registration rights agreement with the Holder, entered into concurrently with the SPA, the Company agreed to provide the Holder with certain registration rights with respect to shares issued pursuant to the terms of the SPA and the $21M Debentures.
~~During the year ended December 31, 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 the nine months ended September 30, 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~~.
24
~~NOTE 13 –~~ ~~MEZZANINE EQUITY~~
~~Series B Convertible Preferred Stock~~
~~In February 2020, the Company entered into an exchange agreement with two institutional shareholders (the “TIS Exchange Agreement”) whereby the Company (i) exchanged~~ ~~4,908,333~~ shares of the Company’s common stock previously acquired by the two institutional shareholders for an equal number of shares of newly designated Series B convertible preferred stock, and (ii) issued the $4.4M Notes previously discussed in Note 11 – ~~Promissory Notes~~.
In connection with the TIS Exchange Agreement, the Company filed (i) a certificate of designation with respect to the rights and preferences of the Series B convertible preferred stock, and (ii) a certificate of elimination to return all shares of the Series A convertible preferred stock, of which no shares were issued or outstanding at the time of filing, to the status of authorized and unissued shares of undesignated preferred stock.
The holders of Series B convertible preferred stock (the “Series B Holders”) are entitled to cast the number of votes equal to the number of shares of common stock into which the shares of Series B convertible preferred stock are convertible, together with the holders of common stock as a single class, on most matters. However, the affirmative vote or consent of the Series B Holders voting separately as a class is required for certain acts taken by the Company, including the amendment or repeal of certain charter provisions, liquidation or winding up of the Company, creation of stock senior to the Series B convertible preferred stock, and/or other acts defined in the certificate of designation.
The Series B convertible preferred stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the Company’s common stock. The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company unless the Series B Holders then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B convertible preferred stock in an amount calculated pursuant to the certificate of designation.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Series B Holders then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share equal to $~~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.
At any time on or prior to the six-year anniversary of the issuance date of the Series B convertible preferred stock, (i) the Series B Holders have the option to convert their shares of Series B convertible preferred stock into common stock at a conversion price of $~~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, shares of Series B convertible preferred stock into 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.
On the day following the six-year anniversary of the issuance of the Series B convertible preferred stock, all outstanding shares of Series B convertible preferred stock shall automatically convert into common stock as follows:
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 Company shall at all times when the Series B convertible preferred stock is outstanding, reserve and keep available out 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.
25
~~Series C Convertible Preferred Stock~~
~~In March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) 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.~~
~~At the closing of the transaction in March 2021, Hadron purchased $23.0~~ ~~million of Units at a price of $3.70~~ ~~per Unit. Each Unit is comprised of one share of Series C preferred stock and a~~ ~~four-year~~ ~~warrant to purchase two and one-half shares of common stock. Accordingly, the Company issued to Hadron~~ ~~6,216,216~~ ~~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 common stock, and each warrant is exercisable at an exercise price of $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~~ ~~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 to the issuance of the aforementioned shares to Hadron which was recorded as a reduction to additional paid-in capital in March 2021.~~
In connection with the closing of the transaction, the Company filed a certificate of designation with respect to the rights and preferences of the Series C convertible preferred stock. Such stock is zero coupon, 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.
~~Of the $23.0~~ ~~million of proceeds received by the Company in March 2021, approximately (i) $7.8~~ ~~million is designated to fund construction and upgrades of certain of the Company’s owned and managed facilities, which was expended during the nine months ended September 30, 2021, and (ii) $15.2~~ million was used to pay down debt and obligations, comprised of principal and interest on the $4.4M Notes, the $1M Note, the New $3M 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 Transactions~~.
The balance of the committed facility of up to an additional $23.0 million is intended to fund the Company’s specific targeted acquisitions provided such acquisitions are contracted in 2021 and 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.
~~Provided that as at least~~ 50% of the shares of Series C convertible preferred stock remain outstanding, the holders shall have 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 becomes available, at which time the observer roles shall terminate.
The transaction imposes 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.
26
~~NOTE 14 –~~ ~~STOCKHOLDERS’ EQUITY~~
~~Stockholder Resolutions~~
At the Company’s 2021 annual meeting of stockholders in September 2021 (the “Annual Meeting”), stockholders approved an amendment to the Company’s certificate of incorporation increasing the number of authorized shares of common stock from ~~500,000,000~~ to ~~700,000,000~~.
Also at the Annual Meeting, stockholders approved an amendment to the Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “Plan”) increasing the aggregate number shares reserved for issuance under the Plan from ~~40,000,000~~ to ~~70,000,000~~.
~~Undesignated Preferred Stock~~
In February 2020, the Company filed a certificate of elimination to return all shares of formerly designated Series A convertible preferred stock to the status of authorized and unissued shares of undesignated preferred stock.
~~Common Stock~~
~~In February 2020, pursuant to the TIS Exchange Agreement discussed in Note 13 –~~ ~~Mezzanine Equity~~~~, the~~ ~~4,908,333~~ ~~shares of common stock exchanged for shares of Series B convertible preferred stock were treated as an increase to treasury stock of $14,725,000~~ ($~~3.00~~ ~~per share), and then immediately cancelled, thereby reducing treasury stock to zero, with corresponding reductions to common stock of approximately $5,000~~ ~~(the par value of the exchanged common shares) and additional paid-in capital of approximately $14,720,000~~.
~~In the nine months ended September 30, 2021 and 2020, the Company granted~~ ~~9,081~~ ~~and~~ ~~97,797~~ ~~shares of common stock, respectively, to an employee. The fair value of these shares of approximately $7,000~~ ~~in 2021 and $11,000~~ ~~in 2020 was charged to compensation expense. Of these shares granted,~~ ~~2,204~~ ~~shares and~~ ~~33,319~~ ~~shares, with fair values of approximately $2,000~~ ~~and $5,000, respectively, were yet to be issued at September 30, 2021 and 2020, respectively, and were included in~~ ~~Common Stock Subscribed But Not Issued~~ ~~on the balance sheets at those dates.~~
~~In the nine months ended September 30, 2021, the Company granted~~ ~~245,217~~ ~~shares of restricted common stock to three employees. The fair value of these restricted shares of approximately $226,000~~ ~~was charged to compensation expense. Of these restricted shares granted,~~ ~~100,000~~ ~~shares, with a fair value of approximately $93,000, were yet to be issued at September 30, 2021, and were included in~~ ~~Common Stock Subscribed But Not Issued~~ ~~on the balance sheet at such date. No shares of restricted common stock were issued in 2020.~~
~~In the nine months ended September 30, 2021 and 2020, the Company issued~~ ~~71,691~~ ~~and~~ ~~4,400,000~~ ~~shares of common stock, respectively, to settle obligations of $51,000~~ ~~and approximately $699,000, respectively. Based on the price of the Company’s common stock on the settlement dates, the Company incurred non-cash losses of approximately $2,500~~ ~~in 2021 and $45,000~~ ~~in 2020, which were reflected under~~ ~~Loss On Obligations Settled with Equity~~ ~~on the statement of operations for each period.~~
~~In the nine months ended September 30, 2021, the Company issued (i)~~ ~~300,000~~ ~~shares of common stock valued at $283,200~~ ~~to pay for consulting fees, and (ii)~~ ~~109,308~~ ~~shares valued at approximately $92,000~~ ~~to pay for licensing fees. No such fees were paid with common stock in 2020.~~
~~In July 2021,~~ ~~79,815~~ ~~shares of common stock were returned to the Company from the adjustment of a previously converted debenture.~~ ~~NaN~~ ~~common stock was returned in 2020.~~
~~During the nine months ended September 30, 2021 and 2020, the Company issued~~ ~~11,413~~ ~~and~~ ~~3,236,857~~ ~~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 11 –~~ ~~Promissory Notes~~~~, the Company issued (i) an aggregate of~~ ~~10,042,125~~ ~~shares of common stock in 2021 upon the conversion of approximately $3,346,000~~ ~~of principal and interest on promissory notes, (ii)~~ ~~1,900,000~~ ~~shares of common stock in June 2020 to extinguish $352,000~~ ~~of principal on promissory notes, and (iii)~~ ~~2,525,596~~ ~~shares common stock in June 2020 upon the conversion of $460,050~~ ~~of principal and interest on promissory notes.~~
~~As previously disclosed in Note 12 –~~ ~~Debentures Payable~~~~, the holder of the $21M Debentures converted (i) approximately $1.4~~ ~~million of principal and interest in 2021 into~~ ~~4,610,645~~ ~~shares of common stock, and (ii) approximately $10.1~~ ~~million of principal and interest in 2020 into~~ ~~77,766,559~~ ~~shares of common stock.~~
~~As further disclosed in Note 15 –~~ ~~Options~~~~, the Company issued~~ ~~178,885~~ ~~shares of common stock during the nine months ended September 30, 2021 from the exercise of stock options.~~ ~~NaN~~ ~~options were exercised during the same period in 2020.~~
~~As further disclosed in Note 16 –~~ ~~Warrants~~~~, the Company issued~~ ~~980,062~~ ~~shares of common stock during the nine months ended September 30, 2021 from the exercise of warrants.~~ ~~NaN~~ ~~warrants were exercised during the same period in 2020.~~
~~Common Stock Issuance Obligations~~
~~At September 30, 2021, the Company was obligated to issue (i)~~ ~~102,204~~ ~~shares of common stock valued at approximately $95,000~~ ~~in connection with a stock grant and restricted stock grants to current employees, and (ii)~~ ~~100,000~~ ~~shares of common stock valued at approximately $94,000~~ ~~in connection with the purchase of the remaining~~ 30~~% interest of MediTaurus as discussed in Note 3 –~~ ~~Acquisitions~~~~. These shares were issued in November 2021. At September 30, 2020, the Company was obligated to issue~~ ~~33,319~~ ~~shares of common stock valued at approximately $5,000~~ ~~in connection with a stock grant to a current employee. These shares were issued in October 2020.~~
27
~~NOTE 15 –~~ ~~STOCK OPTIONS~~
~~During the nine months ended September 30, 2021, the Company granted~~ ~~three- and~~ ~~five-year options to purchase up to~~ ~~16,651,421~~ ~~shares of common stock at exercise prices ranging from $0.30~~ ~~to $1.00~~ ~~per share. The fair value of these options of approximately $10,142,000~~ ~~in the aggregate is being amortized to compensation expense over the respective option vesting periods, of which approximately $5,993,000~~ was amortized during the nine months ended September 30, 2021. Additionally, compensation expense in the first half of 2021 for options issued in previous years, and continuing to be amortized over their respective vesting periods, approximated $~~638,000~~.
~~During the nine months ended September 30, 2020,~~ ~~five-year~~ ~~options to purchase up to~~ ~~1,064,500~~ ~~shares of common stock were issued to employees at exercise prices of $0.15~~ ~~and $0.30~~ ~~per share. The fair value of these options of approximately $117,000~~ ~~in the aggregate is being amortized to compensation expense over their respective vesting periods, of which approximately $100,000~~ was amortized during the nine months ended September 30, 2020. Additionally, compensation expense in the first half of 2020 for options issued in previous years, and continuing to be amortized over their respective vesting periods, approximated $~~746,000~~.
~~During the nine months ended September 30, 2021, options to purchase~~ ~~251,000~~ ~~shares of common stock were exercised at prices ranging from $0.21~~ ~~to $0.45~~ ~~per share. Of these exercised options,~~ ~~125,000~~ ~~were exercised on a cashless basis with the exercise prices paid via the surrender of~~ ~~72,115~~ ~~shares of common stock. No options were exercised during the nine months ended September 30, 2020.~~
~~During the nine months ended September 30, 2021 and 2020, options to purchase~~ ~~152,000~~ ~~and~~ ~~210,000~~ ~~shares of common stock, respectively, were forfeited or expired, resulting in an aggregate reduction of amortized compensation expense of~~ ~~zero~~ ~~in 2021 and approximately $208,000~~ ~~in 2020.~~
~~Stock options outstanding and exercisable as of September 30, 2021 were:~~
~~SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE~~
Exercise Price Shares Under Option Remaining Life
per Share Outstanding Exercisable in Years
$0.140 160,000 80,000 3.78
$0.149 500,000 500,000 4.25
$0.169 200,000 200,000 4.12
$0.225 2,000,000 1,250,000 4.11
$0.250 20,000 20,000 3.67
$0.250 50,000 12,500 4.07
$0.250 800,000 600,000 4.12
$0.250 80,000 60,000 4.15
$0.250 50,000 50,000 3.42
$0.300 403,000 403,000 3.50
$0.417 900,000 900,000 3.24
$0.505 100,000 50,000 4.26
$0.505 800,000 200,000 4.28
$0.590 15,000 15,000 3.19
$0.630 300,000 300,000 0.25
$0.740 590,000 356,250 4.58
$0.770 200,000 200,000 1.25
$0.830 287,000 143,500 4.48
$0.830 600,000 - 4.66
$0.840 878,921 600,000 4.79
$0.840 99,000 19,800 4.84
$0.850 90,000 33,125 4.71
$0.880 11,550,000 5,925,000 4.78
$0.880 15,000 - 4.87
$0.890 10,000 2,500 4.31
$0.892 40,000 20,000 4.31
$0.895 25,000 12,500 4.32
$0.900 50,000 50,000 1.61
$0.910 50,000 50,000 1.06
$0.920 300,000 - 4.76
$0.928 500,000 100,000 4.86
$0.950 50,000 50,000 1.25
$0.970 100,000 50,000 4.71
$0.983 145,000 - 4.74
$0.990 500,000 - 4.97
$0.992 300,000 300,000 2.99
$1.000 15,000 15,000 2.71
$1.000 125,000 125,000 3.09
$1.350 100,000 100,000 1.83
$1.950 375,000 375,000 1.75
$2.320 100,000 100,000 1.95
$2.450 2,000,000 2,000,000 1.23
$2.500 100,000 100,000 1.91
$2.650 200,000 200,000 1.98
$2.850 56,250 56,250 1.20
$2.850 100,000 100,000 2.20
$3.000 25,000 25,000 2.21
$3.725 100,000 100,000 2.19
26,054,171 15,849,425
28
~~NOTE 16 – WARRANTS~~
~~During the nine months ended September 30, 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. Also during this period, 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.~~
~~During the nine months ended September 30, 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 this period, (i) in conjunction with the $8.8M Note discussed in Note 11 –~~ ~~Promissory Notes~~~~, 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, also discussed in Note 11 –~~ ~~Promissory Notes~~~~, 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 the nine months ended September 30, 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,~~ ~~437,500~~ ~~were exercised on a cashless basis with the exercise prices paid via the surrender of~~ ~~257,438~~ ~~shares of common stock.~~ ~~NaN~~ ~~warrants were exercised during the same period in 2020.~~
~~During the nine months ended September 30, 2021, warrants to purchase~~ ~~5,517,474~~ ~~shares of common stock with exercise prices ranging from $0.90~~ ~~to $4.30~~ ~~per share were forfeited. No warrants were forfeited during the same period in 2020.~~
~~At September 30, 2021 and 2020, warrants to purchase up to~~ ~~27,802,734~~ ~~and~~ ~~17,735,107~~ ~~shares of common stock, respectively, were outstanding with exercise prices ranging from $0.11~~ ~~to $5.50~~ ~~per share across both periods.~~
~~NOTE 17 –~~ ~~REVENUES~~
~~For the nine months ended September 30, 2021 and 2020, the Company’s revenues were comprised of the following major categories:~~
~~SCHEDULE OF REVENUES COMPRISED OF MAJOR CATEGORIES~~
2021 2020
Product sales - retail $ 59,230,023 $ 16,895,170
Product sales - wholesale 20,536,161 5,097,128
Real estate rentals 5,397,384 5,065,538
Management fees 2,562,002 1,081,562
Supply procurement 1,446,085 1,218,334
Licensing fees 1,248,625 1,180,097
Total revenues $ 90,420,280 $ 30,537,829
~~For the nine months ended September 30, 2021 and 2020, revenues from two clients represented~~ 11~~% and~~ ~~24%, respectively, of total revenues.~~
29
~~NOTE 18 –~~ ~~BAD DEBTS~~
The Company maintains two types of reserves to address uncertain collections of amounts due—an allowance against trade accounts receivable (the “AR Allowance”), and a reserve against cash advanced by the Company to its cannabis-licensed clients for working capital purposes (the WC Reserve”).
~~During the nine months ended September 30, 2021, the Company increased the AR Allowance by $1,400,000, and the WC Reserve by approximately $455,000. The aggregate of these two amounts of approximately $1,855,000~~ ~~was charged to~~ ~~Bad Debts~~ ~~on the statement of operations during this period. During the nine months ended September 30, 2020, the Company increased the AR Allowance by $1,000,000~~ ~~and the WC Reserve by approximately $342,000~~.
30
~~NOTE 19 –~~ ~~RELATED PARTY TRANSACTIONS~~
~~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 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~~ ~~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 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. No options were exercised by related parties in 2021.~~
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 each of the nine-month periods ended September 30, 2021 and 2020, expenses incurred under this lease approximated $~~117,000~~.
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 the nine months ended September 30, 2021 and 2020 approximated $~~3.8~~ ~~million and $1.8~~ ~~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 the nine months ended September 30, 2021 and 2020 approximated $210,000~~ ~~and $275,000, respectively.~~
~~In the nine months ended September 30, 2021 and 2020, one of the Company’s majority owned subsidiaries paid aggregate distributions of approximately $34,000~~ ~~and $40,000~~, respectively, to the Company’s CEO and CFO, who own minority equity interests in such subsidiary. In the nine months ended September 30, 2021, another of the Company’s majority owned subsidiaries paid distributions of approximately $~~4,000~~ ~~to a current employee who owns a minority equity interest in such subsidiary.~~
~~In the nine months ended September 30, 2021 and 2020, the Company purchased fixed assets and consulting services of approximately $723,000~~ ~~and $455,000, respectively, in the aggregate from two entities owned by two of the Company’s general managers.~~
~~In the nine months ended September 30, 2021 and 2020, the Company purchased fixed assets of approximately $438,000~~ ~~and $176,000~~ ~~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.~~
31
~~NOTE 20 –~~ ~~COMMITMENTS AND CONTINGENCIES~~
~~Lease Commitments~~
The Company is the lessee under six operating leases and four 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.

The ~~details of~~Company leases the ~~Company’s~~following facilities under operating ~~lease agreements are as follows:~~leases:

● Delaware – 4,000 square feet of retail space in a multi-use building under a five-year lease that expires in ~~December 2021 with a five-year option to extend.~~April 2027 ~~The~~that the Company has developed ~~the space~~ into a cannabis dispensary which is subleased to its cannabis-licensed client.

● Delaware – a 100,000 square foot warehouse, ~~leased in March 2019 that~~of which the Company ~~is developing~~developed 60,000 square feet into a cultivation ~~and processing~~ facility ~~to be~~that is being subleased to ~~the same Delaware~~its cannabis-licensed client. The lease ~~term is~~ 10 ~~years,~~expires in March 2030, with an option to extend the term for three additional ~~five-year periods.~~years.

25
● Delaware –a– a 12,000 square foot premises which the Company developed into a cannabis production facility with offices, and iswhich it 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~~built out into a cannabis cultivation facility ~~and~~which it plans to rent to its cannabis-licensed client under a ~~sub-lease~~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 10~~-year~~ lease with a related party expiring in 2028, with an option to extend the term for an additional five-year ~~period.~~period.

● Maryland – a 2,700 square foot two-unit apartment under a lease that expires in July ~~2022~~2023.

The Company leases machinery and office equipment under finance leases that expire infrom February ~~2022~~2024 through ~~June 2024~~February 2026, with such terms being a major part of the economic useful life of the leased property.

The components of lease expense for the ~~nine~~three and six months ended ~~September~~June 30, 2022 and 2021 were as ~~follows:~~follows (in thousands):
SCHEDULE OF COMPONENTS OF LEASE EXPENSE

Operating lease cost $ 820,607

Finance lease cost:
Amortization of right-of-use assets $ 24,512
Interest on lease liabilities 4,051
Total finance lease cost $ 28,563

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021

Operating lease expense $ 298 $ 277 $ 575 $ 544

Finance lease expenses:
Amortization of right of use assets $ 40 $ 8 $ 59 $ 16
Interest on lease liabilities 10 1 17 3
Total finance lease expense $ 50 $ 9 $ 76 $ 19

~~The~~At June 30, 2022, the weighted average remaining lease ~~term~~terms for operating leases isand finance leases were ~~7.6~~6.9 years and ~~for the finance leases is~~ ~~2.2~~3.5 ~~years.~~years, respectively. The weighted average discount rate used to determine the right-of-use assets and lease liabilities was between 7.5% toand 1212.0% for all leases.

Future minimum lease payments as of ~~September~~June 30, ~~2021~~2022 under all non-cancelable leases having an initial or remaining term of more than one year ~~were:~~were (in thousands):
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER ALL ~~NON-CANCELABLE~~NON CANCELABLE OPERATING LEASES

Operating
Leases

Finance
Leases

2021 $ 282,673 $ 9,603
2022 1,071,079 27,123
2023 1,035,017 23,201
2024 963,589 3,229
2025 936,947 -
Thereafter 3,468,041 -
Total lease payments 7,757,344 $ 63,156
Less: imputed interest (1,942,403 ) (5,012 )
$ 5,814,941 $ 58,144
32
~~Terminated Employment Agreement~~

Operating Finance
leases leases

Remainder of 2022 $ 571 $ 90
2023 1,264 176
2024 1,199 153
2025 1,179 150
2026 1,129 22
Thereafter 3,214 -
Total lease payments 8,556 591
Less: imputed interest (2,935 ) (73 )
$ 5,621 $ 518

~~An employment agreement which commenced in 2012 with Thomas Kidrin, the former CEO of~~In November 2021, the Company ~~was terminated by the Company in 2017.~~entered into lease agreements for six retail properties, each with square footage between 4,000 ~~Since the termination date, the Company had maintained an accrual of approximately $~~and ~~1,043,000~~6,000 ~~for any amounts that may be owed under this agreement.~~
~~In July 2019, Mr. Kidrin, also a former director of the Company, filed a complaint~~square feet, in the ~~Massachusetts Superior Court, which alleged~~state of Ohio (each an “Ohio Lease” and collectively the ~~Company failed to pay all wages owed to him and breached the employment agreement, and requested multiple damages, attorney fees, costs, and interest. The Company moved to dismiss certain counts~~“Ohio Leases”). Each Ohio Lease has an initial lease period of ~~the complaint 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 dismiss was pending, the parties entered into~~eleven months, with 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~~minimum rent of $~~0.50~~31.00 per ~~share, (iii)~~square foot, which amount increases 3.0% annually.In 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.
~~In August 2021, the fair value of the warrants of approximately $776,000~~ ~~was charged to compensation expense, and the Company reversed its accrual of approximately $1,043,000~~
~~Maryland Acquisition~~
~~As previously disclosed in Note 3~~ ~~– Acquisitions~~, Kind has sought to renege on the parties’ original agreement to a partnership/joint venture made in the fall of 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 on 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, MariMed (including MariMed 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 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,event 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 conclusionawarded one or more of the ~~hearing) and granting the Company’s request~~six Ohio cannabis licenses for ~~preliminary injunction. The Court determined that~~which it had previously applied, the Company ~~is likely to succeed with respect to~~can extend the ~~validity and enforceability~~term of one or more of the ~~MSA~~Ohio Leases to ten years (with two additional five-year options to extend) upon the payment of $50,000 for each extended Ohio Lease, and develop the ~~LMA, that the Company would suffer substantial and irreparable harm without the preliminary injunction, and that the balance~~premises of ~~convenience and public interest both warranted the issuance of~~such extended lease(s) into 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 is pending; however, the preliminary injunction order remains in effect.cannabis dispensary.
In addition to the favorable rulings on the Lease, MSA, and LMA, the Company believes that its claims with respect to the 70%/30% partnership/joint venture agreement 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 has 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.
~~The Company intends to aggressively prosecute and defend the action. Trial has been scheduled from March 28, 2022 to April 11, 2022.~~
~~DiPietro Lawsuit~~
In August 2020, Jennifer DiPietro, directly and derivatively on behalf of Mari Holdings MD LLC (“Mari-MD”) and Mia Development LLC (“Mia”), commenced a suit against the Company’s CEO, CFO, and wholly-owned subsidiary MariMed Advisors Inc. (“MMA”), in Suffolk Superior Court, Massachusetts.

3326

In ~~this action, DiPietro, a party to prior ongoing litigation in Maryland involving~~February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio. The Company is awaiting the final verification process to be completed by the state. As of June 30, 2022, the lease terms of the Ohio Leases were all less than one year, and ~~Kind as discussed above, brings claims~~accordingly the Company has not recorded a right-of-use asset and corresponding lease liability on its balance sheet. In April 2022, the Company extended the term of one of the Ohio Leases, and the remaining five Ohio Leases were terminated.
(17) RELATED PARTY TRANSACTIONS
The Company’s corporate offices are leased from an entity in which the Company’s former Chief Financial Officer, now the Company’s Chief Administrative Officer (“CAO”) has an investment interest. This lease expires in October 2028 and contains a five-year extension option. Expenses incurred under this lease were approximately $39,000 for ~~breach~~both of ~~fiduciary duty, breach~~the three-month periods ended June 30, 2022 and 2021, and approximately $78,000 for both of ~~contract, fraud in~~ the ~~inducement, aiding~~six-month periods ended June 30, 2022 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.2021.

The Company ~~has answered~~procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the ~~complaint~~family of the Company’s Chief Operating Officer (“COO”). Purchases from this entity totaled $1.4 million and ~~MMA filed counterclaims against DiPietro on its own behalf~~$2.3 million in the three and ~~derivatively on behalf of Mari-MD for breach of her fiduciary duties to each of those entities,~~six months ended June 30, 2022, respectively, and ~~for tortious interference with Mari-MD’s lease~~$1.2 million and ~~MMA’s management services agreement with Kind.~~$2.0 million in the three and six months ended June 30, 2021, respectively.

The Company ~~believes that~~pays royalties on the ~~allegations of the complaint are without merit and intends~~revenue generated from its Betty’s Eddies product line to ~~defend the case vigorously. The Company’s counterclaim seeks monetary damages from DiPietro, including~~an entity owned by the Company’s ~~legal fees in~~ COO and its Senior Vice President of Sales (“SVP Sales”) under a royalty agreement. This agreement was amended effective January 1, 2021 whereby, among other modifications, the ~~Kind action.~~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 were approximately $53,000 and $109,000 for the three and six months ended June 30, 2022, respectively, and approximately $79,000 and $162,000 for the three and six months ended June 30, 2021, respectively.

During the three and six months ended June 30, 2022, one of the Company’s majority-owned subsidiaries paid aggregate distributions of $12,600 and $23,100, respectively, to the Company’s Chief Executive Officer (“CEO”) and its CAO, who own minority equity interests in such subsidiary. During the three and six months ended June 30, 2021, this majority-owned subsidiary paid aggregate distributions of approximately $12,000 and $21,000 to the Company’s CEO and CAO, respectively.
During the three and six months ended June 30, 2022, one of the Company’s majority-owned subsidiaries paid distributions of $8,000 and $11,000, respectively, to a current employee who owns a minority equity interest in such subsidiary.
During the three and six months ended June 30, 2022, the Company purchased fixed assets and consulting services aggregating $267,000 and $659,000, respectively, from two entities owned by two of the Company’s general managers. During the three and six months ended June 30, 2021, the Company purchased fixed assets and consulting services from these entities aggregating approximately $308,000 and $573,000, respectively.
During the three and six months ended June 30, 2022, the Company purchased fixed assets of $278,000 and $360,000, respectively, from an entity owned by an employee. During the three and six months ended June 30, 2021, the Company purchased fix assets of approximately $156,000 and $466,000, respectively, from this employee.
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 the Company’s CAO.
27
(18) COMMITMENTS AND CONTINGENCIES
Maryland Litigation
Following the consummation of the Kind Acquisition, in April 2022, the Maryland litigation between the Company and the members of Kind was dismissed in its entirety with prejudice, and the parties have released one another of any and all claims between them.
DiPietro Lawsuit
In December 2021, the parties to this action entered into a global confidential settlement and release agreement, along with the parties to the aforementioned Maryland litigation. At the same date, the Company’s wholly-owned subsidiary MariMed Advisors Inc. (“MMA”) and Jennifer DiPietro (“Ms. DiPietro”), one of the former members of Kind, entered into membership interest purchase agreement pursuant to which the Company would purchase Ms. DiPietro’s interests in Mia and Mari-MD. Upon the court’s approval of the parties’ joint motion for approval, on June 8, 2022, the purchase of Ms. DiPietro’s interests was consummated. The parties released all direct and derivative claims against one another, and a stipulation dismissing all claims and counterclaims with prejudice was filed with the court.
Bankruptcy Claim

During 2019, the Company’s MMH subsidiary sold and delivered hemp seed inventory to GenCanna Global Inc., a Kentucky-based cultivator, producer, and distributor of hemp (“GenCanna”). At the time of sale, the Company owned a 33.5% ownership interest in GenCanna. The Company recorded a related party receivable of approximately $29.0 million from the sale, which was fully reserved on December 31, 2019.

In February 2020, GenCanna 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-filed involuntary bankruptcy proceeding with the U.S. Bankruptcy Court in the Eastern District of Kentucky (the “Bankruptcy Court”) into a voluntary Chapter 11 proceeding. In addition, GenCanna and GenCanna USA’s subsidiary, Hemp Kentucky LLC (collectively with GenCanna and GenCanna USA, the “GenCanna Debtors”), filed voluntary petitions under Chapter 11 in the Bankruptcy Court.

In May 2020, after an abbreviated solicitation/bid/sale process, the Bankruptcy Court, over numerous objections by creditors and shareholders of the GenCanna Debtors which included the Company, entered an order authorizing the sale of all or substantially all of the assets of the GenCanna Debtors to MGG. After the consummation of the sale of all or substantially all of their assets and business, the GenCanna 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 ODDUSA 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 approved by the Bankruptcy Court as a general unsecured claim in the amount of $31.0 million.

Since the approval of the Liquidating Plan, the OGGUSA Debtors have been in the process of liquidating the remaining assets, negotiating and prosecuting objections to other creditors’ claims, and pursuing the collection of accounts receivable and Chapter 5 bankruptcy avoidance claims.
In January 2022, the Company, at the request of the Liquidating Plan administrator for the OGGUSA Debtors, 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.
28
On April 20, 2022, the Plan Administrator for the OGGUSA Debtors filed an adversary proceeding against the Company seeking to recover approximately $200,000 in certain alleged preferential transfers made to MariMed Hemp, Inc. prior to the filing of the Chapter 11 bankruptcy. After investigating the nature of these claims, the Company and its counsel do not believe that such claims have any factual or legal merit and intend to vigorously defend such preference action. In addition, by reason of the nature of the claims, the Company believes that it has certain counterclaims and possible third-party claims against the OGGUSA Debtors in relation to the facts asserted in the preference action. The Company and its counsel are continuing to have discussions with the Plan Administrator in an attempt to resolve this action without further litigation or expense. It is not known at this time whether such matter can be resolved or if the Company will be required to proceed with its defense and counterclaims.
As of the date of this filing, there is still insufficient information as to what portion, 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.

(19) SUBSEQUENT EVENTS
~~Contract Dispute~~
In September 2021, MD Global Partners LLC (“MDGP”) filed an action in the Supreme Court of the State of New York alleging breach of contract. This matter was settled in October 2021 as disclosed in Note 21 – ~~Subsequent Events~~.

The Company’s common stock commenced trading on the Canadian Securities Exchange on July 12, 2022 under the ticker symbol MRMD.
In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $3 million loan agreement and mortgage with Du Quoin State Bank secured by property owned in Mt. Vernon, Illinois which the Company is developing into a grow and production facility. The loan has a 20-year term and initially bears interest at the rate of 7.75%, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75%). The proceeds of this loan will be utilized for the build-out of the property and other working capital needs.
3429

~~NOTE 21 –~~ ~~SUBSEQUENT EVENTS~~
~~Legal Settlement~~
~~In October 2021, the Company entered into a settlement agreement with and obtained a general release from MDGP whereby the Company paid $150,000~~ ~~to resolve the action filed by MDGP as previously disclosed in Note 20 –~~ ~~Commitments and Contingencies~~.
~~Promissory Note Conversions~~
~~In October and November 2021, the Noteholder of the $3.2M Note converted $475,000~~ ~~of principal in the aggregate into~~ ~~1,357,143~~ shares of the Company’s common stock. Such conversions were effected in accordance with the terms of the note agreement, and therefore the Company was not required to record a gain or loss upon the conversions.
~~Equity Transactions~~
~~In October 2021, the Company granted its CEO, CFO, and COO 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.~~
~~Also during this period, (i) options to purchase~~ ~~40,000~~ ~~shares of common stock were exercised at an exercise price of $0.14~~ ~~per share, (ii) options to purchase~~ ~~110,000~~ ~~shares of common stock were forfeited, (iii) warrants to purchase~~ ~~1,201,163~~ ~~shares of common stock were forfeited, and (iv)~~ ~~202,204~~ ~~shares of common stock that were classified under~~ ~~Common Stock Subscribed But Not Issued~~ ~~on the balance sheet at September 30, 2021, as discussed in Note 14 –~~ ~~Stockholders’ Equity~~~~, were issued.~~
35
Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations

~~Forward Looking Statements~~
When used in this form 10-Q and in future filings by the Company with the Commission, the words or phrases such as “anticipate,” “believe,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or similar expressions are intended to identify “forward-looking statements” within the meaningThe following discussion of the ~~Private Securities Litigation Reform Act~~financial condition and results of ~~1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each~~operations 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.
These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. These factors include, but are not limited to, changes that may occur to general economic and business conditions; changes in current pricing levels that we can charge for our services or which we pay to our suppliers and business partners; changes in political, social and economic conditions in the jurisdictions in which we operate; changes to laws and regulations that pertain to our products and operations; and increased competition.
~~The following discussion~~MariMed Inc. should be read in conjunction with the ~~unaudited~~condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021, which ~~are included under Item 1 of this report.~~
~~We do not undertake to update our forward-looking statements or risk factors to reflect future events or circumstances.~~was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2022.

Overview

~~General~~
~~MariMed Inc. (the “Company”) is~~We are a multi-state operator in the United States cannabis industry. ~~The Company develops, operates, manages,~~We develop, operate, manage, and ~~optimizes~~optimize over 300,000 square feet of state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of medicinal and recreational cannabis. ~~The Company~~We also ~~licenses its~~license our proprietary brands of cannabis and hemp-infused products, along with other top brands, in several domestic markets and overseas.
~~Upon its entry into~~Our common stock commenced trading on the Canadian Securities Exchange effective July 12, 2022, under the ticker symbol MRMD, and continues to trade on the OTCQX under the same symbol.
On April 27, 2022 (the “Kind Acquisition Date”), we acquired Kind Therapeutics USA (“Kind”), our former client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis ~~industry~~(the “Kind Acquisition”). The financial results of Kind are included in ~~2014,~~our condensed consolidated financial statements for the ~~Company was an advisory firm that procured state-issued cannabis licenses on behalf of its clients, developed cannabis facilities which it leased~~period subsequent 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.the Kind Acquisition Date.
~~More recently, 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~~On May 5, 2022, we completed the acquisition ~~and consolidation~~of 100% of the ~~Company’s clients (the “Consolidation Plan”~~equity ownership of Green Growth Group Inc. (“Green Growth”)~~. Among several benefits, the Consolidation Plan would present~~, an entity that holds a ~~simpler, more transparent financial picture of the full breadth of the Company’s efforts, with a clearer representation of the revenues, earnings,~~craft cultivation and ~~other financial metrics the Company has generated for its clients. The Company has played a key role~~production cannabis license in the ~~successes~~state of ~~these entities, from~~Illinois (the “Green Growth Acquisition”).
During the ~~securing~~balance of ~~their cannabis licenses,~~2022 and into 2023, we are focused on continuing 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 facilities and manage the continuing growth of their operations.
To date, acquisitions of its client businesses in Massachusetts and Illinois have been completed and establish the Company as a fully integrated seed-to-sale multi-state operator (“MSO”). The acquisitions of the remaining entities located in Maryland, Nevada, and Delaware are at various stages of completion and subject to each state’s laws governing the ownership transfer of cannabis licenses, which in the case of Delaware requires a modification of current cannabis ownership laws to permit for-profit ownership. Meanwhile, the Company continues to expand these businesses and maximize the Company’s revenue from rental income, management fees, and licensing royalties.
~~The transition to a fully integrated MSO is part of a~~execute our strategic growth plan, ~~(the “Strategic Growth Plan”)~~with priority on activities that include the ~~Company~~following:
● Continuing to consolidate the cannabis business that we have developed and manage.
● Expanding revenue, assets, and our footprint in the states in which we operate:
○ In Massachusetts, we intend to open two additional dispensaries and significantly expand the capacity and capability of our manufacturing facility.
○ In Delaware, we intend to develop an additional 40,000 square feet of cultivation and production capacity at our facility in Milford.
○ In Maryland, we intend to expand our manufacturing facility by 40,000 square feet and open a dispensary in Annapolis.
○ In Illinois, we recently closed on the acquisition of an Illinois craft cannabis license which will enable us to be vertically integrated and add cultivation, manufacturing, and distribution to our four existing retail cannabis operations in Illinois. Under Illinois cannabis laws, we have the potential to add six additional dispensaries, for a total of ten.
● Expanding into other legal states through mergers and acquisitions and by filing new applications in states where new licensing opportunities are available.
● Increasing revenues by producing and distributing our award-winning brands to qualified strategic partners or by acquiring production and distribution licenses.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is ~~implementing~~based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to ~~drive its~~make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and ~~profitability. The Strategic Growth Plan has four components: (i) complete~~expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and believes of what could occur in the ~~Consolidation Plan, (ii) increase revenues in existing states, by spending capital~~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 ~~increase the Company’s cultivation and production capacity, and develop additional assets within~~be both 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 creating products that meet specific customer needs, and distributing these products in states where cannabis has been legalized.
As to its products, 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 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 adheremost important to the ~~Company’s precise scientific formulations~~portrayal of our financial condition and ~~trademarked product recipes.~~those that require the most subjective judgment: accounts receivable, the 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.
~~The Company utilizes proprietary cannabis genetics to produce high-quality flowers and concentrates under the award-winning~~³ ~~Nature’s Heritage™ brand, and cannabis-infused products under the brand names Kalm Fusion®, in the form of chewable tablets and drink powder mixes, and the award-winning~~¹~~Betty’s Eddies® brand of all natural fruit chews. Both cannabis-infused brands are top-selling products in Maryland and Massachusetts~~²~~and the Company intends to continue to introduce additional product lines under these brands in the foreseeable future.~~
The Company also has exclusive alliances with prominent brands. The Company has partnered with renown 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™.
¹ ~~LeafLink 2021 Best Selling Medical Product, LeafLink 2020 Industry Innovator, Explore Maryland Cannabis 2020 Edible of the Year, LeafLink 2019 Best Selling Medical Product.~~
² ~~Sources: BDSA 2021 and LeafLink Insights 2020.~~
³ ~~LeafLink 2021 Fastest-Selling Concentrate.~~
3630

~~Revenues~~Accounts Receivable
We provide credit to our clients in the form of payment terms. We limit our credit risk by performing credit evaluations of our clients and maintaining a reserve, as applicable, for potential credit losses. Such evaluations are judgmental in nature and include a review of the client’s outstanding balances with consideration toward such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Accordingly, the actual amounts collected could differ from expected amounts and require that we record additional reserves.
Inventory

The ~~Company’s revenues~~net realizable value of inventories represents the estimated selling price for inventories in the ordinary course of business, less all estimated costs of completion and costs necessary to make the sale. The determination of net realizable value requires significant judgment, including consideration of factors such as shrinkage, the aging of and future demand for inventory, expected future selling price, what we expect to realize by selling the inventory and the contractual arrangements with customers. Reserves for excess and obsolete inventory are ~~primarily~~based upon quantities on hand, project volumes from demand forecasts and net realizable value. The estimates are judgmental in nature and are made at a point in time, using available information, expected business plans and expected market conditions. As a result, the actual amount received on sale could differ from the estimated value of inventory. Periodic reviews are performed on the inventory balance. The impact of any changes in inventory reserves is reflected in cost of goods sold.
Estimated Useful Lives and Depreciation and Amortization of Property and Equipment and Intangible Assets
Depreciation and amortization of property and equipment and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.
Acquisitions and Business Combinations
Classification of an acquisition as a business combination or an asset acquisition depends on whether the assets acquired constitute a business, which can be a complex judgment. Whether an acquisition is classified as a business combination or asset acquisition can have a significant impact on how we record the transaction.
We allocate the purchase price of acquired assets and companies to identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net amount of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits from other assets acquired in the acquisition or business combination that are not individually identified and separately recognized. Significant judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, which are principally based upon estimates of the future performance and cash flows expected from the acquired asset or business and applied discount rates. While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. If different assumptions are used, it could materially impact the purchase price allocation and our financial position and results of operations. Any adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period are included in operating results in the period in which the adjustments are determined. Intangible assets typically are comprised of trademarks and tradenames, licenses and customer relationships, and non-compete agreements.
Loss Contingencies and Reserves
We are subject to ongoing business risks arising in the ordinary course of business that affect the estimation process of the carrying value of asserts, the recording liabilities, and the possibility of various loss contingencies. An estimated loss contingency is accrued when it is probably that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such amounts should be adjusted and record changes in estimates in the period they become know. We are subject to various legal claims. We reserve for legal contingencies and legal fees when the amounts are probable and estimable.
31
Stock-Based Compensation
Our stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite 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 expected 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.
Income Taxes
We use the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent our management concludes that it is more likely than not that the assets will not be realized. To assess the recoverability of any tax assets recorded on the balance sheet, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative income in the most recent years, changes in the business in which we operate and our forecast of future taxable income. In determining future taxable income, we make assumptions, including the amount of state and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our businesses.
Results of Operations
Three and six months ended June 30, 2022 and 2021
Revenue
Our main sources of revenue are comprised of the ~~following categories:~~following:

● Product ~~Sales~~sales (retail and wholesale) – direct sales of cannabis and cannabis-infused products primarily by ~~the Company’s~~our retail dispensaries and wholesale operations in Massachusetts, ~~and~~ Illinois, and, ~~sales~~as of ~~hemp and hemp-infused products. An increase in product sales is expected from~~ the ~~Company’s planned cannabis-licensee acquisitions in Maryland, Nevada, and Delaware (upon~~Kind Acquisition Date, Maryland. We recognize this ~~state’s amendment to permit for-profit ownership of cannabis entities).~~revenue when products are delivered or at retail points-of-sale.

● Real ~~Estate~~estate rentals – rental income and additional rental fees generated from leasing of ~~the Company’s~~our state-of-the-art, ~~regulatory-compliant~~regulatory compliant cannabis facilities to ~~its~~our 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 – fees for providing ~~the Company’s~~our cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations. ~~Along with this oversight, the Company provides human resources, regulatory, marketing,~~These fees are based on a percentage of such clients’ revenue and ~~other corporate services.~~are recognized after services have been performed.

● Supply ~~Procurement~~procurement – ~~the Company maintains volume discounts with top national vendors~~resale of cultivation and production resources, supplies and equipment ~~which the Company acquires~~that we have acquired from top national vendors at discounted prices to our clients and ~~resells to its clients or~~ third parties within the cannabis industry. We recognize this revenue after the delivery and acceptance of goods by the purchaser.

● Licensing fees – ~~royalties~~revenue from the ~~licensed distribution~~sale of ~~the Company’s~~our branded products, including Betty’s Eddies and Kalm ~~Fusion® and Betty’s Eddies®,~~Fusion, and from the sublicensing ofor contracted brands, including Healer and ~~Tikun~~Tikum Olam, to regulated dispensaries throughout the United States and Puerto Rico.
~~Expenses~~
~~The Company classifies its expenses into three general categories:~~
● ~~Cost of Revenues –~~ We recognize this revenue when 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, changes in the fair value of non-consolidated investments, and other non-operating gains and losses.products are delivered.

3732

Our revenue for the three and six months ended June 30, 2022 and 2021 was comprised of the following (in thousands):
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021
Product revenue:
Product sales - retail $ 23,087 $ 20,552 $ 44,528 $ 35,776
Product sales - wholesale 7,958 8,178 14,020 13,903
Total product sales 31,045 28,730 58,548 49,679
Other revenue:
Real estate rentals 846 1,862 2,433 3,671
Supply procurement 820 398 2,010 918
Management fees 81 981 834 1,877
Licensing fees 194 598 443 1,067
Total other revenue 1,941 3,839 5,720 7,533
Total revenue $ 32,986 $ 32,569 $ 64,268 $ 57,212
Our total revenue increased slightly in the three months ended June 30, 2022 compared to the three months ended June 30, 2021. Our total product revenue increased $2.3 million, primarily attributable to higher retail dispensary cannabis sales in Illinois and the inclusion of Kind’s sales in our results since the Kind Acquisition Date. These increases were partially offset by lower retail and wholesale sales in Massachusetts due to increased competition. The decrease in our other revenue was primarily attributable to rent and management fee reductions in connection with one of our customers and the Kind Acquisition, partially offset by higher supply procurement revenue primarily attributable to revenue generated from our cannabis clients in Delaware and Maryland.
Our total revenue increased 12.3% in the six months ended June 30, 2022 compared to the six months ended June 30, 2021. Our total product revenue increased $8.9 million, or 17.9%, primarily attributable to higher retail dispensary cannabis sales in Illinois and the inclusion of Kind’s sales in our results since the Kind Acquisition Date. Similar to our quarter-over-quarter results described above, the decrease in our other revenue was primarily attributable to rent and management fee reductions in connection with one of our customers and the Kind Acquisition, partially offset by higher supply procurement revenue primarily attributable to revenue generated from our cannabis clients in Delaware and Maryland.
Cost of Revenue, Gross Profit and Gross Margin
Our cost of revenue represents the direct costs associated with the generation of our revenue, including licensing, packaging, supply procurement, manufacturing, supplies, depreciation, amortization of acquired intangible assets, and other product-related costs.
Our cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands, except percentages):
Increase (decrease) from prior year
2022 2021 $ %
Three months ended June 30,
Cost of revenue $ 17,981 $ 13,163 $ 4,818 36.6 %
Gross profit $ 15,005 $ 19,406 $ (4,401 ) (22.7 )%
Gross margin 45.5 % 59.6 %

Six months ended June 30,
Cost of revenue $ 32,287 $ 24,620 $ 7,667 31.1 %
Gross profit $ 31,981 $ 32,592 $ (611 ) (1.9 )%
Gross margin 49.8 % 57.0 %
Our cost of revenue increased in both the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021. These higher costs resulted in lower gross margins in both current year periods compared to the same prior year periods. Our higher cost of revenue in the current year periods compared to the same prior year periods was primarily attributable to higher manufacturing, employee-related and supply procurement costs aggregating $4.4 million and $8.9 million, respectively, in the three and six months ended June 30, 2022. These higher costs were primarily attributable to continuing supply chain issues and associated higher shipping costs, coupled with higher employee-related costs principally due to our increased headcount in connection with our recent acquisitions and in-process expansions. These increases in cost and resulting decreases in gross profit resulted in lower gross margins in both current year periods.
33
Operating Expenses
Our operating expenses are comprised of personnel, marketing and promotion, general and administrative, acquisition-related and other, and bad debt expenses. Our operating expenses for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands, except percentages):
Increase (decrease) from prior year
2022 2021 $ %

Three months ended June 30,
Personnel $ 3,382 $ 2,058 $ 1,324 64.3 %
Marketing and promotion 809 270 539 199.6 %
General and administrative 5,565 4,282 1,283 30.0 %
Acquisition-related and other 754 - 754 100.0 %
Bad debt - 794 (794 ) (100.0 %)
$ 10,510 $ 7,404 $ 3,106 42.0 %

Six months ended June 30,
Personnel $ 6,424 $ 3,785 $ 2,639 69.7 %
Marketing and promotion 1,452 495 957 193.3 %
General and administrative 11,793 7,453 4,340 58.2 %
Acquisition-related and other 754 - 754 100.0 %
Bad debt 14 1,819 (1,805 ) (99.2 %)
$ 20,437 $ 13,552 $ 6,885 50.8 %
The increase in our personnel expenses in both the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 was primarily due to the hiring of additional staff to support higher levels of projected revenue from existing operations as well as from the Kind Acquisition. Personnel costs increased to approximately 10% of revenue in both current year periods, compared to approximately 6% of revenue in the same prior year periods.
The increase in our marketing and promotion expenses in both the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 was primarily attributable to our focused efforts to upgrade our marketing initiatives and personnel in order to expand branding and distribution of our licensed products. Marketing and promotion costs increased to approximately 2% of revenue in both current year periods, compared to less than 1% of revenue in the same prior year periods.
The increase in our general and administrative expenses in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily attributable to $1.3 million of higher stock-based compensation, $0.3 million of higher depreciation and $0.2 million of higher facility-related expenses. These increases were partially offset by $0.5 million of lower professional fees. The increase in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily attributable to $3.4 million of higher stock-based compensation, a $0.5 million increase in depreciation expense and an increase of $0.3 million in facility-related expenses. General and administrative expenses increased to 16.9% and 18.3% of revenue in the three and six months ended June 30, 2022, respectively, compared to approximately 13% of revenue in both the three and six months ended June 30, 2021.
Acquisition-related and other expenses include those expenses related to acquisitions 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 recorded $0.8 million of acquisition-related and other expenses in both the three and six months ended June 30, 2022, primarily related to the Kind Acquisition and the recent listing of our common stock on the Canadian Securities Exchange. We did not record any acquisition-related and other expenses in the three and six months ended June 30, 2021.
We did not record bad debt expense in the three months ended June 30, 2022, and such expense was nominal in the six months then ended, compared to $0.8 million and $1.8 million in the three and six months ended June 30, 2021, respectively. These decreases are due to the higher reserve balances that were required in 2021 for aged trade receivable balances.
34
Interest and Other (Expense) Income, Net
Interest expense primarily relates to interest on mortgages and notes payable. Interest income primarily relates to interest receivable in connection with our notes receivable. Other (expense) income, net, includes gains (losses) on changes in the fair value of our investments, and other investment-related income (expense).
Our net interest expense decreased in both the three and six months ended June 30, 2022 compared to the same prior year periods, reflecting our lower debt levels in the current year periods. Our net other expense was $0.7 million and $0.4 million in the three months ended June 30, 2022 and 2021, respectively, and was primarily comprised of losses from the changes in the fair value of our investments. The three months ended June 30, 2021 also included a nominal loss on the extinguishment of debt.
We recorded net other income of $0.3 million in the six months ended June 30, 2022 and net other expense of $0.4 million in the six months ended June 30, 2021. The current year amount is comprised of $1.0 million of non-cash income from an investment, partially offset by a $0.7 million loss from the change in fair value of our investments. The prior year amount is comprised of a $0.4 million loss from the change in fair value of our investments and a nominal loss on the extinguishment of debt.
Income Tax Provision
We recorded income tax provisions of $5.4 million and $5.0 million in the six months ended June 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

~~The Company produced significant improvements~~We had cash and cash equivalents of $7.9 million and $29.7 million at June 30, 2022 and December 31, 2021, respectively. In addition to ~~its liquidity~~the discussions below of our cash flows from operating, investing, and financing activities included here, please also see our discussion of non-GAAP Adjusted EBITDA in the ~~reported periods:~~
● ~~Cash and cash equivalents increased 753% to approximately $25.6 million at September 30, 2021, from approximately $3.0 million at December 31, 2020.~~
● Working capital increased to approximately $27.3 million at September 30, 2021 from a working capital deficit of approximately $2.2 million at December 31, 2020, a positive swing of approximately $29.5 million.
● In the nine months ended September 30, 2021, the Company’s operating activities provided positive cash flow of approximately $28.2 million, compared to approximately $1.6 million in the same period in 2020, an increase of approximately $26.6 million.
~~The aforementioned improvements were primarily the result of (i) increases in revenues and profitability generated~~section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by ~~the Company’s cannabis operations in the states of Illinois and Massachusetts, acquired as part of the Company’s Consolidation Plan~~GAAP which our management also uses to transition from a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations, and (ii) $23.0 million of gross proceeds raised by the Company under a financing facility of up to $46.0 million pursuant to a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) in exchange for newly-designated Series C convertible preferred stock and warrants.measure our liquidity.

~~Additionally,~~Cash Flows from Operating Activities
Our primary sources of cash from operating activities are from sales to customers in our dispensaries and cash collections from our wholesale customers. We expect cash flows from operating activities to be affected by increases and decreases in sales volumes and timing of collections, and by purchases of inventory and shipment of our products. Our primary uses of cash for operating activities are for personnel costs, purchases of packaging and other materials required for the ~~section below entitled~~ production and sale of our products, and income taxes.
Our operating activities provided $2.0 million and $17.6 million of cash in the six months ended June 30, 2022 and 2021, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to $11.9 million of cash utilized to pay income taxes in the current year period, compared to $0.4 million in the same prior year period, coupled with higher costs and operating expenses arising as we continue to increase and expand our sales activities, facilities and footprint both in the states where we currently operate and into other states.
Cash Flows from Investing Activities
Our investing activities used $20.9 million and $8.5 million of cash in the six months ended June 30, 2022 and 2021, respectively. The increase in cash usage in the current year period was primarily attributable to $12.7 million of aggregate cash consideration paid for the Kind Acquisition and Green Growth Acquisition in April 2022 and May 2022, respectively.
Cash Flows from Financing Activities
Our financing activities used $2.9 million of cash in the six months ended June 30, 2022 and provided $5.3 million of cash in the six months ended June 30, 2021. We paid $2.0 million of cash to redeem the outstanding minority interests in one of our majority-owned subsidiaries in June 2022 and made $0.6 million of aggregate principal payments on our outstanding mortgages and notes payable.
35
On August 4, 2022, we entered into a Second Amendment to the Purchase Agreement with Hadron pursuant to which, inter alia, (a) Hadron’s obligation to provide any further funding to the Company and the Company’s obligation to issue any further securities to Hadron was terminated, (b) Hadron’s right to appointment a designee to the Company’s board of directors was eliminated, and (c) certain covenants restricting the Company’s incurrence of new indebtedness were eliminated.
Based on our current expectations, we believe our current cash and future funding opportunities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at June 30, 2022, primarily comprised of our outstanding mortgages and promissory notes, as well as our operating leases. Our mortgage and promissory note obligations totaled approximately $23 million at June 30, 2022, with payments aggregating approximately $1 million in the remainder of 2022, $3 million in 2023, $2 million in 2024, $2 million in 2025, $1 million in 2026 and $14 million thereafter. Our operating lease obligations totaled approximately $9 million at June 30, 2022, with payments aggregating approximately $571,000 in the remainder of 2022, $1 million in each of the years 2023 through 2026, and $3 million thereafter. We anticipate devoting substantial capital resources to continue our efforts to execute our strategic growth plan as described above.
Non-GAAP Measurement ~~discusses an additional financial measure not defined by GAAP which the Company’s management uses to evaluate liquidity.~~
~~Operating Activities~~
Net cash provided by operating activities in the nine months ended September 30, 2021 approximated $28.2 million, compared to approximately $1.6 million in the same period in 2020. The year-over-year improvement was primarily attributable to the increase in cannabis-derived profits generated by the acquired operations in Illinois and Massachusetts.
~~Investing Activities~~
Net cash used in investing activities in the nine months ended September 30, 2021 approximated $13.7 million, compared to approximately $3.9 million in the same period in 2020. The increase was due to (i) development of the Company’s facilities in Milford, DE, Mt. Vernon, IL, Metropolis, IL, (ii) improvements to existing facilities in Massachusetts, Maryland, Illinois, and Delaware, and (iii) amounts paid to renew cannabis licenses, offset by proceeds from (x) notes receivable and (y) the MRSVP asset sale transaction.
~~Financing Activities~~
Net cash provided by financing activities in the nine months ended September 30, 2021 approximated $7.7 million, compared to approximately $3.8 million in the same period in 2020. The 2021 activities primarily consisted of the net proceeds of approximately $22.6 million from the aforementioned Hadron transaction and an additional mortgage from DuQuoin State Bank of $2.7 million, offset by the paydown of debt and obligations of approximately $17.4 million and distributions of approximately $301,000. The 2020 activities primarily consisted of debt financings of approximately $20.1 million, offset by paydowns of debt and obligations of approximately $16.0 million and distributions of approximately $229,000.
The remaining proceeds from the Hadron transaction will fund construction and upgrades of certain of the Company’s owned and managed facilities. The balance of the committed facility of up to an additional $23.0 million is intended to fund the Company’s specific targeted acquisitions that are contracted in 2021 and consummated by the end of 2022.
38
~~Results of Operations~~
~~Three months ended September 30, 2021 compared to three months ended September 30, 2020~~
Revenues in the three months ended September 30, 2021 approximated $33.2 million compared to approximately $13.5 million in the same period in 2020, an increase of approximately $19.7 million or 146.7%. The year-over-year increase was primarily due to the nearly three-fold growth of cannabis sales to approximately $30.1 million in the current period, compared to approximately $10.8 million from the same period a year ago. This growth was attributable to sales increases of approximately (i) $11.7 million generated by the Company’s retail operations in Illinois, where the Company opened an additional dispensary in late 2020 and another in May 2021, and (ii) $4.1 million generated by the Company’s retail operations in Massachusetts, which saw a nearly ten-fold increase in customer visits year-over-year, and (iii) $3.5 million generated by the Company’s wholesale operations in Massachusetts, which saw a three-fold increase in customers. The year-over-year increase in revenues was also the result of continued improvement in real estate rentals, management fees, and supply procurement revenue primarily from increased business with the Company’s clients in Delaware and Maryland.
Cost of revenues in the three months ended September 30, 2021 approximated $15.0 million compared to approximately $4.8 million in the same period in 2020, an increase of approximately $10.2 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 45.3% in the three months ended September 30, 2021 from 35.5% in the same period in 2020, primarily due to the change in the relative mix of revenue categories in each period. Specifically, in the three months ended September 30, 2021, (a) 90.6% of revenues were comprised of product sales, which historically have had corresponding cost of revenue of approximately 45.0% to 50.0%, and (b) 7.3% of revenues were comprised of real estate rentals and management fees, which have no corresponding cost of revenue. This compares to revenues in the same period in 2020 that were comprised of (x) 80.0% of product sales and (y) 14.2% of real estate rentals and management fees. While the cost rate is higher for product sales, the level of product sales the Company can potentially generate is several multiples higher than the level of real estate rentals and management fees the Company can generate, resulting in significantly higher potential gross profit dollars to be generated.
As a result of the foregoing, gross profit approximated $18.2 million, or 54.7% of revenues, in the three months ended September 30, 2021, from approximately $8.7 million, or 64.5% of revenues, in the same period in 2020.
Personnel expenses increased to approximately $1.5 million in the three months ended September 30, 2021 from approximately $1.4 million in the same period in 2020. The increase was primarily due to the hiring of additional staff to support (i) higher levels of revenue, and (ii) the Company’s expansion into a direct owner and operator of seed-to-sale cannabis businesses, offset by the reversal of an approximate $1.0 million accrual related to the Kidrin complaint which was settled in August 2021. As a percentage of revenues, personnel expenses decreased to 4.5% (7.6% excluding the accrual reversal) in the three months ended September 30, 2021 from 10.1% in the same period in 2020.
Marketing and promotion costs increased to approximately $563,000 in the three months ended September 30, 2021 from approximately $103,000 in the same period in 2020. The 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 1.7% in the three months ended September 30, 2021 compared with 0.8% in the same period in 2020.
General and administrative costs increased to approximately $9.5 million in the three months ended September 30, 2021 from approximately $2.9 million in the same period in 2020. This change is primarily due to increases of approximately (i) $6.2 million of non-cash equity compensation expense associated with option grants and warrant issuances, (ii) $407,000 of facility costs from additional properties in service in 2021, and (iii) $269,000 of credit card processing fees due to increased credit card sales at the Company’s cannabis dispensaries, offset by lower professional fees. As a percentage of revenues, these costs increased to 28.6% in the three months ended September 30, 2021 from 21.8% in the same period in 2020.
Bad debt expense approximated $36,000 in the three months ended September 30, 2021 compared to approximately $892,000 in the same period in 2020. The decrease is due to lower reserves required against trade accounts receivable. As a percentage of revenues, this expense decreased to 0.1% in the three months ended September 30, 2021 from 6.6% in the same period in 2020.
As a result of the foregoing, the Company generated operating income of approximately $6.6 million in the three months ended September 30, 2021 compared to approximately $3.4 million in the same period in 2020.
Net non-operating expenses decreased to approximately $487,000 in the three months ended September 30, 2021 from approximately $1.7 million in the same period in 2020. The decrease is primarily due to an approximate $1.6 million reduction of interest expense from lower levels of outstanding debt, offset by the gain on sale of the MRSVP investment of approximately $309,000.
As a result of the foregoing, the Company generated income before income taxes of approximately $6.1 million in the three months ended September 30, 2021, compared to approximately $1.7 million in the same period in 2020. After a tax provision of approximately $4.0 million in the three months ended September 30, 2021, net income approximated $2.1 million in the current period, compared to approximately $1.7 million in the prior period.
39
~~Nine months ended September 30, 2021 compared to nine months September 30, 2020~~
Revenues for the nine months ended September 30, 2021 approximated $90.4 million compared to approximately $30.5 million for the same period in 2020, an increase of approximately $59.9 million or 196.1%. The year-over-year increase was primarily attributable to the nearly four-fold growth of cannabis sales to approximately $79.8 million in the current period, compared to approximately $22.0 million from the same period a year ago. This growth was attributable to sales increases of approximately (i) $29.6 million generated by the Company’s retail operations in Illinois, where the Company opened an additional dispensary in late 2020 and another in May 2021, and also saw significant increases in sales of existing dispensaries in this state, (ii) $11.9 million generated by the Company’s retail operations in Massachusetts, which saw a 1,298.6% increase in customer visits, and (iii) $16.3 million generated by the Company’s wholesale operations in Massachusetts, which saw a year-over-year increase in customers of 245.5%. The year-over-year increase in revenues was also the result of continued improvement across all revenue categories, primarily from increased business with the Company’s clients in Delaware and Maryland.
Cost of revenues approximated $39.6 million for the nine months ended September 30, 2021 from approximately $10.8 million for the same period in 2020. 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 43.8% in the nine months ended September 30, 2021 from 35.5% in the same period in 2020, primarily due to the change in the relative mix of revenue categories in each period. Specifically, in the nine months ended September 30, 2021, (a) 88.2% of revenues were comprised of product sales, which historically have had corresponding costs of revenue of approximately 45.0% to 50.0%, and (b) 8.8% of revenues were comprised of real estate rentals and management fees, which have no corresponding cost of revenue. This compares to revenues in the same period in 2020 that were comprised of (x) 72.0% of product sales and (y) 20.1% of real estate rentals and management fees. While the cost rate is higher for product sales, the level of product sales the Company can potentially generate is several multiples higher than the level of real estate rentals and management fees the Company can generate, resulting in significantly higher potential gross profit dollars to be generated.
As a result of the foregoing, gross profit approximated $50.8 million, or 56.2% of total revenues, for the nine months ended September 30, 2021 from approximately $19.7 million, or 64.5% of total revenues, for the same period a year ago.
Personnel expenses increased to approximately $5.3 million for the nine months ended September 30, 2021 from approximately $4.1 million for the same period a year ago. The increase was primarily due to the hiring of additional staff to support (i) higher levels of revenue, and (ii) the Company’s expansion into a direct owner and operator of seed-to-sale cannabis businesses, offset by the reversal of an approximate $1.0 million accrual related to the Kidrin complaint which was settled in August 2021. As a percentage of revenues, personnel expenses decreased to 5.8% (7.0% excluding the accrual reversal) in 2021 compared to 13.3% in 2020.
Marketing and promotion costs increased to approximately $1.1 million for the nine months ended September 30, 2021 from approximately $281,000 for the same period a year ago. The change 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 1.2% in 2021 from 0.9% in 2020.
General and administrative costs increased to approximately $16.9 million for the nine months ended September 30, 2021 from approximately $7.5 million for the same period a year ago. This change is primarily due to increases of approximately (i) $7.2 million in non-cash equity compensation expense associated with option grants and warrant issuances, (ii) $1.0 million in facility costs on additional properties in service in 2021, (iii) $896,000 of credit card processing fees due to a significant increase in credit card sales at the Company’s cannabis dispensaries, and (iv) $351,000 in depreciation and amortization expenses from higher property, equipment, and intangibles. As a percentage of revenues, general and administrative costs were 18.7% in 2021 compared with 24.6% in 2020, reflecting the more efficient utilization of the Company’s fixed overhead costs.
Bad debt expense increased to approximately $1.9 million in the nine months ended September 30, 2021 compared to approximately $1.3 million in the same period in 2020. The change is due to the increase of reserves recorded against aging trade accounts receivable. As a percentage of revenues, this expense decreased to 2.1% in the nine months ended September 30, 2021 from 4.4% in the same period in 2020.
As a result of the foregoing, the Company generated operating income of approximately $25.7 million for the nine months ended September 30, 2021, compared to approximately $6.5 million for the same period in 2020.
Net non-operating expenses decreased to approximately $2.6 million for the nine months ended September 30, 2021 compared to approximately $8.3 million for the same period in 2020. The year-over-year change is primarily due to an approximate $5.5 million reduction of interest expense from lower levels of outstanding debt, coupled with an approximate $506,000 decrease in the fair value of investments, offset by the gain on sale of the MRSVP investment of approximately $309,000.
As a result of the foregoing, the Company generated income before income taxes of approximately $23.0 million for the nine months ended September 30, 2021. For the same period a year ago, the Company incurred a loss before income taxes of approximately $1.8 million. After a tax provision of approximately $9.0 million in 2021, the Company generated net income of approximately $14.0 million for the nine months ended September 30, 2021 compared to a net loss of approximately $1.8 million for the same period in 2020, a positive swing of approximately $15.8 million.
40
~~Non-GAAP Measurement~~

In addition to the financial information reflected in this report, which is prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), ~~the Company is~~we are providing a non-GAAP financial measurement of profitability – Adjusted EBITDA – as a supplement to the preceding discussion of ~~the Company’s~~our financial results.

Management defines Adjusted EBITDA as net income, ~~(loss),~~ determined in accordance with GAAP, excluding the following:

-● interest income and interest expense;
-● income ~~taxes;~~tax provision;
-● depreciation ~~of fixed assets~~ and amortization of ~~intangibles;~~property and equipment;
● - ~~non-cash expenses on debt and equity issuances;~~
- ~~impairment or write-downs~~amortization of acquired intangible assets;
● - ~~unrealized gains and losses on investments and currency translations;~~impairments or write-downs of acquired intangible assets;
● -stock-based compensation;
● acquisition-related and other;
● legal settlements;
● - ~~gains or losses from the extinguishment of debt via the issuance of equity;~~other income (expense), net; and
-● discontinued ~~operations; and~~
- ~~merger- and acquisition-related transaction expenses.~~operations.

Management believes that Adjusted EBITDA is a useful measure to assess ~~the~~our performance and liquidity, ~~of the Company~~ as it provides meaningful operating results by excluding the effects of expenses that are not reflective of ~~its~~our operating business performance. In addition, ~~the Company’s~~our 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.

Management believes that investors and analysts benefit from considering Adjusted EBITDA in assessing ~~the Company’s~~our financial results and ~~its~~our 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.

As there are no standardized methods of calculating non-GAAP measurements, ~~the Company’s~~our 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.

36
Reconciliation of Net Income ~~(Loss)~~ to Adjusted EBITDA (a Non-GAAP Measurement)

The table below reconciles Net ~~Income (Loss)~~income to Adjusted EBITDA for the three and ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 ~~and 2020:~~(in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Unaudited)
Net income (loss) $ 2,123,148 $ 1,695,826 $ 14,021,750 $ (1,783,122 )

Interest expense, net 274,230 1,886,494 1,981,053 7,459,936
Income taxes 4,009,111 - 9,026,016 -
Depreciation and amortization 708,893 574,317 2,017,500 1,648,510
EBITDA 7,115,382 4,156,637 27,046,319 7,325,324

Amortization of stock grants 228,003 5,364 233,368 16,094
Amortization of option grants 5,324,301 150,624 6,208,376 707,003
Amortization of stand-alone warrant issuances - 2,179 55,786 2,179
Amortization of warrants issued with stock - - 654,681 -
Loss on equity issued to settle obligations - - 2,545 44,678
Equity in earnings of investments - (51,511 ) - (18,553 )
Asset write-down - 84,708 - 84,708
Legal settlement (266,717 ) - (266,717 ) -
Change in fair value of investments 522,106 (217,374 ) 937,390 704,172
Adjusted EBITDA $ 12,923,075 $ 4,130,627 $ 34,871,748 $ 8,865,605
41
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2022 2021 2022 2021

GAAP net income $ 1,896 $ 7,589 $ 6,137 $ 11,899
Interest expense, net 122 229 272 1,707
Income tax provision 1,750 3,813 5,410 5,017
Depreciation and amortization of property and equipment 850 501 1,552 963
Amortization of acquired intangible assets 285 169 425 346
EBITDA (earnings before interest, taxes, depreciation and amortization) 4,903 12,301 13,796 19,932
Stock-based compensation 2,553 1,244 5,024 1,600
Acquisition-related and other 754 - 754 -
Other expense (income), net 727 371 (275 ) 417
Adjusted EBITDA $ 8,937 $ 13,916 $ 19,299 $ 21,949

~~2021 and 2022 Plans~~
~~For the balance of 2021 and into 2022, the Company’s focus will be to continue to execute its Strategic Growth Plan. The Company’s priority activities will include the following:~~
1) ~~Continue to consolidate the cannabis businesses that the Company has developed and manages.~~
2) ~~Expand our revenue, assets, and footprint in the states in which the Company is operating.~~
~~- In Massachusetts, the Company intends to open two additional dispensaries and significantly expand the capacity and capability of its manufacturing facility.~~
~~- In Delaware, the Company is completing the development of an additional 60,000 square feet of cultivation and production in a new facility in Milford.~~
~~- In Maryland, the Company intends to expand its manufacturing facility by 40,000 square feet and open a dispensary in Annapolis.~~
~~-In Illinois, the Company intends to go vertical by acquiring one or more craft licenses and to potentially add up to six more dispensaries up to the statutory limit of ten.~~
3) ~~Expand into other legal states through M&A and filing new applications in states where new licensing opportunities arise.~~
4) ~~Expand revenues by producing and distributing our award-winning brands to qualified strategic partners or acquiring production and distribution licenses.~~
~~No assurances can be given that any of these plans will come to fruition or that if implemented will necessarily yield positive results.~~
~~Subsequent Events~~
~~Please refer to Note 21 –~~ ~~Subsequent Events~~ ~~of the Company’s financial statements included in this report for a discussion of material events that occurred after the balance sheet date.~~
~~The issuance of the shares of common stock described in Note 21 –~~ ~~Subsequent Events~~ of the Company’s financial statements were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Sections 4(a)(2) and/or 4(a)(5) of the Securities Act. A legend restricting the sale, transfer, or other disposition of these securities other than in compliance with the Securities Act was placed on the securities issued in the foregoing transactions.
Off-Balance Sheet Arrangements

~~The Company has~~We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on ~~its~~our financial condition, changes in financial condition, ~~revenues, or~~revenue, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Inflation

In the opinion of management, inflation has not had a material effect on ~~the Company’s~~our financial condition or results of ~~its~~ operations.

Seasonality

In the opinion of management, ~~the Company’s~~our financial condition and results of its operations are not materially impacted by seasonal sales.
42
Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company is a “smaller reporting company” as defined by Regulation S-K and, as such, is not required to provide the information contained in this item pursuant to Regulation S-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Our~~The Company’s management, with the participation of ~~our CEO~~its Chief Executive Officer (“CEO”) and ~~CFO,~~Chief Financial Officer (“CFO”), evaluated the effectiveness of ~~our~~the Company’s disclosure controls and procedures ~~(as defined~~(defined in Rules 13a-15(e) and 15d-15(e) under the Exchange ~~Act)~~Act of 1934, as amended (the “Exchange Act”)), as of ~~September~~June 30, ~~2021~~2022 (the “Evaluation Date”). Based upon that evaluation, the ~~chief executive officer~~CEO and ~~the chief financial officer~~CFO concluded that, as of the Evaluation Date, ~~our~~the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by usthe Company in the reports that ~~we file~~it files or ~~submit~~submits 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 ~~our~~the Company’s management, including ~~our~~its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
37

Changes in Internal Control Over Financial Reporting

~~During~~Over the past several ~~fiscal~~ years, wethe Company implemented significant measures to remediate ~~the previously disclosed~~past instances of ineffectiveness of ~~our~~the Company’s internal control over financial reporting, which included an insufficient degree of segregation of duties amongst our accounting and financial reporting personnel, and the lack of a formalized and complete set of policy and procedure documentation evidencing our system of internal controls over financial reporting. The remediation measures consisted of the hiring of a new CFO, the engagement of accounting consultants as needed to provide expertise on specific areas of the accounting guidance, the ~~continued~~ hiring of individuals with appropriate experience in internal controls over financial reporting, and the modification ~~of our~~to the Company’s accounting processes and enhancement to ~~our~~the Company’s financial ~~controls, including~~control. Further, the ~~testing~~Company expanded its board of ~~such controls.~~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.

Other than as described above, there was no change ~~in our~~to the Company’s 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) or 15d-15(d) that occurred during the ~~three months~~fiscal quarter ended ~~September~~June 30, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

43
PART II – OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings
Following the consummation of the Kind Acquisition, in April 2022, the Maryland litigation between the Company and the members of Kind was dismissed with prejudice and the parties exchanged releases of any and all existing claims.

In ~~July 2019, Mr. Kidrin, also a former director of~~April 2022, the Company, ~~filed a complaint~~MMA and Ms. DiPietro agreed to dismiss all direct claims and counterclaims asserted in the Massachusetts Superior Court, which alleged the Company failed to pay all wages owed to him and breached his employment agreement. The Company moved to dismiss certain counts of the complaint and asserted counterclaims against Mr. Kidrin.
litigation between them. In August 2021, the parties entered into a settlement agreement and general release 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 relatingaddition to the ~~online virtual worlds business~~direct claims, the ~~Company had conducted in early 2014, prior to its pivot into the legal cannabis industry (such assets had zero carrying value~~derivative claims were also dismissed on ~~the Company’s balance sheet), and (iv) each party released and discharged the other from all claims, losses, and liabilities.~~
In September 2021, MD Global Partners LLC (“MDGP”) filed an action in the Supreme Court of the State of New York alleging that the Company had breached an executed contract. In October 2021, the Company entered into a settlement agreement with and obtained a general release from MDGP whereby the Company paid $150,000 to resolve this matter.
June 8, 2022 upon court approval.

Other than the above, there has been no material change to the status of the Company’s legal proceedings.

Item 1A. Risk Factors

As a smaller reporting company, the Company is not required to provide the information contained in this item pursuant to Regulation S-K. However, information regarding the Company’s risk factors appears in Part I, Item 1A. of its Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. These risk factors describe some of the assumptions, risks, uncertainties, and other factors that could adversely affect the Company’s business or that could otherwise result in changes that differ materially from management’s expectations. There have been no material changes to the risk factors contained in the Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended ~~September~~June 30, ~~2021,~~2022, the Company issued (i) ~~3,104,725~~2,717 shares of common stock associated with previously issued subscriptions on common stock with a fair value of approximately $2,000, and (ii) 234,961 shares of common stock upon the ~~conversion~~cashless exercise of ~~approximately $1,087,000~~a warrant exercised for an aggregate of principal of promissory notes, (iii) 145,217 shares of common stock, with a fair value on grant date of approximately $133,000 in the aggregate, in connection with the grants of restricted stock to employees, (iv) 750,000 shares of common ~~stock valued at $705,000 to purchase property and equipment, and (v) 409,308 shares of common stock to pay fees of approximately $375,000.~~stock.

The issuance of the shares of common stock described above were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Sections 4(a)(2) and/or 4(a)(5) of the Securities Act. A legend restricting the sale, transfer, or other disposition of these securities other than in compliance with the Securities Act was placed on the securities issued in the foregoing ~~transactions.~~transactions in accordance with the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

38
Item 5. Other Information

~~None.~~In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $3.0 million loan agreement and mortgage with Du Quoin State Bank secured by property owned in Mt. Vernon, Illinois, which the Company is developing into grow and production facility. The loan has a 20-year term and initially bears interest at the rate of 7.75%, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75%). The proceeds of this loan will be utilized for the build-out of the property and other working capital needs.

44
On August 4, 2022, the Company and Hadron entered into a Second Amendment to the Purchase Agreement pursuant to which, inter alia, (a) Hadron’s obligation to provide any further funding to the Company and the Company’s obligation to issue any further securities to Hadron was terminated, (b) Hadron’s right to appointment a designee to the Company’s board of directors was eliminated, and (c) certain covenants restricting the Company’s incurrence of new indebtedness were eliminated.

Item 6. Exhibits

Exhibit No. Description

3.1 Certificate of Incorporation of the Company ~~(a)~~(incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10-12G, File No. 000-54433, filed on June 9, 2011 with the SEC).

3.1.1 Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 9, 2017 ~~(b)~~(incorporated by reference to Exhibit 3.1.1 to the Company’s Annual Report on Form 10-K filed on April 17, 2017 with the SEC).

3.1.2 Series B Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on February 27, 2020 ~~(h)~~(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 28, 2020 with the SEC).

3.1.3 Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 ~~(h)~~(incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on February 28, 2020 with the SEC).

3.1.4 Series C Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on March 1, 2021 ~~(p)~~(incorporated by reference to Exhibit 3.1.4 to the Company’s Current Report on Form 8-K, filed on March 2, 2021 with the SEC).

3.1.5 Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on April 25, 2017, effective as of May 1, 2017 *(incorporated by reference to Exhibit 3.1.5 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021 with the SEC).

3.1.6 Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 24, 2021 *(incorporated by reference to Exhibit 3.1.6 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021 with the SEC).

3.2 By-Laws – Restated as Amended ~~(a)~~
~~4.1~~ ~~Amended and Restated Promissory Note, dated February 10, 2020, in the principal amount of $11,500,000, issued~~(incorporated by ~~MariMed Hemp Inc. and MariMed Inc. (f)~~
~~4.1.1~~ ~~Promissory Note, dated February 27, 2020, in the principal amount of $3,742,500, issued by MariMed Inc.~~reference to ~~Navy Capital Green Fund, LP (h)~~
~~4.1.2~~ ~~Promissory Note, dated February 27, 2020, in the principal amount of $675,000, issued by MariMed Inc. to Navy Capital Green Co-Invest Fund, LLC (h)~~
~~4.1.3~~ ~~12% Convertible Promissory Note, dated April 23, 2020, in the principal amount of $900,000, issued by MariMed Inc. to Best Buds Funding LLC (i)~~
~~4.2~~ ~~Second Amended and Restated Promissory Note, dated June 24, 2020, in the principal amount of $8,811,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (j)~~
~~4.3~~ ~~Common Stock Purchase Warrant, dated June 24, 2020, issued by MariMed Inc.to SYYM LLC (k)~~
~~4.4~~ ~~Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $5,845,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)~~
~~4.5~~ ~~Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $3,000,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)~~
45
~~4.6~~ ~~Common Stock Purchase Warrant, dated September 30, 2020, issued by MariMed Inc.to Best Buds Funding, LLC. and/or its designees (m)~~
~~4.7~~ ~~Amended and Restated Common Stock Purchase Warrant, dated March 18, 2021, issued by MariMed Inc. to Hadron Healthcare Master Fund (q)~~
~~4.8~~ ~~Third Amended and Restated Promissory Note, dated April 1, 2021, in the principal amount of $3,211,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (r)~~
~~10.1~~ ~~Employment Agreement dated as of August 30, 2012 between Worlds Online Inc. and Thomas Kidrin (o)~~
~~10.2~~ ~~2011 Stock Option and Restricted Stock Award Plan (a)~~
~~10.3~~ ~~Form of Convertible Debenture issued by the Company (c)~~
~~10.4~~ ~~Form of Secured Convertible Debenture of GenCanna Global, Inc. (c)~~
~~10.5~~ ~~Form of Securities Purchase Agreement between the Company and YA II PN, LTD. (c)~~
~~10.6~~ ~~Amended and Restated Registration Rights Agreement dated as of November 5, 2018 between the Company and YA II PN, LTD. (c)~~
~~10.7~~ ~~Amended and Restated 2018 Stock Award and Incentive Plan (d)~~
~~10.7.1~~ ~~Amendment~~Exhibit 3.2 to the Amended and Restated 2018 Stock Award and Incentive Plan, effective as of September 23, 2021 *Company’s Form 10-12G, filed on June 9, 2011 with the SEC).

~~10.8~~ ~~Form of Stock Option Agreement, dated September 27, 2019, with each of David R. Allen, Eva Selhub, M.D., and Edward J. Gildea (e)~~
10.1***
~~10.9~~ Form of Second Amendment to Agreement ~~dated as of February 10, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (g)~~
~~10.10~~ Exchange Agreement, dated as of February 27, 2020, among MariMed Inc., Navy Capital Green Management, LLC, a Delaware limited liability company, as discretionary investment manager of Navy Capital Green Fund, LP, and Navy Capital Green Co-Invest Fund, LLC. (h)
~~10.11~~ ~~Amendment Agreement dated June 24, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (l)~~
~~10.12~~ ~~Note Extension Agreement,~~to Employment, effective as of ~~September 30, 2020, among Best Buds Funding LLC, as lender, and each of MariMed Inc., Mari Holdings MD LLC, and MariMed Advisors Inc., as the borrower parties (n)~~
~~10.13~~ ~~Securities Purchase Agreement, dated March 1, 2021,~~May 11, 2022, between MariMed Inc. and ~~Hadron Healthcare Master Fund (p)~~
~~10.14~~ ~~First Amendment~~Jon R. Levine (incorporated by reference to ~~Securities Purchase Agreement, dated March~~Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on May 18, ~~2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)~~2022 with the SEC).
~~10.15~~ ~~Amendment Agreement dated April 1, 2021, between SYYM LLC, as noteholder and collateral agent, and MariMed, Inc. and MariMed Hemp, Inc., as co-borrowers (r)~~

4639

10.16 **10.2** ~~Employment Agreement between MariMed Inc. and Robert Fireman, dated July 9, 2021 (s)~~
10.17 *** ~~Employment Agreement between MariMed Inc. and Jon R. Levine, dated July 9, 2021 (s)~~
10.18 *** ~~Employment Agreement between MariMed Inc. and Timothy Shaw, dated July 9, 2021 (s)~~
10.19 *** Form of ~~the First Amendment to the Employment~~Stock Option Agreement, ~~effective as of September 22, 2021,~~dated May 2, 2022, between MariMed Inc. and each of Robert Fireman, Jon R. Levine, and Timothy Shaw *Susan M. Villare (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on May 18, 2022 with the SEC).

10.20 **10.3*** Form of Restricted Stock ~~Option~~ Agreement, dated ~~July 9, 2021,~~May 2, 2022, between MariMed Inc. and Susan M. Villare (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed on May 18, 2022 with each of Robert Fireman, Jon R. Levine, and Timothy Shaw *the SEC).

10.21 *** ~~Form of Stock Option Agreement, dated October 1, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (t)~~
10.4*
~~10.22~~ ~~Settlement~~Second Amendment to Securities Purchase Agreement, ~~and General Release,~~ dated August ~~19, 2021,~~4, 2022, by and between MariMed Inc. and Thomas Kidrin *Hadron Healthcare Master Fund.

31.1. Rule 13a-14(a)/15d-14(a) ~~Certifications~~Certification of Chief Executive Officer *

31.2. Rule 13a-14(a)/15d-14(a) ~~Certifications~~Certification of Chief Financial Officer *

32.1. Section 1350 ~~Certifications~~Certification of Chief Executive Officer **

32.2. Section 1350 ~~Certifications~~Certification of Chief Financial Officer **

101.INS XBRL Instance Document *

101.SCH XBRL Taxonomy Extension Schema *

101.CAL XBRL Taxonomy Extension Calculation Linkbase *

101.DEF XBRL Taxonomy Extension Definition Linkbase *

101.LAB XBRL Taxonomy Extension Label Linkbase *

101.PRE XBRL Taxonomy Extension Presentation Linkbase *

104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *

* Filed herewith.
** Furnished herewith in accordance with Item 601 (32)(ii) of Regulation S-K.
*** This exhibit is a management contract or compensatory plan or arrangement.
47
~~(a)~~ ~~Incorporated by reference to the same numbered exhibit of the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011.~~
~~(b)~~ ~~Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017.~~
~~(c)~~ ~~Incorporated by reference to the Current Report on Form 8-K filed on November 9, 2018.~~
~~(d)~~ ~~Incorporated herein by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A filed on August 26, 2019.~~
~~(e)~~ ~~Incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019.~~
~~(f)~~ ~~Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on February 12, 2020.~~
~~(g)~~ ~~Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 12, 2020.~~
~~(h)~~ ~~Incorporated by reference to the Current Report on Form 8-K filed on February 27, 2020.~~
~~(i)~~ ~~Incorporated by reference to the Quarterly Report on Form 10-Q for the period ended June 30, 2020, filed on May 28, 2020.~~
~~(j)~~ ~~Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on June 30, 2020.~~
~~(k)~~ ~~Incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed on June 30, 2020.~~
~~(l)~~ ~~Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on June 30, 2020.~~
~~(m)~~ ~~Incorporated by reference to the same numbered exhibit of the Current Report on Form 8-K filed on October 26, 2020.~~
~~(n)~~ ~~Incorporated by reference to Exhibit 10.13 of the Current Report on Form 8-K filed on October 26, 2020.~~
~~(o)~~ ~~Incorporated by reference to the same numbered exhibit of the Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 29, 2013.~~
~~(p)~~ ~~Incorporated by reference to the same numbered exhibit of the Current Report on Form 8-K filed on March 2, 2021.~~
~~(q)~~ ~~Incorporated by reference to the same numbered exhibit of the Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 23, 2021.~~
~~(r)~~ ~~Incorporated by reference to the exhibit of the Current Report on Form 8-K filed on March 23, 2021.~~
~~(s)~~ ~~Incorporated by reference to the same numbered exhibit of the Current Report on Form 8-K filed on July 9, 2021.~~
~~(t)~~ ~~Same as Exhibit 10.20.~~

4840

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this report to be signed on its behalf by the undersigned, ~~thereto~~thereunto duly authorized.

Date: ~~November 15, 2021~~August 9, 2022

MARIMED INC.

By: /s/ ~~Robert Fireman~~Susan M. Villare
~~Robert Fireman~~
~~President and Chief Executive Officer~~
~~(Principal Executive Officer)~~
~~By:~~ ~~/s/ Jon R. Levine~~
~~Jon R. Levine~~Susan M. Villare

Chief Financial Officer
(Principal Financial Officer)

49
41

~~INDEX TO EXHIBITS~~
~~Exhibit No.~~ ~~Description~~
~~3.1~~ ~~Certificate of Incorporation of the Company (a)~~
~~3.1.1~~ ~~Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 9, 2017 (b)~~
~~3.1.2~~ ~~Series B Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on February 27, 2020 (h)~~
~~3.1.3~~ ~~Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 (h)~~
~~3.1.4~~ ~~Series C Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on March 1, 2021 (p)~~
~~3.1.5~~ Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on April 25, 2017, effective as of May 1, 2017 *
~~3.1.6~~ Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 24, 2021 *
~~3.2~~ ~~By-Laws – Restated as Amended (a)~~
~~4.1~~ ~~Amended and Restated Promissory Note, dated February 10, 2020, in the principal amount of $11,500,000, issued by MariMed Hemp Inc. and MariMed Inc. (f)~~
~~4.1.1~~ ~~Promissory Note, dated February 27, 2020, in the principal amount of $3,742,500, issued by MariMed Inc. to Navy Capital Green Fund, LP (h)~~
~~4.1.2~~ ~~Promissory Note, dated February 27, 2020, in the principal amount of $675,000, issued by MariMed Inc. to Navy Capital Green Co-Invest Fund, LLC (h)~~
~~4.1.3~~ ~~12% Convertible Promissory Note, dated April 23, 2020, in the principal amount of $900,000, issued by MariMed Inc. to Best Buds Funding LLC (i)~~
~~4.2~~ ~~Second Amended and Restated Promissory Note, dated June 24, 2020, in the principal amount of $8,811,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (j)~~
~~4.3~~ ~~Common Stock Purchase Warrant, dated June 24, 2020, issued by MariMed Inc.to SYYM LLC (k)~~
~~4.4~~ ~~Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $5,845,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)~~
~~4.5~~ ~~Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $3,000,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)~~
~~4.6~~ ~~Common Stock Purchase Warrant, dated September 30, 2020, issued by MariMed Inc.to Best Buds Funding, LLC. and/or its designees (m)~~
~~4.7~~ ~~Amended and Restated Common Stock Purchase Warrant, dated March 18, 2021, issued by MariMed Inc. to Hadron Healthcare Master Fund (q)~~
~~4.8~~ ~~Third Amended and Restated Promissory Note, dated April 1, 2021, in the principal amount of $3,211,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (r)~~
~~10.1~~ ~~Employment Agreement dated as of August 30, 2012 between Worlds Online Inc. and Thomas Kidrin (o)~~
50
~~10.2~~ ~~2011 Stock Option and Restricted Stock Award Plan (a)~~
~~10.3~~ ~~Form of Convertible Debenture issued by the Company (c)~~
~~10.4~~ ~~Form of Secured Convertible Debenture of GenCanna Global, Inc. (c)~~
~~10.5~~ ~~Form of Securities Purchase Agreement between the Company and YA II PN, LTD. (c)~~
~~10.6~~ ~~Amended and Restated Registration Rights Agreement dated as of November 5, 2018 between the Company and YA II PN, LTD. (c)~~
~~10.7~~ ~~Amended and Restated 2018 Stock Award and Incentive Plan (d)~~
~~10.7.1~~ Amendment to the Amended and Restated 2018 Stock Award and Incentive Plan, effective as of September 23, 2021 *
~~10.8~~ ~~Form of Stock Option Agreement, dated September 27, 2019, with each of David R. Allen, Eva Selhub, M.D., and Edward J. Gildea (e)~~
~~10.9~~ ~~Amendment Agreement, dated as of February 10, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (g)~~
~~10.10~~ Exchange Agreement, dated as of February 27, 2020, among MariMed Inc., Navy Capital Green Management, LLC, a Delaware limited liability company, as discretionary investment manager of Navy Capital Green Fund, LP, and Navy Capital Green Co-Invest Fund, LLC. (h)
~~10.11~~ ~~Amendment Agreement dated June 24, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (l)~~
~~10.12~~ Note Extension Agreement, effective as of September 30, 2020, among Best Buds Funding LLC, as lender, and each of MariMed Inc., Mari Holdings MD LLC, and MariMed Advisors Inc., as the borrower parties (n)
~~10.13~~ ~~Securities Purchase Agreement, dated March 1, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (p)~~
~~10.14~~ ~~First Amendment to Securities Purchase Agreement, dated March 18, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)~~
~~10.15~~ ~~Amendment Agreement dated April 1, 2021, between SYYM LLC, as noteholder and collateral agent, and MariMed, Inc. and MariMed Hemp, Inc., as co-borrowers (r)~~
10.16 *** ~~Employment Agreement between MariMed Inc. and Robert Fireman, dated July 9, 2021 (s)~~
10.17 *** ~~Employment Agreement between MariMed Inc. and Jon R. Levine, dated July 9, 2021 (s)~~
10.18 *** ~~Employment Agreement between MariMed Inc. and Timothy Shaw, dated July 9, 2021 (s)~~
10.19 *** Form of the First Amendment to the Employment Agreement, effective as of September 22, 2021, between MariMed Inc. and each of Robert Fireman, Jon R. Levine, and Timothy Shaw *
10.20 *** Form of Stock Option Agreement, dated July 9, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw *
10.21 *** ~~Form of Stock Option Agreement, dated October 1, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (t)~~
~~10.22~~ Settlement Agreement and General Release, dated August 19, 2021, between MariMed Inc. and Thomas Kidrin *
~~31.1.~~ Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer *
~~31.2.~~ Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer *
~~32.1.~~ Section 1350 Certifications of Chief Executive Officer **
~~32.2.~~ Section 1350 Certifications of Chief Financial Officer **
~~101.INS XBRL~~ Instance Document *
~~101.SCH XBRL~~ Taxonomy Extension Schema *
~~101.CAL XBRL~~ Taxonomy Extension Calculation Linkbase *
~~101.DEF XBRL~~ Taxonomy Extension Definition Linkbase *
~~101.LAB XBRL~~ Taxonomy Extension Label Linkbase *
~~101.PRE XBRL~~ Taxonomy Extension Presentation Linkbase *
~~104~~ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *
51
* Filed herewith.
** Furnished herewith in accordance with Item 601 (32)(ii) of Regulation S-K.
*** This exhibit is a management contract or compensatory plan or arrangement.
~~(a)~~ ~~Incorporated by reference to the same numbered exhibit of the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011.~~
~~(b)~~ ~~Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017.~~
~~(c)~~ ~~Incorporated by reference to the Current Report on Form 8-K filed on November 9, 2018.~~
~~(d)~~ ~~Incorporated herein by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A, filed on August 26, 2019.~~
~~(e)~~ ~~Incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019.~~
~~(f)~~ ~~Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on February 12, 2020.~~
~~(g)~~ ~~Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 12, 2020.~~
~~(h)~~ ~~Incorporated by reference to the Current Report on Form 8-K filed on February 27, 2020.~~
~~(i)~~ ~~Incorporated by reference to the Quarterly Report on Form 10-Q for the period ended June 30, 2020, filed on May 28, 2020.~~
~~(j)~~ ~~Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on June 30, 2020.~~
~~(k)~~ ~~Incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed on June 30, 2020.~~
~~(l)~~ ~~Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on June 30, 2020.~~
~~(m)~~ ~~Incorporated by reference to the same numbered exhibit of the Current Report on Form 8-K filed on October 26, 2020.~~
~~(n)~~ ~~Incorporated by reference to Exhibit 10.13 of the Current Report on Form 8-K filed on October 26, 2020.~~
~~(o)~~ ~~Incorporated by reference to the same numbered exhibit of the Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 29, 2013.~~
~~(p)~~ ~~Incorporated by reference to the same numbered exhibit of the Current Report on Form 8-K filed on March 2, 2021.~~
~~(q)~~ ~~Incorporated by reference to the same numbered exhibit of the Annual Report on Form 10-K for the year ended December 31, 2020, filed on March 23, 2021.~~
~~(r)~~ ~~Incorporated by reference to the exhibit of the Current Report on Form 8-K filed on March 23, 2021.~~
~~(s)~~ ~~Incorporated by reference to the same numbered exhibit of the Current Report on Form 8-K filed on July 9, 2021.~~
~~(t)~~ ~~Same as Exhibit 10.20.~~
52

	September 30,			December 31,
	2021			2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	25,580,508		$	2,999,053
Accounts receivable, net		8,706,467			6,675,512
Deferred rents receivable		1,747,803			1,940,181
Notes receivable, current portion		124,426			658,122
Inventory		10,993,963			6,830,571
Investments		419,803			1,357,193
Other current assets		2,213,348			582,589
Total current assets		49,786,318			21,043,221

Property and equipment, net		59,516,169			45,636,529
Intangibles, net		2,348,948			2,228,560
Investments		-			1,165,788
Notes receivable, less current portion		1,188,478			965,008
Right-of-use assets under operating leases		5,245,577			5,247,152
Right-of-use assets under finance leases		53,908			78,420
Other assets		97,951			80,493
Total assets	$	118,237,349		$	76,445,171

Liabilities, mezzanine equity, and stockholders’ equity
Current liabilities:
Accounts payable	$	7,092,073		$	5,044,918
Accrued expenses		11,094,752			3,621,269
Sales and excise taxes payable		1,725,618			1,053,693
Debentures payable		-			1,032,448
Notes payable, current portion		9,705			8,859,175
Mortgages payable, current portion		1,412,545			1,387,014
Operating lease liabilities, current portion		1,097,008			1,008,227
Finance lease liabilities, current portion		30,288			38,412
Due to related parties		-			1,157,815
Other current liabilities		-			23,640
Total current liabilities		22,461,989			23,226,611

Notes payable, less current portion		925,871			10,682,234
Mortgages payable, less current portion		16,974,749			14,744,136
Operating lease liabilities, less current portion		4,717,933			4,822,064
Finance lease liabilities, less current portion		27,856			44,490
Other liabilities		100,200			100,200
Total liabilities		45,208,598			53,619,735

Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020		14,725,000			14,725,000
Series C convertible preferred stock, $0.001 par value; 6,216,216 and 0 shares authorized, issued and outstanding at September 30, 2021 and December 31, 2020, respectively		23,000,000			-
Total mezzanine equity		37,725,000			14,725,000

Stockholders’ equity:
Undesignated preferred stock, $0.001 par value; 38,875,451 and 45,091,667 shares authorized at September 30, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020		-			-
Common stock, $0.001 par value; 700,000,000 and 500,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively; 331,545,220 and 314,418,812 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		331,545			314,419
Common stock subscribed but not issued; 202,204 and 11,413 shares at September 30, 2021 and December 31, 2020, respectively		189,184			5,365
Additional paid-in capital		127,231,090			112,974,329
Accumulated deficit		(90,883,748	)		(104,616,538	)
Noncontrolling interests		(1,564,320	)		(577,139	)
Total stockholders’ equity		35,303,751			8,100,436
Total liabilities, mezzanine equity, and stockholders’ equity	$	118,237,349		$	76,445,171

	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, 2020		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		152,094			152			102,204			95,284			137,932			-			-			233,368
Exercise of options		178,885			179			-			-			31,321			-			-			31,500
Exercise of warrants		980,062			980			-			-			91,795			-			-			92,775
Amortization of option grants		-			-			-			-			6,208,376			-			-			6,208,376
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		10,042,125			10,042			-			-			3,336,403			-			-			3,346,445
Common stock issued to settle obligations		71,691			72			-			-			53,473			-			-			53,545
Purchase of property and equipment with stock		750,000			750			-			-			704,250			-			-			705,000
Fees paid with stock		409,308			409			-			-			374,610			-			-			375,019
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			93,900			871,460			-			(975,360	)		(10,000	)
Distributions		-			-			-			-			-			-			(300,781	)		(300,781	)
Net income		-			-			-			-			-			13,732,790			288,960			14,021,750
Balances at September 30, 2021		331,545,220		$	331,545			202,204		$	189,184		$	127,231,090		$	(90,883,748	)	$	(1,564,320	)	$	35,303,751

	2021			2020
	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net income (loss) attributable to MariMed Inc.	$	13,732,790		$	(1,976,614	)
Net income (loss) attributable to noncontrolling interests		288,960			193,492
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		1,499,318			1,340,649
Asset writeoff		-			84,708
Amortization of intangibles		518,182			307,861
Amortization of stock grants		233,368			16,094
Amortization of option grants		6,208,376			707,003
Amortization of stand-alone warrant issuances		832,105			2,179
Amortization of warrants attached to debt		539,272			631,895
Amortization of warrants issued with stock		654,681			-
Amortization of beneficial conversion feature		176,522			2,552,933
Amortization of original issue discount		51,753			286,353
Bad debt expense		1,854,869			1,342,029
Fees paid with stock		375,019			-
Loss on obligations settled with equity		2,546			44,678
Equity in earnings of investments		-			(18,553	)
Change in fair value of investments		937,390			704,172
Gain on sale of investment		(309,212	)			=
Changes in operating assets and liabilities:
Accounts receivable, net		(3,885,824	)		(3,750,792	)
Deferred rents receivable		192,378			(171,675	)
Inventory		(4,163,392	)		(5,582,862	)
Other current assets		(1,640,696	)		(57,677	)
Other assets		(17,458	)		95,412
Accounts payable		2,098,155			2,272,810
Accrued expenses		7,432,580			1,263,976
Sales and excise taxes payable		671,925			608,716
Operating lease payments, net		(13,775	)		58,559
Finance lease interest payments		1,504			4,033
Other current liabilities		(23,640	)		646,832
Net cash provided by operating activities		28,247,696			1,606,211

Cash flows from investing activities:
Purchase of property and equipment		(14,649,446	)		(4,116,053	)
Purchase of cannabis licenses		(638,570	)		(255,000	)
Return on investment		1,475,000			-
Interest on notes receivable		407,374			443,150
Net cash used in investing activities		(13,405,642	)		(3,927,903	)

Cash flows from financing activities:
Proceeds from issuance of preferred stock		23,000,000			-
Equity issuance costs		(386,983	)		-
Proceeds from issuance of promissory notes		35,096			5,249,763
Repayments of promissory notes		(15,804,273	)		(10,770,011	)
Proceeds from issuance of debentures		-			935,000
Proceeds from mortgages		2,700,000			13,897,282
Payments on mortgages		(443,856	)		(4,989,661	)
Proceeds from exercise of options		31,500			-
Proceeds from exercise of warrants		92,775			-
Due to related parties		(1,157,815	)		(221,705	)
Finance lease principal payments		(26,262	)		(27,008	)
Distributions		(300,781	)		(229,329	)
Net cash provided by financing activities		7,739,401			3,844,331

Net change to cash and cash equivalents		22,581,455			1,522,639
Cash and cash equivalents at beginning of period		2,999,053			738,688
Cash and cash equivalents at end of period	$	25,580,508		$	2,261,327

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,705,029		$	1,236,464
Cash paid for income taxes	$	419,070		$	488,772

Non-cash activities:
Conversion of promissory notes	$	3,346,445		$	460,050
Conversions of debentures payable	$	1,356,452		$	7,166,041
Acquisition of 30% interest in subsidiary	$	975,360		$	-
Purchase of property and equipment 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	$	53		$	-
Exchange of common stock to preferred stock	$	-		$	14,725,000
Conversion of accrued interest to promissory notes	$	-		$	3,908,654
Discount on promissory notes	$	-		$	638,927
Beneficial conversion feature on debentures payable	$	-		$	379,183	��
Extinguishment of promissory note	$	-		$	352,000
Discount on debentures payable	$	-		$	28,021

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 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:
Tradename and trademarks		2,041
Licenses and customer base		4,700
Non-compete agreements		42
Goodwill		6,011
Current liabilities		(511	)
Total fair value of assets acquired and (liabilities assumed)	$	17,952

	●	Delaware – a 45,000 square foot cannabis cultivation, processing, and dispensary facility which is leased to its cannabis-licensed client under a triple net lease that expires in 2035.

	●	Maryland – a 180,000 square foot cultivation and processing facility that expires in 2037. This facility had been leased to Kind prior to the Kind Acquisition Date.

	●	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.

	●	Delaware – a 4,000 square foot cannabis dispensary which is subleased to its cannabis-licensed client 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 that is 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. The Company intends to develop the remaining space into a processing facility.

	●	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.

Year ending December 31,
Remainder of 2022	$	1,085
2023		1,911
2024		1,925
2025		1,946
2026		1,868
Thereafter		11,366
Total	$	20,101

	June 30, 2022		December 31, 2021
First State Compassion Center (initial note)	$	367	$	403
First State Compassion Center (secondary note)		8,002		7,845
Healer LLC		879		866
Total notes receivable		9,248		9,114
Notes receivable, current portion		132		127
Notes receivable, less current portion	$	9,116	$	8,987

	June 30, 2022		December 31, 2021
Plants	$	1,430	$	1,015
Ingredients and other raw materials		498		262
Work-in-process		8,262		4,661
Finished goods		5,699		3,830
Total inventory	$	15,889	$	9,768

	June 30, 2022		December 31, 2021
Investments – current:
Flowr Corp. (formerly Terrace Inc.)	$	124	$	251
WM Technology Inc.		401		-
Total current investments	$	525	$	251

	June 30, 2022			December 31, 2021
Land	$	4,450		$	4,450
Buildings and building improvements		38,672			35,231
Tenant improvements		16,990			9,745
Furniture and fixtures		1,973			1,888
Machinery and equipment		9,466			7,221
Construction in progress		5,897			10,569
Property and equipment, gross		77,448			69,104
Less: accumulated depreciation		(8,316	)		(6,954	)
Property and equipment, net	$	69,132		$	62,150

	Weighted
	average						Net
	amortization				Accumulated		carrying
	period (years)		Cost		amortization		value

Tradename and trademarks		3.00	$	2,041	$	113	$	1,928
Licenses and customer base		8.26		8,100		169		7,931
Non-compete agreements		2.00		42		3		39
		7.18	$	10,183	$	285	$	9,898

	2022		2021
Balance at January 1,	$	2,068	$	2,068
Kind Acquisition		6,011		-
Balance at June 30,	$	8,079	$	2,068

	June 30, 2022			December 31, 2021
Bank of New England – New Bedford, MA and Middleboro, MA properties	$	12,319		$	12,499
Bank of New England – Wilmington, DE property		1,404			1,463
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties		767			778
DuQuoin State Bank – Metropolis, IL property		2,574			2,658
South Porte Bank – Mt. Vernon, IL property		814			816
Total mortgages payable		17,878			18,214
Less: Mortgages payable, current		(1,417	)		(1,400	)
Mortgages payable, less current portion	$	16,461		$	16,814

Year ending December 31,
Remainder of 2022	$	1,042
2023		2,999
2024		2,323
2025		2,471
2026		1,183
Thereafter		14,025
Total		24,043
Less: discount		(680	)
Total debt gross	$	23,363

	Three months			Six months
	ended			ended
	June 30,			June 30,
	2022			2022
Estimated life (in years)		5.0			5.0
Volatility		98.4	%		98.4	%
Risk-free interest rates		3.0	%		3.0	%
Dividend yield		-			-

	●	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. An increase in product sales is expected from 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). 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.

~~Level 1~~	~~Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.~~

~~Level 2~~	~~Pricing 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 3~~	~~Pricing inputs that are generally observable inputs and not corroborated by market data.~~

	Nine Months Ended September 30,
	2021		2020
Life of instrument		3.0 to 5.0 years		2.7 to 4.3 years
Volatility factors		1.230 to 1.266		1.059 to 1.180
Risk-free interest rates		0.36% to 0.90%		0.26% to 1.30%
Dividend yield		0%		0%

	September 30, 2021		December 31, 2020
Current investments:
Flowr Corp. (formerly Terrace Inc.)	$	419,803	$	1,357,193

Non-current investments:
MembersRSVP LLC		-		1,165,788

Total investments	$	419,803	$	2,522,981

	●	~~Delaware – a~~ ~~45,000~~ square foot facility purchased in September 2016 and developed into a cannabis cultivation, processing, and dispensary facility which is leased to a cannabis-licensed client under a triple net lease that commenced in 2017 and ~~expires in 2035~~.

	●	~~Maryland – a~~ ~~180,000~~ square foot former manufacturing facility purchased in January 2017 and developed by the Company into a cultivation and processing facility which is leased to a licensed cannabis client under a triple net lease that commenced 2018 and ~~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 commenced in 2017 and~~ ~~expires in 2022~~.

	●	~~Delaware –~~ ~~4,000~~ ~~square feet of retail space in a multi-use building space which the Company developed into a cannabis dispensary and is subleased to its cannabis-licensed client under a under a triple net~~ ~~lease expiring in December 2021 with a five-year option to extend~~.

	●	~~Delaware – a~~ ~~100,000~~ ~~square foot warehouse which the Company is developing into a cultivation and processing facility to be 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 subleased 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~~.


2021	$	1,207,136
2022		4,740,130
2023		4,446,410
2024		4,506,585
2025		4,574,023
Thereafter		39,591,553
Total	$	59,065,837

	September 30, 2021		December 31, 2020
First State Compassion Center	$	420,267	$	468,985
Healer LLC		892,637		899,226
High Fidelity Inc.		-		254,919
Total notes receivable		1,312,904		1,623,130
Notes receivable, current portion		124,426		658,122
Notes receivable, less current portion	$	1,188,478	$	965,008

	September 30, 2021			December 31, 2020
Bank of New England – New Bedford, MA and Middleboro, MA properties	$	12,583,053		$	12,834,090
Bank of New England – Wilmington, DE property		1,491,525			1,575,658
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties		786,046			814,749
DuQuoin State Bank – Metropolis, IL property		2,688,230			-
South Porte Bank – Mt. Vernon, IL property		838,440			906,653
Total mortgages payable		18,387,294			16,131,150
Mortgages payable, current portion		(1,412,545	)		(1,387,014	)
Mortgages payable, less current portion	$	16,974,749		$	14,744,136


2021	$	1,253,995
2022		593,112
2023		1,231,622
2024		669,650
2025		716,186
Thereafter		14,859,046
Total		19,323,611
Less discounts		(741	)
Long-term debt, net	$	19,322,870

Issue Date	Maturity Date	Initial Principal	Interest Rate		Issue Discount	Warrant Discount		Beneficial Conversion Feature	Converted To Common Stock
10/17/18	10/16/20	$5,000,000		6.0%	1.0%	$	457,966	$1,554,389	$	5,000,000
11/07/18	11/06/20	5,000,000		6.0%	1.0%		599,867	4,015,515		5,000,000
05/08/19	05/07/21	5,000,000		6.0%	1.0%		783,701	2,537,235		5,000,000
06/28/19	06/27/21	2,500,000		0.0%	7.0%		145,022	847,745		2,500,000
08/20/19	08/19/21	2,500,000		0.0%	7.0%		219,333	850,489		2,500,000
02/21/20	02/20/21	1,000,000		6.5%	6.5%		28,021	379,183		1,000,000

Exercise Price	Shares Under Option				Remaining Life
per Share	Outstanding		Exercisable		in Years
$0.140		160,000		80,000		3.78
$0.149		500,000		500,000		4.25
$0.169		200,000		200,000		4.12
$0.225		2,000,000		1,250,000		4.11
$0.250		20,000		20,000		3.67
$0.250		50,000		12,500		4.07
$0.250		800,000		600,000		4.12
$0.250		80,000		60,000		4.15
$0.250		50,000		50,000		3.42
$0.300		403,000		403,000		3.50
$0.417		900,000		900,000		3.24
$0.505		100,000		50,000		4.26
$0.505		800,000		200,000		4.28
$0.590		15,000		15,000		3.19
$0.630		300,000		300,000		0.25
$0.740		590,000		356,250		4.58
$0.770		200,000		200,000		1.25
$0.830		287,000		143,500		4.48
$0.830		600,000		-		4.66
$0.840		878,921		600,000		4.79
$0.840		99,000		19,800		4.84
$0.850		90,000		33,125		4.71
$0.880		11,550,000		5,925,000		4.78
$0.880		15,000		-		4.87
$0.890		10,000		2,500		4.31
$0.892		40,000		20,000		4.31
$0.895		25,000		12,500		4.32
$0.900		50,000		50,000		1.61
$0.910		50,000		50,000		1.06
$0.920		300,000		-		4.76
$0.928		500,000		100,000		4.86
$0.950		50,000		50,000		1.25
$0.970		100,000		50,000		4.71
$0.983		145,000		-		4.74
$0.990		500,000		-		4.97
$0.992		300,000		300,000		2.99
$1.000		15,000		15,000		2.71
$1.000		125,000		125,000		3.09
$1.350		100,000		100,000		1.83
$1.950		375,000		375,000		1.75
$2.320		100,000		100,000		1.95
$2.450		2,000,000		2,000,000		1.23
$2.500		100,000		100,000		1.91
$2.650		200,000		200,000		1.98
$2.850		56,250		56,250		1.20
$2.850		100,000		100,000		2.20
$3.000		25,000		25,000		2.21
$3.725		100,000		100,000		2.19
		26,054,171		15,849,425