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

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

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 ~~[X]~~ ☒ 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 ~~[X]~~ ☒ 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.

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 ~~[X]~~ ☒

As of November ~~27, 2019, 219,238,047~~ 9, 2020, 300,416,773shares of the ~~Issuer’s Common Stock~~registrant’s common stock were outstanding.

	September 30, 2019			December 31, 2018			September 30, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	136,682		$	4,104,315		$	2,261,327		$	738,688
Accounts receivable, net		10,170,631			5,376,966			4,077,902			1,669,139
Accounts receivable from related party, net		33,200,000			-
Deferred rents receivable		2,042,923			2,096,384			1,968,500			1,796,825
Due from third parties		3,178,980			3,860,377
Due from third parties, net								9,937			-
Notes receivable, current portion		1,321,284			51,462			540,319			311,149
Inventory		1,462,149			-			6,802,291			1,219,429
Investments								1,002,659			1,449,144
Other current assets		211,858			219,012			250,045			192,368
Total current assets		51,724,507			15,708,516			16,912,980			7,376,742

Property and equipment, net		40,158,470			34,099,864			45,507,577			42,792,369
Intangibles, net		3,592,302			185,000			2,311,181			2,364,042
Investments		32,728,854			1,672,163			1,085,528			1,324,661
Notes receivable, less current portion		2,471,595			1,092,376			1,084,671			1,639,496
Debentures receivable		-			30,000,000
Right-of-use assets under operating leases		5,915,004			-			5,381,761			5,787,423
Right-of-use assets under finance leases		119,274			-			86,591			111,103
Due from related parties		-			119,781
Other assets		345,905			82,924			80,493			175,905
Total assets	$	137,055,911		$	82,960,624		$	72,450,782		$	61,571,741

Liabilities and stockholders’ equity
Liabilities, mezzanine equity, and stockholders’ equity
Current liabilities:
Accounts payable	$	3,387,205		$	3,915,430		$	6,292,958		$	4,719,069
Accrued expenses		5,185,029			1,588,368			3,111,373			5,395,996
Deferred rents payable		-			105,901
Notes payable		21,073,459			3,877,701
Notes payable, current portion								8,512,590			23,112,742
Mortgages payable, current portion		220,256			188,231			1,379,541			223,888
Debentures payable, current portion								2,928,047			-
Operating lease liabilities, current portion		807,757			-			1,002,171			917,444
Finance lease liabilities, current portion		38,411			-			38,412			38,412
Due to related parties		415,713			276,311			1,233,008			1,454,713
Unearned revenue from related party		4,170,750			-
Other current liabilities		197,943			-			1,505,008			858,176
Total current liabilities		35,496,523			9,951,942			26,003,108			36,720,440

Notes payable, less current portion								11,653,775			-
Mortgages payable, less current portion		7,174,385			7,348,581			14,864,810			7,112,842
Debentures payable		5,877,556			3,557,440
Debentures payable, less current portion								-			5,835,212
Operating lease liabilities, less current portion		5,531,376			-			4,967,583			5,399,414
Finance lease liabilities, less current portion		82,790			-			52,439			75,413
Other liabilities		100,200			338,200			100,200			100,200
Total liabilities		54,262,830			21,196,163			57,641,915			55,243,521

Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 and 0 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019, respectively								14,725,000			-

Stockholders’ equity:
Series A convertible preferred stock, $0.001 par value; 50,000,000 shares authorized at September 30, 2019 and December 31, 2018; no shares issued or outstanding at September 30, 2019 and December 31, 2018		-			-
Common stock, $0.001 par value; 500,000,000 shares authorized at September 30, 2019 and December 31, 2018; 218,213,973 and 211,013,043 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		218,214			211,013
Common stock subscribed but not issued; 6,603,532 and 97,136 shares at September 30, 2019 and December 31, 2018, respectively		4,958,332			169,123
Series A convertible preferred stock, $0.001 par value; 0 and 50,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019								-			-
No designation preferred stock, $0.001 par value; 45,091,667 and 0 shares authorized at September 30, 2020 and December 31, 2019, respectively; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019								-			-
Common stock, $0.001 par value; 500,000,000 shares authorized at September 30, 2020 and December 31, 2019; 289,729,854 and 228,408,024 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively								289,730			228,408
Common stock subscribed but not issued; 33,319 and 3,236,857 shares at September 30, 2020 and December 31, 2019, respectively								5,365			1,168,074
Additional paid-in capital		105,087,809			87,180,165			109,115,215			112,245,730
Accumulated deficit		(28,320,616	)		(25,575,808	)		(108,737,141	)		(106,760,527	)
Noncontrolling interests		849,342			(220,032	)		(589,302	)		(553,465	)
Total stockholders’ equity		82,793,081			61,764,461			83,867			6,328,220
Total liabilities and stockholders’ equity	$	137,055,911		$	82,960,624
Total liabilities, mezzanine equity, and stockholders’ equity							$	72,450,782		$	61,571,741

													2020			2019			2020			2019
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2020			2019			2020			2019

Revenues	$	4,209,328		$	3,391,582		$	11,382,942		$	8,411,858		$	13,461,504		$	4,209,328		$	30,537,829		$	11,382,942
Revenues from related party		7,014,371			-			29,029,249			-			-			7,014,371			-			29,029,249
Total revenues		11,223,699			3,391,582			40,412,191			8,411,858			13,461,504			11,223,699			30,537,829			40,412,191

Cost of revenues		6,523,283			1,521,783			24,523,626			3,324,009			4,781,677			6,523,283			10,831,763			24,523,626

Gross profit		4,700,416			1,869,799			15,888,565			5,087,849			8,679,827			4,700,416			19,706,066			15,888,565

Operating expenses:
Personnel		1,241,535			352,257			2,740,039			821,815			1,354,644			1,241,535			4,075,168			2,740,039
Marketing and promotion		91,562			37,202			286,521			166,906			103,327			91,562			281,329			286,521
General and administrative		2,394,692			2,029,333			6,752,168			4,516,132			2,931,684			2,394,692			7,515,721			6,752,168
Bad debts														892,029			-			1,342,029			-
Total operating expenses		3,727,789			2,418,792			9,778,728			5,504,853			5,281,684			3,727,789			13,214,247			9,778,728

Operating income (loss)		972,627			(548,993	)		6,109,837			(417,004	)
Operating income														3,398,143			972,627			6,491,819			6,109,837

Non-operating income (expenses):
Interest expense		(4,516,576	)		(478,118	)		(9,076,583	)		(1,080,637	)		(1,921,312	)		(4,516,576	)		(7,581,648	)		(9,076,583	)
Interest income		79,016			23,270			425,770			62,176			34,818			79,016			121,712			425,770
Loss on debt settlements		-			(2,407,671	)		-			(4,184,631	)
Equity in losses of investments		(2,933,252	)		-			(1,020,310	)		-
Loss on obligations settled with equity														-			-			(44,678	)		-
Equity in earnings of investments														51,511			(2,933,252	)		18,553			(1,020,310	)
Change in fair value of investments														217,374			-			(704,172	)		-
Other		-			-			2,948,917			(3,600	)		(84,708	)		-			(84,708	)		2,948,917
Total non-operating expenses		(7,370,812	)		(2,862,519	)		(6,722,206	)		(5,206,692	)
Total non-operating income (expenses), net														(1,702,317	)		(7,370,812	)		(8,274,941	)		(6,722,206	)

Loss before income taxes		(6,398,185	)		(3,411,512	)		(612,369	)		(5,623,696	)
Income (loss) before income taxes														1,695,826			(6,398,185	)		(1,783,122	)		(612,369	)
Provision for income taxes		901,477			-			1,886,072			12,407						901,477			-			1,886,072
Net loss	$	(7,299,662	)	$	(3,411,512	)	$	(2,498,441	)	$	(5,636,103	)
Net income (loss)													$	1,695,826		$	(7,299,662	)	$	(1,783,122	)	$	(2,498,441	)

Net income (loss) attributable to noncontrolling interests	$	99,021		$	91,362		$	246,367		$	223,882		$	36,959		$	99,021		$	193,492		$	246,367
Net income (loss) attributable to MariMed Inc.	$	(7,398,683	)	$	(3,502,874	)	$	(2,744,808	)	$	(5,859,985	)	$	1,658,867		$	(7,398,683	)	$	(1,976,614	)	$	(2,744,808	)

Net loss per share	$	(0.034	)	$	(0.018	)	$	(0.013	)	$	(0.031	)
Net income (loss) per share
Basic													$	0.006		$	(0.034	)	$	(0.008	)	$	(0.013	)
Diluted													$	0.005		$	(0.034	)	$	(0.008	)	$	(0.013	)

Weighted average common shares outstanding		217,417,326			196,415,503			214,274,342			186,952,362
Basic														281,535,212			217,417,326			254,387,761			214,274,342
Diluted														346,091,840			217,417,326			254,387,761			214,274,342

The above statements do not show ~~a column~~columns for Series A convertible preferred stock and no designation

preferred stock as the balances were zero and there was no activity in the periods presented.

	Nine Months Ended September 30,						2020			2019
	2019			2018			Nine Months Ended September 30,
							2020			2019
Cash flows from operating activities:
Net income (loss) attributable to MariMed Inc.	$	(2,744,808	)	$	(5,859,985	)	$	(1,976,614	)	$	(2,744,808	)
Net income (loss) attributable to noncontrolling interests		246,367			223,882			193,492			246,367
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		697,946			253,713			1,340,649			697,946
Asset write-off								84,708			-
Amortization of intangibles		154,167			-			307,861			154,167
Amortization of stock grants		193,710			-			16,094			193,710
Amortization of option grants		1,219,958			1,023,300			707,003			1,219,958
Amortization of warrant issuances		1,975,908			1,609,095
Amortization of beneficial conversion feature on debentures payable		4,646,070			-
Amortization of stand-alone warrant issuances								2,179			139,016
Amortization of warrants attached to debt								631,895			1,836,892
Amortization of beneficial conversion feature								2,552,933			4,646,070
Amortization of original issue discount		107,256			-			286,353			107,256
Equity issued to settle obligations		-			3,640,621
Loss on preferred stock conversions		-			34,044
Loss on debt settlements		-			3,210,472
Equity in losses of investments		1,020,310			-
Bad debt expense								1,342,029			-
Loss on obligations settled with equity								44,678			-
Equity in (earnings) losses of investments								(18,553	)		1,020,310
Change in fair value of investments								704,172			-
Changes in operating assets and liabilities:		-			-
Accounts receivable, net		(4,788,303	)		(2,566,254	)		(3,750,792	)		(4,788,303	)
Accounts receivable from related party, net		(33,200,000	)		-						(33,200,000	)
Deferred rents receivable		53,461			(1,096,908	)		(171,675	)		53,461
Due from third parties		(174,516	)		(1,925,735	)		-			(174,516	)
Inventory		(942,399	)		-			(5,582,862	)		(942,399	)
Other current assets		7,154			(100,684	)		(57,677	)		7,154
Other assets		(262,981	)		29,731			95,412			(262,981	)
Accounts payable		(178,223	)		(198,836	)		2,272,810			(178,223	)
Accrued expenses		3,339,325			129,689			1,872,692			3,339,325
Deferred rents payable		(105,901	)		-			-			(105,901	)
Operating lease payments		424,129			-			58,559			424,129
Finance lease interest payments		(1,824	)		-			4,033			(1,824	)
Unearned revenue		4,170,750			-
Unearned revenue from related party								-			4,170,750
Other current liabilities		197,943			-			646,832			197,943
Other liabilities		(238,000	)		53,755			-			(238,000	)
Net cash used in operating activities		(24,182,501	)		(1,540,100	)
Net cash provided by (used in) operating activities								1,606,211			(24,182,501	)

Cash flows from investing activities:
Purchase of property and equipment		(6,741,632	)		(7,259,413	)		(4,116,053	)		(6,741,632	)
Purchase of cannabis licenses		(150,000	)		-			(255,000	)		(150,000	)
MediTaurus acquisition		(655,804	)		-
Investment in Sprout		-			(100,000	)
Investment in convertible debentures		-			(6,750,000	)
Investment in notes receivable		(2,030,000	)		(300,000	)		-			(2,030,000	)
Interest on notes receivable		175,509			-			443,150			175,509
Acquisition								-			(655,804	)
Due from related parties		119,781			29,087			-			119,781
Net cash used in investing activities		(9,282,146	)		(14,380,326	)		(3,927,903	)		(9,282,146	)

Cash flows from financing activities:
Proceeds from subscribed common stock
Issuance of common stock		2,600,000			16,896,000			-			2,600,000
Issuance of promissory notes		17,000,000			3,000,000			5,249,763			17,000,000
Payments on promissory notes		-			(700,000	)
Repayments of promissory notes								(10,770,011	)		-
Proceeds from issuance of debentures		9,600,000			-			935,000			9,600,000
Proceeds from mortgages		-			1,998,360			13,897,282			-
Payments on mortgages		(142,170	)		(84,952	)		(4,989,661	)		(142,170	)
Exercise of stock options		75,500			39,000			-			75,500
Exercise of warrants		612,442			212,284			-			612,442
Due to related parties		139,402			(196,000	)		(221,705	)		139,402
Finance lease principal payments		(11,167	)		-			(27,008	)		(11,167	)
Distributions		(376,993	)		(507,453	)		(229,329	)		(376,993	)
Net cash provided by financing activities		29,497,014			20,657,239			3,844,331			29,497,014

Net change to cash and cash equivalents		(3,967,633	)		4,736,813			1,522,639			(3,967,633	)
Cash and cash equivalents at beginning of period		4,104,315			1,290,231			738,688			4,104,315
Cash and cash equivalents at end of period	$	136,682		$	6,027,044		$	2,261,327		$	136,682

Supplemental disclosure of cash flow information:
Cash paid for interest	$	699,582		$	931,195		$	1,236,464		$	699,582
Cash paid for taxes	$	88,150		$	12,021
Cash paid for income taxes							$	488,772		$	88,150

Non-cash activities:
Conversion of debentures receivable	$	30,000,000		$	-
Operating lease right-of-use assets and liabilities	$	7,142,150		$	-
Finance lease right-of-use assets and liabilities	$	134,193		$	-
Conversions of debentures payable	$	7,859,283		$	-		$	7,166,041		$	7,859,283
Beneficial conversion feature on debentures payable	$	4,235,469		$	-		$	379,183		$	4,235,469
Discount on debentures payable	$	1,148,056		$	-		$	28,021		$	1,148,056
Issuance of common stock associated with subscriptions							$	1,168,074		$	169,123
Discount on promissory notes	$	600,621		$	-		$	638,927		$	600,621
Conversion of promissory notes							$	460,050		$	-
Extinguishment of promissory note							$	352,000		$	-
Common stock issued to settle obligations							$	698,922		$	-
Exchange of common stock to preferred stock							$	14,725,000		$	-
Conversion of accrued interest to promissory note							$	3,908,654		$	-
Conversion of debentures receivable to investment							$	-		$	30,000,000
Operating lease right-of-use assets and liabilities							$	-		$	7,142,150
Finance lease right-of-use assets and liabilities							$	-		$	134,193
Conversion of notes receivable to investment							$	-		$	257,687
Conversion of advances to notes receivable							$	-		$	855,913
MediTaurus acquisition	$	2,500,000		$	-		$	-		$	2,500,000
Terrace investment	$	1,590,000		$	-		$	-		$	1,590,000
Harvest payment	$	1,000		$	-		$	-		$	1,000
Conversion of notes receivable to investment	$	257,687		$	-
Issuance of common stock associated with subscriptions	$	169,123		$	-
Conversion of advances to notes receivable	$	855,913		$	-
Exercise of options via the reduction of an obligation	$	350,000		$
Exercise of stock options via the reduction of an obligation							$	-		$	350,000
Cashless exercise of stock options	$	1,762		$	-		$	-		$	1,762
Reclass of accrued interest from notes payable	$	127,450		$	-		$	-		$	127,450
Reclass of accrued interest from debentures payable	$	62,748		$	-		$	-		$	62,748
Equity issued to settle debt	$	-		$	8,425,000
iRollie acquisition	$	-		$	600,000

MariMed Inc. (the “Company”)~~, a Delaware corporation,~~ is a multi-state ~~organization~~operator in the ~~emerging legal~~ cannabis and hemp industries. During 2018, the Company made a strategic decision to transition from a management and advisory firm that provides cannabis licensing, operational consulting and real estate services, to a direct owner of cannabis licenses and seed-to-sale operations, dedicated to improving health and wellness through the use of cannabinoids and cannabis products.

Further, with the enactment of the 2018 U.S. Farm Bill and in recognition of the growing demand for hemp-derived cannabidiol (“CBD”), the Company made a strategic investment during 2018 in Kentucky-based GenCanna Global Inc., an international cultivator, producer, and distributor of hemp and GMP-quality CBD oils and isolates (“GenCanna”).

To date, the Company’s cannabis business has secured, on behalf of itself and its clients, 12 cannabis licenses across six states—two in Delaware, two in Illinois, one in Nevada, one in Rhode Island, three in Maryland and three in Massachusetts.industry. The Company ~~has developed in excess of~~ develops, operates, manages, and optimizes over 300,000square feet of state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of ~~legal~~medicinal and recreational cannabis. The Company also licenses its proprietary brands of cannabis and ~~cannabis-infused~~hemp-infused products, ~~located~~along with other top brands, in several domestic markets and overseas.

Upon its entry into the cannabis industry, the Company was an advisory firm that procured state-issued cannabis licenses on behalf of its clients, leased its cannabis facilities to these newly-licensed companies, and provided industry-leading expertise and oversight in all aspects of ~~the aforementioned states, except Rhode Island. Along with operational oversight of these facilities, the~~their cannabis operations. The Company ~~provides~~also provided its clients with ~~license procurement, business development,~~ongoing regulatory, accounting, real estate, human resources, ~~accounting, and other corporate~~ and administrative services.

In 2018, the Company commenced a strategic plan to transition from a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations. The Company’s strategic plan ~~is primarily comprised~~consists of ~~acquiring~~the acquisition of its cannabis-licensed clients ~~who currently lease~~located in five states—Delaware, Illinois, Maryland, Massachusetts, and Nevada—and the ~~Company’s facilities, and ultimately consolidating~~consolidation of these entities under the MariMed banner. ~~To date,~~

A goal in completing this transition is to 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 ~~completed~~generated for its clients. The Company has played a key role in the ~~acquisition~~successes of ~~its clients~~these entities, from the securing of their cannabis licenses, to the development of facilities that are models of excellence, to providing industry best practices 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 the licensed businesses in Massachusetts and Illinois ~~with~~have been state-approved and completed, and establishes the Company as a fully integrated seed-to-sale multi-state operator. The acquisitions of the remaining ~~clients under contract or~~entities located in Maryland, Nevada, and Delaware are at various stages of ~~negotiation, as discussed below. Each acquisition is~~completion and subject to ~~the respective~~each state’s ~~approval under its~~ laws governing the ownership and transfer of cannabis ~~licenses. Accordingly, there is no assurance that~~licenses, which in the case of Delaware requires a modification of current cannabis ownership laws to permit for-profit ownership. Meanwhile, the Company ~~will be successful~~continues to develop additional revenue and business in ~~fully implementing~~these states and plans to leverage its ~~plan.~~success to expand into other markets where cannabis is and becomes legal.

~~Additionally, the~~The Company ~~licenses~~has also created its own brands of cannabis flower, concentrates, and precision-dosed ~~cannabis-~~products utilizing proprietary strains and ~~hemp-infused~~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 product formulations only to ~~treat specific medical conditions or~~certified manufacturing professionals who adhere to ~~achieve a certain effect. These~~the Company’s precise scientific formulations and trademarked product recipes.

The Company’s branded cannabis products are licensed under ~~the~~ brand names including Kalm Fusion™, Nature’s Heritage™, and Betty’s Eddies™, and ~~Florance™.~~are distributed in the form of dissolvable strips, tablets, powders, microwaveable popcorn, fruit chews, and other varieties in development. The Company also has exclusive sublicensing rights in certain states to distribute ~~Lucid Mood™ vaporizer pens, DabTabs™ vaporization tablets infused with cannabis concentrates,~~ the ~~Binske~~^®Binske® line of cannabis products ~~made~~crafted from premium artisan ingredients, the Healer™ line of medical full-spectrum tinctures, and the ~~clinically tested~~clinically-tested medicinal cannabis strains developed in Israel by global medical cannabis research pioneer Tikun Olam™.

~~Leveraging~~ The Company’s hemp division distributes hemp-derived CBD products, including its ~~cannabis platform~~Florance™ brand, in the US and ~~product experience,~~abroad. The Company intends to continue licensing and distributing its brands, as well as other top brands, in the Company’s current markets and in additional legal markets worldwide.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The spread of the virus in the United States and the measures implemented to contain it—including business shutdowns, indoor capacity restrictions, social distancing, and diminished travel—have negatively impacted the economy and have created significant volatility and disruption in financial markets. Consequently, the Company’s expansion efforts and implementation of its strategic ~~relationship with GenCanna,~~plan have been delayed. Additionally, while the cannabis industry has been deemed an essential business and is not expected to suffer severe declines in revenue, the Company’s business, operations, financial condition, and liquidity have been adversely affected, as further discussed in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the notes to the financial statements included in this report.

Continued disruption to the global economy may materially and adversely affect the future carrying values of certain of the Company’s assets, including inventories, accounts receivables, and intangibles, as well as negatively impact the Company’s ability to raise working capital to support its operations. The full extent to which COVID-19 and the measures to contain it will impact the Company’s business, operations financial condition, and liquidity will depend on the continued severity and duration of the COVID-19 outbreak and other future developments in response to the virus, all of which are highly uncertain at this time. As a result, the Company ~~has recently developed~~cannot predict the ultimate impact of COVID-19 on its operational and ~~is marketing a portfolio of hemp-based CBD brands to multiple retailers and direct to consumers both domestically and internationally.~~financial performance.

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.

The following is a chronological summary of the major transactions undertaken by the Company over the past two years to achieve its strategic plan to transition into a multistate cannabis licensee and seed-to-sale cannabis operator. These transactions are disclosed in further detail in Note 3~~– Acquisitions,Note 4~~~~– Investments,~~~~Note 8~~~~– Notes Receivable, and~~~~Note 11~~~~– Debt.~~

~~April 2018 – The Company acquired iRollie LLC, a manufacturer of branded cannabis products and accessories for consumers, and custom product and packaging for companies in the cannabis industry.~~

August 2018 – The Company exchanged cash and stock to acquire a 23% ownership interest in an entity that developed Sprout, a customer relationship management and marketing platform for companies in the cannabis industry.

August to October 2018 – The Company loaned $300,000 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. In 2019, the Company loaned Healer an additional $500,000.

October 2018 – The Company entered into a purchase agreement to acquire its two cannabis-licensed clients, KPG of Anna LLC and KPG of Harrisburg LLC, currently operating medical marijuana dispensaries in the state of Illinois. In October 2019, the Company received legislative approval for the transaction. Accordingly, the transaction was consummated and these entities became wholly-owned subsidiaries which will be consolidated into the Company’s financial statements starting in the fourth quarter of 2019.

October 2018 – The Company’s cannabis-licensed client with cultivation and dispensary operations in Massachusetts, ARL Healthcare Inc. (“ARL”), filed a plan of entity conversion with the state to convert from a non-profit entity to a for-profit corporation, with the Company as the sole shareholder of the for-profit corporation. On November 30, 2018, the conversion plan was approved by the Massachusetts Secretary of State, and effective December 1, 2018, ARL was consolidated into the Company as a wholly-owned subsidiary.

November 2018 – The Company issued a letter of intent to acquire The Harvest Foundation LLC, its cannabis-licensed client with cultivation operations in the state of Nevada. The parties entered into a purchase agreement governing the transaction in August 2019. The Company has not yet received state approval for the acquisition and therefore this acquisition is still pending. The Company anticipates approval will be obtained, and the transaction completed, by the end of this year.

December 2018 – The Company entered into a memorandum of understanding (“MOU”) to acquire Kind Therapeutics USA Inc. (“Kind”), its client in the state of Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis. 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 the approval by the Maryland Medical Cannabis Commission, which approval was not expected prior to October 2020. Recently, the sellers of Kind have attempted to renegotiate the terms of the MOU. Even though the MOU contains all the definitive material terms with respect to the acquisition transaction and confirms certain management and lease agreements, the selling parties now allege that the MOU is not an enforceable agreement. The Company engaged with the sellers in good faith in an attempt to reach updated terms acceptable to both parties, however the sellers 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. For further information, see Part II, Item 1.~~Legal Proceedings~~ ~~in this report.~~

January 2019 – The Company entered into an agreement with Maryland Health & Wellness Center Inc. (“MHWC”), an entity that has been pre-approved for a cannabis dispensing license, to provide MHWC with a $300,000 construction loan in connection with the buildout of MHWC’s proposed dispensary. Upon the two-year anniversary of final state approval of MHWC’s dispensing license, the Company shall have the right, subject to state approval, to convert the promissory note underlying the construction loan into a 20% ownership interest of MHWC.

January 2019 – The Company converted a $250,000 note receivable from Chooze Corp., an entity that develops environmentally conscious CBD- and THC-infused products, into a 2.7% ownership interest in the entity.

January 2019 – The Company established MariMed Hemp Inc., a wholly-owned subsidiary, to develop, market, and distribute hemp-based CBD brands and products, and to provide hemp producers with bulk quantities of hemp genetics and biomass (“MariMed Hemp”). During the quarter ended September 30, 2019, MariMed Hemp launched Hemp Engine™, a store-within-a-store turnkey distribution platform of CBD-based products for retailers.

~~February 2019 – The Company converted its $30 million investment in subordinated secured convertible debentures of GenCanna into a 33.5% ownership interest in GenCanna.~~

May 2019 – The Company loaned an aggregate of $750,000 to Atalo Holdings Inc. (“Atalo”), an agriculture and biotechnology firm specializing in research, development, and production of industrial hemp and hemp-based CBD products. In July 2019, the Company extended an additional loan of $230,000 to Atalo.

~~May 2019 – The Company issued 500,000 shares of its common stock in exchange for an 8.95% interest in Terrace Inc., a Canadian entity that develops and acquires international cannabis assets.~~

June 2019 – the Company entered into a purchase agreement to acquire MediTaurus LLC, a company established by Jokubas Ziburkas PhD, a neuroscientist and leading authority on hemp-based CBD and the endocannabinoid system. MediTaurus operates in the United States and Europe and has developed proprietary CBD formulations sold under its Florance™ brand.

~~July 2019 – The Company entered into a licensing agreement for the exclusive manufacturing and distribution in seven eastern states of the Binske~~^® ~~portfolio of products, a brand known for utilizing best-in-class proprietary strains and craft ingredients in its edibles, concentrates, vaporizers, and topicals.~~

August 2019 – The Company loaned $250,000 to High Fidelity Inc., a company that owns and operates two seed-to sale medical marijuana facilities in the state of Vermont, and produces its own line of CBD products.

~~October 2019 – The Company closed on the purchase of a 9,000 square foot building in Annapolis, MD which it intends to develop into a medical marijuana dispensary to be leased to Kind.~~

During the nine months ended September 30, 2019, the Company entered into several hemp seed sale transactions with GenCanna whereby the Company acquired large quantities of top-grade feminized hemp seeds with proven genetics at volume discounts that it sold to GenCanna at market rates. The seeds met the U.S. government’s definition of federally legal industrial hemp, which was descheduled as a controlled substance and classified as an agricultural commodity upon the signing of the 2018 U.S. Farm Bill.

The Company purchased $20.75 million of hemp seed inventory during the nine months ended September 30, 2019, which the Company sold and delivered to GenCanna for $33.2 million. The Company provided GenCanna with extended payment terms through December 2019, to coincide with the completion of the seeds’ harvest, although the payment by GenCanna is not contingent upon the success of such harvest or its yield.

As required by the relevant accounting guidance, the Company has classified the $33.2 million due from GenCanna as a receivable from a related party, with approximately $29.0 million recognized as revenue from a related party for the nine months ended September 30, 2019, and approximately $4.2 million recorded under~~Unearned Revenue From Related Party~~ ~~on the balance sheet. Upon payment of the receivable balance by GenCanna, the amount in~~~~Unearned Revenue From Related Party~~ ~~will be recognized as revenue. This deferral of revenue represents the Company’s 33.5% ownership portion of the profit on these transactions.~~

~~To partially fund the seed purchases, the Company borrowed $17.0 million, which is reflected in~~~~Notes Payable~~ ~~on the balance sheet as of September 30, 2019 and further discussed in Note 11~~~~– Debt~~.

~~The Company continues to explore opportunities to continue such seed sale transactions in the future, however there is no assurance that such transactions will materialize.~~

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

In accordance with GAAP, ~~these~~ interim financial statements doare not required to contain all of the disclosures normally required in annual financial statements. In addition, the results of operations of interim periods ~~are~~may not necessarily be indicative of the results of operations to be expected for the full year. Accordingly, these interim financial statements should be read in conjunction with the Company’s most recent audited annual financial statements and accompanying notes for the year ended December 31, ~~2018.~~2019.

Certain reclassifications have been made to prior periods’ data to conform to the current period presentation. These reclassifications had no effect on reported income (losses) or cash flows.

In connection with the preparation of its financial statements for the nine months ended September 30, 2020, the Company’s management evaluated the Company’s ability to continue as a going concern in accordance with ASU 2014-15, Presentation of Financial Statements–Going Concern (Subtopic 205-40), which requires an assessment of relevant conditions or events, considered in the aggregate, that are known or reasonably knowable by management on the issuance dates of the financial statements which indicate the probable likelihood that the Company will be unable to meet its obligations as they become due within one year after the issuance date of the financial statements.

As part of its evaluation, management assessed known events, trends, commitments, and uncertainties, which at the time included the status of the Company’s consolidation plan, the continuing impact of the COVID-19 pandemic on its operations, developments concerning GenCanna’s bankruptcy proceedings, recent cannabis industry investment activity, price movements of public cannabis stock, actions and/or results of certain bellwether cannabis companies, the level of cannabis investor confidence, and changes to state laws governing recreational (adult-use) and medical cannabis.

Management also reviewed certain key liquidity metrics of the Company, as further described below, as well as other factors in its evaluation, and determined that there currently exists a substantial doubt that the Company will be able to continue as a going concern within one year after the issuance date of these financial statements without additional funding or the continued profitability growth of its cannabis operations in Illinois and Massachusetts.

The Company produced the following improvements to key liquidity metrics during the reported period:

For further discussion of the Company’s liquidity and capital resources, please refer to Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-Q for the period ended September 30, 2020.

The accompanying condensed consolidated financial statements include the accounts of MariMed Inc. and the following majority-owned subsidiaries:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts within the financial statements and disclosures thereof. Actual results could differ from these estimates or assumptions.

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 and cash equivalents are maintained with recognized financial institutions located in the United States. In the normal course of business, the Company may carry balances with certain financial institutions that exceed federally insured limits. The Company has not experienced losses on balances in excess of such limits and management believes the Company is not exposed to significant risks in that regard.

Accounts receivable consist of trade receivables and are carried at their estimated collectible amounts.

The Company provides credit to its clients in the form of payment terms. The Company limits its credit risk by performing credit evaluations 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 ~~recorded a reserve~~maintained an allowance for doubtful accounts of ~~$250,000~~approximately $40.5 million and ~~$150,000~~$39.7 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Please refer to Note 16 – Bad Debts for further discussion on receivable reserves.

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company ~~periodically~~allocates a certain percentage of overhead cost to its manufactured inventory; such allocation is based on square footage and other industry-standard criteria. The Company reviews physical inventory for obsolescence and/or excess and will record a reserve ~~for excess and/or obsolete inventory~~ if necessary. As of the date of this report, no reserve was deemed necessary.

~~The Company classifies its investments as available-for-sale-investments.~~ Investments are comprised of equity holding of private companies. These investments are recorded at fair value on the Company’s consolidated balance sheet, with changes to fair value ~~if any,~~ included in ~~comprehensive~~ income. Investments are evaluated for ~~other-than-temporary~~permanent impairment and are written down if such impairments are deemed to have occurred.

~~On January 1, 2018, the~~The Company ~~adopted~~recognizes revenue in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 606,Revenue from Contract with Customers,as amended by subsequently issued Accounting Standards Updates. This revenue standard 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:

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 adoption of this standard did not have a significant impact on the Company’s consolidated operating results, and accordingly no restatement has been made to prior period reported amounts.~~

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, seven to thirty-nine years; tenant improvements, the remaining duration of the related ~~lease;~~lease; furniture and fixtures, seven years; machinery and equipment, five to 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, ~~2019~~2020 and ~~2018,~~2019, based on the results of management’s ~~impairment~~ analyses, there were no0 impairment losses.

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 which calls for applying the new standard to all of the Company’s leases effective January 1, 2019, which is the effective date of adoption.

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, or (iii) the accounting for indirect costs as defined in ASC 842.

The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities 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.

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.

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:

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, ~~2019~~2020 and ~~2018:~~2019.

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.

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.

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.

The Company accounts for income taxes in accordance with ASC 740,Income Taxes. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities, and are measured using the 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 no0 adjustments to unrecognized income tax liabilities or benefits for the nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

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.

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 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~~At September 30, ~~2019~~2020 and ~~2018,~~2019, there were ~~16,815,107~~24,860,857 and ~~15,497,823,~~16,815,107, respectively, of potentially dilutive securities in the form of outstanding options and warrants. AsAlso as of ~~September 30, 2019,~~such dates, there were ~~$350,000~~(i) $4.2 million and $11.1 million, respectively, of ~~convertible promissory notes and $11.1 million of~~outstanding convertible debentures payable, (ii) 4,908,333 and 0 shares, respectively, of Series B convertible preferred stock outstanding, ~~that were~~and (iii) approximately $5.2 million and $350,000, respectively, of outstanding convertible promissory notes. All of these potentially dilutive ~~whose conversion~~securities are convertible into common stock is based on either (i) a ~~discount~~predetermined price, subject to adjustment, or (ii) the market value of common stock on or about the future conversion date. ~~No such debt instruments existed as of~~

2020, all such potentially dilutive securities were convertible into approximately 64.6 million net shares of common stock, which were included in the number of weighted average common shares outstanding on a diluted basis, and in the calculation of diluted net income per share for this period as shown in the statement of operations. For the nine months ended September 30, 2020, and for the three and nine months ended Septembers 30, 2019, ~~and 2018, all~~the potentially dilutive securities had an anti-dilutive effect on earnings per share, and in accordance with ASC 260, were excluded from the diluted net income per share calculations, resulting in identical basic and fully diluted net income per share for these periods. ~~The potentially dilutive securities may dilute earnings per share in the future.~~

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.

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 of the option, 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.

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 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.

~~In November 2016, the FASB issued ASU No. 2016-18,~~~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which enhances and clarifies the guidance on the classification and presentation of restricted cash in the statement of cash flows. This ASU was adopted effective January 1, 2019 with no impact to the Company’s financial statements and related disclosures.

~~In June 2018, the FASB issued ASU 2018-07,~~~~Compensation - Stock Compensation (Topic 718): Improvement to Nonemployee Share-Based Payment Accounting,~~which is part of the FASB’s simplification initiative to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. This update, which provides consistency in the accounting for share-based payments to nonemployees with that of employees, was adopted effective January 1, 2019 with no material impact to the Company’s financial statements and related disclosures.

~~In January 2017, the FASB issued ASU 2017-04,~~~~Intangibles - Goodwill and Other (Topic 350)~~ which simplifies goodwill impairment testing by requiring that such periodic testing be performed by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures, which is effective for fiscal years, including interim periods, beginning after December 15, 2019.

~~In addition to the above, the~~ Company has reviewed all ~~other~~ recently issued, but not yet effective, accounting pronouncements, and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.

Effective April 2018, the Company entered into a purchase agreement whereby 264,317 shares of the Company’s common stock were exchanged for 100% of the ownership interests of iRollie LLC, a manufacturer of branded cannabis products and accessories for consumers, and custom product and packaging for companies in the cannabis industry. The Company acquired, among other assets, iRollie’s entire product line, service offerings, client list, and intellectual property, and hired its two co-founders.

The acquisition was accounted for in accordance with ASC 10. The shares of Company common stock, valued at approximately $280,000, were issued to iRollie’s former owners in December 2018, at which time the Company adjusted the total goodwill generated by the transaction. The following table summarizes the allocation of the purchase price to the fair value of the assets acquired:

~~Prior to the acquisition, iRollie had not been generating positive cash flow as a stand-alone entity, and in conformity with relevant accounting guidance, the goodwill was written off.~~

In October 2018, the Company’s cannabis-licensed client in Massachusetts, ARL Healthcare Inc. (“ARL”), filed a plan of entity conversion with the state to convert from a non-profit entity to a for-profit corporation, with the Company as the sole shareholder of the for-profit corporation. ARL holds three cannabis licenses from the state of Massachusetts for the cultivation, production and dispensing of cannabis.

~~On November 30, 2018, the conversion plan was approved by the Massachusetts Secretary of State, and effective December 1, 2018, ARL was consolidated into the Company as a wholly-owned subsidiary.~~

~~The acquisition was accounted for in accordance with ASC 10,~~~~Business Combinations~~~~. The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed on the acquisition date:~~

The total consideration paid by the Company was equal to the forgiveness of amounts owed to the Company by ARL. Accordingly, the transaction gave rise to goodwill of approximately $732,000, which the Company wrote off. The cannabis licenses acquired was included in the balance of~~Intangibles~~within the asset section of the Company’s balance sheet at December 31, 2018. This intangible asset is being amortized over its estimated useful life, and at September 30, 2019, the carrying value less amortization was approximately $31,000.

InEffective October ~~2018,~~1, 2019, the ~~Company entered into a purchase agreement to acquire 100%~~Illinois Department of Financial and Professional Regulation approved the Company’s acquisition of (i)100% of the ownership interests of KPG of Anna LLC and KPG of Harrisburg LLC, the Company’s two cannabis-licensed clients that operate medical marijuana dispensaries in the state of Illinois (both entities collectively, the “KPGs”), ~~from~~and (ii) the ~~current~~40% ownership ~~group of~~interests not already owned by the ~~KPGs (the “Sellers”). As part of this transaction, the~~ Company ~~also acquired the Sellers’ ownership interests~~ of Mari Holdings IL LLC, the Company’s subsidiary which owns the real estate in which the KPGs’ dispensaries are located (“Mari-IL”).

~~In October 2019, the transaction was approved by the Illinois Department of Financial & Professional Regulation, and~~ On such date, 1,000,000 shares of the Company’s common stock, representing the entire purchase price, were issued to the ~~Sellers. Effective October 1, 2019,~~sellers of the KPGs and Mari-IL, ~~are~~and these entities became wholly-owned subsidiaries of the ~~Company~~Company.

The acquisition was accounted for in accordance with ~~100%~~ASC 805. The following table summarizes the allocation of the ~~operations~~purchase price to the fair value of ~~these entities to be consolidated into~~ the ~~Company’s financial statements as~~assets acquired and liabilities assumed on the acquisition date:

Based on an impairment analysis performed shortly before the filing date of ~~that date.~~this report, the Company determined the intangibles of approximately $2.1 million arising from this transaction were not impaired.

In ~~November 2018,~~August 2019, the Company ~~issued~~entered into a ~~letter of intent~~purchase agreement to acquire ~~100%~~100% of the ownership interests of The Harvest Foundation LLC (“Harvest”), the Company’s cannabis-licensed client in the state of ~~Nevada (“Harvest”). In August 2019, the parties entered into a purchase agreement governing the transaction.~~Nevada. The acquisition is conditioned upon ~~the appropriate~~ legislative approval of the ~~transaction, which is expected to occur~~transaction. At this time, the state has 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 ~~end of 2019. Upon consummation,~~state, this agreement will be consummated and 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~~$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 Company issued 1,000,000 shares of common stock to the two owners of Harvest as a good faith deposit.~~ These shares are restricted and will be returned to the Company in the event the transaction does not close by a ~~certain date.~~date certain. As the transaction has not been consummated, the issued shares were recorded at par ~~value within the~~~~Stockholders’ Equity~~~~section of the balance sheet at September 30, 2019.~~value.

In December 2018, the Company entered into a memorandum of understanding ~~(“MOU”~~(the “MOU”) to acquire Kind Therapeutics USA Inc. (“Kind”), its client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis. The MOU provides for a total purchase price of ~~$6.3~~ $6.3 million in cash, 2,500,000 shares of the Company’s common stock, and other consideration. The acquisition is subject to the approval by the Maryland Medical Cannabis Commission, which approval ~~was not expected prior to October 2020.~~can be applied for starting in March 2021.

Also in December 2018, MariMed Advisors Inc, the Company’s wholly owned subsidiary, and Kind entered into a management agreement pursuant to which the Company provides comprehensive management services in connection with the business and operations of Kind, and Mari Holdings MD LLC, the Company’s majority-owned subsidiary, entered into a 20-year lease with Kind for its utilization of the Company’s 180,000 square foot cultivation and production facility in Hagerstown, MD. Additionally, in October 2019, Mari Holdings MD LLC purchased a 9,000 square foot building in Anne Arundel County, MD for the development of a dispensary which would be leased to ~~Kind, as further disclosed in Note 19 –~~~~Subsequent Events~~.Kind.

~~Recently, the~~The sellers of Kind have attempted to renegotiate the terms of the MOU. Even though the MOU contains all the definitive material terms with respect to the acquisition transaction and confirms the management and lease agreements, the selling parties now allege that the MOU is not an enforceable agreement. The Company engaged with the sellers in good faith in an attempt to reach updated terms acceptable to both parties, however the sellers 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~~and both parties commencing legal ~~proceedings.~~proceedings which are pending in the Circuit Court for Washington County, Maryland. For further information, see Note 18 – Commitments and Contingencies and Part II, Item 1.Legal Proceedingsin this report.

In May 2019, the Company entered into a purchase agreement to acquire MediTaurus LLC (“MediTaurus”), a company ~~established~~formed and owned by Jokubas Ziburkas PhD, a neuroscientist and leading authority on CBD and its interactions with the brain and endocannabinoid system. MediTaurus currently operates in the United States and Europe and has developed proprietary CBD formulations sold under its Florance™ brand.

Pursuant to the purchase agreement, the Company acquired ~~70%~~70% of MediTaurus on June 1, ~~2019, and will acquire the remaining 30% of MediTaurus on June 1, 2020.~~2019. The purchase price ~~for the initial 70%~~ was ~~$2.8~~$2.8 million, comprised of cash payments totaling ~~$720,000~~$720,000 and ~~752,260~~520,000 shares of the Company’s common stock valued at ~~$2,080,000.~~$2,080,000. The ~~purchase price~~parties are currently in negotiations regarding the Company’s acquisition of the remaining ~~30%, payable in cash or stock at the Company’s option, shall be equal to a defined percentage~~30% of the Company’s receipts from the licensing of certain MediTaurus technology and products that existing on June 1, 2019 (all such technology and products, the “MT Property”). For a period of ten years following June 1, 2020, certain former members of MediTaurus shall be paid a royalty on the Company’s receipts from the licensing of MT Property, with the royalty percentage commencing at 10% and decreasing to 2% over time.MediTaurus.

The acquisition was accounted for in accordance with ASC 10. The following table summarizes the allocation, adjusted in September 2019, of the purchase price to the fair value of the assets acquired and liabilities assumed on the acquisition date:

~~The tradename and customer lists acquired were included the balance of~~~~Intangibles~~ ~~within the asset section of the Company’s balance sheet at September 30, 2019. A~~SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED ON ACQUISITION

Based on a valuation of MediTaurus ~~is currently pending;~~in late 2019, the ~~useful lives~~goodwill on the transaction was adjusted to approximately $2.7 million, which was written off due to the impact of the ~~intangible assets will be disclosed in future reports after the valuation is completed~~COVID-19 pandemic on MediTaurus’ business.

~~As part of the transaction, the Company hired Dr. Ziburkas as the Company’s Chief Innovation Officer, as well as other members of the MediTaurus executive team.~~

In July 2018, the Company entered into a purchase agreement to acquire ~~100%~~100% of the ownership interests of AgriMed Industries of PA LLC (“AgriMed”), an entity that holds a license from the state of Pennsylvania for the cultivation of cannabis. The purchase price was comprised of $8$8.0 million, payable in stock and cash, and the assumption of certain liabilities of AgriMed. In February 2019, the Company commenced legal proceedings against AgriMed seeking specific performance of the purchase agreement.

In May 2019, the dispute between the parties was resolved through the cash payment to the Company of ~~$3.1~~$3.1 million and other good and valuable consideration, in exchange for the Company relinquishing its rights under the purchase agreement and releasing its claims against AgriMed. The net amount of approximately ~~$2,949,000,~~$2,949,000, representing the cash payment less legal fees and ~~writeoffs~~write-offs of assets and supplies, was recorded inOther Non-Operating Income in the Company’s consolidated statement of operations for the ~~nine months~~year ended ~~September 30,~~December 31, 2019.

At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company’s investments were comprised of the following:

The investment has been accounted for under the equity method. Accordingly, the Company recorded its equity in GenCanna’s net loss from the date of conversion through September 30, 2019, which resulted in a non-cash, non-operating loss to the Company of approximately $928,000.

Among other provisions of the subscription agreement governing the GC Debentures, (i) the Company’s CEO was appointed to GenCanna’s board, and (ii) the Company agreed to fund a $10.0 million employee bonus pool in the event GenCanna meets certain 2019 operating targets. The Company’s funding obligation will be determined following the audit of GenCanna’s 2019 financial statements. Additionally, pursuant to a rights agreement, the Company was granted certain rights, including the rights of inspection, financial information, and participation in future security offerings of GenCanna.

In May 2019, the Company issued 500,000 shares of its common stock, valued at ~~$1.59~~$1.59 million on the date of issuance, to purchase an ~~8.95%~~8.95% interest in Terrace Inc. (“Terrace”), a Canadian entity that develops and acquires international cannabis assets. The Company ~~was not given a~~has no board ~~seat,~~representation, nor does it have the ability to exert operational or financial control over the entity.

In November 2019, the common stock of Terrace commenced public trading on the Toronto Stock Venture Exchange. In accordance with ASC 321,Investments – Equity Securities, this investment is carried at fair value, with changes to fair value recognized in net income. Prior to Terrace becoming publicly traded, the Company had elected the measurement alternative to value this equity investment without a readily determinable fair value. ~~Under~~

At September 30, 2020, the carrying amount of this ~~alternative measurement election,~~investment approximated $1,003,000, based on its publicly traded stock price on such date, which required the ~~investment is recorded at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions~~ Company to record a charge to net income of approximately $447,000 for the ~~identical or a similar investment in Terrace. Following~~nine months then ended that is reflected under Change In Fair Value Of Investments on the ~~Company’s purchase, there has been no impairment to this investment, nor any observable price declines in investments in Terrace. Accordingly, this investment was carried at its cost~~statement of ~~$1.59 million at September 30, 2019.~~operations.

The Company will continue to apply the alternative measurement guidance until this investment does not qualify to be so measured. The Company may subsequently elect to measure this investment at fair value, and if so, shall measure all identical or similar investments in Terrace at fair value. Any subsequent changes in fair value shall be recognized in net income.MembersRSVP LLC

In August 2018, the Company invested ~~$300,000,~~$300,000, of a total contracted cash investment of ~~$500,000,~~$500,000, and issued 378,259 shares of its common stock, valued at approximately ~~$915,000,~~$915,000, in exchange for a ~~23%~~23% ownership in ~~CVP Worldwide~~MembersRSVP LLC (“~~CVP”~~MRSVP”)~~. CVP~~, an entity that has developed a customer relationship management and marketing platform, branded under the name Sprout, ~~which~~that is ~~specifically~~ designed for and licensed to companies in the cannabis industry.

The investment ~~has been~~is accounted ~~for~~ under the equity method. ~~Accordingly, the Company recorded its equity in CVP’s net loss for~~During the nine months ended September 30, ~~2019, which resulted in a non-cash, non-operating loss to the Company of approximately $92,000~~

~~The Company shall assist in the ongoing development~~2020 and design of Sprout, and in marketing Sprout to companies within the cannabis industry. The Company shall earn a percentage share of Sprout’s revenues generated from sales (i) to the Company’s clients, and (ii) by the Company to third parties. As of September 30, 2019, no revenue was earned by the Company.

The investment has been accounted under the equity method. In 2018, the Company recorded a charge to net income of approximately $43,000 based on its equity in CVP’s net loss during the period of the Company’s ownership. Such amount reduced the carrying value of the investment to approximately $1,172,000 at December 31, 2018. For the nine months ended September 30, 2019, the Company recorded earnings of approximately $19,000 and a charge of approximately ~~$92,000 representing~~$105,000, respectively, based on the Company’s equity in ~~CVP’s~~MRSVP’s net ~~loss~~income and losses during ~~this period, further~~such periods. Since the inception of the investment, the Company has recorded cumulative equity in net losses of approximately $130,000, reducing the carrying value of the investment to approximately ~~$1,080,000~~$1,086,000 at September 30, ~~2019.~~2020.

In December 2018, the Company purchased 2,500,000 shares of common stock of Iconic Ventures Inc. (“Iconic”) for an aggregate cash payment of $500,000. Iconic has developed DabTabs™, a unique solution for cannabinoid vaporization via a convenient portable tablet that provides precisely measured dosing and acts as a storage system for full spectrum extracts, concentrates and distillates.

The Company’s investment equates to a current ownership interest in Iconic of approximately 10%. The Company was not given a board seat, nor does it have the ability to exert operational or financial control over the entity. In accordance with ASC 321, the Company elected the measurement alternative to value this equity investment without a readily determinable fair value. Following the Company’s purchase, there has been no impairment to this investment, nor any observable price changes to investments in Iconic. Accordingly, this investment was carried at $500,000 at September 30, 2019 and December 31, 2018.

The Company will continue to apply the alternative measurement guidance until this investment does not qualify to be so measured. The Company may subsequently elect to measure this investment at fair value, and if so, shall measure all identical or similar investments in Iconic at fair value. Any subsequent changes in fair value shall be recognized in net income.

In January 2019, the entire principal and accrued interest balance of a note receivable from Chooze Corp. of approximately ~~$258,000~~$258,000 was converted into a ~~2.7%~~2.7% equity interest in Chooze. In accordance with ASC 321, the Company elected the measurement alternative to value this equity investment without a readily determinable fair value. ~~Following~~Accordingly, the ~~Company’s purchase, there has been no impairment to this investment, nor any observable price changes to investments in the entity. Accordingly, this~~ investment was carried at its cost until June 2020 when the investment was fully reserved due to the Company’s determination that the investment was impaired. This reserve of approximately ~~$258,000~~$258,000 is reflected under Change In Fair Value Of Investments on the statement of operations.

During 2018, in a series of transactions, the Company purchased $30 million of subordinated secured convertible debentures (the “GC Debentures”) of GenCanna. In February 2019, the Company converted the GC Debentures, plus unpaid accrued interest through the conversion date of approximately $229,000, into common stock of GenCanna equal to a 33.5% ownership interest in GenCanna on a fully diluted basis. Concurrent with the conversion, the Company’s CEO was appointed to GenCanna’s board and the Company was granted certain rights, including the rights of inspection, financial information, and participation in future security offerings of GenCanna. At conversion, the Company commenced accounting for this investment under the equity method.

In late January 2020, an involuntary bankruptcy proceeding under Chapter 11 was filed against GenCanna USA, GenCanna’s wholly-owned operating subsidiary, with the U.S. Bankruptcy Court in the Eastern District of Kentucky (the “Bankruptcy Court”). In the months leading up to the filing, GenCanna had faced several challenges including defaults under its senior credit facility with MGG Investment Group LP (“MGG”), a fire at ~~September 30, 2019.~~its main processing and lab facility, the domestic decline of CBD selling prices, and the contraction of the cannabis capital markets. On February 6, 2020, GenCanna USA, under pressure from certain of its creditors and MGG, agreed to convert the involuntary bankruptcy proceeding 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. As a result, the Company recorded a charge to net income of approximately $30.2 million in December 2019, which reduced the carrying value of this investment to 0.

On February 18, 2020, the GenCanna Debtors sought permission from the Bankruptcy Court to sell all or substantially all of their assets. After the entry of various orders to establish the bidding procedures and criteria for such sale, the GenCanna Debtors received only four proposals (including a credit bid from MGG) for the purchase of the GenCanna Debtors’ assets and a single proposal for a plan of reorganization which was submitted by the Company.

On May 19, 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 for its credit bid in the amount of $73.5 million and cash in the amount of $3.5 million.

Based on recent filings with the Bankruptcy Court, the GenCanna Debtors are proposing to file a liquidating plan of reorganization to collect various prepetition payments and commercial claims against third parties, liquidate the remaining assets of the GenCanna Debtors, and make payments to creditors. The Company ~~will continue~~and the unsecured creditors committee are exploring options, including litigation against MGG for lender liability, equitable subordination, and return of preference. In connection with this liquidation process, the Company has filed its proofs of claim for the $33.2 million of hemp seeds sold to ~~apply~~GenCanna, which transaction is further discussed in Note 17 – Related Party Transactions.

In December 2018, the ~~alternative measurement guidance until this investment does not qualify~~Company purchased 2,500,000 shares of common stock of Iconic Ventures Inc. (“Iconic”), which equated to ~~be so measured.~~an ownership interest in Iconic of approximately 10%, for an aggregate cash payment of $500,000. Iconic has developed DabTabs™, a unique solution for cannabinoid vaporization. The Company ~~may subsequently elect~~has no board representation, nor does it have the ability to ~~measure this~~exert operational or financial control over the entity. In 2019, the Company wrote off the investment ~~at fair value, and if so, shall measure all identical or similar investments~~after an impairment review that considered the viability of the entity in ~~Chooze at fair value. Any subsequent changes in fair value shall be recognized in net income.~~light of the current economic climate.

In July 2019, the Company entered into a licensing agreement for the exclusive manufacturing and distribution in ~~seven~~several eastern U.S. states of the Binske^® portfolio of products, a brand known for utilizing best-in-class proprietary strains and craft ingredients in its edibles, concentrates, vaporizers, and topicals. In consideration for the license and other rights, the Company agreed to pay a royalty of ~~10.0%~~10.0% to ~~12.5%~~12.5% of gross revenue, as defined, derived from the sale of Binske^®products, subject to an annual minimum royalty. No ~~such~~ gross revenue was generated as of September 30, ~~2019.~~2020.

In August 2019, the Company terminated the license agreement it had entered into in August 2018 for the use of a patented technology to produce and distribute cannabis products with precise dosing and at increased economies (“Vitiprints”). The licensing agreement had an initial term of five years, and required the Company to make a non-refundable payment of $250,000 which the Company charged to~~Cost of Revenuesin August 2018.~~

The Company is the lessor under several 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 tounder 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 underDeferred 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~~During the reporting periods, the Company ~~leases~~leased to third parties the following owned properties:

~~The~~During the reporting periods, the Company ~~subleases~~subleased to a third party the following property:

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, cumulative fixed rental receipts under such leases approximated ~~$8.5~~$12.8 million and ~~$5.4~~$9.5 million, respectively, compared to revenue recognized on a straight-line basis of approximately ~~$10.5~~$14.8 million and ~~$7.5~~$11.3 million. Accordingly, the deferred rents receivable balances at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 approximated ~~$2.0~~$2.0 million and ~~$2.1~~$1.8 million, respectively.

Future minimum rental receipts for non-cancelable leases and subleases as of September 30, ~~2019~~2020 were:

~~NOTE 6 – DUE FROM THIRD PARTIES~~SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON-CANCELABLE LEASES AND SUBLEASES

~~At September 30, 2019 and December 31, 2018, the following amounts were advanced by the Company to its cannabis-licensed clients primarily for working capital purposes:~~

When a client is able to organically fund its ongoing operations, such client will issue a promissory note to the Company for the cumulative advances made up to that point, which will then be paid down monthly over a specified period of time. The Company has successfully employed this strategy in the past, and accordingly, in January 2019, KPG of Anna LLC and KPG of Harrisburg LLC issued promissory notes to the Company as further described in Note 7 –~~Notes Receivable~~.

At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, notes receivable were comprised of the following:

The Company loaned approximately ~~$700,000~~$700,000 to First State Compassion Center, its Delaware cannabis-licensee client, during the period from October 2015 to April 2016. In May 2016, this client issued a ~~10-year~~10-year promissory note, as subsequently amended, to the Company bearing interest at a rate of ~~12.5%~~12.5% per annum. The monthly payments of approximately ~~$10,100~~$10,100 will continue through April 2026, at which time the note will become due. At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the current portion of this note was approximately ~~$56,000~~$64,000 and ~~$51,000,~~$58,000, respectively, and is included inNotes Receivable, Current Portionon the respective balance sheets.

~~During the period from~~From August 2018 to ~~October 2018,~~June 2019, the Company loaned ~~$300,000~~ an aggregate of $800,000 to Healer LLC (“Healer”), an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak, an integrative medicine physician and nationally renowned cannabis practitioner. ~~In 2019, the Company loaned Healer an additional $500,000.~~ The loans bear interest at 6%6% per annum, with principal and interest payable on the maturity dates which are three years from the respective loan ~~dates.~~dates. At September 30, 2020, the current portion of this note approximated $221,000. No portion was current at December 31, 2019.

In May 2019, the Company extended loans aggregating $750,000 to Atalo Holdings Inc. (“Atalo”), an agriculture and biotechnology firm specializing in research, development, and production of industrial hemp and hemp-based CBD products. The loans bear interest at 6% per annum, with principal and interest payable on the earlier of April 3, 2020 or the date on which the Company acquires at least 25% of Atalo’s outstanding capital stock, in which case the principal and interest due shall be credited toward Company’s purchase price for such capital stock. In JulyAugust 2019, the Company loaned ~~an additional $230,000 to Atalo under the same terms as the initial loans.~~

In January 2019, KPG of Anna LLC and KPG of Harrisburg LLC each issued a promissory note to the Company in the approximate amount of $451,000 and $405,000, respectively, representing the advances made by the Company to these entities through December 31, 2018. The notes bear interest at 12% per annum, with monthly principal and interest payments due through December 2038. At September 30, 2019, the current portion of these notes approximated $12,000 in the aggregate.

In January 2019, the Company entered into an agreement with Maryland Health & Wellness Center Inc. (“MHWC”), an entity that has been pre-approved by the state of Maryland for a cannabis dispensing license, to provide MHWC with a $300,000 construction loan in connection with the buildout of MHWC’s proposed dispensary. The Company also entered into a consulting services agreement to provide MHWC with advisory and oversight services over a three-year period relating to the development, administration, operation, and management of MHWC’s proposed dispensary in Maryland. The construction loan bears interest at 8% per annum, with principal and interest payable in January 2020, provided however, upon the two-year anniversary of final state approval of MHWC’s dispensing license, the Company shall have the right, subject to state approval, to convert the promissory note underlying the construction loan into a 20% ownership interest of MHWC. This conversion right of the Company shall terminate if the consulting services agreement is terminated.

~~In August 2019, The Company loaned $250,000~~$250,000 to High Fidelity Inc., a company 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~~Prior to the note’s maturity in August 2020, the parties agreed to continue the note on a month-to-month basis, with interest-only monthly payments ongoing at the rate of 10% per annum.

In January 2019, the Company provided Maryland Health & Wellness Center Inc. (“MHWC”), an entity that has been pre-approved by the state of Maryland for a cannabis dispensing license, with a $300,000 construction loan ~~bears~~bearing interest at a rate of ~~10%~~8% per ~~annum, with interest-only monthly payments through its maturity in February 2020.~~

~~During~~annum. In June 2020, MHWC repaid the ~~period from May to October 2018, the Company loaned $250,000 to Chooze Corp. bearing interest at 8% per annum and maturing in 2021. In January 2019, the entire~~ principal and accrued interest ~~balance~~thereon, at which time the parties agreed to terminate their business relationship and release each other from all other previously executed agreements.

From May 2019 to July 2019, the Company extended loans aggregating $980,000 to Atalo Holdings Inc. (“Atalo”), an agriculture and biotechnology firm specializing in research, development, and production of ~~approximately $258,000 was converted into a 2.7% ownership interest in Chooze.~~

~~During the nine months ended September 30, 2019, MariMed Hemp purchased $21.6 million of~~industrial hemp ~~seeds for its wholesale hemp distribution business~~ and ~~to develop~~ hemp-derived CBD products. The ~~seeds meet~~loans initially bore interest at 6% per annum and matured in April 2020. The Company wrote off the ~~U.S. government’s definition~~entire carrying value of ~~federally legal industrial hemp, which was descheduled~~the Atalo note receivable balance as ~~a controlled substance and classified as an agricultural commodity~~of December 2019, based upon the ~~signing of~~expectation that Atalo would be critically impacted by the ~~2018 U.S. Farm Bill. As previously disclosed in Note 1~~COVID-19 pandemic. In 2020, Atalo filed for bankruptcy.

At September 30, 2019, MariMed Hemp sold a majority of these seeds to GenCanna, a related party, at market value which generated $33.2 million of receipts. The Company provided GenCanna with extended payment terms through2020 and December ~~2019, to coincide with the completion of the seeds’ harvest, although the payment by GenCanna is not contingent upon the success of such harvest or its yield.~~

As required by the relevant accounting guidance, the Company classified the $33.2 million of billings to GenCanna as a receivable from a related party, with approximately $29,0 million recognized as revenue from a related party for the nine months ended September 30, 2019, and approximately $4.2 million recorded under~~Unearned Revenue From Related Party~~ ~~on the balance sheet. Upon payment of the receivable balance by GenCanna, the amount in~~~~Unearned Revenue From Related Party~~~~will be recognized as revenue.~~

~~At September 30,~~31, 2019, inventory was comprised of ~~$850,000~~approximately (i) $3.1 million and $395,000, respectively, of ~~hemp seeds,~~plants and ~~approximately $681,000~~other raw materials, (ii) $188,000 and $226,000, respectively, of CBD isolate and hemp ~~oil~~ extract, and (iii) $3.5 million and $599,000 of work-in-process and finished cannabis and CBD products. ~~At December 31, 2018, inventory was comprised of product packaging and other collateral.~~

~~As detailed in Note 4 –~~~~Investments~~, the Company converted the GC Debentures into a 33.5% ownership interest in GenCanna in February 2019. Prior to conversion, the GC Debentures bore interest at a rate of 9% per annum and had an original maturity date of three years from issuance. For the year ended December 31, 2018, the Company earned and received interest income of approximately $502,000 on the GC Debentures.

At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, property and equipment consisted of the following:

During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, additions to property and equipment were approximately ~~$6.7~~$4.1 million and ~~$5.7~~$6.7 million, respectively.

~~The 2018 additions were~~Additions during the nine months ended September 30, 2020 consisted primarily ~~comprised~~ of (i) the ~~buildout~~commencement of ~~properties~~construction in ~~Hagerstown, MD, New Bedford, MA, and Middleborough, MA,~~Mt. Vernon, IL, and (ii) ~~improvements to~~machinery and equipment purchases for facilities in Massachusetts, Maryland, Illinois, and Delaware. Additions during the ~~Lewes, DE facility. The~~nine months ended September 30, 2019 ~~additions~~ consisted primarily of (i) the commencement of construction in Milford, DE, (ii) the continued buildout of properties in ~~Hagerstown, MD, New Bedford, MA,~~Maryland and ~~Middleborough, MA,~~Massachusetts, and ~~(ii)~~(iii) improvements to the Wilmington, DE and Las Vegas, NV properties.

The December 31, 2018 construction in progress balance of approximately $12.2 million was primarily comprised of (i) New Bedford, MA building, improvements and machinery of approximately $9.8 million and (ii) Middleborough, MA building, improvements and fixtures of approximately $2.4 million. The additions to construction in progress duringDuring the nine months ended September 30, ~~2019~~2020, the Company disposed of an asset with a cost of approximately ~~$3.6 million consisted~~$91,000 and accumulated depreciation through the disposal date of approximately $6,000. The loss on disposal of approximately $85,000 is reflected in Other Non-Operating Expenses in the ~~continuing buildout and machinery for the New Bedford, MA and Middleborough, MA properties, and the commencement~~statement of ~~construction~~operations at September 30, 2020. There were 0 disposals in ~~Milford, DE.~~2019.

Depreciation expense for the nine months ended September 30, 2020 and 2019 approximated $1,341,000and ~~2018 was approximately $698,000 and $254,000,~~$698,000, respectively.

At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, mortgage balances, including accrued but unpaid interest, were comprised of the following:

In November 2017, the Company entered into a ~~10-year~~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, Massachusetts, within which the Company has built a 70,000 square foot cannabis cultivation and processing ~~facility that is leased~~facility. Pursuant to ~~ARL. This mortgage was personally guaranteed by~~ the ~~Company’s CEO and CFO. From~~Initial Mortgage, the Company made monthly payments of (i) interest-only from the mortgage date through May 2019 ~~the Company was required to make monthly payments of interest-only~~ at a rate equal to the prime rate plus 2%2%, with a floor of ~~6.25%~~6.25% per ~~annum. From~~annum, and (ii) principal and interest payments from May 2019 to ~~May 2024, the Company is required to make principal and interest payments~~July 2020 at a rate equal to the prime rate on May 2, 2019 plus 2%2%, with a floor of ~~6.25%~~6.25% per annum. ~~Principal~~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 ~~interest payments shall continue from May 2024 through~~restated mortgage agreement, secured by the ~~end~~Company’s properties in New Bedford and Middleboro in the amount of ~~the lease~~$13.0 million bearing interest at a rate ~~equal~~of 6.5% per annum that matures in August 2025(the “Refinanced Mortgage”). Proceeds from the Refinanced Mortgage were used to pay down the ~~prime rate on May 2, 2024 plus 2%, with a floor~~Initial Mortgage and approximately $7.2 million of ~~6.25% per annum.~~promissory notes as further described below. The outstanding principal balance ~~on this mortgage was approximately $4,852,000 and $4,895,000~~of the Refinanced Mortgage approximated $12.9 million on September 30, ~~2019 and December 31, 2018, respectively,~~2020, of which approximately ~~$93,000 and $63,000, respectively,~~ $330,000 was current. The outstanding principal balance of the Initial Mortgage approximated $4.8 million on December 31, 2019, of which approximately $94,000 was current.

The Company maintains ~~a second~~another mortgage with Bank of New England ~~also personally guaranteed by the Company’s CEO and CFO,~~ for the 2016 purchase of a 45,070 square foot building in Wilmington, Delaware 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 2031with monthly principal and interest payments at a rate of ~~5.25%~~5.25% per annum through September 2021, and thereafter the rate adjusting every five years to the then prime rate plus ~~1.5%~~1.5% with a floor of ~~5.25%~~5.25% per annum. At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the outstanding principal balance on this mortgage was approximately ~~$1,708,000~~ $1,603,000 and ~~$1,792,000,~~$1,682,000, respectively, of which approximately ~~$105,000~~ $112,000 and ~~$104,000,~~$105,000, respectively, was current.

In May 2016, the Company entered into a mortgage agreement with DuQuoin State Bank (“DSB”) for the purchase of two properties which the Company developed into two 3,400 square foot free-standing retail dispensaries ~~that are currently leased to the KPGs.~~in Illinois. On May ~~5th~~ 5^thof each year, this mortgage is due to be repaid unless it is renewed for another year at a rate determined ~~at the discretion of~~by DSB’s executive committee. The mortgage was renewed in May ~~2019~~2020 at a rate of ~~8.5%~~6.75% per annum. At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the outstanding principal balance on this mortgage was approximately ~~$835,000~~ $822,000 and ~~$850,000,~~ $829,000 respectively, of which approximately ~~$23,000~~ $31,000 and ~~$24,000,~~$24,000, respectively, 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 mortgage agreement, the Company made interest-only monthly payments at a rate of 5.5% per annum through its initial maturity date in August 2020. At that time, the parties amended the mortgage agreement to extend the maturity date through November 2020,and requiring continuing monthly interest-only payments at 5.5% per annum.

In February 2020, pursuant to an exchange agreement as further described in Note 11 – 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. The Company has the right to extend the maturity date through February 2022 upon payment of an extension fee equal to 2.5% of the principal amount of the loan. As of September 30, 2020, no principal payments were made on the $4.4M Notes and accrued interest through such date of approximately $439,000 was paid.

In June 2019, the Company and MariMed Hemp, its wholly-owned subsidiary, issued a ~~$10 million~~ secured promissory note in the principal amount of $10.0 million (the “$10M Note”) to an unaffiliated party (the ~~“$10M Note”~~“Noteholder”). OnThe proceeds from the ~~maturity date~~$10M Note were used to finance a portion of the purchases of hemp seed inventory that was sold to GenCanna (the “Seed Transactions”) as further discussed in ~~January 2020, or earlier at MariMed Hemp’s discretion,~~Note 17 – Related Party Transactions. The $10M Note provided for the repayment of principal ~~balance shall be repaid~~ plus a payment of ~~$1.5 million. At September 30, 2019, the pro-rata portion of such payment, based~~$1.5 million (the “$1.5M Payment”) on the ~~term~~maturity date of ~~the $10M Note, approximated $573,000 and~~January 31, 2020. Such payment was charged to interest ~~expense. The~~expense over the life of the $10M ~~Note is secured by the Company’s right, title, and interest in certain property relative to the seed sale transactions with GenCanna, previously disclosed in Note 1~~~~– Organization and Description of Business.~~ ~~The $10M Note imposes certain covenants on the borrower, all of which were complied with as of September 30, 2019.~~Note.

As part of the $10M Note transaction, the Company issued ~~three-year~~three-year warrants to purchase 375,000 shares of common stock at an exercise price of ~~$4.50~~$4.50 per share to the ~~holder of the $10M Note.~~Noteholder. The fair value of these warrants on the issuance date of approximately ~~$601,000~~$601,000 was recorded as a discount to the $10M Note. Approximately ~~$294,000~~$523,000 of the warrant discount was amortized to interest expense ~~through September 30, 2019.~~in 2019, with the remainder in January 2020. Accordingly, the carrying value of the $10M Note approximated ~~$9.69~~$9.9 million at December 31, 2019.

The Company entered into an amendment agreement with the Noteholder in February 2020, whereby the Company and MariMed Hemp 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 (which the Company had accrued).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.

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 an extinguishment loss as the conversion price was higher than the price of the Company’s common stock on the conversion date), and (ii) the Company and MariMed Hemp issued a second amended and restated promissory note in the principal amount of approximately $8.8 million (the “$8.8M Note”), comprised of the outstanding principal and unpaid interest balances of the $11.5M Note, plus an extension fee of approximately $330,000. In addition, the Company issued three-year warrants to the Noteholder to purchase 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, to be amortized to interest expense over the life of the $8.8M Note.

The $8.8M Note bears interest at a rate of 15% per annum, matures in June 2022, and required a minimum amortization payment of $4,000,000 in July 2020, which the Company paid with a portion of proceeds of the Refinanced Mortgage. The Company can prepay all, or a portion, of the outstanding principal and unpaid interest of the $8.8M Note, however if any prepayment is made prior to December 25, 2021, the Company shall be required to pay a prepayment premium equal to 10% of the principal amount being prepaid. The Noteholder has the right to require the redemption of up to $250,000 of principal and unpaid interest thereon per calendar month. Such monthly redemptions shall be paid in common stock if certain defined conditions of the $8.8M Note and of the Company’s common stock are met, or else in cash. The Noteholder has 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, subject to certain conversion limitations.

The $8.8M Note is secured by a first priority security interest in the assets of certain of the Company’s subsidiaries and brands, and a pledge of the Company’s ownership interest in certain of its subsidiaries. The $8.8M Note imposes certain covenants on the borrowers, all of which were complied with as of September 30, ~~2019.~~2020. On such date, the carrying value of the $8.8M note approximated $4.8 million.

In April 2019, MariMed Hemp issued a ~~$1 million~~ secured promissory note in the principal amount of $1,000,000 (the “$1M Note”) to an unaffiliated ~~party maturing~~party. The proceeds of the $1M Note were used to finance a portion of the Seed Transactions as further discussed in ~~December 2019.~~Note 17 – Related Party Transactions. The ~~note~~$1M Note is secured by the collateral assignment of certain receivables from GenCanna ~~(the “Secured Receivables”)~~ and certain obligations of GenCanna to MariMed ~~Hemp arising from the seed sale transactions previously disclosed in Note 1~~~~– Organization and Description of Business~~.Hemp. The principal balance plus a payment of ~~$180,000 shall be~~$180,000, initially due in ~~full on~~December 2019, was extended to March 2020 in accordance with the ~~earlier~~terms of the maturity date or three business days after MariMed Hemp’s receipt of payment by GenCanna of the Secured Receivables. Such payment date can be extended by the noteholder for an additional three months with proper notice, and if extended, the noteholder shall receive$1M Note, requiring an additional payment of ~~$30,000.~~$30,000 (the “$30,000 Fee”). Prior to the extended due date, the parties agreed that the $1M Note would continue on a month-to-month basis bearing interest at a rate of 15% per annum. In September 2020, the Company paid down $500,000 of principal on the $1M Note. At September 30, ~~2019,~~2020, the ~~pro-rata portion, based on~~outstanding balance consisted of $500,000 of principal and approximately $403,000 of accrued interest which included the term of the note, of the $180,000 payment approximated $64,000 and was charged to interest expense. MariMed Hemp can elect to repay the note in whole or in part without penalty, provided the noteholder is given proper notice and MariMed Hemp is not in default of the note agreement. Upon such election, the entire payment of $180,000 shall be deemed earned by and due to the noteholder.$30,000 Fee.

In March 2019, the Company raised $6 $6.0 million through the issuance of a secured promissory note (the “$6M Note”) to an unaffiliated party ~~maturing in December 2019 and~~(the “Holding Party”) bearing interest at ~~the~~a rate of ~~13%~~13% per annum ~~(the “$6M Note”~~and a service fee of $900,000 (the “Service Fee”). ~~Such~~The proceeds of the note were used to finance a portion of the Seed Transactions as further discussed in Note 17 – Related Party Transactions. The $6M Note is secured by the collateral assignment of certain receivables from and obligations of GenCanna to MariMed ~~Hemp arising from~~Hemp. The $6M Note’s initial maturity date of December 31, 2019 was extended to April 30, 2020in accordance with its terms, with the ~~seed sale transactions previously disclosed~~Company paying a $300,000 extension fee in ~~Note 1~~~~– Organization and Description of Business.~~December 2019 which was charged to interest expense.

The Company ~~may elect~~and the Holding Party entered into a note extension agreement in April 2020 (the “Initial Extension Agreement”) pursuant to ~~prepay~~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 ~~whole or part without penalty upon three business days’ notice and with payment~~the amount of ~~all~~$900,000 (the “$900k Note”) was issued evidencing the Service Fee, bearing interest ~~through the maturity date.~~at a rate of 12% per annum. The Company ~~may extend~~satisfied the maturity date by up to three months upon thirty days’ notice prior to the maturity date with an extension fee payment to the note holder of $300,000. At September 30, 2019, this note has a principal balance of $6 million$900k Note and accrued interest of ~~approximately $424,000.~~$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, representing the other half of the principal and accrued interest.

In September 2018, the Company raised $3$3.0 million from the issuance of a secured promissory note to the ~~same unaffiliated party of the $6M Note~~Holding Party, bearing interest at ~~the~~a rate of ~~10%~~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 ~~payable monthly through~~rate increasing to 12% per annum during the extension period. Pursuant to the Initial Extension Agreement, the maturity ~~in March 2020.~~date of the $3M Note was extended to December 2020. The Company may elect to prepay the ~~note~~$3M Note in whole or part ~~at any time after December 17, 2018~~ without premium or penalty provided the ~~noteholder~~Holding Party is given proper notice and the Company is not in default of the note agreement. ~~The~~

In consideration of the Initial Extension Agreement, the Company (i) paid the Holding Party a fee of $50,000, (ii) extended the security interest in the Company’s properties in Maryland to secure each note ~~can be extended for an additional six months with proper notice, with the interest rate increasing to 12% per annum during the extension period. The note is secured~~held by the ~~Company’s property~~Holding Party, and (iii) granted the Holding Party certain security interests in ~~Maryland. The~~equity interests held by the Company. Each of the notes held by the Holding Party provides for cross-default and imposes certain covenants on the Company, all of which were complied with as of September 30, 2020.

As part of the $3M Note transaction, the Company issued three-year warrants ~~which were attached to this promissory note,~~ to the ~~lender’s~~Holding Party’s designees to purchase 750,000 shares of the Company’s common stock at an exercise price of ~~$1.80~~ $1.80 per share. The Company recorded a discount on the ~~note~~$3M Note of approximately ~~$1,511,000~~ $1,511,000 from the allocation of note proceeds to the warrants based on the fair value of such warrants on the issuance date. Approximately ~~$882,000~~ $882,000 of the warrant discount was amortized to interest expense during 2018, and the remaining ~~$629,000~~ $629,000 was amortized during 2019.

In October 2020, the Company and the Holding Party entered into a second note extension agreement effective September 30, 2020 (the “Second Extension Agreement”), whereby the Company (i) paid, in October 2020, $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”). At September 30, 2020, the $1 million of principal and approximately $333,000 of accrued interest on the $6.8M Note, both of which were paid in October 2020, were reflected in the current portion of outstanding notes payable and in accrued interest, respectively.

The Amended Notes bear interest at a rate of 12% per annum and mature in September 2022. If all principal and accrued interest on either or both of the Amended Notes are not paid on or prior to their respective maturity dates, the Holding Party shall have the right, exercisable in its sole discretion at any time from September 2022 through March 2023, to convert all or a portion of the principal and interest owed into shares of the Company’s common stock at a conversion price equal to the average closing price for the 20 consecutive trading days prior to the date of conversion.The $5.8M Note requires mandatory principal payments of $400,000 in February 2021, and $500,000 per quarter during the period from May 2021 to August 2022 (such quarterly payments amounting to $3.0 million in the aggregate). The $5.8M Note can be prepaid in whole or in part at any time without penalty. The New $3M Note can be prepaid in whole or in part without penalty only after the $5.8M Note has been fully repaid.

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 $1,000 was amortized as of the end of the quarter, and the remainder to be amortized over the life of the Amended Notes. Accordingly, the carrying value of ~~this note was $3~~ the Amended Notes approximated $8.3 million at September 30, ~~2019~~ 2020, of which $1.4 million was current.

In addition to the above transactions, the Company raised $800,000 and ~~approximately $2.37 million, net of remaining warrant discount of $629,000, at December 31, 2018.~~

During 2018, holders of previously issued promissory notes with principal balances of $1,075,000 converted such promissory notes into 1,568,375 shares of common stock at conversion prices ranging from $0.65 to $0.90 per share. The conversions resulted in the recording of non-cash losses of approximately $829,000 in the aggregate, based on the market value of the common stock on the conversion dates. No conversions occurred $2,760,000 during the nine months ended September 30, ~~2019.~~

~~During 2018,~~2020 and December 31, 2019, respectively, from the Company issued 2,596,313 shares of its common stock and subscriptions on 1,310,196 shares of its common stock to retire promissory notes with principal balances of $7,495,000 and approximately $95,000 of accrued interest. The Company recorded non-cash losses of approximately $2.5 million based on the fair value of the common stock on the retirement dates. No retirements were made during the nine months ended September 30, 2019.

~~During 2018, the Company repaid $700,000 of promissory notes. No repayments~~issuance of promissory notes ~~occurred during~~ to accredited investors bearing interest at rates ranging from 6.5% to 18% per annum, and maturing in 2020 and 2021(the ~~nine months ended~~“Third Party Notes”). $2,800,000 of the Third Party Notes was repaid in 2020, and accordingly, $760,000 remained outstanding at September 30, ~~2019.~~2020 with related accrued interest of approximately $48,000.

As of September 30, 2020, the aggregate scheduled maturities of the Company’s total debt outstanding, inclusive of the promissory notes and mortgages described within this Note 119 –Debt, and the convertible debentures described in the following Note 1210 – Debentures Payable, ~~as of September 30, 2019~~ were:

In a series of transactions from the period October ~~and November~~ 2018 ~~pursuant to a securities purchase agreement (the “SPA”),~~through February 2020, the Company sold an aggregate of ~~$10,000,000~~$21.0 million of convertible debentures ~~bearing interest at the rate of 6% per annum that mature two years from issuance, with a 1% issue discount,~~(the “$21M Debentures”) to an accredited investor ~~resulting in net proceeds~~pursuant to an amended securities purchase agreement (the “SPA”). The following table summarizes the ~~Company~~purchase dates and selected terms of ~~$9,900,000 (the “$10M Debentures”).~~each debenture transaction that comprises the $21M Debentures:

The holder of the ~~$10M~~$21M Debentures (the “Holder”) has the right at any time to convert all or a portion of the ~~$10M Debenture,~~$21M Debentures, along with accrued and unpaid interest, into the Company’s common stock at conversion prices equal to ~~80%~~80% of a calculated average, as determined in accordance with the terms of the ~~$10M~~$21M Debentures, of the daily volume-weighted price during the ten consecutive trading days preceding the date of ~~conversion.~~conversion, subject to a cap in certain conversions. Notwithstanding this conversion right, the Holder shall limit conversions in any given month to certain agreed-upon ~~values~~amounts based on the conversion price, and the Holder shall also be limited from beneficially owning more than ~~4.99%~~4.99% of the Company’s outstanding common stock (potentially further limiting the Holder’s conversion right).

The Company ~~shall have~~has the right to redeem all or a portion of the ~~$10M~~$21M Debentures, along with accrued and unpaid interest, at a ~~10%~~10% premium, provided ~~however~~ that the Company first ~~provide~~delivers advance written notice to the Holder of its intention to make a redemption, with the Holder allowed to ~~affect~~effect certain conversions of the ~~$10M~~$21M Debentures during such notice period.

Upon a change in control transaction, as defined, ~~in the $10M Debentures,~~ the Holder may require the Company to redeem all or a portion of the ~~$10M~~$21M Debentures at a price equal to ~~110%~~110% of the outstanding principal amount of the ~~$10M~~$21M Debentures, plus all accrued and unpaid interest thereon. So long as the ~~$10M~~$21M Debentures are outstanding, in the event the Company enters into a Variable Rate Transaction (“VRT”), as defined in the SPA, the Holder may cause the Company to revise the terms of the ~~$10M~~$21M Debentures to match the terms of the convertible security issued in such VRT.

In conjunction with the issuance of the ~~$10M~~$21M Debentures, the Company issued ~~two warrants to~~ the Holder three-year warrantsto purchase ~~142,857 and 181,818~~an aggregate of 1,354,675 shares of the Company’s common stock at exercise prices ~~of $3.50 and $5.50~~ranging from $0.75 to $5.50 per share, ~~respectively, and expiring three years from issuance (the “Initial Warrants”).~~of which warrants to purchase 180,000 shares of common stock at an exercise price of $0.75 were issued in the nine months ended September 30, 2020. The fair value of the ~~Initial Warrants~~warrants of approximately ~~$1,057,000~~$2.2 million was recorded as a discount to the carrying amount of the ~~$10M~~$21M Debentures and are amortized to interest expense over the respective term of the individual debentures comprising the $21M Debentures.

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, with an offset to additional paid-in-capital. The beneficial conversion feature is 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, ~~and the $10M Debentures,~~ the Company agreed to provide the Holder with certain registration rights with respect to any potential shares issued pursuant to the terms of the SPA ~~the $10M Debentures,~~ and the ~~Warrants.~~

~~Subsequent to entering into the SPA and related agreements, the Company and the Holder executed an~~$21M Debentures. An addendum to the SPA ~~whereby~~stipulates that the Holder has agreed not to ~~that it would not~~ undertake a conversion of all or a portion of the ~~$10M~~$21M Debentures that would require the Company to issue more shares than the amount of available authorized shares at the time of conversion, which amount of authorized shares shall not be less than the current authorized number of 500 million shares of common ~~stock. Such addendum eliminated~~stock, thereby eliminating the requirement to bifurcate and account for the conversion feature of the ~~$10M~~$21M Debentures as a derivative.

Based on the conversion prices of the $10M Debentures in relation to the market value of the Company’s common stock, the $10M Debentures provided the Holder with a beneficial conversion feature, as the embedded conversion option was in-the-money on the commitment date. The ~~intrinsic value of the beneficial conversion feature of approximately $5,570,000 was recorded as a discount to the carrying amount of the $10M Debentures, with an offset to additional paid-in-capital.~~

In May 2019, the Company sold to the Holder an additional $5,000,000 of convertible debentures bearing interest at the rate of 6% per annum that mature two years from issuance, with a 1% issue discount, resulting in net proceeds to the Company of $4,950,000, and (the “$5M Debentures”). In each of June and August 2019, the Company sold to the Holder an additional $2,500,000 of convertible debentures, totaling $5,000,000, that mature two years from issuance, with a 7% issue discount, resulting in aggregate net proceeds to the Company of $4,650,000 (the “Two $2.5M Debentures,” and together with the $5M Debentures, the “Additional $10M Debentures”).

The terms of the Additional $10M Debentures are consistent with the terms of the $10M Debentures, except that (i) no interest shall accrue on the Two $2.5M Debentures, (ii) the issue discount on the Two $2.5M Debentures is 7%, compared to 1% on the $10M Debentures and the $5M Debentures, and (iii) other small variations, most notably a cap on the conversion price. The SPA, registration rights agreement, and addendum to the SPA were all amended and restated to incorporate the Additional $10M Debentures.

As part of issuance of the Additional $10M Debentures, the Company issued three-year warrants to the Holder to purchase 550,000 and 300,000 shares of common stock exercise prices of $3.00 and $5.00 per share, respectively (the “Additional Warrants”). The fair value of the Additional Warrants of approximately $1,148,000 was recorded as a discount to the carrying amount of the Additional $10M Debentures.

Based on the conversion prices of the Additional $10M Debentures in relation to the market value of the Company’s common stock, the Additional $10M 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 $4,235,000 was recorded as a discount to the carrying amount of the Additional $10M Debentures, with an offset to additional paid-in-capital.

~~In November and December 2018, the~~ Holder converted, in ~~two separate~~several transactions from November 2018 through September 2020, an aggregate of ~~$1,400,000~~$16.8 million of principal and approximately ~~$36,000~~ $768,000 of accrued interest into 524,360 shares of common stock at conversion prices of $2.23 and $3.04 per share. In January 2019, the Holder converted, in three separate transactions, an aggregate of $600,000 of principal and approximately $97,000 of accrued interest into 233,194 64,470,063 shares of common stock at conversion prices ranging from ~~$2.90~~ $0.11 to ~~$3.06~~ $3.06 per share. ~~In April and June 2019, the Holder converted, in four separate transactions,~~Of these conversions, an aggregate of ~~$1,750,000~~$6.8 million of principal and approximately ~~$181,000~~ $356,000 of accrued interest was converted into ~~923,185~~ 54,143,232 shares of common stock at ~~conversion prices ranging from $1.74 to $2.74 per share.In July, the Holder converted, in two separate transactions, an aggregate of $2,750,000 of principal and approximately $17,000 of accrued interest into 2,435,144 shares of common stock at conversion~~exercise prices of ~~$1.08~~ $0.11 and ~~$1.70~~ $0.34 per ~~share. In~~share during the nine months ended September ~~2019,~~30, 2020.

All of the ~~Holder converted $2,400,000~~aforementioned conversions were performed in accordance with the terms of ~~principal~~their respective convertible debenture agreements, and ~~approximately $64,000 of accrued interest into subscriptions~~therefore the Company was not required to record a gain or loss on ~~3,206,816 shares of common stock at a conversion price of $0.77 per share.~~such conversions.

During the nine months ended September 30, 2020 and 2019, amortization of the beneficial conversion features, after adjustment for the aforementioned conversions, approximated ~~$4,646,000;~~$2,553,000 and $4,646,000, respectively; amortization of the warrant discounts ~~from the Initial Warrants~~ approximated $545,000 and ~~Additional Warrants (together, the “Total Warrants”) approximated $913,000;~~$913,000 respectively; and the amortization of original issue discounts approximated ~~$107,000. This amortization was charged to interest expense.~~$267,000 and $107,000, respectively. Additionally, accrued interest expense for such ~~period~~periods approximated ~~$421,000.~~$234,000 and $421,000, respectively.

At September 30, ~~2019,~~2020, the aggregate outstanding principal balance onof the ~~$10M~~$21M Debentures ~~and the Additional $10M Debentures (together, the “$20M Debentures”)~~ was ~~$11,100,000.~~$4,200,000. Also on such date, the unamortized balances of the beneficial conversion ~~feature,~~features, the ~~Total Warrants discount,~~warrant discounts, and original issue discounts were approximately ~~$3,637,000, $1,201,000,~~$867,000, $300,000, and ~~$66,000,~~$105,000, respectively. Accordingly, at September 30, ~~2019,~~2020, the carrying value of the ~~$20M~~$21M Debentures was approximately ~~$5,878,000.~~$2,928,000, all of which was current.

At December 31, ~~2018,~~2019, the aggregate outstanding principal balance on the ~~$10M~~$21M Debentures was ~~$8,600,000.~~$10,000,000. Also on such date, the unamortized balances of the beneficial conversion ~~feature, Initial Warrants discount,~~features, the warrant discounts, and original issue discounts were approximately ~~$4,048,000, $966,000,~~$3,041,000, $817,000, and ~~$91,000, respectively, and accrued and unpaid interest was approximately $62,000.~~$307,000, respectively. Accordingly, at December 31, ~~2018,~~2019, the carrying value of the ~~$10M~~$21M Debentures was approximately ~~$3,557,000.~~$5,835,000, all of which was long term.

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 9 – Debt.

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.

~~In January 2018, all 500,000 shares of subscribed~~The Series AB 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 ~~were~~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 ~~into 970,988~~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 ~~$0.55~~$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 ~~recorded a non-cash loss on~~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.

In February 2020, pursuant to the TIS Exchange Agreement, 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 ~~$34,000 based on the market~~$5,000 (the par value of the exchanged common shares) and additional paid-in capital of approximately $14,720,000.

During the nine months ended September 30, 2020, the Company issued 4,400,000 shares of common stock to settle approximately $699,000 of obligations. Based on the price of the Company’s common stock on the ~~conversion date.~~settlement date, the Company incurred a loss of approximately $45,000 which is reflected under Loss On Obligations Settled With Equity on the statement of operations. NaNsuch settlements occurred during the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, the Company granted 97,797 shares of common stock to a current employee. The fair value of the shares of approximately $16,000 was charged to employee compensation during the period. At September 30, 2020, 33,319 of these shares were yet to be issued. During the nine months ended September 30, 2019, the Company ~~sold 799,995~~granted 108,820 shares of common stock ~~at a price~~to current employees. The fair value of ~~$3.25 per share, resulting in total proceeds of $2.6 million. During~~ the ~~same period in 2018, the Company sold 10,111,578~~ shares of ~~common stock, at prices ranging from $0.50~~approximately $194,000 was charged to ~~$1.30 per share, resulting in total proceeds of approximately $8.5 million.~~employee compensation during the period.

During the nine months ended September 30, 2020, 40,000 shares of common stock granted to an employee in 2019 were forfeited. The Company recorded these returned shares at par value. NaN common stock forfeitures occurred in 2019.

During the nine months ended September 30, 2020 and ~~2018,~~2019, the Company issued ~~97,136~~3,236,857 and ~~1,000,000~~97,136 shares of common ~~shares,~~stock, respectively, associated with previously issued subscriptions on common stock with a value of approximately ~~$169,000~~$1,168,000 and ~~$370,000,~~$169,000, respectively.

During the nine months ended September 30, 2018, the Company issued 1,313,901 common shares in exchange for services rendered by third-parties or to otherwise settle outstanding obligations. Based on the market value of the common stock on the dates of issuance, the Company recorded non-cash losses on these settlements of approximately $959,000. Also during such period, the Company issued 1,679,486 common shares to retire $1,175,000 of promissory notes. Based on the market value of the stock on the retirement dates, the Company recorded non-cash losses of approximately $918,000. No common shares were issued during the same period in 2019 to settle obligations or retire promissory notes.

~~In August~~ 2019, the Company ~~granted 108,820~~sold 799,995 shares of common stock ~~to employees~~ at ~~weighted average~~a price of ~~$1.78, or an aggregate value~~$3.25 per share, resulting in total proceeds of ~~approximately $194,000.~~$2,600,000. NaN common stock was sold during the nine months ended September 30, 2020.

As previously disclosed in Note 3– Acquisitions, the Company issued in 2019 (i) 1,000,000 shares of common stock toin connection with the ~~owners~~acquisition of ~~Harvest.~~the KPGs and Mari-IL, (ii) 1,000,000 shares of common stock as a good faith deposit on the Harvest acquisition, and (iii) 520,000 shares of common stock in connection with the acquisition of MediTaurus.

As previously disclosed in Note 4– Investments, the Company issued 500,000 shares of common stock in 2019 to purchase a minority interest in ~~Terrace.~~Terrace, and 378,259 shares of common stock in 2018 to purchase a minority interest in MRSVP.

As previously disclosed in Note 129 –Debt, the Company issued 4,425,596 shares of common stock during the nine months ended September 30, 2020 to retire approximately $812,000 of promissory notes (principal and accrued interest).

As previously disclosed in Note 10 – Debentures Payable, during the nine months ended September 30, 2020, the holder of the $21M Debentures converted approximately $7.2 million of principal and interest into 54,143,232 shares of common stock. During the nine months ended September 30, 2019, the holder of the ~~$20M Debentures~~$21M debentures converted ~~$7,500,000~~approximately $7.9 million of principal and ~~approximately $359,000 of accrued~~ interest into ~~3,591,523~~6,798,339 shares of common ~~stock and subscriptions on 3,206,816 shares of common~~ stock.

As further disclosed in Note 1413 – Stock Options, during the nine months ended September 30, 2019, ~~and 2018,~~ 417,352 ~~and 602,000~~ shares of common stock ~~respectively,~~ were issued in connection with the exercise of stock options.NaN stock options were exercised during the nine months ended September 30, 2020.

As further disclosed in Note 1514 – Warrants, during the nine months ended September 30, 2019, ~~and 2018,~~ warrants to purchase 686,104 ~~and 2,057,462~~ shares of common stock were exercised.NaN warrants were exercised during the nine months ended September 30, 2020.

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. Such shares were subsequently issued in October 2020. At September 30, 2019, the Company was obligated to issue ~~(i) 2,644,456~~ 6,603,532 shares of common stock, valued at approximately ~~$414,000,~~$5.0 million, in connection with the ~~exercise of~~MediTaurus acquisition, stock ~~options, (ii) 3,206,816~~option exercises, and debenture conversions. Such shares ~~of common stock, valued at approximately $2,464,000, with respect to the September 2019 conversion of a portion of the $20M Debentures, as previously disclosed in Note 12~~~~– Debentures Payable~~~~, and (iii) 752,260 shares of common stock, valued at $2,080,000, as part of the purchase price of MediTaurus, as previously disclosed in Note 3~~~~– Acquisitions~~~~. These shares are expected to be~~were subsequently issued in the fourth quarter of 2019.

At December 31, 2018, the Company was obligated to issue: (a) 79,136 shares of common stock, valued at approximately $95,000, related to the settlement of a previously issued promissory note with a principal balance of $50,000 and accrued interest of $1,454; and (b) 18,000 shares of common stock, valued at approximately $74,000, for the payment of rent for a leased property in Massachusetts for the months of September 2018 through January 2019. Such shares were subsequently issued in the first quarter of 2019.

In August 2019, the Company’s board of directors approved the Amended and Restated 2018 Stock Award and Incentive Plan (the “Incentive Plan”), based on the board’s belief that awards authorized under the Incentive Plan provide incentives for the achievement of important performance objectives and promote the long-term success of the Company. In September 2019, the Incentive Plan was approved by the stockholders at the Company’s annual stock-holders meeting.

The ~~2018~~Incentive Plan is an omnibus plan, authorizing a variety of equity award types as well as cash and long-term incentive awards. The Incentive Plan amends and restates the Company’s 2018 Stock Award and Incentive Plan (the ~~“Original~~“Previous Plan”), which was approved by the board of directors in July 2018 but never presented to stockholders for approval. Any grants made under the ~~Original~~Previous Plan prior to the approval date of the Incentive Plan shall continue to be governed by the terms of the ~~Original~~Previous Plan.

The Incentive Plan authorizes a broad range of awards, including stock options, stock appreciation rights, restricted stock, deferred stock, dividend equivalents, performance shares, cash-based performance awards, and other stock-based awards. Such awards can be granted to employees, non-employee directors and other persons who provide substantial services to the Company and its affiliates. Nothing in the Incentive Plan precludes the payment of other compensation to officers and employees, including bonuses based upon performance, outside of the Incentive Plan.

An aggregate of 40,000,000 shares are reserved for delivery to participants and may be used for any type of award under the Incentive Plan. Shares actually delivered in connection with an award will be counted against such number of reserved shares. Shares will remain available for new awards if an award under the Incentive Plan expires, is forfeited, canceled, or otherwise terminated without delivery of shares or is settled in cash. Each award under the Incentive Plan is subject to the Company’s claw back policy in effect at the time of grant of the award.

The board of directors may amend, suspend, discontinue, or terminate the Incentive Plan or the authority to grant awards thereunder without stockholder approval, except as required by law or regulation or under rules of the stock exchange, if any, on which the Company’s stock may then be listed. Unless earlier terminated, grants under the Incentive Plan will terminate ten years after stockholder approval of the Incentive Plan, and the Incentive Plan will terminate when no shares remain available and the Company has no further obligation with respect to any outstanding award.

During the nine months ended September 30, 2020, the Company granted five-year options to purchase up to 1,064,500 shares of common stock at exercise prices of $0.15 and $0.30 per share. During the same period in 2019, the Company granted options to purchase up to 900,000 shares of common stock, expiring four and five years from their grant dates, ~~with exercise prices ranging from $0.99 to $1.95 per share.During the same period in 2018, the Company granted five-year options to purchase 2,300,000 shares of common stock~~ at exercise prices ranging from ~~$0.14~~$0.99 to ~~$2.65~~$1.95 per share.

The fair values of the aforementioned options granted in ~~2019~~2020 and ~~2018~~2019 of approximately ~~$876,000~~$117,000 and ~~$2,102,000,~~$876,000, respectively, are being amortized to compensation expense over their vesting periods, of which approximately ~~$101,000~~$100,000 and ~~$1,743,000~~$101,000 was amortized atduring the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

During the nine months ended September 30, 2019, options to purchase 3,585,000 shares of common stock were exercised at ~~exercise~~ prices ranging from ~~$0.08~~$0.08 to ~~$0.77~~$0.77 per share. ~~At September 30, 2019~~ ~~, 2,644,456 shares of common stock related to~~Of these ~~exercises had yet to be issued by the Company as previously disclosed in Note 13~~~~– Equity~~ ~~under the section entitled~~~~Common Stock Issuance Obligations.~~~~Accordingly, such shares were reflected within~~~~Common Stock Subscribed But Not Issued~~ ~~on the September 30, 2019 balance sheet.~~ ~~Of the~~exercised options, ~~exercised in 2019,~~ 2,285,000 were exercised on a cashless basis with the exercise prices paid via the surrender of 523,192 shares of common stock. No options were exercised during the nine months ended September 30, 2020.

During the nine months ended September 30, ~~2018,~~2020 and 2019, options to purchase ~~700,000~~210,000 and 80,000 shares of common stock, were exercised at exercise prices ranging from $0.08 to $0.63 per share. Of the options exercised in 2018, 400,000 were exercised on a cashless basis with the exercise price paid via the surrender of 98,000 shares of common stock.

~~During the nine months ended September 30, 2019 and 2018, options to purchase 80,000 and 300,000,~~ respectively, were forfeited, resulting in aan aggregate reduction of ~~amortization~~amortized compensation expense of approximately ~~$170,000 in 2019,~~$208,000 and ~~zero in 2018.~~$170,000, respectively.

Stock options outstanding and exercisable as of September 30, ~~2019~~2020 were:

During the nine months ended September 30, ~~2019,~~2020, in conjunction with the ~~Additional $10M~~$21M Debentures previously disclosed in Note 1210 – Debentures Payable, the Company issued three-year warrants to purchase ~~550,000 and 300,000~~up to 180,000 shares of ~~its~~ common stock at an exercise ~~prices~~price of ~~$3.00 and $5.00~~$0.75 per ~~share, respectively.~~share. The fair value of these warrants aton the issuance date approximated ~~$1,148,000,~~$28,000, with approximately ~~$187,000~~$17,000 of this amount amortized to interest expense during the period and the remainder to be amortized over the ~~two-year~~ term of the ~~Additional $10M Debentures.~~respective debentures.

Also during this period, as previously disclosed in Note 9 – Debt, (i) as part of the $8.8M Note transaction, the Company issued three-year warrants to purchase ~~375,000~~up to 750,000 shares of common stock at an exercise price of ~~$4.50~~$0.50 per share, ~~as part~~and (ii) in consideration of the ~~$10M Note transaction previously disclosed in Note 11~~~~– Debt~~.Second Extension Agreement, the Company issued four-year warrants to purchase up to 5,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share. The fair value of these warrants aton their issuance dates approximated ~~$601,000,~~$639,000, with approximately ~~$294,000~~$10,000 of this amount amortized to interest expense during the period and the remainder to be amortized by the ~~January 2020~~ maturity ~~date~~dates of the ~~$10M Note.~~respective promissory notes.

In July 2018, the Company issued stand-alone warrants to purchase 125,000 shares of common that expire three years from issuance. The warrants have an exercise price of $1.71 per share, and a fair value of approximately $139,000 which was charged to expense on the issuance date.

During the nine months ended September 30, 2018, the Company issued warrants to purchase 7,209,974 shares of common stock at exercise prices ranging from $0.20 to $4.30 per share. Of these warrants, (i) 1,000,000 warrants were issued in exchange for services previously rendered to the Company, with expiration dates of three and five years from issuance, at a fair value of approximately $1,354,000 which was charged to compensation expense during the period, (ii) 987,500 three-year warrants were issued in conjunction with promissory notes, at a fair value of approximately $1,710,000 which was charged to interest expense during the period, and (iii) 5,222,474 warrants were issued as part of the sale of common stock, expiring three and five years from issuance, at a fair value at issuance of approximately $8.4 million which was charged to~~Additional Paid-In Capital~~.

During the nine months ended September 30, 2019, ~~and 2018,~~in conjunction with the $21M Debentures previously disclosed in Note 10 – Debentures Payable, the Company issued three-year warrants to purchase ~~686,104 and 2,057,462~~850,000 shares of common stock ~~respectively,~~at exercise prices of $3.00 and $5.00 per share. The fair value of these warrants at issuance approximated $1,148,000, with approximately $517,000 of this amount amortized to interest expense during the period and the remainder to be amortized over the remaining term of the respective debentures.

Also during this period, as part of the $10M Note transaction previously disclosed in Note 9 – Debt, the Company issued three-year warrants to purchase 375,000 shares of common stock at an exercise price of $4.50 per share. The fair value of these warrants at issuance approximated $601,000, with approximately $294,000 of this amount amortized to interest expense during the period and the remainder amortized by the maturity date of the $10M Note.

The Company also issued stand-alone warrants to purchase up to 25,000 and 125,000 shares of common stock during the nine months ended September 30, 2020 and 2019, respectively. The fair value of these warrants at issuance approximated $2,000 in 2020 and $139,000 in 2019, and were charged to compensation expense during the periods.

During the nine months ended September 30, 2019, warrants to purchase up to 686,104 shares of common stock were exercised at exercise prices ranging from ~~$0.12~~$0.12 to ~~$1.75~~$1.75 per share, resulting in ~~2019 and $0.10~~aggregate proceeds to ~~$0.50 per share in 2018.~~the Company of approximately $612,000. No warrants were exercised during the nine months ended September 30, 2020.

At September 30, ~~2019~~2020 and ~~2018,~~2019, warrants to purchase ~~11,270,107~~up to 17,735,107 and ~~9,397,823~~11,270,107 shares of common stock, respectively, were outstanding atwith exercise prices ranging from ~~$0.15~~$0.15 to ~~$5.50~~$5.50 per share in ~~2019 and $0.12 to $4.30 per share in 2018.~~both periods.

~~For the nine months ended September 30, 2019 and 2018, the~~The Company’s revenues were comprised of the following major categories:

For the nine months ended September 30, 2019, revenue from three clients represented 95% of total revenues. One of these clients was GenCanna, a related party, with whom the Company conducted the seed sale transactions previously disclosed in Note 1~~– Organization and Description of Business~~. SCHEDULE OF REVENUES COMPRISED OF MAJOR CATEGORIES

The amount underProduct Sales ToFrom Related Party shown in the table above represents the total revenues from ~~these~~the seed transactions with GenCanna, ~~through September 30, 2019.~~which is further disclosed in Note 17 – Related Party Transactions. Excluding ~~the~~these revenues, ~~from GenCanna, two clients represented 82% of revenues during this period.~~

~~For~~for the nine months ended September 30, ~~2018, these same~~2020 and 2019, revenue from two clients ~~comprised 72%~~represented 24% and 82%, respectively, of total revenues.

At September 30, 2020 and 2019, the Company maintained reserves against bad debts of approximately $44.3 million and $250,000, respectively.

The September 30, 2020 reserves were primarily comprised of (i) an allowance against the accounts receivable balance due from GenCanna of approximately $29.0million, following the commencement of GenCanna’s Chapter 11 proceedings as previously discussed in Note 4 – Investments, (ii) an allowance against the accounts receivable balance of approximately $11.1 million, and reserve against the working capital balance of approximately $1.5 million, due from Kind, in light of the current litigation between the Company and Kind as further discussed in Note 18 – Commitments and Contingencies, and (iii) an allowance against the accounts receivable balance of approximately $314,000, and a reserve against the working capital balance of approximately $2.3 million due from Harvest, based on the Company’s expectation of the negative impact of the COVID-19 pandemic on Harvest’s local economy.

During ~~the nine months ended September 30,~~ 2019, the Company, through its MariMed Hemp subsidiary, entered into several hemp seed sale transactions with GenCanna ~~a related party,~~ whereby the Company acquired large quantities of top-grade feminized hemp seeds with proven genetics at volume discounts that it sold to GenCanna at market rates. AsThe seeds met the U.S. government’s definition of federally legal industrial hemp, which was descheduled as a controlled substance and classified as an agricultural commodity upon the signing of the 2018 U.S. Farm Bill.

The Company purchased $20.75 million of hemp seed inventory which it sold and delivered to GenCanna for $33.2 million. The Company provided GenCanna with extended payment terms through December 2019, to coincide with the completion of the seeds’ harvest, although the payment by GenCanna was not contingent upon the success of such harvest or its yield. To partially fund the seed purchases, the Company raised $17.0 million in debt financings which is reflected in Notes Payable on the balance sheet and previously ~~disclosed~~discussed in Note 19 – ~~Organization and Description~~Debt.

By the end of ~~Business~~,2019, GenCanna had not paid the amount it owed the Company ~~classified~~for its seed purchases due to several challenges it faced late in the ~~$33.2~~year, including defaults under its senior credit facility, a fire at its main processing and lab facility, the domestic decline of CBD selling prices, and the contraction of the cannabis capital markets. In February 2020, as previously discussed in Note 4 – Investments, under pressure from certain of its creditors, the GenCanna Debtors agreed to convert a previously-filed involuntary bankruptcy proceeding into a voluntary Chapter 11 proceeding, and filed voluntary petitions under Chapter 11 in the Bankruptcy Court.

As required by the relevant accounting guidance, the Company initially recorded the $33.2 million due from GenCanna as a ~~receivable from a~~ related party receivable, with approximately ~~$29.0~~$29.0 million recognized as ~~revenue from a~~ related party ~~for the nine months ended September 30, 2019,~~revenue, and approximately ~~$4.2M recorded under~~~~Unearned Revenue From Related Party~~$4.2 million classified as unearned revenue (such amount representing the Company’s 33.5% ownership portion of the profit on these transactions, which was to have been recognized as revenue upon payment by GenCanna). As a result of GenCanna’s Chapter 11 proceedings, the ~~balance sheet. Upon payment of~~Company fully reserved the receivable balance ~~by GenCanna,~~of approximately $29.0 million and wrote off the ~~amount in~~~~Unearned Revenue From Related Party~~~~will be recognized as revenue.~~entire unearned revenue balance of approximately $4.2 million.

~~As disclosed in Note 11~~~~– Debt~~~~, the Company’s two mortgages with Bank of New England are personally guaranteed by the Company’s CEO and CFO.~~

In ~~September~~ 2019, the Company granted five-year optionsto purchase up to 100,000 shares of common stock to each of the Company’s three independent board members at an exercise price of ~~$0.99.~~$0.99 per share. The aggregate fair value of these options of approximately ~~$191,000 is being amortized over the six-month vesting period, of which approximately $92,000~~ $191,000 was fully amortized at ~~September 30, 2019.~~

~~In January 2018, the Company~~March 31, 2020. No options were granted ~~options~~ to purchase 1.45 million shares of common stock to the Company’s board members at exercise prices ranging from $0.14 to $0.77 and expiring between December 2020 and December 2022. The aggregate fair value of these options of approximately $480,000 was fully amortized by June 30, 2018.

In 2019, ~~and 2018,~~ options to purchase ~~350,000~~200,000 and ~~400,000~~132,499 shares of common stock ~~respectively,~~ were exercised by the Company’s CEO and an independent board ~~members~~member, respectively, at weighted average exercise prices of $0.11 and $0.08 per share, respectively. The independent board member’s options were exercised on a cashless basis with the exercise prices paid via the surrender of ~~139,985~~3,108 shares of common ~~stock in~~stock. No options were exercised by related parties during the nine months ended September 30, 2020.

~~In January 2018,~~ options to purchase ~~200,000~~117,501 shares of common stock were forfeited by ~~two~~ board members. No options were forfeited by ~~board members in 2019.~~related parties during the nine months ended September 30, 2020.

The Company’s current corporate offices are leased from a company owned by a related party under a 10-year lease that commenced August 2018 and contains a five-year extension option. ~~Previous to this lease, the Company’s former corporate offices were also leased from a company owned by a related party. For~~During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, expenses incurred under ~~these leases~~this lease approximated ~~$117,000 and $16,000, respectively.~~$117,000 in both periods.

The ~~outstanding~~balance of Due To Related Parties~~balances~~ at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 of approximately ~~$416,000~~ $1,233,000 and ~~$276,000,~~$1,455,000, respectively, were comprised of amounts owed of approximately (i) ~~$100,000~~$515,000 and ~~$81,000,~~$420,000, respectively, to the Company’s CEO and CFO, (ii) ~~$256,000~~$673,000 and ~~$135,000,~~$990,000, respectively, to ~~two~~ companies partially owned by these officers, and (iii) ~~$60,000~~$45,000 in both periods to ~~two stockholders~~a stockholder of the Company. Such amounts owed are not subject to repayment schedules.

~~The outstanding~~~~Due From Related Parties~~~~balance at December 31, 2018~~Both of ~~approximately $120,000 was comprised~~the Company’s mortgages with Bank of ~~an advance to a company partially owned~~New England discussed in Note 9 – Debt, as well as the mortgage with Commonwealth Real Estate Ventures LLC disclosed in Note 19 – Subsequent Events, are personally guaranteed by the Company’s CEO and CFO. ~~This amount was entirely offset by advances from such related parties. At September 30, 2019, there were no amounts due from related parties.~~

The Company is the lessee under five operating leasesand 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 Company leases machinery and office equipment under finance leases that expire in February 2022 through June 2024 with such terms being a major part of the economic useful life of the leased property.

The components of lease expense for the nine months ended September 30, ~~2019~~2020 were as follows:

The weighted average remaining lease term for operating leases is ~~9.5~~8.7 years, and for the finance lease is ~~3.9~~3.0 years. The weighted average discount rate used to determine the right-of-use assets and lease liabilities was 7.5% for all leases.

Future minimum lease payments as of September 30, ~~2019~~2020 under all non-cancelable ~~operating~~ leases having an initial or remaining term of more than one year were:

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER ALL NON-CANCELABLE OPERATING LEASES

An employment agreement which commenced in 2012 with Thomas Kidrin, the former CEO of the Company, that provided Mr. Kidrin with salary, car allowances, stock options, life insurance, and other employee benefits, was terminated by the Company in 2017.At September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company maintained an accrual of approximately ~~$1,043,000~~ $1,043,000 for any amounts that may be owed under this agreement, although the Company contends that such agreement is not valid and that no amount is due.

In July 2019, Mr. Kidrin, also a former director of the Company, filed a complaint in the Massachusetts Superior Court, that alleges the Company failed to pay all wages owed to him and breached the employment agreement, and requests multiple damages, attorney fees, costs, and interest. The Company has moved to dismiss certain counts of the complaint and has asserted counterclaims against Mr. Kidrin alleging breach of contract, breach of fiduciary duty, money had and received, and unjust enrichment. The Company believes that the allegations in the complaint are without merit and intends to vigorously defend this matter and prosecute its counterclaims.

As previously disclosed in Note 3– Acquisitions, the sellers of Kind have attempted to renegotiate the terms of the MOU, alleging that the MOU is not an enforceable agreement, despite the MOU containing all the definitive material terms with respect to the acquisition transaction and confirming the management and lease agreements. The Company engaged with the sellers in a good faith attempt to reach updated terms acceptable to both parties, but the non-reciprocation of the sellers resulted in an ~~impasse. Additionally, both parties through counsel further sought to resolve the~~ impasse ~~however such initiative resulted in~~and both parties commencing legal proceedings. ~~For further information, see Note 19~~~~– Subsequent Events~~.

On November 13, 2019, Kind Therapeutics USA Inc. (“Kind”) commenced an action 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) asserting claims against the Company, including breach of contract, breach of fiduciary duty, accounting, and unjust enrichment, and seeking declaratory judgment and damages in excess of $75,000. 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 “Counterclaim”). The Counterclaim alleged breach of contract with respect to each of the MOU and the Management Agreement (the “MSA”), unjust enrichment, promissory estoppel/detrimental reliance, and fraud in the inducement, and seeking a declaratory judgement that the MOU is an enforceable contract, specific performance of such contact, and the establishment of a constructive trust for the Company’s benefit. The Counterclaim also seeks damages.

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 20-year lease agreementfor Kind’s utilization of the Company’s cultivation and production facility (the “Lease”) “appear to be independent, valid and enforceable contracts.”

On or about April 3, 2020, the Company filed its First Amended Counterclaim and Third Party Complaint in which additional claims were added and clarified, including breach of Lease and breach of the Licensing and Manufacturing Agreement (the “LMA”) against Kind, along with other alternative claims and seeking damages. On August 11, 2020, the Company filed its Second Amended Counterclaim and Third Party Complaint in which additional clarifications were made and claims added for breach of fiduciary duty and breach of partnership. The Company believes that its claims for breach of contract with respect to the MOU, the MSA, the Lease, and the LMA, as well as all other claims are meritorious. Further, the Company believes that Kind’s claims against the Company are without merit. The Company intends to aggressively prosecute and defend the action. In light of this litigation, the Company has not recorded management fees charged to Kind of approximately $1.1 million for the nine months ended September 30, 2020. A hearing on the parties’ cross-motions for preliminary injunction was held on September 14 to 17, 2020 and November 2 and 4, 2020, and the Court’s ruling on the motions is pending. The trial is currently scheduled to start on June 7, 2021.

In October ~~1, 2019,~~2020, the ~~Illinois Department of Financial & Professional Regulation approved the Company’s acquisition~~holder of the ~~KPGs~~$21M Debentures converted an aggregate of approximately $1,259,000 of principal and Mari-IL. Effective on such date, (i) the purchase price of 1,000,000 shares of the Company’s common stock was paid to the selling parties, and (ii) the KPGs and Mari-IL became wholly-owned subsidiaries of the Company to be consolidatedaccrued interest into ~~the Company’s financial statements.~~

~~During the month of October 2019, the Company issued three-year warrants to purchase 300,000~~ 10,653,600 shares of common stock at ~~an exercise price~~conversion prices of ~~$1.37~~ $0.11 and $0.12 per ~~share for services rendered. Also during this month,~~share.

In October 2020, as previously discussed in Note 9 – Debt, the Company ~~granted to employees for services~~and the Holding Party entered into the Second Extension Agreement whereby the Company (i) ~~24,074~~paid, in October 2020, $1 million of principal and all outstanding accrued interest of approximately $333,000 on the $6.8M Note, (ii) issued the $5.8M Note, which replaced the $6.8M Note, and the New $3M Note, both with maturity dates in September 2022.

In October 2020, the Company entered into a $1.3 million mortgage agreement with Commonwealth Real Estate Ventures LLC. The mortgage is secured by the Company’s properties in Illinois, and requires interest-only monthly payments at a rate of 15% per annum through its maturity date in October 2021. The mortgage contained an origination charge of 1% of the principal balance. Repayment of the mortgage is personally guaranteed by the Company’s CEO and CFO.

In October 2020, the Company issued 33,319 shares of common stock ~~and (ii) five-year options to purchase 500,000 shares of common stock at an exercise price of $0.71 per share.~~

~~In October 2019, the Company closed on the purchase of a 9,000 square foot building~~ in ~~Annapolis, MD. The purchase price of approximately $1.7 million was paid~~connection with the ~~proceeds from~~stock grant to a ~~$2.0 million promissory note issued by the Company to an unaffiliated third party and secured by the property. The note, which matures~~current employee previously disclosed in January 2020, provides the payee with origination fees aggregating 5% of the principal, and bears interest at the rate of 2% per month commencing 90 days from the start of the note. The Company intends to develop the property into a medical marijuana dispensary to be leased to Kind.Note 12 – Stockholders’ Equity.

On November 13, 2019, Kind commenced an action in the Circuit Court for Washington County, MD against the Company alleging, inter alia, breach of contract, breach of fiduciary duty and unjust enrichment, and seeking a declaratory judgment, injunctive relief, an accounting and damages in excess of $75,000. On November 15, 2019, the Company filed counterclaims against Kind and, as plaintiffs, the Company commenced an action against the Kind sellers alleging breach of contract with respect to the MOU and the management agreement, unjust enrichment, promissory estoppel/detrimental reliance, and fraud in the inducement. The Company seeks a declaratory judgement that the MOU is an enforceable contract, specific performance of such contact, and the establishment of a constructive trust for the Company’s benefit.

Both parties brought motions for a temporary restraining order and a preliminary injunction. On November 21, 2019, the Court denied both parties’ motion for a temporary restraining order. In its opinion, the Court specifically noted that, contrary to Kind’s allegations, the management agreement and lease “appear to be independent, valid and enforceable contracts.” Currently, each party’s preliminary injunction motion is pending before the Court. The Company believes that its claims for breach of contract with respect to the MOU and the management agreement, unjust enrichment, promissory estoppel/detrimental reliance, and fraud in the inducement are meritorious and that Kind’s claims against the Company are without merit. The Company intends to aggressively prosecute and defend the action.

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

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 meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.

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 should be read in conjunction with the unaudited financial statements and related notes 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.

MariMed Inc. ~~(“we”, “our”, “us”, “MariMed” or the~~(the “Company”) is a ~~leader~~multi-state operator in the ~~legal~~ cannabis industry. The Company develops, operates, manages, and ~~hemp industries. The Company’s stock is quoted on the OTCQX market under the ticker symbol, MRMD.~~

~~We are industry experts in the development, operation, management and optimization~~optimizes over 300,000 square feet of cannabis cultivation, production and dispensing facilities. These facilities, located in multiple states, are leased to our clients who are entities that have been awarded legal and medical marijuana licenses by multiple states.

~~Since entering the cannabis industry, we have demonstrated an excellent track record in managing~~ state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of ~~legal~~medicinal and recreational cannabis. The Company also licenses its proprietary brands of cannabis and ~~cannabis-infused products. We provide~~hemp-infused products, along with other top brands, in several domestic markets and overseas.

Upon its entry into the cannabis industry, the Company was an advisory firm that procured state-issued cannabis licenses on behalf of its clients, leased its cannabis facilities to these newly-licensed companies, and provided industry-leading expertise and ~~consultative services~~oversight in all aspects of their cannabis ~~licensing procurement, including~~operations. The Company also provided its clients with as ongoing ~~management oversight or~~regulatory, accounting, real estate, ~~services to five independent operations in five states – Delaware, Illinois, Maryland, Nevada and Massachusetts.~~

We acquire land and/or real estate for the purpose of developing state-of-the-art, regulatory-compliant legal cannabis facilities. These facilities are designed to be models of excellence in horticultural principals, cannabis production, product development and dispensary operations. Along with operational oversight, we provide our clients with legal, accounting, human resources, and ~~other corporate and~~ administrative services.

~~We have~~ secured, on behalf of our clients, 12 cannabis licenses across six states — two in Delaware, two in Illinois, one in Nevada, one in Rhode Island, three in Maryland and three in Massachusetts. We have client operating facilities that are opened or under development in the cities of Wilmington, Lewes, and Milford in Delaware; the cities of Anna and Harrisburg in Illinois; Clark county in Nevada; Arundel county and the city of Hagerstown in Maryland; and the cities of New Bedford and Middleborough in Massachusetts. In total, we have developed in excess of 300,000 square feet of seed-to-sale cannabis facilities.

In 2018, ~~we began~~the Company commenced a strategic plan to transition from ~~being~~ a ~~management and advisory firm that provides cannabis licensing, operational~~ consulting ~~and real estate services,~~business to ~~being primarily~~ a direct owner of cannabis licenses and operator of seed-to-sale ~~operations, dedicated to~~operations. The Company’s strategic plan consists of the ~~improvement~~acquisition of ~~health~~its cannabis-licensed clients located in five states—Delaware, Illinois, Maryland, Massachusetts, and ~~wellness through~~Nevada—and the ~~use~~consolidation of ~~cannabinoids and cannabis products. We have implemented a plan to consolidate the ownership of our client operating~~these entities under the MariMed banner.

A goal in completing this transition is to 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 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, ~~the~~ acquisitions of ~~clients~~the licensed businesses in Massachusetts and Illinois have been state-approved and completed ~~with~~and establishes the Company as a fully integrated seed-to-sale multi-state operator, The acquisitions of the remaining ~~clients under contract~~entities located in Maryland, Nevada, and inDelaware are at various stages of completion ~~as discussed below. Our acquisition efforts are~~and subject to each ~~particular~~ state’s laws governing ~~cannabis license~~the ownership and ~~accordingly, there is no assurance that we will be successful~~transfer of cannabis licenses, which in ~~fully implementing our plan. Once~~ the ~~consolidation is completed, we will own, manage~~case of Delaware requires a modification of current cannabis ownership laws to permit for-profit ownership. Meanwhile, the Company continues to develop additional revenue and ~~operate cultivation, manufacturing~~business in these states and ~~retail dispensary operations in six states. Moreover, we plan~~plans to leverage ~~our~~its success ~~in providing management oversight in these markets~~ to expand into other ~~states, while focusing on regulatory compliance, efficiency~~markets where cannabis is and becomes legal.

The Company has also 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 product ~~performance.~~

~~Recognizing~~formulations only to certified manufacturing professionals who adhere to the emergence of the global hemp market following the enactment of the 2018 U.S. Farm Bill, in late 2018 we purchased $30 million of subordinated secured convertible debentures (the “GC Debentures”) from GenCanna Global USA, Inc., a leading producer and distributor of industrial hemp, CBDCompany’s precise scientific formulations and hemp genetics (“GenCanna”). In February 2019, we converted the GC Debentures, plus accrued interest, into a 33.5% ownership interest in GenCanna on a fully diluted basis. Additionally, the Company established a wholly owned subsidiary, MariMed Hemp Inc., in January 2019 to market and distribute hemp-derived CBD products across several vertical markets.trademarked product recipes.

~~We have also developed precision-dosed cannabis- and hemp-infused products designed for specific medical conditions and related symptoms. These~~The Company’s branded cannabis products are licensed under ~~Company-owned brands such as~~brand names including Kalm Fusion™, Nature’s Heritage™, and Betty’s Eddies™, ~~Nature’s Heritage™~~ and ~~Florance™,~~are distributed in the form of dissolvable strips, tablets, powders, microwaveable popcorn, fruit chews, and ~~with more~~other varieties in development. The Company also ~~sublicenses several top brands including Lucid Mood™ disposable vape pens, and DabTabs™ revolutionary vaporization tablets infused with cannabis concentrates,~~has exclusive sublicensing rights in certain states to distribute the Binske® line of cannabis products ~~made~~crafted from premium artisan ingredients, the Healer™ line of medical full-spectrum tinctures, and the clinically tested medicinal cannabis strains developed in Israel by global medical cannabis research pioneer Tikun Olam™. ~~We plan~~The Company’s hemp division distributes hemp-derived CBD products, including its Florance™ brand, in the US and abroad. The Company intends to continue licensing ~~the best~~and distributing its brands ~~and products~~as well as other top brands in the ~~industry for distribution through our owned~~Company’s current markets and ~~client owned dispensaries across~~in additional legal markets worldwide.

~~Over our short history, we have developed an excellent reputation for strong management~~World Health Organization declared the outbreak of COVID-19 a global pandemic. The spread of the virus in the United States and the measures implemented to contain it—including business shutdowns, indoor capacity restrictions, social distancing, and diminished travel—have negatively impacted the economy and have created significant volatility and disruption in financial markets. Consequently, the Company’s expansion efforts and implementation of its strategic plan have been delayed. Additionally, while the cannabis ~~industry.~~industry has been deemed an essential business, and is not expected to suffer severe declines in revenue, the Company’s business, operations, financial condition, and liquidity have been adversely affected, as further discussed in the notes accompanying the financial statements and within this Management’s Discussions and Analysis of Financial Condition and Results of Operations.

Continued disruption to the global economy may materially and adversely affect the future carrying values of certain of the Company’s assets, including inventories, accounts receivables, and intangibles, as well as negatively impact the Company’s ability to raise working capital to support its operations. The full extent to which COVID-19 and the measures to contain it will impact the Company’s business, operations financial condition, and liquidity will depend on the continued severity and duration of the COVID-19 outbreak and other future developments in response to the virus, all of which are highly uncertain at this time. As a ~~management company, our clients have thrived~~result, the Company cannot predict the ultimate impact of COVID-19 on its operational and succeeded in their respective markets. Our goal is to continue this success as we transition from a manager and advisor to an owner of cannabis licenses and an operator of cannabis businesses. Our strengths can be summarized as follows:financial performance.

We have had considerable success writing award-winning applications for clients applying for licenses in new and established legal cannabis states; creating and developing defined business, operating and security plans; sourcing real estate for cannabis facilities in receptive municipalities; and raising capital to purchase and develop facilities. These skills are important as we expand our footprint into new states on a direct ownership basis.

We have constructed numerous cannabis cultivation, production, and dispensary facilities in several states utilizing and developing industry “best practices” in all of our facilities, and our clients’ seed-to-sale operations in multiple states are examples of operational excellence under our proven management processes and practices.

We have developed unique brands of precision-dosed cannabis-infused products which are currently licensed and distributed in cannabis-legal states. Going forward, we intend to continue expanding both our brand portfolio and the licensing of our branded products into additional cannabis-legal states.

Our direct ownership in GenCanna, which we believe will become one of the largest hemp producers in the United States by the year 2020, will help ensure we have access to a safe and reliable source of hemp-based CBD. The ~~market for hemp-based CBD products is expected to grow significantly over the next several years.~~

With the creation of the wholly-owned subsidiary MariMed Hemp in early 2019, we have started to make inroads into the branding and distribution of hemp-derived CBD products. With our acquisition in February 2019 of MediTaurus and its Florance™ brand, we are starting to leverage the GenCanna relationship and grow the revenue base for hemp-derived CBD products.

We are diligent in identifying and reviewing the latest sciences and processes applicable to the cultivation, distillation, production, packaging, securing, and distribution of cannabis and cannabis-infused products. We have obtained the highest quality cannabis strains and genetics. We are at the leading edge of patient education and physician outreach for cannabis, and we seek strategic relationships with companies that are at the forefront of extraction and distillation.

Ourstrategic plan involves the acquisition of the business operations and licenses of entities to which we provide advisory and real estate services. The following is an overview of the consolidation process:

Wesuccessfully converted ARL Healthcare Inc. (“ARL”), our cannabis-licensed client, from a non-profit entity to a for-profit corporation of which we are the sole shareholder. We now own ARL and its cannabis licenses for cannabis cultivation, production and dispensing, and as a licensee, we will have priority to obtain incremental licenses as they are made available by the state.

Werecently completed construction of a 70,000 square foot state-of-the-art cultivation and production facility for ARL in New Bedford within our 138,000 square foot facility purchased in 2017. We also own a 22,700 square foot building in Middleborough in which we developed a 10,000 square foot dispensary. Both locations have been approved by the state to commence full operations in December 2019. Furthermore, subject to regulatory approval, we intend to open two more dispensaries in the Boston area by the end of 2020.

In December 2018, we entered into a memorandum of understanding (“MOU”) to acquire Kind Therapeutics USA Inc. (“Kind”), our cannabis-licensed client that holds licenses for the cultivation, production, and dispensing of medical cannabis. The MOU provides for a total purchase price of $6.3 million in cash, 2,500,000 shares of our common stock, and other consideration. The acquisition is subject to the approval by the Maryland Medical Cannabis Commission, which approval was not expected prior to October 2020.

Also in December 2018, MariMed Advisors Inc, our wholly owned subsidiary, and Kind entered into a management agreement pursuant to which we provide Kind with comprehensive management services in connection with the business and operations of Kind, and Mari Holdings MD LLC, our majority-owned subsidiary, entered into a 20-year lease with Kind for its utilization of the Company’s 180,000 square foot cultivation and production facility in Hagerstown, MD. Additionally, in October 2019, we purchased a 9,000 square foot building in Anne Arundel County for the development of a dispensary which would be leased to Kind.

Recently, the sellers of Kind have attempted to renegotiate the terms of the MOU. Even though the MOU contains all the definitive material terms with respect to the acquisition transaction and confirms the management and lease agreements, the selling parties now allege that the MOU is not an enforceable agreement. We engaged with the sellers in good faith in an attempt to reach updated terms acceptable to both parties, however the sellers 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. For further information, see Part II, Item 1.~~Legal Proceedings~~ ~~in this report.~~

In October 2019, the Illinois Department of Financial & Professional Regulation approved our acquisition of the ownership interests of KPG of Anna LLC and KPG of Harrisburg LLC, the Company’s two cannabis-licensed clients that operate Company-built and owned medical marijuana dispensaries in the state of Illinois (both entities collectively, the “KPGs”). As part of this transaction, we also acquired the selling parties’ interests in Mari Holdings IL LLC, our subsidiary which owns the real estate in which the KPGs’ dispensaries are located. Effective October 1, 2019, 100% of the operations of these entities will be consolidated into our financial statements. Additionally, the state is in the process of legalizing adult-use cannabis which we believe will permit us to expand into two additional locations when such legalization occurs.

In November 2018, we issued a letter of intent to acquire 100% of the ownership interests of The Harvest Foundation LLC, our cannabis-licensed client in the state of Nevada (“Harvest”). In August 2019, the parties entered into a purchase agreement governing the transaction. The acquisition is conditioned upon the approval of the state cannabis commission which is pending. Harvest holds both medical and adult-use cannabis licenses, and operates in approximately 10,000 square feet of an industrial building that we lease and have built out into a cannabis cultivation facility. We are currently awaiting state approval of the transaction which we expect to receive by the end of the year.

Delaware currently is a not-for-profit state with regard to the ownership of cannabis licenses. We provide comprehensive management and real estate services to First State Compassion Center (“FSCC”), our cannabis-licensed client which was awarded Delaware’s first ever seed-to-sale medical cannabis license and owns two out of the four statewide licenses.

FSCC operates out of our 47,000 square foot seed-to-sale facility in Wilmington, and a 4,000 square foot retail location in Lewes that we lease. We has recently signed a lease with an option to purchase a 100,000 square foot building in Milford, with plans to build another cultivation and production facility to serve the state’s growing patient count.

~~The state is expected to allow “for-profit” ownership of cannabis licenses in the near future, at which time we will seek to acquire FSCC and obtain ownership of the licenses and operations.~~

Rhode Island currently is a not-for-profit state with regard to the ownership of cannabis licenses. We are in continuing negotiations to purchase the real estate which is leased to our cannabis-licensed client, the Thomas C. Slater Compassion Center (“Slater”), and to acquire, subject to state approval, the management company that oversees Slater’s operations. The entity that owns the real estate and the management company are both partially owned by the Company’s CEO and CFO. If these transactions are completed, we will generate real estate and management fees until the state allows “for-profit” ownership, which is expected to occur in 2020. At that time, we will seek to acquire Slater’s cannabis licenses and operations.

In late 2018, we purchased the GC Debentures from GenCanna. In February 2019, we converted the GC Debentures plus accrued interest through the conversion date into common shares of GenCanna representing a 33.5% ownership interest in GenCanna on a fully diluted basis, and our CEO, Robert Fireman, was appointed to GenCanna’s board of directors.

In December 2018, the 2018 U.S. Farm Bill (the “Farm Bill”) became law in the United States. Under the Farm Bill, industrial and commercial hemp is no longer classified as a Schedule I controlled substance, and explicitly allows interstate hemp commerce which will enable its legal transport and delivery across state lines.

GenCanna, based in Winchester, Kentucky, focuses on growing hemp with superior genetics and creating hemp-based products in accordance with the highest quality standards such as GMP (Good Manufacturing Practices) to ensure that wholesalers and consumers receive a consistent high-quality product to meet their wellness needs. GenCanna has also become a thought leader in the hemp industry, working closely with federal and local governmental regulatory authorities.

~~In 2019 GenCanna has expanded acreage of hemp farming and production of compliant CBD oils, isolates, and infused products, making it one of the largest producers of these products in the country.~~

To leverage its investment in GenCanna, we established MariMed Hemp Inc. in January 2019, a wholly-owned subsidiary to develop, market, and distribute hemp-based CBD brands and products to different classes of retailers and direct to consumers. In addition, MariMed Hemp will be developing and acquiring top quality genetics and biomass to resell to growers and processors.

The rapid growth of legal cannabis and hemp-derived CBD markets presents a global paradigm shift and challenges to medical professionals and consumers who seek scientific knowledge and research regarding medical cannabis and hemp. Accordingly, in addition to the aforementioned objectives, one of MariMed Hemp’s priorities will be to provide credible research-based information about the health benefits of cannabis and hemp to medical providers and their patients, many of whom express a strong and growing appetite for knowledge on this topic. Armed with this knowledge, such healthcare professionals and consumers will be able to effectively and safely choose from a broad, and potentially confusing, range of cannabis products.

As part of our education initiative, we are assembling a Scientific Advisory Board (the “SAB”), that includes some of the world’s leading scientists and researchers focused on the scientific application of cannabis and hemp for health and wellness. The SAB’s goals will include the development of strategies to address the most widespread and debilitating medical and dietary conditions through the utilization of cannabis- and hemp-based therapies.

To facilitate our drive for greater science and education, we acquired MediTaurus LLC in June 2019. MediTaurus was established by Dr. Jokubas Ziburkas a leading authority on hemp-based CBD and the endocannabinoid system. Dr. Ziburkas holds a PhD in Neuroscience, and currently serves as Associate Professor of Neuroscience at the University of Houston, where his research is focused on cannabinoid actions in the brain and novel treatments for neurological disorders. He has published over 20 peer-reviewed articles and book chapters, and is regarded as a thought leader in the global cannabis industry.

~~MediTaurus~~has developed proprietary formulations for hemp-derived CBD, and currently operates in Lithuania and Texas. Its Florance™ brand, recently launched in Germany, is marketed globally through the MediTaurus website. Additionally, Dr. Ziburkas has been named the Chief Innovation Officer of MariMed, and will assist MariMed Hemp in the marketing and distribution of Florance™ and newly-developed products throughout the United States and Europe.

MariMed is actively pursuing other growth opportunities to expand its asset portfolio in the hemp and cannabis industries. At this time, there is no assurance that any of these opportunities will materialize.

The Company was originally incorporated in the state of Delaware in January 2011 as a wholly-owned subsidiary of Worlds Inc. (formerly Worlds.com Inc.) under the name Worlds Online Inc. In May 2011, Worlds Inc. spun-off of the Company to its stockholders. At its inception, the Company operated online virtual environments which did not gain traction with users.

~~In early 2014, the Company transitioned its operational focus to the emerging cannabis industry and made its first acquisition of a cannabis business.~~

During the first half of calendar 2017, the Company changed its name to MariMed Inc. and its ticker symbol to MRMD. Also during this period, the number of authorized shares of the Company’s common and preferred stock were increased to 500 million and 50 million, respectively.

~~In July 2017, Robert Fireman was named as the Company’s CEO and President, and Jon R. Levine as the CFO, Treasurer, and Secretary.~~

In October 2017, the Company acquired the intellectual property, formulations, recipes, proprietary equipment, know-how, and other certain assets of the Betty’s Eddies™ brand of cannabis-infused fruit chews.

~~In April 2018, the Company acquired iRollie LLC, a manufacturer of branded cannabis products and accessories for consumers, and custom product and packaging for companies in the cannabis industry.~~

In August 2018, the Company purchased a 23% ownership interest in CVP Worldwide LLC d/b/a Sprout, an entity that provides a customer relationship management and marketing platform, branded under the name Sprout, specifically designed for companies in the cannabis industry.

During the period from August to October 2018, the Company loaned $300,000 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. In 2019, the Company loaned Healer an additional $500,000.

During the period September 2018 to November 2018, in a series of investments, the Company purchased an aggregate of $30 million of subordinated secured convertible debentures of GenCanna. In February 2019, the Company converted the debentures plus accrued interest through the conversion date into a 33.5% equity interest on a fully diluted basis.

In October 2018, the Company entered into a purchase agreement to acquire KPG of Anna LLC and KPG of Harrisburg LLC, the Company’s two cannabis-licensed clients that operate medical marijuana dispensaries in the state of Illinois (both entities collectively, the “KPGs”), and the KPGs’ owners’ interests in Mari Holdings IL LLC, the Company’s subsidiary that owns the real estate where the KPGs’ two dispensaries are located. On October 1, 2019, the Illinois Department of Financial & Professional Regulation approved the Company’s acquisition of the KPGs and Mari-IL. As of such date, the KPGs and Mari-IL are wholly-owned subsidiaries of the Company.

In November 2018, the Company issued a letter of intent to acquire The Harvest Foundation LLC, the Company’s client awarded a cannabis license for cultivation in the state of Nevada. In August 2019, the parties entered into a purchase agreement governing the transaction. The acquisition is conditional upon state approval, which is expected to occur by the end of the year.

In December 2018, the Company made a $500,000 investment in Iconic Ventures Inc. which has developed DabTabs™, a revolutionary product that consists of a convenient portable tablet that delivers precise dosing and acts as a storage system for full spectrum cannabinoid vaporization. Additionally, the Company secured the exclusive distribution rights for six states and is in the process of beginning distribution in the state of Maryland.

In December 2018, the Company executed a memorandum of understanding (“MOU”) to acquire Kind Therapeutics USA Inc. (“Kind”), its client in the state of Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis. 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 transaction is subject to the approval by the Maryland Medical Cannabis Commission, which approval was not expected prior to October 2020. Recently, the sellers of Kind have attempted to renegotiate the terms of the MOU. Even though the MOU contains all the definitive material terms with respect to the acquisition transaction and confirms certain management and lease agreements, the selling parties now allege that the MOU is not an enforceable agreement. The Company engaged with the sellers in good faith in an attempt to reach updated terms acceptable to both parties, however the sellers 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. For further information, see Part II, Item 1.~~Legal Proceedings~~ ~~in this report.~~

In January 2019, the Company entered into an agreement with Maryland Health & Wellness Center Inc. (“MHWC”), an entity that has been pre-approved for a cannabis dispensing license, to provide MHWC with a $300,000 construction loan in connection with the buildout of MHWC’s proposed dispensary location. Upon the two-year anniversary of final state approval of MHWC’s dispensing license, the Company shall have the right, subject to state approval, to convert the promissory note underlying the construction loan into 20% ownership of MHWC. The Company also entered into a consulting services agreement to provide MHWC with advisory and oversight services over a three-year period relating to the development, administration, operation, and management of MHWC’s proposed dispensary in Maryland.

In January 2019, the Company converted a $250,000 note receivable from Chooze Corp., an entity that develops CBD- and THC-infused products without debilitating side effects, into a 2.7% ownership interest in the entity.

In January 2019, the Company established MariMed Hemp Inc., a wholly-owned subsidiary to develop, market, and distribute hemp-based CBD brands and products, and to provide hemp producers with bulk quantities of hemp genetics and biomass. During the quarter ended September 30, 2019, MariMed Hemp launched Hemp Engine™, a store-within-a-store turnkey distribution platform of CBD-based products for retailers.

In May 2019, the Company extended loans totaling $750,000 to Atalo Holdings Inc., an agriculture and biotechnology firm specializing in research, development, and production of industrial hemp and hemp-based CBD products.~~In July 2019, the Company extended an additional loan of $230,000 to Atalo.~~

~~In May 2019, the Company issued 500,000 shares of its common stock in exchange for an 8.95% interest in Terrace Inc., a Canadian entity that develops and acquires international cannabis assets.~~

In June 2019, the Company executed a purchase agreement to acquire MediTaurus LLC, a company established by Jokubas Ziburkas PhD, a neuroscientist and leading authority on hemp-based CBD and the endocannabinoid system. MediTaurus operates in the United States and Europe and has developed proprietary CBD formulations sold under its Florance™ brand.

In July 2019, the Company entered into a licensing agreement for the exclusive manufacturing and distribution in seven eastern states of the Binske® portfolio of products, a brand known for utilizing best-in-class proprietary strains and craft ingredients in its edibles, concentrates, vaporizers, and topicals.

In August 2019, the Company extended a loan of $250,000 to High Fidelity Inc., a company that owns and operates two seed-to sale medical marijuana facilities in the state of Vermont, and produces its own line of CBD products.

~~In October 2019, the Company closed on the purchase of a 9,000 square foot building in Annapolis, MD which it intends to develop into a medical marijuana dispensary to be leased to Kind.~~

~~The Company purchased $20.75 million of hemp seed inventory during the nine months ended September 30, 2019, which the Company sold and delivered to GenCanna for $33.2 million.~~The Company provided GenCanna with extended payment terms through December 2019, to coincide with the completion of the seeds’ harvest, although the payment by GenCanna is not contingent upon the success of such harvest or its yield.

As required by the relevant accounting guidance, the Company has classified the $33.2 million due from GenCanna as a receivable from a related party, with approximately $29,0 million recognized as revenue from a related party for the nine months ended September 30, 2019, and approximately $4.2 million recorded under~~Unearned Revenue From Related Party~~ ~~on the balance sheet. Upon payment of the receivable balance by GenCanna, the amount in~~~~Unearned Revenue From Related Party~~~~will be recognized as revenue.~~

~~To partially fund the seed purchases, the Company borrowed $17.0 million, which is included in~~~~Notes Payable~~~~on the balance sheet as of September 30, 2019 and further discussed in Note 11~~~~– Debt~~.

~~The Company continues to explore opportunities to continue such seed sale transactions in the future, however there is no assurance that such transactions will materialize.~~

Management – We receive fees for providing comprehensive oversight of our clients’ entire cannabis cultivation, production, and dispensary operations. Along with this oversight, we provide human resources, legal, accounting, sales, marketing, and reporting services.Expenses

Real Estate – Our state-of-the-art, regulatory-compliant legal cannabis facilities are leased to our cannabis-licensed clients over 20-year lease terms. We generate rental income from occupancy, tenant improvements, equipment rentals, and additional rental income based on the success of the cannabis licensees.

Licensing – We derive licensing revenue from the sale by the licensees of our branded precision-dosed cannabis-infused products, such as Kalm Fusion™ and Betty’s Eddies™, to legal dispensaries throughout the country.

~~Consulting – We assist third parties in securing cannabis licenses, and provide advisory services in the areas of facility design and development, and cultivation and dispensing best practices~~

Supply Procurement – We have established large volume discounts with top national vendors of cultivation and production supplies and equipment, which we acquire and resell at competitive prices to our cannabis-licensed clients with a reasonable markup.

Product Sales – Our direct sales of cannabis, hemp, and products derived from these plants will be classified under this revenue category. This year, we commenced the direct sale of acquired hemp seed inventory. As theThe Company continues to explore opportunities to continue such sales, significant product sales are expected to be generated from (i) the distribution of the Company’s acquired and developing hemp-derived CBD product lines, (ii) the dispensary and wholesale operations of ARL in Massachusetts and the KPGs in Illinois, and (iii) the Company’s planned cannabis-licensee acquisitions in Maryland and Nevada.

During the nine months ended September 30, 2019, we raised $2.6 million from the issuance of common stock, $17.0 million from the issuance of promissory notes, and $9.6 million from the issuance of convertible debentures. Please refer to the notes accompanying our condensed consolidated financial statements at September 30, 2019 for further discussion on these transactions.

These funds will be used to execute on our strategy to become a direct cultivator, producer, and dispenser of cannabis and cannabis-related products, continue the development of our facilities, and expand our hemp seed wholesale operations and branded licensing business. We continue to require and negotiate for additional sources of capital, although there can be no assurance that any such capital will be available on terms that are acceptable to us.

At September 30, 2020, the Company had cash and cash equivalents of approximately $2.3 million and negative working capital of approximately $9.1 million, compared to cash and cash equivalents of approximately $739,000 and negative working capital of approximately $29.3 million at December 31, 2019.

The Company produced the following improvements to key liquidity metrics during the reported period:

~~Three months ended September 30,~~The large negative working capital balance at December 31, 2019 ~~compared~~was primarily caused by GenCanna’s bankruptcy proceeding under Chapter 11 initiated in early 2020, the details of which are disclosed in the footnotes accompanying the Company financial statements included in this report. Prior to the commencement of these bankruptcy proceedings, during the period March 2019 to June 2019, the Company raised $17.0 million via the issuance of promissory notes to three ~~months ended September 30, 2018~~

~~Total revenues for~~unaffiliated third parties (the “Seed Funding Notes”). The proceeds from the ~~three months ended September 30, 2019 increased~~Seed Funding Notes were used to ~~approximately $11.2 million from approximately $3.4 million for~~fund the ~~same period in 2018, a more than three-fold increase~~purchase of ~~approximately $7.8 million. This substantial growth was primarily due to the hemp seed sale transactions with GenCanna, a related party, whereby the Company acquired~~ large quantities of top-grade ~~feminized~~ hemp seeds ~~with proven genetics~~ at volume discounts ~~that it~~which were then sold to GenCanna at market rates (the “Seed Transactions”). The Seed ~~Transactions have been~~Funding Notes were committed to be repaid by the end of calendar 2019 utilizing a portion of the approximate $29.0 million of revenue to be generated from the Seed Transactions. Upon the commencement of the GenCanna bankruptcy proceedings, the Company recorded a bad debt reserve at December 31, 2019 against the entire $29.0 million receivable balance from GenCanna.

Also contributing to the large negative working capital balance at December 31, 2019 were the additional bad debt reserves recorded by the Company on such date of $11.2 million against the working capital and receivable balances due from Kind, in light of the pending litigation between the Company and Kind, and $2.2 million against the working capital and receivable balances due from Harvest, based on the impact of the COVID-19 pandemic on Harvest’s operations.

During 2020, the Company (i) successfully extended the maturity dates of all of the Seed Funding Notes, (i) converted $802,000 of accrued interest on the Seed Funding Notes into shares of the Company’s common stock, and (iii) paid down $4,450,000 of principal and accrued interest of the Seed Funding Notes with proceeds from newly-issued long-term debt and cash generated from operations. These actions, coupled with the continuing growth and profitability of the Company’s cannabis operations in Illinois and Maryland, and offset by the continued reserves on amounts due from GenCanna, Kind, and Harvest, resulted in a negative working capital balance of $9.1 million at September 30, 2020, an improvement from December 31, 2019 of approximately $20.2 million.

The approximate $1.5 million increase in cash and cash equivalents from December 31, 2019 to September 30, 2020 was primarily attributable to the proceeds from the Refinanced Mortgage, the $4.4M Notes, the Third Party Notes, and the $1M Note as discussed in ~~further detail in~~ Note 19 – ~~Organization of Description of Business~~Debt of the Company’s financial statements, coupled with the continuing growth in profitability of the Company’s cannabis operations in Illinois and Massachusetts as explained below, offset primarily by the buildup of inventory balances and the purchase of property and equipment.

With respect to the Company’s consolidation plan, the operations of the acquired entities in Illinois and Massachusetts have started to generate considerable liquidity and working capital for the Company. Since their acquisition in October 2019, the KPGs in Illinois have generated in excess of $4.6 million of pretax income for the Company, which continues to exceed forecasts, in part due to the legalization of adult-use cannabis in this state in January 2020. Additionally, the KPGs added a third dispensary in Mt. Vernon which commenced operations in September 2020. In Massachusetts, the cultivation and production facility acquired by the Company in December 2018 has ramped up its grow capabilities to full capacity. Additionally, the Company received final approval for adult-use cannabis production and sales from the Massachusetts Cannabis Control Commission, and commenced business in this state’s robust adult-use market in September 2020.

As part of its evaluation, management assessed known events, trends, commitments, and uncertainties, which at the time included ~~in Part I~~the status of ~~this report. The higher~~the Company’s consolidation plan, the continuing impact of the COVID-19 pandemic on its operations, developments concerning GenCanna’s bankruptcy proceedings, recent cannabis industry investment activity, price movements of public cannabis stock, actions and/or results of certain bellwether cannabis companies, the level of ~~revenues~~cannabis investor confidence, and changes to state laws governing recreational (adult-use) and medical cannabis.

Net cash provided by operating activities for the nine months ended September 30, 2020 approximated $1.6 million, compared to net cash used in operating activities of approximately $24.2 million for the same period in 2019. The year-over-year improvement was ~~also~~primarily attributable to ~~a 167%~~(i) the increase in ~~licensing revenue associated with the Company’s branded products, and a 91% increase~~cannabis-derived profits in ~~management fees earned from a percentage of revenue~~2020 generated by the acquisition of the KPGs in Illinois and ARL in Massachusetts, (ii) the intentional slowing of payments of trade accounts payable and other liabilities in 2020, and (iii) the large purchase of hemp seeds in 2019 as part of the Seed Transactions, offset by higher cannabis inventory in 2020.

Net cash used in investing activities for the nine months ended September 30, 2020 approximated $3.9 million, compared to approximately $9.3 million for the same period in 2019. The year-over-year decrease in the use of cash was due to the investments in Atalo, Healer, MHWC, and MediTaurus made in 2019. No similar investments were made in 2020. The year-over-year decrease is also due to reduced property and equipment purchases in 2020.

Net cash provided by financing activities for the nine months ended September 30, 2020 approximated $3.8 million, compared to approximately $29.5 million for the same period in 2019. In 2020, the Company raised approximately $20.1 million from debt financings, offset by approximately $15.9 million of promissory note and mortgage repayments, compared to debt and equity financings in 2019 of $29.2 million in the aggregate with no repayments of debt.

The proceeds from the aforementioned financings were used to execute on the Company’s ~~cannabis-licensed clients~~.strategy to become a fully integrated multistate operator of seed-to-sale cannabis operations, to continue the development of its regulated facilities, to grow its hemp operations, to expand its branded licensing business, and for working capital purposes.

Three months ended September 30, 2020 compared to three months ended September 30, 2019

Total revenues ~~rose in line with the increase in revenues, from approximately $1.5 million~~ for the three months ended September 30, ~~2018~~2020 approximated $13.5 million compared to approximately ~~$6.5~~$11.2 million for the same period in 2019, an increase of approximately $2.2 million or 19.9%. Excluding the Seed Transactions, core revenues for the three months ended September 30, ~~2019. This~~2020 grew to approximately $13.5 million from approximately $4.2 million for the same period in 2019, an increase of approximately $9.3 million or 219.8%. The year-over-year increase was due to aggregate cannabis sales during the quarter ended September 30, 2020 of approximately $10.8 million generated by the KPGs in Illinois, acquired by the Company in October 2019, and ARL in Massachusetts, acquired by the Company in late 2018 and whose selling operations commenced in December 2019. The cannabis sales were offset by decreases in procurement revenue and management fees charged to Kind, the Company’s cannabis-licensed client in Maryland, and with whom the Company is currently engaged in litigation.

Cost of revenues for the three months ended September 30, 2020 approximated $4.8 million compared to approximately $6.5 million for the same period in 2019, a decrease of approximately $1.7 million or 26.7%. The year-over-year variance was primarily ~~due~~attributable to the cost of ~~hemp~~ seeds incurred by the Company during the quarter ended September 30, 2019 of approximately $5.0 million as part of the Seed Transactions. Excluding the Seed Transactions, cost of revenues for the three months ended September 30, 2020 increased to approximately $4.0 million from approximately $1.5 million for the same period in 2019. As a percentage of ~~revenues, cost of revenues~~revenue, these costs remained relatively steady at 35.9% in ~~the current quarter associated with the Seed Transactions was 71%, higher than the contracted cost ratio of 62.5%, due to the deferral of profits required by the accounting guidance~~2020 and effected by an approximate $1.0 million reduction of the recognized revenue, such reduction based on the Company’s ownership percentage of GenCanna. Apart from the Seed transactions, cost of revenues as a percentage of revenue decreased from 45% in 2018 to 36%35.9% in 2019, demonstrating the Company’s ~~continued~~ leveraging of its infrastructure to ~~generate~~produce higher ~~margins in its core business.~~levels of revenue with minimal increases on cost of revenues.

As a result of the foregoing, gross profit ~~expanded from approximately $1.9~~approximated $8.7 million, ~~in 2018 to approximately $4.7 million in 2019, an increase~~or 64.5% of 151%. Although gross profit as a percentage of revenue declined from 55% to 42%, this was expected based on the 37.5% contracted margin and the required accounting treatment of the Seed Transactions discussed above. Looking at the recurring business on a stand-alone basis, gross profit as a percentage oftotal revenues ~~increased from 55% to 64%.~~

~~Personnel expense increased to approximately $1,242,000~~ for the three months ended September 30, ~~2019~~2020, from approximately ~~$352,000~~$4.7 million, or 41.9% of total revenues, for the same period a year ago. Excluding the Seed Transactions, gross profit increased to approximately $8.7 million for the three months ended September 30, 2020 from approximately $2.7 million for the same period a year ago, an increase of approximately $6.0 million or 221.5%.

Personnel expenses increased to approximately $1.4 million for the three months ended September 30, 2020 from approximately $1.2 million for the same period a year ago. The increase was primarily ~~the result of~~due to the hiring of additional staff to support (i) higher levels of revenue, and (ii) ~~our~~the Company’s expansion into a direct owner ~~of cannabis licenses~~ and operator of seed-to-sale ~~operations.~~cannabis businesses. As a percentage of revenues excluding the Seed Transactions, personnel expenses dropped significantly to 10.1% in 2020 from to 29.5% in 2019.

Marketing and promotion costs increased slightly to approximately ~~$92,000~~$103,000 for the three months ended September 30, ~~2019~~2020 from approximately ~~$37,000~~$92,000 for the same period a year ago. As a percentage of revenues ~~however,~~excluding the Seed Transactions, these costs ~~remained steady at approximately 1% of revenues.~~fell to 0.8% in 2020 from 2.2% in 2019.

General and administrative costs increased to approximately to $2.4 million for the three months ended September 30, 2019 from approximately $2.0 million for the same period a year ago. The year over year increase is primarily due to (i) additional leasing costs and utilities of a property in Milford, DE which the Company is developing into an additional cultivation and production facility for its client in that state, and (ii) increases in corporate insurance and professional fees.

As a result of the above, the Company generated operating income of approximately $973,000 for the three months ended September 30, 2019, compared with an operating loss of approximately $549,000 for the same period in 2018, a positive period-over-period change of approximately $1,522,000.

~~Net non-operating expenses increased to approximately $7.4 million from~~ approximately $2.9 million for the three months ended September 30, ~~2019 and 2018, respectively.~~2020 from approximately $2.4 million for the same period a year ago. This increase ~~was~~is primarily due to ~~(i) approximately $3.2 million of non-cash amortization of the beneficial conversion feature~~taxes paid on the ~~$20M Debentures,~~Company’s cannabis operation, and increases in corporate insurance. As a percentage of ~~warrants issued together with the issuance of debt (such amortization reflected within~~~~Interest Expense~~), (ii) the Company’s non-cash equity in the net loss of GenCanna of approximately $2.9 million, and (iii) approximately $852,000 of interest expense from the issuance of debentures and promissory notes to finance working capital andrevenues excluding the Seed Transactions, ~~offset by a reduction of approximately $2.4 million of losses incurred~~these costs fell significantly to 21.8% in ~~the prior period~~2020 from ~~the extinguishment of debt. Additionally, the Company recorded a provision for income taxes of approximately $901,000 for~~56.9% in 2019

During the three months ended September 30, ~~2019. No provision was~~2020, the Company recorded inadditional bad debt reserves of approximately $892,000 to cover potential losses that would be incurred by the ~~same period in 2018.~~Company from the impact of COVID-19 and the measures enacted by local governments to reduce its spread.

As a result of the foregoing, the Company ~~incurred net losses~~generated operating income of approximately ~~$7.3 million and~~ $3.4 million for the three months ended September 30, 2020 compared to approximately $973,000 for the same period a year ago. Excluding the Seed Transactions, the Company generated operating income of approximately $3.4 million for the three months ended September 30, 2020 compared to an operating loss of approximately $1.0 million for the same period in 2019, a positive swing of approximately $4.4 million.

Net non-operating expenses decreased to $1.7 million for the three months ended September 30, 2020 from approximately $7.4 million for the same period in 2019. The decrease is primarily due to (i) a charge in the third quarter of 2019 of approximately $2.9 million from the Company’s equity in GenCanna’s net loss (GenCanna was accounted for as an equity investment at such time), and ~~2018, respectively.~~(ii) a decrease in interest expense of approximately $2.6 million attributable to a lower amount of remaining beneficial conversion feature on the $21M Debentures that was amortized in 2020 compared to 2019.

As a result of the foregoing, the Company generated net income of approximately $1.7 million for the three months ended September 30, 2020. For the same period a year ago, after a tax provision of approximately $901,000, the Company incurred a net loss of approximately $7.3 million, and excluding the Seed Transactions, incurred a net loss of approximately $8.4 million.

Nine months ended September 30, ~~2019~~2020 compared to nine months ended September 30, ~~2018~~2019

Total revenues for the nine months ended September 30, ~~2019 increased~~2020 approximated $30.5 million compared to ~~approximately~~ $40.4 million ~~compared with $8.4 million from~~for the same period in ~~2018, a nearly five-fold increase~~2019. The year-over-year variance was primarily attributable to revenues of approximately ~~$32.0 million. This considerable growth was principally due to the Seed Transactions discussed in further detail in Note 1~~~~– Organization of Description of Business~~~~of the Company’s financial statements included in Part I of this filing. Revenue~~$22.0 million generated from the Seed Transactions. Excluding the Seed Transactions, ~~commenced in the second quarter of 2019 and approximated $29.0 million through September 30, 2019. The increase in~~core revenues was also attributable to (i) a 106% increase in licensing revenue associated with the Company’s branded products, (ii) a 105% increase in management fees earned from the Company’s cannabis-licensed clients, and (iii) an 85% increase in supply procurement revenue, primarily from Kind in Maryland.

~~Cost of revenues increased from approximately $3.3 million~~ for the nine months ended September 30, ~~2018~~2020 grew to approximately ~~$24.5~~$30.5 million from approximately $11.4 million for the same period in 2019, an increase of approximately $19.2 million or 168.3%. The year-over-year increase was due to aggregate cannabis sales in 2020 of approximately $22.0 million generated by the KPGs in Illinois, acquired by the Company in October 2019, and ARL in Massachusetts, acquired by the Company in late 2018 and whose selling operations commenced in December 2019. The cannabis sales were offset by decreases in procurement revenue and management fees charged to Kind, the Company’s cannabis-licensed client in Maryland, and with whom the Company is currently engaged in litigation.

Cost of revenues for the nine months ended September 30, 2020 approximated $10.8 million compared to approximately $24.5 million for the same period in 2019. ~~This increase~~The year-over-year variance was primarily ~~due~~attributable to the cost of ~~hemp~~ seeds incurred by the Company of approximately $20.8 million as part of the Seed Transactions. Excluding the Seed Transactions, cost of revenues for the nine months ended September 30, 2020 increased to approximately $10.8 million from approximately $3.8 million for the same period in 2019. As a percentage of total revenues, ~~cost~~these costs increased to 35.5% in 2020 from 33.2% in 2019, which is the result of Company’s transition from a cannabis advisory company to a multi-state operator of cannabis businesses, whereby the Company will generate less revenues from a rental income and management fees, which have minimal associated ~~with the Seed Transactions was 71%,~~costs, to a vastly higher than the contracted cost of 62.5%, due to the deferral of profits required by the accounting guidance and effected via an approximate $4.2 million reduction of the recognized revenue, such reduction based on the Company’s ownership percentage of GenCanna. Apart from the Seed transactions, cost of revenues as a percentagelevel of revenue ~~decreased~~ from ~~40% in 2018 to 33% in 2019, as the Company continued to leverage its infrastructure to generate~~product sales, which have a relatively higher ~~margins in its recurring business.~~level of associated costs.

As a result of the foregoing, gross profit ~~increased~~approximated $19.7 million, or 64.5% of total revenues, for the nine months ended September 30, 2020 from ~~approximately $5.1 million in 2018 to~~ approximately $15.9 million, ~~in 2019. Although gross profit as~~or 39.3% of total revenues, for the same period a ~~percentage of revenue declined from 61% to 39%, this was expected based on the 37.5% contracted margin and the required accounting treatment of~~year ago. Excluding the Seed Transactions, ~~discussed above. Looking at the core business on its own,~~ gross profit ~~as a percentage of revenues increased from 61% to 67%.~~

~~Personnel expense~~ increased to approximately ~~$2.7~~$19.7 million for the nine months ended September 30, ~~2019~~2020 from ~~$822,000~~approximately $7.6 million for the same period a year ago, an increase of approximately $12.1 million or 159.0%.

Personnel expenses increased to approximately $4.1 million for the nine months ended September 30, 2020 from approximately $2.7 million for the same period a year ago. The increase was primarily ~~the result of~~due to the hiring of additional staff to support (i) higher levels of revenue, and (ii) ~~our~~the Company’s expansion into a direct owner and operator of seed-to-sale cannabis ~~and hemp operations.~~businesses. As a percentage of revenues excluding the Seed Transactions, personnel expenses dropped to 13.3% in 2020 from 24.1% in 2019.

Marketing and promotion costs ~~increased from~~decreased slightly to approximately ~~$167,000~~$281,000 for the nine months ended September 30, ~~2018 to~~2020 from approximately $287,000 for the ~~nine months ended September 30, 2019. Despite the increase, these costs decreased as~~same period a year ago. As a percentage of revenues excluding the Seed Transactions, these costs fell to 0.9% in 2020 from ~~2% in 2018 to 1%~~2.5% in 2019.

General and administrative costs increased to approximately ~~$6.8~~$7.5 million for the nine months ended September 30, ~~2019~~2020 from approximately ~~$4.5~~$6.8 million for the same period a year ago. The ~~year over year~~ increase is primarily due to ~~a (i)~~ higher ~~level of legal~~facility costs on additional properties owned and ~~travel expenses~~ in service in 2020, higher depreciation expense on such properties, taxes paid on the ~~current period associated with the consolidation of our cannabis-licensee clients, settlement of the AgriMed matter, Terrace investment, acquisition of MediTaurus,~~Company’s cannabis operation, and other merger activity which has yet to close, (ii) additional leasing costs and utilities of a property in Milford, DE which the Company is developing into an additional cultivation and production facility for its client in that state, (iii) increases in corporate ~~insurance,~~insurance. As a percentage of revenue excluding the Seed Sales, general and ~~(ii) non-cash increases~~administrative costs decreased significantly to 24.6% in ~~depreciation~~2020 from 59.3% in 2019, reflecting a more efficient use of the Company’s fixed overhead costs.

During the nine months ended September 30, 2020, the Company recorded an additional bad debt reserve of approximately $1.3 million to cover potential losses that would be incurred by the Company from the impact of COVID-19 and ~~amortization.~~the measures enacted by local governments to reduce its spread.

As a result of the ~~above,~~foregoing, the Company generated operating income of approximately ~~$6.1~~$6.5 million for the nine months ended September 30, ~~2019,~~2020 compared ~~with an operating loss of~~to approximately ~~$417,000~~$6.1 million for the same period in ~~2018.~~

~~Net non-operating expenses increased from~~2019. Excluding the Seed Transactions, the Company generated operating income of approximately ~~$5.2~~$6.5 million for the nine months ended September 30, ~~2018~~2020 compared to an operating loss of approximately ~~$6.7~~$2.2 million for the same period in 2019, a positive swing of approximately $8.7 million.

Net non-operating expenses were approximately $8.3 million for the nine months ended September 30, 2020 compared to approximately $6.7 million for the same period in 2019. ~~This~~The increase ~~was~~is primarily due to ~~(i) approximately $6.5~~the approximate $2.9 million ~~of non-cash amortization~~received by the Company in 2019 from the settlement of the ~~beneficial conversion feature on the $20M Debentures, and~~ AgriMed matter discussed in Note 3 – Acquisitions of ~~warrants issued together with the issuance of debt (such amortization reflected within~~~~Interest Expense~~~~), (ii) interest expense of approximately $1.5 million primarily from the issuance of promissory notes to fund the Seed Transactions, and (iii)~~ the Company’s ~~non-cash equity~~financial statements, and declines in value of the ~~loss of GenCanna of approximately $928,000,~~Company’s investments in Terrace, Chooze and MRSVP in 2020, offset by ~~(a)~~ a reduction of approximately $4.2 million of losses incurred in the prior period from the extinguishment of debt, and (b) the net settlement proceeds of $2.9 million from the AgriMed matter. Additionally, the Company recorded a provision for income taxes of approximately $1.9 million and $12,000 for the nine months ended September 30, 2019 and 2018, respectively.decrease interest expense.

As a result of the foregoing, the Company incurred a net loss of approximately ~~$2.5~~$1.8 million ~~during~~for the nine months ended September 30, ~~2019 compared with~~2020. For the same period a year ago, after a tax provision of approximately $1.9 million, the Company incurred a net loss of approximately ~~$5.6~~$2.5 million, ~~during~~and excluding the ~~same period 2018,~~Seed Transactions, incurred a ~~positive period-over-period change in excess~~net loss of ~~$3.0~~approximately $8.9 million.

For the balance of 2020, the Company’s focus will continue to be on the following key areas:

No assurances can be given that any of these plans will come to fruition or that if implemented will necessarily yield positive results.

No assurances can be given that any of these plans will come to fruition or that if implemented will necessarily yield positive results

On October 1, 2019, the Illinois Department of Financial & Professional Regulation approved the Company’s acquisition of the KPGs and Mari-IL. Effective on such date, (i) the purchase price of 1,000,000 sharesPlease refer to Note 19 – Subsequent Events of the Company’s ~~common stock was paid to~~financial statements included in this report for a discussion of material events that occurred after the ~~selling parties, and the KPGs and Mari-IL became wholly-owned subsidiaries~~balance sheet date.

The issuance of the ~~Company to be consolidated into the Company’s financial statements.~~

~~During the month of October 2019, the Company issued three-year warrants to purchase 300,000~~ shares of common stock ~~at an exercise price~~described in Note 19 – Subsequent Events of ~~$1.37 per share for services rendered. Also during this month,~~ the ~~Company granted~~Company’s financial statements were deemed to ~~employees for services (i) 24,074 shares~~be exempt from registration under the Securities Act of ~~common stock, and (ii) five-year options to purchase 500,000 shares~~1933, as amended (the “Securities Act”), in reliance upon Sections 4(a)(2) and/or 4(a)(5) of ~~common stock at an exercise price~~the Securities Act. A legend restricting the sale, transfer, or other disposition of ~~$0.71 per share.~~

~~In October 2019,~~these securities other than in compliance with the ~~Company closed~~Securities Act was placed on the ~~purchase of a 9,000 square foot building~~securities issued in ~~Annapolis, MD. The purchase price of approximately $1.7 million was paid with~~ the proceeds from a $2.0 million promissory note issued by the Company to an unaffiliated third party and secured by the property. The note, which matures in January 2020, provides the payee with origination fees aggregating 5% of the principal, and bears interest at the rate of 2% per month commencing 90 days from the start of the note. foregoing transactions.

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

In the ~~property into~~opinion of management, inflation has not had a ~~medical marijuana dispensary to be leased to Kind.~~material effect on the Company’s financial condition or results of its operations.

In the opinion of management, the Company’s financial condition and results of its operations are not materially impacted by seasonal sales.

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

Our management, with the participation of our ~~chief executive officer~~CEO and ~~chief financial officer,~~CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, ~~2019~~2020 (the “Evaluation Date”). Based upon that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit 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 management, including our ~~chief executive officer~~CEO and ~~chief financial officer,~~CFO, as appropriate to allow timely decisions regarding required disclosure.

During the ~~quarter~~nine months ended September 30, ~~2019~~2020 and past fiscal year, ~~to date,~~ we implemented significant measures to remediate the previously disclosed ineffectiveness of our internal control over financial reporting, ~~including~~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. ~~This included~~The remediation measures consisted of 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 toof our accounting processes and enhancement to our financial controls, including the ~~ongoing~~ testing of such controls. Further, during the quarter ended September 30, 2019, we expanded our board of directors to include a majority of independent disinterested directors and we established an audit, compensation and nominating, and corporate governance committee of the board of directors. During the quarter, the board of directors also adopted a formal policy with respect to related party transactions.

Other than as described above, there was no change in our 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 ~~fiscal quarter~~nine months ended September 30, ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In July 2019, Thomas Kidrin, the former chief executive officer and a former director of the Company, filed a complaint in the Massachusetts Superior Court, Suffolk County, captioned Thomas Kidrin v. MariMed Inc., et. al., Civil Action No. 19-2173D. In the complaint, Mr. Kidrin alleges that the Company failed to pay all wages owed to him and breached his employment agreement, dated August 30, 2012, and requests multiple damages, attorney fees, costs, and interest. The Company has moved to dismiss certain counts of the complaint and has asserted counterclaims against Mr. Kidrin alleging breach of contract, breach of fiduciary duty, money had and received, and unjust enrichment. The Company believes that the allegations in the complaint are without merit and intends to vigorously defend this matter and prosecute its counterclaims.

On November 13, 2019, Kind Therapeutics USA Inc. (“Kind”) commenced an action in the Circuit Court for Washington County, MD captioned Kind Therapeutics USA, Inc. vs. MariMed, Inc., ~~MariMed Holdings MD, LLC and MariMed Advisors, Inc.~~et al. (Case No. C-21-CV-19-000670) ~~alleging, inter alia,~~asserting claims against the Company, including breach of contract, breach of fiduciary duty, accounting, and unjust enrichment, and seeking a declaratory judgment ~~injunctive relief, an accounting~~ and damages in excess of $75,000. On November 15, 2019, the Company filed counterclaims against Kind and ~~as plaintiffs,~~a third-party complaint against the ~~Company commenced an action against each~~Members of ~~Jennifer~~Kind (Jennifer DiPietro, Susan Zimmerman, and Sophia ~~Leonard-Burns (the Kind sellers)~~Leonard-Burns) and William Tham ~~alleging~~(the “Counterclaim”). The Counterclaim alleges breach of contract with respect to each of the ~~MOU~~Memorandum of Understanding (the “MOU”) and the ~~management agreement,~~Management Services Agreement (the “MSA”), unjust enrichment, promissory estoppel/detrimental reliance, and fraud in the inducement, and seeking a declaratory judgement that the MOU is an enforceable contract, specific performance of such contact, and the establishment of a constructive trust for the Company’s benefit. The Counterclaim also seeks damages. 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 ~~Management Agreement~~MSA and ~~Lease~~the 20-year lease agreement for Kind’s utilization of the Company’s cultivation and production facility (the “Lease”) “appear to be independent, valid and enforceable contracts.” ~~Each party’s preliminary injunction motion is currently pending before~~On or about April 3, 2020, the ~~Court.~~Company filed its First Amended Counterclaim and Third Party Complaint in which additional claims were added and clarified, including breach of Lease and breach of the Licensing and Manufacturing Agreement (the “LMA”) against Kind, along with other alternative claims and seeking damages. On August 11, 2020, the Company filed its Second Amended Counterclaim and Third Party Complaint in which additional clarifications were made and claims added for breach of fiduciary duty and breach of partnership. The Company believes that its claims for breach of contract with respect to ~~each of~~ the MOU, the MSA, the Lease, and the ~~management agreement, unjust enrichment, promissory estoppel/detrimental reliance, and fraud in~~LMA, as well as all other claims are meritorious. Further, the ~~inducement are meritorious and~~Company believes that Kind’s claims against the Company are without merit. The Company intends to aggressively prosecute and defend the action. A hearing on the parties’ cross-motions for preliminary injunction was held on September 14 to 17, 2020 and November 2 and 4, 2020, and the Court’s ruling on the motions is pending. The trial is currently scheduled to start on June 7, 2021.

As a smaller reporting company, ~~we are~~the Company is not required to provide the information ~~required by~~contained in this ~~Item.~~item pursuant to Regulation S-K. However, ~~limited~~ information regarding ~~our~~the Company’s risk factors appears inPart I, Item ~~2. Management’s Discussion and Analysis~~1A. of ~~Financial Condition and Results of Operations~~ ~~under the caption~~~~Forward-Looking Statements~~ ~~contained in this Quarterly Report on Form 10-Q and in~~~~Item 1A. RISK FACTORS~~~~of our~~its Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. 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 ~~from~~to the risk factors ~~previously disclosed~~contained in ~~such~~the Annual Report except for the following additional risk related to COVID-19:

Our business, operations, financial condition, and liquidity have been and may continue to be materially and adversely affected by the outbreak of COVID-19.

In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world implemented measures to reduce the spread of the virus. The spread of COVID-19 in the United States and the measures to contain it have negatively impacted the economy and created significant volatility and disruption in financial markets. Business shutdowns in certain states in response to stay-at-home orders and related measures have temporarily eliminated certain customers’, principally non-medical use customers’, access to our managed dispensaries, adversely impacting sales during this restricted period. In addition, these restrictions and other disruptions caused by the pandemic have impacted our expansion, consolidation, and administrative functions. Further, the volatility in the financial markets and investor uncertainty has delayed and adversely impacted our ability to consummate debt and equity financings to raise working capital to support our operations and expansion plans. As a result, our business, operations, financial condition, and liquidity have been and may continue to be materially and adversely affected. Further, the disruption to the global economy and to our business, along with the decline in our stock price, may also negatively impact the future carrying values of certain assets, including inventories, accounts receivables, intangibles, and goodwill. The full extent to which COVID-19 and the measures to contain it will impact our business, operations financial condition, and liquidity will depend on ~~Form 10-K.~~the severity and duration of the COVID-19 outbreak and other future developments related to the response to the virus, all of which are highly uncertain. As a result, we cannot predict the ultimate impact of COVID-19 on the Company and its operational and financial performance.

~~In January 2019,~~During the quarter ended September 30, 2020, the Company ~~sold 799,995~~issued 18,256,436 shares of common stock ~~at a price~~from the conversion of ~~$3.25 per share, resulting in total proceeds of $2.6 million. These funds will be used to fund the Company’s operations, continue the development of its facilities,~~debentures, and ~~expand its hemp seed wholesale operations and branded licensing business.~~

~~In June 2019, the Company issued an aggregate of 1,000,000~~34,171 shares of common stock related to ~~two owners~~an employee stock grant.

~~During~~ the ~~nine months ended September 30, 2019, the Company issued three-year warrants to purchase 1,350,000~~ shares of common stock at exercise prices ranging from $1.71 to $5.00 per share. Also during this period, the Company granted (i) 108,820 shares of common stock to employees, and (ii) options to purchase 900,000 shares of common stock to employees and independent directors, at exercise prices ranging from $0.99 to $1.95 per share, expiring four and five years from grant date.

~~The sales of the securities~~ 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 and Regulation D promulgated thereunder.~~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.

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

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

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

Large Accelerated filer ~~[ ]~~☐	Accelerated filer ~~[X]~~☒
Non-accelerated filer ~~[ ]~~☐	Smaller reporting company ~~[X]~~☒
	Emerging growth company ~~[X]~~☒

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3335

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	4344

Item 4.	Controls and Procedures	4344

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	4445

Item 1A.	Risk Factors	4445

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4446

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

~~Item 3.~~Signatures		~~Defaults Upon Senior Securities~~	44

~~Item 4.~~	~~Mine Safety Disclosures~~	44

~~Item 5.~~	~~Other Information~~	44

~~Signatures~~		4549

	Series A Convertible Preferred Stock				Series A Convertible Preferred Stock Subscribed But Not Issued						Common Stock				Common Stock Subscribed But Not Issued						Additional Paid-In			Accumulated			Non-Controlling			Total Stockholders’
	Shares		Par Value		Shares			Amount			Shares		Par Value		Shares			Amount			Capital			Deficit			Interests			Equity
Balances at December 31, 2017		-	$	-		500,000		$	500			176,850,331	$	176,850		1,000,000		$	370,000		$	22,256,060		$	(11,971,740	)	$	175,490		$	11,007,160
Sales of common stock												14,189,738		14,190								16,881,810									16,896,000
Conversion of Series A preferred stock						(500,000	)		(500	)		970,988		971								33,573									34,044
Issuance of subscribed shares												1,000,000		1,000		(1,000,000	)		(370,000	)		369,000									-
iRollie acquisition																264,317			600,000												600,000
Settlement of obligations												3,367,632		3,368		2,894			10,000			3,627,253									3,640,621
Conversion of membership interest												222,222		222								(222	)								-
Exercise of options												602,000		602								38,398									39,000
Exercise of warrants												1,899,934		1,900								210,384									212,284
Amortization of option grants																						1,023,300									4,084,658
Amortization of stand-alone warrant issuances																						1,351,762
Warrant discount on promissory notes																						1,709,596
Retirement of promissory notes												4,018,534		4,019		1,231,060			3,250,000			8,474,786									11,728,805
Distributions																												(507,453	)		(507,453	)
Net income (loss)																									(5,859,985	)		223,882			(5,636,103	)
Balances at September 30, 2018		-	$	-		-		$	-			203,121,379	$	203,122		1,498,271		$	3,860,000		$	55,975,700		$	(17,831,725	)	$	(108,081	)	$	42,099,016

Subsidiary:	Percentage Owned
MariMed Advisors Inc.		~~100.0~~	%100.0%
Mia Development LLC		~~89.5~~	%89.5%
Mari Holdings IL LLC		~~60.0~~	%100.0%
Mari Holdings MD LLC		~~97.4~~	%97.4%
Mari Holdings NV LLC		~~100.0~~	%100.0%
Hartwell Realty Holdings LLC		~~100.0~~	%100.0%
iRollie LLC		~~100.0~~	%100.0%
ARL Healthcare Inc.		~~100.0~~	%100.0%
KPG of Anna LLC		100.0%
KPG of Harrisburg LLC		100.0%
MariMed Hemp Inc.		~~100.0~~	%100.0%
MediTaurus LLC		~~70.0~~	%70.0%

	●	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 dispensary and wholesale operations in Massachusetts and Illinois, and direct sales of hemp and hemp-infused products by the Company’s hemp division. In 2019, this division participated in one-time sales of acquired hemp seed inventory, as further explained in Note 17 – Related Party Transactions. Future product sales are expected to include the Company’s planned cannabis-licensee acquisitions in Maryland, Nevada, and Delaware (upon this state’s amendment to permit for-profit ownership of cannabis entities). This revenue is recognized when products are delivered or at retail point-of-sale.

	●	Real Estate – rental income and additional rental fees generated from leasing of the Company’s state-of-the-art, regulatory-compliant ~~legal~~ cannabis facilities to its ~~clients, which are~~ cannabis-licensed ~~operating companies.~~clients. Rental income is generally a fixed amount per month that escalates over the respective lease ~~terms,~~term, while additional rental fees are based on a percentage of tenant revenues that exceed a specified ~~amount.~~amounts.

	●	Management – fees for providing the Company’s cannabis clients with ~~corporate services and operational~~comprehensive oversight of their cannabis cultivation, production, and dispensary operations. Along with this oversight, the Company provides human resources, regulatory, marketing, and other corporate services. 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 – revenue from the sale of precision-dosed, cannabis-infused ~~products,~~ products—such as Kalm Fusion™, Nature’s Heritage™, and Betty’s Eddies™, —to ~~legal~~regulated dispensaries throughout the United ~~States.~~States and Puerto Rico. The recognition of this revenue occurs when the products are delivered.

	●	Consulting – fees from third-parties parties where the Company provides assistance in securing cannabis licenses, and advisory services in the areas of facility design and development, and cultivation and dispensing best practices. These fees are recognized as the services are performed.

	●	Product Sales – direct sales of cannabis, hemp, and products derived from these plants. This year, the Company commenced the direct sale of acquired hemp seed inventory. As the Company continues to explore opportunities to continue such sales, significant product sales are expected to be generated from (i) the distribution of the Company’s acquired and developing hemp-derived CBD product lines, (ii) the dispensary and wholesale operations of ARL in Massachusetts and the KPGs in Illinois, and (iii) the Company’s planned cannabis-licensee acquisitions in Maryland and Nevada. This revenue will be recognized when products are delivered or at retail points-of-sale.

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.

Cash and cash equivalents	$	13,494
Goodwill		266,682
Total fair value of consideration	$	280,176

Equipment	$	21,000
Cannabis licenses		185,000
Accounts payable		(120,689	)
Due to related parties		(92,765	)
Total identifiable net assets		(7,454	)
Goodwill		731,902
Total fair value of consideration	$	724,448

Cash and cash equivalents	$	443,980
Inventory		113,825
Intangibles		2,067,727
Minority interests		138,356
Accounts payable		(642,033	)
Accrued expenses		(186,005	)
Due to third parties		(1,020,850	)
Total fair value of consideration	$	915,000

Cash and cash equivalents	$	64,196
Accounts receivable		5,362
Inventory		519,750
Tradename and customer lists		3,411,469
Accounts payable		(777	)
Total value of MediTaurus		4,000,000
Noncontrolling interests in MediTaurus		(1,200,000	)
Total fair value of consideration	$	2,800,000

	September 30, 2019		December 31, 2018
GenCanna Global Inc.	$	29,301,151	$	-
Terrace Inc.		1,590,000		-
CVP Worldwide LLC		1,080,016		1,172,163
Iconic Ventures Inc.		500,000		500,000
Chooze Corp.		257,687		-
Total investments	$	32,728,854	$	1,672,163

	September 30, 2020		December 31, 2019
Current investments:
Terrace Inc.	$	1,002,659	$	1,449,144
Total current investments		1,002,659		1,449,144

Non-current investments:
MembersRSVP LLC		1,085,528		1,066,975
Chooze Corp.		-		257,686
GenCanna Global Inc.		-		-
Iconic Ventures Inc.		-		-
Total non-current investments		1,085,528		1,324,661
Total investments	$	2,088,187	$	2,773,805

	●	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 occupying ~~100%~~100% of the space under a ~~20-year~~ triple net lease ~~expiring~~that commenced in ~~2035.~~2017 and expires in 2035.

	●	Illinois – two 3,400 square foot free-standing retail dispensaries in the cities of Anna and Harrisburg and leased to the KPGs each under a 20-year lease expiring in 2036. With the acquisition of the KPGs approved in October 2019, as disclosed in Note 3 –~~Acquisitions~~, this lease will be eliminated upon the consolidation of the KPGs starting in the fourth quarter of calendar 2018. Accordingly, the rental receipts on such leases have been removed from the table of future minimum rental receipts below.

	●	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 ~~expiring~~that commenced in ~~2037.~~2018and 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 ~~expiring~~that commenced in 2017 and expires in 2022.

	●	Illinois – two 3,400 square foot free-standing retail dispensaries in the cities of Anna and Harrisburg and leased to the KPGs, each under a 20-year lease that commenced in 2018. With the acquisition of the KPGs as disclosed in Note 3 – Acquisitions, this lease was eliminated upon the consolidation of the KPGs in October 2019. Accordingly, the rental receipts on such leases have been removed from the table of future minimum rental receipts below.

2019	$	956,492
2020		3,896,550
2021		4,036,550
2022		3,959,709
2023		3,661,820
Thereafter		44,121,550
Total	$	60,632,671

2020	$	1,130,989
2021		4,667,497
2022		4,590,656
2023		4,292,769
2024		4,348,027
Thereafter		43,995,612
Total	$	63,025,550

	September 30, 2019		December 31, 2018
Kind Therapeutics USA Inc. (Maryland licensee)	$	1,367,385	$	2,679,496
KPG of Anna LLC (Illinois licensee)		73,211		482,700
KPG of Harrisburg LLC (Illinois licensee)		79,295		449,385
Harvest Foundation LLC (Nevada licensee)		1,659,089		248,796
Total due from third parties	$	3,178,980	$	3,860,377

	September 30, 2019		December 31, 2018
First State Compassion Center	$	540,732	$	578,722
Healer LLC		834,407		307,429
Atalo Holdings Inc.		999,948		-
KPG of Anna LLC		446,248		-
KPG of Harrisburg LLC		401,560		-
Maryland Health & Wellness Center Inc.		317,141		-
High Fidelity Inc.		252,843		-
Chooze Corp.		-		257,687
Total notes receivable		3,792,879		1,143,838
Notes receivable, current portion		1,321,284		51,462
Notes receivable, less current portion	$	2,471,595	$	1,092,376

	September 30, 2019			December 31, 2018
Land	$	3,392,710		$	3,392,710
Buildings and building improvements		15,265,983			13,566,144
Tenant improvements		5,798,164			5,348,882
Furniture and fixtures		177,505			114,160
Machinery and equipment		2,544,346			1,632,351
Construction in progress		15,822,615			12,205,447
		43,001,323			36,259,694
Less: accumulated depreciation		(2,842,853	)		(2,159,830	)
Property and equipment, net	$	40,158,470		$	34,099,864

	September 30, 2019			December 31, 2018
Bank of New England – Massachusetts property	$	4,851,665		$	4,895,000
Bank of New England – Delaware property		1,707,942			1,791,736
DuQuoin State Bank – Illinois properties		835,035			850,076
Total mortgages payable		7,394,642			7,536,812
Mortgages payable, current portion		(220,257	)		(188,231	)
Mortgages payable, less current portion	$	7,174,385		$	7,348,581

2020	$	2,808,883
2021		11,024,306
2022		12,268,122
2023		544,571
2024		577,281
Thereafter		13,110,191
Total		40,333,354
Less discounts		(994,591	)
	$	39,338,763

2019	$	8,439,091
2020		14,343,484
2021		10,262,710
2022		280,830
2023		300,248
Thereafter		6,248,279
Total		39,874,642
Less discounts		(5,528,985	)
	$	34,345,657

Issue Date	Maturity Date	Initial Principal		Interest Rate		Issue Discount		Warrant Discount		Ben. Conv. Feature		Converted To Common Stk.		Outstanding Principal
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		3,250,000		1,750,000
06/28/19	06/27/21		2,500,000	0.0	%	7.0	%		145,022		847,745		1,050,000		1,450,000
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
per Share		Outstanding		Exercisable		Life in Years
$	0.080		100,000		100,000		0.22
$	0.130		200,000		200,000		0.75
$	0.140		100,000		100,000		0.25
$	0.140		550,000		550,000		1.25
$	0.330		50,000		50,000		1.44
$	0.450		125,000		125,000		2.01
$	0.630		300,000		300,000		2.25
$	0.770		200,000		200,000		3.25
$	0.900		50,000		50,000		3.62
$	0.950		50,000		10,000		3.25
$	0.992		300,000		-		4.99
$	1.350		100,000		-		3.83
$	1.950		500,000		-		3.75
$	2.320		220,000		100,000		3.95
$	2.450		2,000,000		2,000,000		3.23
$	2.500		100,000		50,000		3.91
$	2.650		200,000		150,000		3.99
$	2.850		75,000		18,750		3.20
$	2.850		100,000		25,000		4.20
$	3.000		25,000		12,500		4.21
$	3.725		200,000		50,000		4.19
			5,545,000		4,091,250

	●	Delaware – 4,000 square feet of retail space in a multi-use building under a five-year lease that commenced in October 2016 and contains a five-year option to extend the term. The Company 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 the Company ~~intends to construct~~is developing into a cultivation and processing facility to be subleased to the same Delaware client. The lease term is 10 years, with an option to extend the term for three additional five-year periods.

	●	Nevada – 10,000 square feet of an industrial building that the Company has built-out into a cannabis cultivation facility and plans to rent to its cannabis-licensed client under a sub-lease which will be coterminous with this lease expiring in ~~2024.~~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 2-unit apartment under a lease that expires in July ~~2020~~2022 with an option to renew for a two-year term.

Operating lease cost	$	585,940
Finance lease cost:
Amortization of right-of-use assets	$	14,914
Interest on lease liabilities		4,188
Total finance lease cost	$	19,102


Operating lease cost	$	737,993

Finance lease cost:
Amortization of right-of-use assets	$	24,512
Interest on lease liabilities		5,834
Total finance lease cost	$	30,346

	Operating Leases			Finance Lease
2019	$	141,156		$	9,603
2020		917,444			38,412
2021		1,008,227			38,412
2022		949,535			27,123
2023		910,166			23,201
Thereafter		5,139,851			3,229
Total lease payments		9,066,379		$	139,980
Less: imputed interest		(2,727,246	)		(18,778	)
	$	6,339,133		$	121,202

	●	cost of revenues, which includes the direct costs associated with the generation of ~~our~~the Company’s revenues;

	●	operating expenses, which include the sub-categories of personnel, marketing and promotion, ~~and~~ general and ~~administrative;~~administrative, and bad debts; and

	●	non-operating income and expenses, which include the sub-categories of interest expense, interest income, ~~non-cash losses on debt settlements~~ equity in earnings of ~~our~~equity method investments, loss on obligations settled with equity, and changes in the fair value of non-consolidated ~~investments, and other one-one gains or losses.~~investments.

	●	During the nine months ended September 30, 2020, the Company’s operating activities provided positive cash flow of approximately $1.6 million, compared to approximately $24.2 million of negative cash flow used by such activities during the same period of 2019, a positive swing of approximately $25.8 million.

	●	At September 30, 2020, the Company’s negative working capital was approximately $9.1 million, a continued improvement from approximately $21.5 million at June 30, 2020 and approximately $29.3 million at December 31, 2019.

	●	The Company successfully restructured the terms of its short term promissory notes payable to approximately $8.5 million at September 30, 2020 from approximately $17.2 million at June 30, 2020 and $23.1 million at December 31, 2019.

	1)	In Massachusetts, increase production and wholesale revenue at its cultivation and production facility in New Bedford, and drive revenues at the recently approved for adult-use dispensary in Middleboro.

	2)	In Illinois, increase sales and profits of the dispensaries in Anna, Harrisburg and recently-opened Mt. Vernon.

	3)	Continue to expand the Company’s Nature’s Heritage™ branded flower and popular infused-product brands, such as Betty’s Eddies™ and Kalm Fusion™, into the robust Massachusetts medical and adult-use marketplace.

	4)	Continue to execute its aforementioned strategic plan.

Exhibit No.		Description

3.1		Certificate of Incorporation of the Company (a)

3.1.1		Amended Certificate of Incorporation of the Company (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)

3.2		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		~~Description~~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)

~~3.1~~4.5		~~Certificate~~Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of ~~Incorporation~~$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)

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 ~~Registrant. (Incorporated herein~~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)

10.8		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)

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) *