Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q
10-Qx

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

For the Quarterly Period ended September 30, 2022
March 31, o2022

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

For the transition period from _____________________________________ to __________________

___________________

Commission File number 0-54433

MARIMED INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware27-4672745
(State or Other Jurisdiction of(I.R.S. Employer

Incorporation or Organization)		(I.R.S. Employer
Identification No.)

10 Oceana Way

Norwood,, MA02062

(Address of Principal Executive Offices)

617-795-5140

617-795-5140

(Registrant’s Telephone Number, Including Area Code)

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

Title of each classTicker symbol(s)Name of each exchange on which registered
Not Applicable.ApplicableNot Applicable.ApplicableNot Applicable.Applicable

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

o

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 Yesx ☒ No ☐

o

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

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

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. ☐o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ Noo ☒

No

x

As of May 10,November 3, 2022, 335,793,167339,353,353 shares of the registrant’s common stock were outstanding.


MariMed Inc.

Table of Contents

MariMed Inc.
Table of Contents
Page
PART I – FINANCIAL INFORMATION
Financial Statements3
4
34
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31,September 30, 2022 and 2021 (Unaudited)(unaudited)
46
Condensed Consolidated Statements of Stockholders’ Equity for the ThreeNine Months Ended March 31,September 30, 2022 and 2021 (Unaudited)(unaudited)
57
Condensed Consolidated Statements of Cash Flows for the ThreeNine Months Ended March 31,September 30, 2022 and 2021 (Unaudited)(unaudited)
68
Notes to Condensed Consolidated Financial Statements (Unaudited)(unaudited)
710
Item 2.
3031
Item 3.
3639
Item 4.
3639
PART II – OTHER INFORMATION
39
3739
Item 1A.Risk Factors37
Item 2.
3740
Item 3.
3740
Item 4.
3740
40
3741
42
Item 6.Exhibits38
Signatures41

2

2

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

Additional important factors that could cause actual results to differ materially from those in these forward-looking statements are also discussed in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Any forward-looking statement made by the Company in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
3
Table of Contents
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MariMed Inc.
Condensed Consolidated Balance Sheets

(in thousands, except share and par value amounts)

  March 31,  December 31, 
  2022  2021 
  (unaudited)    
Assets        
Current assets:        
Cash and cash equivalents $33,467  $29,683 
Accounts receivable, net  3,462   1,666 
Deferred rents receivable  1,586   1,678 
Notes receivable, current portion  129   127 
Inventory  12,238   9,768 
Investments  1,253   251 
Other current assets  2,179   1,440 
Total current assets  54,314   44,613 
         
Property and equipment, net  65,482   62,150 
Intangibles, net  2,395   2,230 
Investments  100   - 
Notes receivable, less current portion  9,104   8,987 
Right-of-use assets under operating leases  4,913   5,081 
Right-of-use assets under finance leases  576   46 
Other assets  98   98 
Total assets $136,982  $123,205 
         
Liabilities, mezzanine equity, and stockholders’ equity        
Current liabilities:        
Accounts payable $8,311  $5,099 
Accrued expenses  1,728   1,349 
Income taxes payable  20,059   16,467 
Sales and excise taxes payable  1,355   1,798 
Notes payable, current portion  10   10 
Mortgages payable, current portion  1,416   1,400 
Operating lease liabilities, current portion  1,128   1,071 
Finance lease liabilities, current portion  178   27 
Other current liabilities  -   2 
Total current liabilities  34,185   27,223 
         
Notes payable, less current portion  46   448 
Mortgages payable, less current portion  16,624   16,814 
Operating lease liabilities, less current portion  4,343   4,574 
Finance lease liabilities, less current portion  372   22 
Other liabilities  100   100 
Total liabilities  55,670   49,181 
         
Mezzanine equity:        
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at March 31, 2022 and December 31, 2021  14,725   14,725 
Series C convertible preferred stock, $0.001 par value; 12,432,432 shares authorized at March 31, 2022 and December 31, 2021; 6,216,216 shares issued and outstanding at March 31, 2022 and December 31, 2021  23,000   23,000 
Total mezzanine equity  37,725   37,725 
         
Stockholders’ equity:        
Undesignated preferred stock, $0.001 par value; 38,875,451 shares authorized at March 31, 2022 and December 31, 2021; 0 shares issued and outstanding at March 31, 2022 and December 31, 2021  -   - 
Common stock, $0.001 par value; 700,000,000 shares authorized at March 31, 2022 and December 31, 2021; 335,558,206 and 334,030,348 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively  336   334 
Common stock subscribed but not issued; 2,717 and 0 shares at March 31, 2022 and December 31, 2021, respectively  2   - 
Additional paid-in capital  138,064   134,920 
Accumulated deficit  (93,204)  (97,392)
Noncontrolling interests  (1,611)  (1,563)
Total stockholders’ equity  43,587   36,299 
Total liabilities, mezzanine equity, and stockholders’ equity $136,982  $123,205 

See accompanying notes to condensed consolidated financial statements.

3

MariMed Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts; unaudited)amounts)

(unaudited)
September 30,
2022		December 31,
2021
Assets
Current assets:
Cash and cash equivalents$11,113 $29,683 
Accounts receivable, net6,560 1,666 
Deferred rents receivable725 1,678 
Notes receivable, current portion134 127 
Inventory18,309 9,768 
Investments, current274 251 
Other current assets3,768 1,440 
Total current assets40,883 44,613 
Property and equipment, net70,396 62,150 
Intangible assets, net9,469 162 
Goodwill8,079 2,068 
Notes receivable, net of current9,160 8,987 
Operating lease right-of-use assets4,954 5,081 
Finance lease right-of-use assets747 46 
Other assets1,010 98 
Total assets$144,698 $123,205 
Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Mortgages and notes payable, current portion$2,825 $1,410 
Accounts payable7,973 5,099 
Accrued expenses and other3,265 3,149 
Income taxes payable11,663 16,467 
Operating lease liabilities, current portion1,284 1,071 
Finance lease liabilities, current portion241 27 
Total current liabilities27,251 27,223 
Mortgages and notes payable, net of current23,048 17,262 
Operating lease liabilities, net of current4,214 4,574 
Finance lease liabilities, net of current483 22 
Other liabilities100 100 
Total liabilities55,096 49,181 
Commitments and contingencies
4
Table of Contents

  2022  2021 
  Three Months Ended
March 31,		 
  2022  2021 
Revenues $31,282  $24,643 
         
Cost of revenues  14,306   11,457 
         
Gross profit  16,976   13,186 
         
Operating expenses:        
Personnel  3,042   1,727 
Marketing and promotion  643   225 
General and administrative  6,228   3,171 
Bad debts  14   1,025 
Total operating expenses  9,927   6,148 
         
Operating income  7,049   7,038 
         
Non-operating income (expenses):        
Interest expense  (313)  (1,512)
Interest income  163   34 
Loss on obligations settled with equity  -   (1)
Gain (loss) on change in fair value of investment  48   (45)
Other investment income  954   -
Total non-operating income (expenses), net  852  (1,524)
         
Income before income taxes  7,901   5,514 
Provision for income taxes  3,660   1,204 
Net income $4,241  $4,310 
         
Net income attributable to noncontrolling interests $53  $90 
Net income attributable to MariMed Inc. $4,188  $4,220 
         
Net income per share        
Basic $0.01  $0.01 
Diluted $0.01  $0.01 
         
Weighted average common shares outstanding        
Basic  334,762,825   305,212,269 
Diluted  378,890,365   340,825,940 

MariMed Inc.
Condensed Consolidated Balance Sheets (continued)
(in thousands, except share and per share amounts)
(unaudited)
September 30,
2022		December 31,
2021
Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at September 30, 2022 and December 31, 202114,725 14,725 
Series C convertible preferred stock $0.001 par value; 12,432,432 shares authorized; 6,216,216 shares issued and outstanding at September 30, 2022 and December 31, 202123,000 23,000 
Total mezzanine equity37,725 37,725 
Stockholders’ equity
Undesignated preferred stock, $0.001 par value; 38,875,451 shares authorized; zero shares issued and outstanding at September 30, 2022 and December 31, 2021— — 
Common stock, $0.001 par value; 700,000,000 shares authorized; 339,270,387 and 334,030,348 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively339 334 
Common stock subscribed but not issued41 — 
Additional paid-in capital141,652 134,920 
Accumulated deficit(88,675)(97,392)
Noncontrolling interests(1,480)(1,563)
Total stockholders’ equity51,877 36,299 
Total liabilities, mezzanine equity and stockholders’ equity$144,698 $123,205 
See accompanying notes to the unaudited condensed consolidated financial statements.

4

5

Table of Contents

MariMed Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

Three months endedNine months ended
September 30,September 30,
2022202120222021
Revenue$33,912 $33,208 $98,180 $90,420 
Cost of revenue17,748 15,027 50,035 39,647 
Gross profit16,164 18,181 48,145 50,773 
Operating expenses:
Personnel3,746 1,481 10,170 5,266 
Marketing and promotion1,402 563 2,854 1,058 
General and administrative5,097 9,481 16,890 16,934 
Acquisition-related and other143 — 897 — 
Bad debt40 36 54 1,855 
Total operating expenses10,428 11,561 30,865 25,113 
Income from operations5,736 6,620 17,280 25,660 
Interest and other (expense) income:
Interest expense(518)(300)(1,271)(2,077)
Interest income239 26 720 96 
Other (expense) income, net(251)(214)24 (631)
Total interest and other expense(530)(488)(527)(2,612)
Income before income taxes5,206 6,132 16,753 23,048 
Provision for income taxes2,484 4,009 7,894 9,026 
Net income2,722 2,123 8,859 14,022 
Less: Net income attributable to noncontrolling interests16 103 142 289 
Net income attributable to common stockholders$2,706 $2,020 $8,717 $13,733 
Net income per share attributable to common stockholders:
Basic$0.01 $0.01 $0.03 $0.04 
Diluted$0.01 $0.01 $0.02 $0.04 
Weighted average common shares outstanding:
Basic339,025329,454337,111324,340
Diluted381,071378,934379,868370,204
See accompanying notes to the unaudited condensed consolidated financial statements.
6
Table of Contents
MariMed Inc.
Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts; unaudited)

  Shares  Par Value  Shares  Amount  

Capital

  

Deficit

  

Interests

  

Equity

 
  Common Stock  Common Stock
Subscribed But
Not Issued		  

Additional

Paid-In 

  Accumulated  Non-Controlling  

Total

Stockholders’

 
  Shares  Par Value  Shares  Amount  

Capital

  

Deficit

  

Interests

  

Equity

 
Balances at December 31, 2020  314,418,812  $314   11,413  $5  $112,974  $(104,615) $(577)  8,101 
Issuance of subscribed shares  11,413   -   (11,413)  (5)  5   -   -   - 
Stock grants  -   -   6,877   5   -   -   -   5 
Exercise of warrants  50,000   -   -   -   8   -   -   8 
Amortization of option grants  -   -   -   -   295   -   -   295 
Issuance of stand-alone warrants  -   -   -   -   56   -   -   56 
Conversion of debentures payable  4,610,645   5   -   -   1,351   -   -   1,356 
Conversion of promissory notes  3,365,972   3   -   -   1,007   -   -   1,010 
Common stock issued to settle obligations  42,857   -   -   -   31   -   -   31 
Equity issuance costs  -   -   -   -   (387)  -   -   (387)
Distributions  -   -   -   -   -   -   (83)  (83)
Net income (loss)  -                 -   -   -   -   4,220   90   4,310 
Balances at March 31, 2021  322,499,699  $322   6,877  $          5  $115,340  $(100,395) $         (570) $     14,702 

  Common Stock  Common Stock
Subscribed But
Not Issued		  Additional
Paid-In		  Accumulated  Non-
Controlling		  Total
Stockholders’		 
  Shares  Par Value  Shares  Amount  Capital  Deficit  Interests  Equity 
Balances at December 31, 2021  334,030,348  $334   -  $-  $134,920  $(97,392) $(1,563) $36,299 
Stock grants  -   -   2,717   2   -   -   -   2 
Exercise of options  10,000   -   -   -   3   -   -   3 
Amortization of option grants  -   -   -   -   2,469   -   -   2,469 
Conversion of promissory notes  1,142,858   1   -   -   399   -   -   400 
Fees paid with stock  375,000   1   -   -   273   -   -   274 
Distributions  -   -   -   -   -   -   (101)  (101)
Net income  -                 -   -   -   -   4,188   53   4,241 
Balances at March 31, 2022  335,558,206   336   2,717            2   138,064        (93,204)     (1,611)         43,587 

The above statements do not show columns for the shares and par value of Undesignated

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

amounts)

(unaudited)
Nine months ended September 30, 2022
Common stockCommon stock
subscribed but
 not issued		Additional
paid-in
capital		Accumulated
deficit		Non-
controlling
interests		Total
stockholders’
equity
SharesPar valueSharesAmount
Balances at January 1, 2022334,030,348$334 —$— $134,920 $(97,392)$(1,563)$36,299 
Exercise of stock options55,00010 10 
Cashless exercise of stock options200,000— 
Cashless exercise of warrants234,961— 
Release of shares under stock grants357,077— 
Common stock subscribed but not issued74,58141 41 
Shares issued as purchase consideration - business acquisition2,343,7503 1,497 1,500 
Purchase of minority interests in certain of the Company’s subsidiaries(2,165)165 (2,000)
Obligations settled with common stock906,3931 636 637 
Conversion of promissory notes to stock1,142,8581 399 400 
Distributions to non-controlling interests(224)(224)
Stock-based compensation6,355 6,355 
Net income8,717 142 8,859 
Balances at September 30, 2022339,270,387$339 74,581$41 $141,652 $(88,675)$(1,480)$51,877 
Nine months ended September 30, 2021
Common stockCommon stock
subscribed but
 not issued		Additional
paid-in
capital		Accumulated
deficit		Non-
controlling
interests		Total
stockholders’
equity
SharesPar valueSharesAmount
Balances at January 1, 2021314,418,812$314 11,413$5 $112,975 $(104,617)$(577)$8,100 
Issuance of subscribed shares11,413(11,413)(5)5 — 
Exercise of stock options178,88531 31 
Exercise of warrants980,0621 92 93 
Release of shares under stock grants152,094102,20495 138 233 
Issuance of standalone warrants832 832 
Issuance of warrants with stock655 655 
Conversion of debentures payable to equity4,610,6455 1,352 1,357 
Conversion of promissory notes to equity10,042,12510 3,337 3,347 
Common stock issued to settle obligations71,69154 54 
Common stock issued to purchase property and equipment750,0001 704 705 
Obligations settled with common stock409,3081 374 375 
Common stock returned to the Company(79,815)(10)(10)
Equity issuance costs(387)(387)
Acquisition of interest in subsidiary100,00094 871 (975)(10)
Distributions to non-controlling interests(301)(301)
Stock-based compensation6,208 6,208 
Net income13,733 289 14,022 
Balances at September 30, 2021331,545,220$332 202,204$189 $127,231 $(90,884)$(1,564)$35,304 
See accompanying notes to the unaudited condensed consolidated financial statements.

5

7

MariMed Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands; unaudited)thousands)
(unaudited)
Nine months ended
September 30,
20222021
Cash flows from operating activities:
Net income attributable to common stockholders$8,717 $13,733 
Net income attributable to noncontrolling interests142 289 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of property and equipment2,469 1,499 
Amortization of intangible assets854 518 
Stock-based compensation6,396 7,152 
Amortization of standalone warrant issuances— 776 
Amortization of warrants attached to debt— 539 
Amortization of beneficial conversion feature— 177 
Amortization of original issue discount— 52 
Bad debt expense54 1,855 
Obligations settled with common stock637 375 
Loss on obligations settled with equity— 3 
Gain on sale of investment— (309)
Loss on changes in fair value of investments930 937 
Other investment income(954)— 
Changes in operating assets and liabilities:
Accounts receivable, net(4,856)(3,886)
Deferred rents receivable111 192 
Inventory(4,215)(4,163)
Other current assets(1,973)(1,641)
Other assets(113)(17)
Accounts payable2,372 2,098 
Accrued expenses and other(193)8,069 
Income taxes payable(4,804)— 
Net cash provided by operating activities5,574 28,248 
Cash flows from investing activities:
Purchases of property and equipment(9,985)(14,649)
Business acquisitions, net of cash acquired(12,746)— 
Advances toward future business acquisitions(800)— 
Purchases of cannabis licenses(330)(638)
Proceeds from sale of investment— 1,475 
Proceeds from notes receivable130 407 
8
Table of Contents

  2022  2021 
  Three Months Ended
March 31,		 
  2022  2021 
Cash flows from operating activities:        
Net income attributable to MariMed Inc. $4,188  $4,220 
Net income attributable to noncontrolling interests  53   90 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation  702   462 
Amortization of intangibles  140   177 
Amortization of stock grants  2   5 
Amortization of option grants  2,469   295 
Amortization of stand-alone warrant issuances  -   56 
Amortization of warrants attached to debt  -   539 
Amortization of beneficial conversion feature  -   177 
Amortization of original issue discount  -   52 
Bad debt expense  14   1,025 
Fees paid with stock  274   - 
Loss on obligations settled with equity  -   1 
Gain (loss) on change in fair value of investment  (48)  45 
Other investment income  

(954

)  - 
Changes in operating assets and liabilities:        
Accounts receivable, net  (1,810)  (1,691)
Deferred rents receivable  92   64 
Inventory  (2,470)  (624)
Other current assets  (739)  (434)
Other assets  -   (17)
Accounts payable  3,212   1,035 
Accrued expenses  217   (129)
Income taxes payable  3,592   1,204 
Sales and excise taxes payable  (443)  233 
Operating lease payments, net  (6)  (4)
Finance lease interest payments  7   2 
Other current liabilities  (2)  (24)
Net cash provided by operating activities  8,490   6,759 
         
Cash flows from investing activities:        
Purchase of property and equipment  (4,015)  (2,308)
Purchase of cannabis licenses  (305)  (638)
Investment in Green Growth Group, Inc.  (100)  - 
Interest on notes receivable  43   69 
Net cash used in investing activities  (4,377)  (2,877)
         
Cash flows from financing activities:        
Proceeds from issuance of preferred stock  -   23,000 
Equity issuance costs  -   (387)
Repayments of promissory notes  (2)  (15,801)
Payments on mortgages  (174)  (1,157)
Proceeds from exercise of options  3   - 
Proceeds from exercise of warrants  -   8 
Due to related parties  -   (132)
Finance lease principal payments  (55)  (10)
Distributions  (101)  (83)
Net cash (used in) provided by financing activities  (329)  5,438 
         
Net change to cash and cash equivalents  3,784   9,320 
Cash and cash equivalents at beginning of period  29,683   2,999 
Cash and cash equivalents at end of period $33,467  $12,319 
         
Supplemental disclosure of cash flow information:        
Cash paid for interest $302  $1,092 
Cash paid for income taxes $68  $14 
         
Non-cash activities:        
Finance lease right-of-use assets and liabilities $514  $- 
Conversion of promissory notes $400  $1,010 
Conversions of debentures payable $-  $1,356 
Operating lease right-of-use assets and liabilities $-  $466 
Common stock issued to settle obligations $-  $30 
Issuance of common stock associated with subscriptions $-  $5 

MariMed Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
Nine months ended
September 30,
20222021
Net cash used in investing activities(23,731)(13,405)
Cash flows from financing activities:
Proceeds from issuance of preferred stock— 23,000 
Equity issuance costs— (387)
Proceeds from issuance of promissory notes— 35 
Principal payments of mortgages and promissory notes(1,033)(16,248)
Proceeds from mortgages3,000 2,700 
Proceeds from exercise of stock options10 31 
Proceeds from exercise of warrants— 93 
Repayment of loans from related parties— (1,158)
Principal payments of finance leases(166)(26)
Redemption of minority interests(2,000)— 
Distributions(224)(301)
Net cash (used in) provided by financing activities(413)7,739 
Net (decrease) increase in cash and cash equivalents(18,570)22,582 
Cash and equivalents, beginning of year29,683 2,999 
Cash and cash equivalents, end of period$11,113 $25,581 
Supplemental disclosure of cash flow information:
Cash paid for interest$1,120 $1,705 
Cash paid for income taxes$12,582 $419 
Non-cash activities:
Stock issued as purchase consideration$1,500 $— 
Conversion of promissory notes$400 $3,346 
Conversion of debentures payable$— $1,356 
Acquisition of interest in subsidiary$— $975 
Purchases of property and equipment with stock$— $705 
Operating lease right-of-use assets and liabilities$378 $466 
Finance lease right-of-use assets and liabilities$781 $— 
Common stock issued to settle obligations$— $51 
Return of stock$— $10 
Issuance of common stock associated with subscriptions$— $5 
Cashless exercise of warrants$235 $180 
Cashless exercise of stock options$200 $53 
See accompanying notes to the unaudited condensed consolidated financial statements.

6

9

MariMed Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION

(unaudited)
(1) BASIS OF BUSINESSPRESENTATION

Business

MariMed Inc. (the(“MariMed” or the “Company”) is a multi-state operator in the United States cannabis industry. The CompanyMariMed develops, operates, manages, and optimizes over 300,000 square feet of state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medicinalmedical and recreationaladult use cannabis. The CompanyMariMed also licenses its proprietary brands of cannabis and hemp-infused products, along with other top brands, in several domestic markets and overseas.

Upon its entry into the cannabis industry in 2014, the Company was an advisory firm that procured state-issued cannabis licenses on behalf of its clients, developed cannabis facilities which it leased to these newly-licensed companies, and provided industry-leading expertise and oversight in all aspects of their cannabis operations. The Company also provided its clients with ongoing regulatory, accounting, real estate, human resources, and administrative services.

Over the last few years, the Company made the strategic decision to transition from a consulting business to a direct owner and operator of cannabis licenses in high-growth states. Core to this transition is the acquisition and consolidation of the Company’s clients (the “Consolidation Plan”). Among several benefits, the Consolidation Plan would present a simpler, more transparent financial picture of the full breadth of the Company’s efforts, with a clearer representation of the revenues, earnings, and other financial metrics the Company has generated for its clients. The Company has played a key role in the successes of these entities, from the securing of their cannabis licenses, to the development of facilities that are models of excellence, to funding their operations, and to providing operational and corporate guidance. Accordingly, the Company believes it is well suited to own these businesses and manage the continuing growth of their operations.

To date, the Company’s acquisition and consolidation of its cannabis-licensed clients’ retail businesses in Illinois and retail and wholesale businesses in Massachusetts have been completed. In April 2022, the acquisition of its client’s wholesale business in Maryland, and a third-party wholesale business in Illinois were consummated. The acquisitions of clients’ retail and wholesale businesses in Nevada and Delaware are at various stages of completion and subject to each state’s laws governing the ownership transfer of cannabis licenses and other closing conditions. Delaware will require a modification of current cannabis ownership laws to permit for-profit ownership, which is expected to occur when the state legalizes recreational adult-use cannabis. Until the law changes and the acquisition is approved, the Company continues to generate revenue from rental income, management fees, and licensing royalties.

In addition to the aforementioned acquisitions of its cannabis-licensed clients, in February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio, for which it had previously applied. The Company is awaiting the final verification process to be completed by the state before commencing cannabis operations in this state.

The Company’s transition to a fully integrated muti-state cannabis operator (“MSO”) is part of a strategic growth plan (the “Strategic Growth Plan”) it is implementing to drive its revenues and profitability. The Strategic Growth Plan has four components: (i) complete the Consolidation Plan, (ii) increase revenues in existing states, by spending capital to increase the Company’s cultivation and production capacity, and develop additional assets within those states, (iii) expand the Company’s footprint in additional legal cannabis states through new applications and acquisitions of existing cannabis businesses, and (iv) optimize the Company’s brand portfolio and licensing revenue by expanding into additional states with legal cannabis programs.

The Company has created its own brands of cannabis flower, concentrates, and precision-dosed products utilizing proprietary strains and formulations. These products are developed by the Company in cooperation with state-licensed operators who meet the Company’s strict quality standards, including all natural—not artificial or synthetic—ingredients. The Company licenses its brands and product formulations only to certified manufacturing professionals who follow state cannabis laws and adhere to the Company’s precise scientific formulations and product recipes.

The Company markets its high-quality cannabis flowers and concentrates under the award-winning1 Nature’s Heritage brand; chewable tablets under the brand names Kalm Fusion and K Fusion; all natural fruit chews under the award-winning1 Betty’s Eddies brand; brownies, cookies, and other social sweets under the Bubby’s Baked brand; and powder drink mixes under the Vibations: High + Energy brand. The Company’s brands have been top-selling products in Maryland and Massachusetts.2 The Company intends to introduce additional product lines under these brands in the foreseeable future.

The Company also has strategic alliances with prominent brands. The Company has partnered with renowned ice cream maker Emack & Bolio’s® to create a line-up of cannabis-infused vegan and dairy ice cream. Additionally, the Company has secured distribution rights for the Binske® line of cannabis products crafted from premium artisan ingredients, the Healer line of medical full-spectrum cannabis tinctures, and the clinically-tested medicinal cannabis strains developed in Israel by global medical cannabis research pioneer Tikun Olam.

The Company was incorporated in Delaware in January 2011 under the name Worlds Online Inc. The Company’s stock is quoted on the OTCQX market under the ticker symbol MRMD. In April 2022, the Company applied to list its shares of common stock on the Canadian Securities Exchange, which application is currently pending.

1 Awards won by the Company’s Betty’s Eddies brand include LeafLink 2021 Best Selling Medical Product, Reddit Sparkie 2021 Best Edible, Respect My Region 2021 Hottest Edible, LeafLink 2020 Industry Innovator, and Explore Maryland Cannabis 2020 Edible of the Year. Awards won by the Company’s Nature’s Heritage brand include the Cultivators Cup 2021 Silver Medal and the High Times Cannabis Cup 2021 Bronze Medal.

2 Source: LeafLink Insights 2020.

7
markets.


NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been preparedinclude all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformityaccordance with accounting principles generally accepted in the United States of America (“GAAP”).

In accordance with GAAP, interim

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

Interim results are not required to contain all of the disclosures normally required in annual financial statements. In addition, the results of operations of interim periods may not necessarily be indicative of the results of operations to be expected for the full year. Accordingly, thesefiscal year or any future interim financial statementsperiod. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s most recent audited annual financial statements and accompanying notesAnnual Report on Form 10-K for the year ended December 31, 2021.2021 (the “Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2022.

Certain reclassifications, maynot affecting previously reported net income or cash flows, have been made to prior periods’ presentationthe previously issued financial statements to conform to the current period presentation. These reclassifications had

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements included in the Annual Report. There were no effect on previously reported incomematerial changes to the significant accounting policies during the three- or cash flows.nine-month periods ended September 30, 2022.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of MariMed Inc.and its wholly- and majority-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Noncontrolling interests represent third-party minority ownership interests in the Company’s majority-owned consolidated subsidiaries. Net income attributable to noncontrolling interests is reported in the condensed consolidated statements of operations, and the following majority-owned subsidiaries at March 31, 2022:value of minority-owned interests is presented as a component of equity within the condensed consolidated balance sheets.

SCHEDULE OF MAJORITY OWNED SUBSIDIARIES

Subsidiary:Percentage
Owned
MariMed Advisors Inc.100.0%
Mia Development LLC89.5%
Mari Holdings IL LLC100.0%
Mari Holdings MD LLC97.4%
Mari Holdings NJ LLC100.0%
Mari Holdings NV LLC100.0%
Mari Holdings Metropolis LLC70.0%
Mari Holdings Mt. Vernon LLC100.0%
Mari Mfg LLC100.0%
Hartwell Realty Holdings LLC100.0%
iRollie LLC100.0%
ARL Healthcare Inc.100.0%
KPG of Anna LLC100.0%
KPG of Harrisburg LLC100.0%
MariMed OH LLC100.0%
MariMed Hemp Inc.100.0%
Meditaurus LLC100.0%

Intercompany accounts and transactions have been eliminated.

Use of Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts withinof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and disclosures thereof.the reporting amounts of revenue and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements include accounting for business combinations, inventory valuations, assumptions used to determine the fair value of stock-based compensation, and intangible assets and goodwill. Actual results could differ from these estimates or assumptions.those estimates.

10
Cash and Cash Equivalents

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

The Company had $0.1 million of cash held in escrow at September 30, 2022. At both March 31, 2022 and December 31, 2021, the Company had cash of approximately $5,101,000 was$5.1 million held in escrow, primarily comprised of a $5,000,000 which $5.0 million was an escrow deposit in connection with the acquisition of Kind Therapeutics USA LLC as further discussed in Note 3 – Acquisitions.Kind.

Fair Value of Financial Instruments

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

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

Level 1. Level 1 applies to assets or liabilities for which there are maintained with recognized financial institutions locatedquoted prices in active markets for identical assets or liabilities.

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

Level 3. Level 3 applies to assets or liabilities for which there are unobservable inputs to the normal coursevaluation methodology that are significant to the measurement of business, the Company may carry balances with certain financial institutions that exceed federally insured limits. fair value of the assets or liabilities.

Recent Accounting Pronouncements

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


(2) ACQUISITIONS

Kind

In December 2021, the Company entered into a membership interest purchase agreement with the members of Kind to acquire 100% of the equity ownership of Kind in exchange for $13.5 million payable in cash (subject to certain adjustments) and $6.5 million payable by the issuance of four-year 6.0% promissory notes to the members of Kind, secured by a first priority lien on the Company’s property in Hagerstown, MD (collectively, the “Kind Consideration”). Kind was the Company's client in Maryland that held licenses for the cultivation, production, and dispensing of medical cannabis. Upon execution of the membership interest purchase agreement, the Company had deposited $5.0 million into escrow as a contract down payment.

In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the acquisition was completed on the Kind Acquisition Date (the “Kind Acquisition”). Following the Kind Acquisition, litigation between the Company and the members of Kind was dismissed (see Note 18).

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

11
The Kind Acquisition has been accounted for as a business combination and the financial results of Kind have been included in the Company’s condensed consolidated financial statement for the periods subsequent to the Kind Acquisition Date. The Company’s financial results for the three months ended September 30, 2022 include $2.6 million of revenue and a net loss of $0.2 million attributable to Kind. The Company's financial results for the nine months ended September 30, 2022 include $4.3 million of revenue and a net loss of $0.5 million attributable to Kind. A summary of the preliminary allocation of Kind Consideration to the acquired assets, identifiable intangible assets and certain assumed liabilities is as follows (in thousands):

Fair value of consideration transferred:
Cash consideration:
Cash paid at closing$10,128 
Release of escrow2,444 
Severance paid from escrow556 
Less cash acquired(2,310)
Net cash consideration10,818 
Note payable5,634 
Write-off accounts receivable658 
Write-off of deferred accounts receivable842 
Total fair value of consideration transferred$17,952 
Fair value of assets acquired and (liabilities assumed):
Current assets, net of cash acquired$5,047 
Property and equipment622 
Intangible assets:
Tradename and trademarks2,041 
Licenses and customer base4,700 
Non-compete agreements42 
Goodwill6,011 
Current liabilities(511)
Fair value of net assets acquired$17,952 

The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the acquired tradename/trademarks, licenses/customer base, and non-compete intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of new markets, products and customers and its outcome through key assumptions driving asset values, including sales growth, royalty rates and other related costs.

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

Concurrent with entering into the Kind membership purchase agreement, the Company entered into a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ownership interest in (i) Mari Holdings MD LLC (“Mari-MD”), the Company’s majority-owned subsidiary that owns production and retail cannabis facilities in Hagerstown, MD and Annapolis, MD, and (ii) Mia Development LLC (“Mia”), the Company’s majority-owned subsidiary that owns production and retail cannabis facilities in Wilmington, DE. Upon the dismissal in September 2022 of the derivative claims in the DiPietro lawsuit (see Note 18), the Company paid the aggregate purchase consideration of $2.0 million, and the transaction was completed, increasing the Company’s ownership of Mari-MD and Mia to 99.7% and 94.3%, respectively.

Green Growth Group Inc.

In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the equity ownership of Green Growth Group Inc. (“Green Growth”), an entity that holds a craft cultivation and production cannabis license issued by the
12
Illinois Department of Agriculture, in exchange for cash of $1.9 million and shares of the Company’s common stock valued at $1.5 million. Concurrently, the Company made a good faith deposit of $100,000.

In April 2022, the Illinois Department of Agriculture approved the Company’s acquisition of Green Growth, and the purchase transaction (the “Green Growth Acquisition”) was completed on May 5, 2022 (the “Green Growth Acquisition Date”). The Company paid the remaining $1.8 million in cash and issued 2,343,750 shares of common stock to the sellers on the Green Growth Acquisition Date. With this license, the Company can cultivate up to 14,000 square feet of cannabis flowers and produce cannabis concentrates. The Company believes that the acquisition of this cannabis license will allow it to be vertically integrated in Illinois by growing cannabis and producing cannabis products that can be distributed and sold at the Company-owned Thrive dispensaries and sold into the robust Illinois wholesale cannabis marketplace.

The Company has allocated the purchase price to its licenses/customer base intangible asset on a preliminary basis. The Company recorded approximately $85,000 and $142,000 of amortization expense in the three and nine months ended September 30, 2022, respectively, for the intangible asset acquired based on an estimated ten-year life for such asset.

Meditaurus LLC

In 2019, the Company had acquired a 70.0% ownership interest in Meditaurus in exchange for stock and cash aggregating $2.8 million. In September 2021, the Company acquired the remaining 30.0% ownership interest of Meditaurus LLC, a developer of CBD products sold under the Florance brand name (“Meditaurus”), in exchange for 100,000 shares of the Company’s common stock, valued at approximately $94,000, and $10,000 in cash.

The carrying value of the noncontrolling interest of approximately $975,000 was eliminated on the date such interest was acquired, and as there was no change in control of Meditaurus from this transaction, the resulting gain on bargain purchase was recognized in Additional paid-in capital in the condensed consolidated balance sheet. As part of this transaction, the initial purchase agreement was amended, eliminating all future license fees and payments to the prior owners of Meditaurus. The Company has discontinued sales of its Meditaurus products.

Pending Transactions

Beverly Asset Purchase

In November 2021, the Company entered into an asset purchase agreement to acquire the cannabis license, property lease, and other assets and rights of, and to assume certain liabilities and operating obligations associated with a cannabis dispensary that had been operating in Beverly, MA. The purchase price is comprised of 2,000,000 shares of the Company’s common stock and $5.1 million in cash, with the cash amount to be paid on a monthly basis as a percentage of the business’ monthly gross sales.

The purchase was contingent upon the approval of the Massachusetts Cannabis Control Commission (the "State") for a license and the city transfer of the host community agreement to MariMed. The State has approved the transfer but the Company has not yet received approval of the host community agreement transfer. Upon final inspection by the State, the dispensary will be able to open. The Company expects this to occur in early 2023. Concurrent with the execution of this agreement, the parties entered into a consulting agreement under which the Company provides certain oversight services related to the development, staffing, and operation of the business in exchange for a monthly fee.

The Harvest Foundation LLC

In 2019, the Company entered into a purchase agreement to acquire 100% of the ownership interests of The Harvest Foundation LLC (“Harvest”), the holder of a cannabis cultivation license in the state of Nevada. The acquisition is conditioned upon state regulatory approval of the transaction and other closing conditions. The regulatory approval process for license transfers in Nevada has experienced lossessignificant delays as a result of multiple factors including the impact of Covid. Additionally, the progress of this acquisition has been delayed as a result of actions taken by the Nevada Cannabis Control Board (“CCB”) relating to regulatory operating violations by Harvest and its current ownership. Harvest is in process of negotiating a settlement with the CCB to resolve these violations which will allow it to proceed with the sale. In October 2022, the CCB issued an order approving the placement of a receiver to oversee Harvest and its licenses. This followed the motion of a creditor of Harvest for such appointment which was granted by the Eighth Judicial District Court, Clark County Nevada, subject to CCB approval. The Company has had exchanges with the receiver in connection with
13
potentially moving forward with the acquisition. The Company is monitoring the status of Harvest matters which will require adjustments to the terms of the purchase agreement if the Company determines to proceed with the acquisition.

The original purchase agreement provided for a purchase price comprised of the issuance of (i) 1,000,000 shares of the Company’s common stock in the aggregate to the two owners of Harvest, which were issued as a good faith deposit upon execution of the purchase agreement, (ii) $1.2 million of the Company’s common stock at closing, based on balancesthe closing price of the common stock on the day prior to regulatory approval of the transaction, which have not been issued, and (iii) warrants to purchase 400,000 shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock on the day prior to regulatory approval of the transaction, which have not been issued. The issued shares were recorded at par value. Such shares are restricted and are to be returned to the Company in excessthe event the transaction does not close.

If the Company determines to proceed with the acquisition on terms acceptable to it, upon CCB approval of such limitsthe transfer, and management believes the fulfillment of other closing conditions, if achieved, the ownership of Harvest will be transferred to the Company, and the operations of Harvest will begin to be consolidated into the Company’s financial statements. There is no assurance that the Company will determine to proceed with the acquisition of Harvest, and if it does, that the closing conditions to the Company’s acquisition of Harvest, including regulatory approval, will be achieved or that the acquisition will be consummated.


(3) EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted net earnings per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period, unless the effect is antidilutive.

The calculations of shares used to compute net earnings per share were as follows (in thousands):

Three months endedNine months ended
September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Weighted average shares outstanding - basic339,025 329,454 337,111 324,340 
Potential dilutive common shares42,046 49,480 42,757 45,864 
Weighted average shares outstanding - diluted381,071 378,934 379,868 370,204 


(4) DEFERRED RENTS RECEIVABLE

The Company is the lessor under operating leases which contain escalating rents over time, rent holidays, options to renew, requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based on a percentage of monthly tenant revenues. The Company is not exposed to significant risks in that regard.the lessor under any finance leases.

Accounts Receivable

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

The Company provides creditrecognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term. Differences between amounts received and amounts recognized are recorded in Deferred rents receivable in the condensed consolidated balance sheets. Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.

The Company leases the following owned properties:

•Delaware – a 45,000 square foot cannabis cultivation, processing, and dispensary facility which is leased to its clientscannabis-licensed client under a triple net lease that expires in 2035.
•Maryland – a 180,000 square foot cultivation and processing facility that expires in 2037. This facility had been leased to Kind prior to the Kind Acquisition Date.
•Massachusetts – a 138,000 square foot industrial property of which approximately half of the available square footage is leased to a non-cannabis manufacturing company under a lease that expires in February 2023.
14

The Company subleases the following properties:

•Delaware – a 4,000 square foot cannabis dispensary which is subleased to its cannabis-licensed client under a sublease expiring in April 2027.
•Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility that is subleased to its cannabis-licensed client. The sublease expires in March 2030, with an option to extend the term for three additional five-year periods. The Company intends to develop the remaining space into a processing facility.
•Delaware – a 12,000 square foot cannabis production facility with offices which is subleased to its cannabis-licensed client. The sublease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.

The Company received rental payments aggregating $0.4 million and $2.4 million in the formthree and nine months ended September 30, 2022, respectively, and $1.2 million and $3.6 million in the three and nine months ended September 30, 2021, respectively. Revenue from these payments was recognized on a straight-line basis and aggregated $0.4 million and $2.3 million in the three and nine months ended September 30, 2022, respectively, and $1.1 million and $3.4 million in the three and nine months ended September 30, 2021, respectively.

Future minimum rental receipts for non-cancellable leases and subleases as 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,September 30, 2022 were as well as prevailing economic and market conditions and other factors. Based on such evaluations, the Company maintained a reserve of approximately $follows (in thousands):

Year ending December 31,
Remainder of 2022$315 
20231,170 
20241,196 
20251,199 
20261,051 
Thereafter6,131 
$11,062 
41.4

(5) NOTES RECEIVABLE

million
Notes receivable, including accrued interest, at both March 31,September 30, 2022 and December 31, 2021. For further discussion2021 consisted of the following (in thousands):
September 30,
2022		December 31,
2021
First State Compassion Center (initial note)$348 $403 
First State Compassion Center (secondary note)8,080 7,845 
Healer LLC866 866 
Total notes receivable9,294 9,114 
Notes receivable, current portion134 127 
Notes receivable, less current portion$9,160 $8,987 

First State Compassion Center

The Company’s cannabis-licensed client in Delaware, First State Compassion Center (“FSCC”), issued a 10-year promissory note to the Company in May 2016 for $0.7 million, bearing interest at a rate of 12.5% per annum and maturing in April 2026, as amended (the “FSCC Initial Note”). The monthly payments on the FSCC Initial Note approximate $10,000. At September 30, 2022 and December 31, 2021, the current portions of the FSCC Initial Note were approximately $82,000 and $75,000, respectively, and were included in Notes receivable, reserves, please refercurrent, in the condensed consolidated balance sheets.

15
In December 2021, the Company converted financed trade accounts receivable balances from FSCC aggregating $7.8 million into notes receivable, whereby FSCC issued promissory notes aggregating $7.8 million to the Company (the “FSCC Secondary Notes”). The FSCC Secondary Notes bear interest of 6.0% per annum and mature in December 2025. FSCC is required to make periodic payments of principal and interest throughout the term of the FSCC Secondary Notes. At September 30, 2022, the FSCC Secondary Notes balance included approximately $54,000 of unpaid accrued interest. The increase in the FSCC Secondary Notes in the nine months ended September 30, 2022 was attributable to the accreted interest, which increases the value of such notes.

Healer LLC

In March 2021, the Company was issued a promissory note in the principal amount of approximately $0.9 million from Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak (“Healer”). The principal balance of the note represents previous loans extended to Healer by the Company of $0.8 million, plus accrued interest through the revised promissory note issuance date of approximately $94,000 (the “Revised Healer Note”). The Revised Healer Note 18 – Bad Debts bears interest at a rate of 6.0% per annum and requires quarterly payments of interest through the Bankruptcy Claim sectionApril 2026 maturity date.

The Company has the right to offset any licensing fees payable by the Company to Healer in the event Healer fails to make any payment when due. In March 2021, the Company offset approximately $28,000 of licensing fees payable to Healer against the principal balance of the Revised Healer Note, 20 – Commitmentsreducing the principal amount to approximately $866,000. Of the outstanding Revised Healer Note balance at both September 30, 2022 and Contingencies.

8
December 31, 2021, approximately $52,000 was current.


High Fidelity

In August 2021, a $250,000 loan to High Fidelity Inc., an entity with cannabis operations in the state of Vermont, which bore interest at a rate of 10.0% per annum, was repaid in full.


(6) INVENTORY
Inventory

Inventory is carried at September 30, 2022 and December 31, 2021 consisted of the lowerfollowing (in thousands):

September 30,
2022		December 31,
2021
Plants$2,585 $1,015 
Ingredients and other raw materials2,582 262 
Work-in-process8,071 4,661 
Finished goods5,071 3,830 
$18,309 $9,768 


(7) INVESTMENTS

The Company’s investments at September 30, 2022 and December 31, 2021 were all classified as current and were comprised of costthe following (in thousands):
September 30,
2022		December 31,
2021
Flowr Corp. (formerly Terrace Inc.)$78 $251 
WM Technology Inc.196 — 
$274 $251 

The Company did not have any noncurrent investments at September 30, 2022 or net realizable value,December 31, 2021.

16
Flowr Corp. (formerly Terrace Inc.)

In December 2020, Terrace Inc., a Canadian cannabis entity in which the Company had an ownership interest of 8.95% (“Terrace”), was acquired by Flowr Corp. (TSX.V: FLWR; OTC: FLWPF), a Toronto-headquartered cannabis company with operations in Canada, Europe, and Australia (“Flowr”). In accordance with the cost being determined on a first-in, first-out (FIFO) basis. purchase agreement for this transaction, each shareholder of Terrace received 0.4973 shares in Flowr for each Terrace share held (the “Flowr Investment”).

The Company allocates a certain percentage of overhead cost to its manufactured inventory; such allocationFlowr Investment is based on square footage and other industry-standard criteria. The Company reviews physical inventory for obsolescence and/or excess and will record a reserve if necessary. As of the date of this report, no reserve was deemed necessary.

Investments

Investments are comprised of equity holdings in public and private companies. These investments are recorded at fair value, with changes in fair value recorded as a component of Other (expense) income, net, in the condensed consolidated statements of operations. The Company recorded losses of $0.1 million and $0.2 million in the three and nine months ended September 30, 2022, respectively, and losses of $0.5 million and $0.9 million in of the three- and nine-month periods ended September 30, 2021, respectively. These amounts represent the changes in the fair value of the Flowr Investment in the respective periods.


WM Technology Inc. (formerly MembersRSVP LLC)

In January 2021, the Company and MembersRSVP LLC, an entity that develops cannabis-specific software (“MRSVP”) in which the Company owned a 23.0% membership interest, entered into an agreement under which the Company returned membership interests comprising 11.0% ownership in MRSVP in exchange for a release of the Company from any further obligation to make any incremental investments or payments to MRSVP, and certain other non-monetary consideration.

In addition to the reduction of the Company’s ownership interest to 12.0%, the Company relinquished its right to appoint a member to the board of MRSVP. As a result, the Company no longer had the ability to exercise significant influence over MRSVP, and accordingly, as of January 1, 2021, the Company discontinued accounting for this investment under the equity method.

In September 2021, MRSVP sold substantially all of its assets pursuant to an asset purchase agreement. In connection with this transaction, the Company received cash proceeds of $1.5 million, which represented the Company’s pro rata share of the cash consideration received by MRSVP at the closing of the transaction. The cash proceeds reduced the Company’s MRSVP investment balance to zero and resulted in a gain of $0.3 million, which gain was reported as a component of Other (expense) income, net.

As an ongoing member of MRSVP, the Company was entitled to its pro rata share of any additional consideration received by MRSVP pursuant to the asset purchase agreement, which could include securities or other forms of non-cash or in-kind consideration and holdback amounts, if and when received and distributed by MRSVP. In February 2022, the Company received 121,968 shares of common stock of WM Technology Inc. (Nasdaq: MAPS), a technology and software infrastructure provider to the cannabis industry, which represented the Company’s pro rata share of the additional consideration received by MRSVP pursuant to the asset purchase agreement. The Company recognized losses of $0.2 million and $0.8 million in the three and nine months ended September 30, 2022, respectively, which are included as components of Other (expense) income, net, in the condensed consolidated statements of operations for those periods. This amount represents the change in the fair value of the MAPS shares in the respective periods.


17
(8) PROPERTY AND EQUIPMENT, NET

The Company’s property and equipment, net, at September 30, 2022 and December 31, 2021 was comprised of the following (in thousands):
September 30,
2022		December 31,
2021
Land$4,450 $4,450 
Buildings and building improvements39,497 35,231 
Tenant improvements17,005 9,745 
Furniture and fixtures1,986 1,888 
Machinery and equipment9,689 7,221 
Construction in progress7,084 10,569 
79,711 69,104 
Less: accumulated depreciation(9,315)(6,954)
Property and equipment, net$70,396 $62,150 

The amounts reported as construction in progress primarily relate to the development of facilities in Annapolis, MD, Beverly, MA and Mt. Vernon, IL.


(9) INTANGIBLE ASSETS AND GOODWILL

The Company’s acquired intangible assets at September 30, 2022 consisted of the following (in thousands):

Weighted
average
amortization
period (years)		 CostAccumulated
amortization		Net
carrying
value
Tradename and trademarks3.00$2,041 $283 $1,758 
Licenses and customer base8.268,100 422 7,678 
Non-compete agreements2.0042 9 33 
7.18$10,183 $714 $9,469 

Estimated future amortization expense for the Company’s intangible assets at September 30, 2022 was as follows:

Year ending December 31,
Remainder of 2022$428 
20231,712 
20241,698 
20251,239 
20261,011 
Thereafter3,381 
Total$9,469 

The changes in the carrying value of the Company’s goodwill in the three months ended September 30, 2022 and 2021 were as follows (in thousands):
20222021
Balance at January 1,$2,068 $2,068 
Kind Acquisition6,011 — 
Balance at September 30,$8,079 $2,068 


18
(10) MORTGAGES AND NOTES PAYABLE

The Company’s mortgages and notes payable are reported in the aggregate on the Company’scondensed consolidated balance sheet,sheets under the captions Mortgages and notes payable, current, and Mortgages and notes payable, net of current.

Mortgages

The Company’s mortgage balances, including accrued interest, at September 30, 2022 and December 31, 2021 were comprised of the following (in thousands):
September 30,
2022		December 31,
2021
Bank of New England – New Bedford, MA and Middleboro, MA properties$12,231 $12,499 
Bank of New England – Wilmington, DE property1,374 1,463 
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties759 778 
DuQuoin State Bank – Metropolis, IL property2,541 2,658 
Du Quoin State Bank - Mt. Vernon, IL property2,990 — 
South Porte Bank – Mt. Vernon, IL property808 816 
Total mortgages payable20,703 18,214 
Less: Mortgages payable, current(1,485)(1,400)
Mortgages payable, less current portion$19,218 $16,814 

The Company maintains an amended and restated mortgage agreement with changesthe Bank of New England with an interest rate of 6.5% per annum which matures in August 2025 (the “Amended BNE Mortgage”). The Amended BNE Mortgage is secured by the Company’s properties in New Bedford, MA and Middleboro, MA. Proceeds from the Amended BNE Mortgage were used to pay down a previous mortgage of $4.8 million with the Bank of New England on the New Bedford property, and $7.2 million of outstanding promissory notes as discussed below. The current portions of the outstanding principal balance under the Amended BNE Mortgage at September 30, 2022 and December 31, 2021 were approximately $376,000 and $358,000, respectively.

The Company maintains a second mortgage with Bank of New England that is secured by the Company’s property in Wilmington, DE (the “BNE Delaware Mortgage”). The mortgage matures in 2031, with monthly principal and interest payments. The interest rate is 5.25% per annum, with the rate adjusting every five years to the then-prime rate plus 1.5%, with a floor of 5.25% per annum. The next interest rate adjustment will occur in September 2026. The current portions of the outstanding principal balance under the BNE Delaware Mortgage at September 30, 2022 and December 31, 2021 were approximately $125,000 and $120,000, respectively.

The Company maintains a mortgage with DuQuoin State Bank (“DSB”) in connection with its purchase of properties in Anna, IL and Harrisburg, IL (the “DuQuoin Mortgage”). On May 5 of each year, the DuQuoin Mortgage becomes due unless it is renewed for another year at a rate determined by DSB’s executive committee. The DuQuoin Mortgage was renewed in May 2021 at a rate of 6.75% per annum. The current portions of the outstanding principal balance under the DuQuoin Mortgage at September 30, 2022 and December 31, 2021 were approximately $35,000 and $33,000, respectively.

In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $3 million loan agreement and mortgage with Du Quoin State Bank secured by property owned in Mt. Vernon, Illinois, which the Company is developing into a grow and production facility (the "DuQuoin Mt. Vernon Mortgage"). The DuQuoin Mt. Vernon Mortgage has a 20-year term and initially bears interest at the rate of 7.75%, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75%). The proceeds of this loan are being utilized for the build-out of the property and other working capital needs. The current portion of the DuQuoin Mt. Vernon Mortgage was approximately $66,000 at September 30, 2022.

In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, IL. The purchase price consisted of 750,000 shares of the Company’s common stock, which were valued at $705,000 on the date of the transaction, and payoff of the seller’s remaining mortgage balance of $1.6 million. In connection with this purchase, the Company entered into a second mortgage agreement with DSB for $2.7 million that matures in July 2041 and which initially bears interest at a rate of 6.25% per annum (the “DuQuoin Metropolis Mortgage”). The interest rate on the DuQuoin Metropolis Mortgage is adjusted each year based on a certain interest rate index plus a margin. As part of this transaction, the seller was provided with a 30.0% ownership interest in Mari Holdings Metropolis LLC (“Metro”), the
19
Company’s subsidiary that owns the property and holds the related mortgage obligation, reducing the Company’s ownership interest in Metro to 70.0%. The current portions of the outstanding balance of the DuQuoin Metropolis Mortgage at September 30, 2022 and December 31, 2021 were approximately $75,000 and $73,000, respectively.

In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, IL, (the “South Porte Bank Mortgage”). Beginning in August 2021, pursuant to the amendment of the South Porte Bank Mortgage, the monthly payments of principal and interest aggregated approximately $6,000, with such payment amounts effective through June 2023, at which time all remaining principal, interest and fees are due.

Promissory Notes

Promissory Note Retirements

In March 2021, utilizing a portion of the proceeds from the Hadron Transaction (defined below; see Note 12), the Company retired $15.2 million of principal and interest on promissory notes issued in previous fiscal years to accredited individual and institutional investors. Concurrently, the remaining debt discount of approximately $450,000 on one of the retired promissory notes (such discount having arisen from the issuance of warrants attached to such promissory note) was fully amortized.

Promissory Note Conversions

During the three months ended March 31, 2021, the holder of a note issued by the Company in September 2020, with an outstanding balance of $4.2 million, converted $1.0 million of principal and approximately $10,000 of accrued interest into 3,365,972 shares of the Company’s common stock. The Company issued the holder an amended and restated promissory note simultaneous with the conversion transaction representing the $3.2 million remaining balance due.

During 2021, in a series of transactions, the noteholder converted $2.8 million of principal into 8,033,296 shares of the Company’s common stock. At December 31, 2021, the outstanding balance on the amended and restated promissory note was $400,000.

During the three months ended March 31, 2022, the noteholder converted the remaining principal balance of $400,000 into 1,142,858 shares of the Company’s common stock and the note was retired. The Company did not record any gains or losses arising from these conversions.

Promissory Notes Issued as Purchase Consideration – Kind Acquisition

In connection with the Kind Acquisition (see Note 2), the Company issued four-year promissory notes aggregating $6.5 million at the rate of 6.0% per annum to the members of Kind (the “Kind Notes”). The Company paid $0.8 million of principal during the period since the Kind Acquisition Date. At September 30, 2022, the current portions of the Kind Notes aggregated $1.5 million.

Promissory Notes Issued to Purchase Commercial Vehicles

In August 2020, the Company entered into a note agreement with First Citizens’ Federal Credit Union for the purchase of a commercial vehicle (the “First Citizens’ Note”). The First Citizens’ Note bears interest at the rate of 5.74% per annum and matures in July 2026. At September 30, 2022, the First Citizens' Note had an outstanding balance of approximately $22,000. The current portions of the outstanding balance under the First Citizens’ Note at September 30, 2022 and December 31, 2021 were approximately$6,500 and $5,000, respectively.

In September 2021, the Company entered into a note agreement with Ally Financial for the purchase of a second commercial vehicle (the “Ally Financial Note”). The Ally Financial note bears interest at the rate of 10.0% per annum and matures in May 2027. At September 30, 2022, the Ally Financial Note had an outstanding balance of approximately $29,000. The current portions of the outstanding balance under the Ally Financial Note at both September 30, 2022 and December 31, 2021 were approximately $5,000.

20
Promissory Note Issued by MariMed Hemp Inc.

In September 2020, the Company paid $0.5 million of principal on a $1.0 million promissory note issued in 2019 by MariMed Hemp Inc., one of the Company’s wholly-owned subsidiaries. In March 2021, utilizing a portion of the proceeds from the Hadron Transaction, the Company made an interest payment of $0.2 million and paid the remaining principal of $0.5 million on this promissory note.

At September 30, 2022 and December 31, 2021, the Company was carrying accrued interest balances of approximately $309,000 and $125,000, respectively.

Future Payments

The future principal amounts due under the Company outstanding mortgages and notes payable at September 30, 2022 are as follows (in thousands):

Year ending December 31,
Remainder of 2022$536 
20233,060 
20242,390 
20252,545 
20261,263 
Thereafter16,700 
26,494 
Less: discount(621)
$25,873 


(11) DEBENTURES PAYABLE

In a series of transactions from October 2018 through February 2020, the Company sold an aggregate of $21.0 million of convertible debentures (the “$21M Debentures”) to an unaffiliated institutional investor pursuant to an amended securities purchase agreement.

As of March 31, 2021, the holder of the $21M Debentures had converted the entire $21.0 million of principal and related accrued interest into the Company’s common stock in a series of conversions, at conversion prices equal to 80.0% of a calculated average of the daily volume-weighted price preceding the date of conversion. Of these conversions, $1.3 million of principal and approximately $56,000 of accrued interest were converted into 4,610,645 shares of common stock at a conversion price of $0.29 per share during the three months ended March 31, 2021. Additionally, a remaining (i) original issue discount of approximately $52,000, (ii) debt discount of approximately $39,000 (such discount having arisen from the issuance of warrants attached to the $21M Debentures), and (iii) beneficial conversion feature of approximately $177,000 (such conversion feature having arisen from an in-the-money embedded conversion option on the commitment date), were fully amortized upon the final conversion of the $21M Debentures. All conversions were effected within the terms of the debenture agreements, and accordingly, the Company did not record any gains or losses in connection with these conversions.


(12) MEZZANINE EQUITY

Series B Convertible Preferred Stock

In 2020, the Company entered into an exchange agreement with two unaffiliated institutional shareholders (the “Exchange Agreement”) whereby the Company (i) issued $4.4 million of promissory notes to the two institutional shareholders (such notes were retired in March 2021 as part of the promissory note retirements described above (see Note 11)), and (ii) exchanged 4,908,333 shares of the Company’s common stock previously acquired by the two institutional shareholders for an equal number of shares of newly designated Series B convertible preferred stock (the “Series B Stock”).

21
In connection with the Exchange Agreement, the Company filed (i) a certificate of designation with respect to the rights and preferences of the Series B Stock, and (ii) a certificate of elimination to return all shares of the Series A convertible preferred stock, of which no shares were issued or outstanding at the time of filing, to the status of authorized and unissued shares of undesignated preferred stock.

The holders of Series B Stock (the “Series B Holders”) are entitled to cast the number of votes equal to the number of shares of common stock into which the shares of Series B Stock are convertible, together with the holders of common stock as a single class, on most matters. However, the affirmative vote or consent of the Series B Holders voting separately as a class is required for certain acts taken by the Company, including the amendment or repeal of certain charter provisions, liquidation or winding up of the Company, creation of stock senior to the Series B Stock, and/or other acts defined in the certificate of designation.

The Series B Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the Company’s common stock. The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company unless the Series B Holders then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Stock in an amount calculated pursuant to the certificate of designation.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holder of Series B Stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share of Series B Stock equal to $3.00, plus any dividends declared but unpaid thereon, with any remaining assets distributed pro-rata among the holders of the shares of Series B Stock and common stock, based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock.

At any time on or prior to the six-year anniversary of the issuance date of the Series B Stock, (i) the Series B Holders have the option to convert their shares of Series B Stock into common stock at a conversion price of $3.00 per share, without the payment of additional consideration, and (ii) the Company has the option to convert all, but not less than all, shares of Series B Stock into common stock at a conversion price of $3.00 if the daily volume weighted average price of common stock (the “VWAP”) exceeds $4.00 per share for at least twenty consecutive trading days prior to the date on which the Company gives notice of such conversion to the Series B Holders.

On the day following the six-year anniversary of the issuance of the Series B convertible preferred stock, all outstanding shares of Series B Stock shall automatically convert into common stock as follows:

•If the sixty-day VWAP is less than or equal to $0.50 per share, the Company shall have the option to (i) convert all shares of Series B Stock into common stock at a conversion price of $1.00 per share, and pay cash to the Series B Holders equal to the difference between the sixty-day VWAP and $3.00 per share, or (ii) pay cash to the Series B Holders equal to $3.00 per share.
•If the sixty-day VWAP is greater than $0.50 per share, the Company shall have the option to (i) convert all shares of Series B Stock into common stock at a conversion price per share equal to the quotient of $3.00 per share divided by the sixty-day VWAP, or (ii) pay cash to the Series B Holders equal to $3.00 per share, or (iii) convert all shares of Series B Stock into common stock at a conversion price per share equal to the sixty-day VWAP and pay cash to the Series B Holders equal to the difference between $3.00 per share and the sixty-day VWAP.

The Company shall at all times when the Series B Stock is outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B Stock, such number of its duly authorized shares of common stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Stock.

Series C Convertible Preferred Stock

In March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) with respect to a financing facility of up to $46.0 million (the “Hadron Facility”) in exchange for newly-designated Series C convertible preferred stock of the Company (the “Series C Stock”) and warrants to purchase the Company’s common stock (the “Hadron Transaction”).

22
At the closing of the Hadron Transaction in March 2021, Hadron purchased $23.0 million of Units at a price of $3.70 per Unit. Each Unit is comprised of one share of Series C Stock and a four-year warrant to purchase two and one-half shares of common stock. The Company issued to Hadron 6,216,216 shares of Series C Stock and warrants to purchase up to an aggregate of 15,540,540 shares of its common stock. Each share of Series C Stock is convertible, at Hadron’s option, into five shares of common stock, and each warrant is exercisable at an exercise price of $1.087 per share. The warrants are subject to early termination if certain milestones are achieved and the market value of the Company’s common stock reaches certain predetermined levels. The fair value includedof the warrants on the issuance date was $9.5 million, which amount was recorded in income. InvestmentsAdditional paid-in capital. The Company incurred costs of $0.4 million related to the issuance of these securities, which was recorded as a reduction to Additional paid-in capital in March 2021.

In connection with the closing of the Hadron Transaction, the Company filed a certificate of designation with respect to the rights and preferences of the Series C Stock. Such stock is zero coupon, non-voting, and has a liquidation preference equal to its original issuance price plus declared but unpaid dividends. Holders of Series C Stock are evaluatedentitled to receive dividends on an as-converted basis.

Of the $23.0 million of proceeds received by the Company in March 2021, $7.3 million was used to fund construction and upgrades of certain of the Company’s owned and managed facilities, and $15.7 million was used to pay down debt and related interest (see Note 10).

No further funding has occurred under the Hadron Facility and, on August 4, 2022, the Company and Hadron entered into a Second Amendment to the Purchase Agreement pursuant to which, inter alia, (a) Hadron’s obligation to provide any further funding to the Company and the Company’s obligation to sell any further securities to Hadron was terminated, (b) Hadron’s right to appoint a designee to the Company’s board of directors was eliminated, and (c) certain covenants restricting the Company’s incurrence of new indebtedness were eliminated.


(13) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Common Stock

During 2021 and 2022, the Company issued an aggregate of 12,542,126 shares of common stock in a series of conversions of a promissory note in the original principal amount of $8.8 million, of which 1,142,858 shares were issued in the first quarter of 2022, resulting in the promissory note being fully paid and retired (see Note 11).

During the three months ended September 30, 2022, the Company issued an aggregate of 531,393 shares of common stock to one of its vendors as payment for permanent impairmentservices rendered and one of its partners as a royalty payment. The shares had an aggregate fair market value of approximately $361,000.

During the three months ended September 30, 2022, the issued subscriptions for common stock aggregating 74,581 shares, with a grant date fair value of approximately $41,000.

In August 2022, the Company issued 139 shares of common stock to an employee with a grant date fair value of approximately $80.

During the three months ended June 30, 2022, the Company issued 2,717 shares of restricted common stock associated with previously issued subscriptions for common stock with a grant date fair value of approximately $2,000.

In June 2022, the Company issued 4,221 shares of restricted common stock with a grant date fair value of approximately $2,500.

In May 2022, the Company issued 350,000 shares of restricted common stock with a grant date fair value of approximately $217,000 to the Company’s new Chief Financial Officer in connection with her appointment.

In March 2022, the Company issued 375,000 shares of restricted common stock with a grant date fair value of approximately $274,000 in exchange for consulting services.

23
Amended and Restated 2018 Stock Award and Incentive Plan

The Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “2018 Plan”) provides for the award of options to purchase the Company’s common stock (“stock options”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”), restricted stock, deferred stock, dividend equivalents, performance shares or other stock-based performance awards and other stock- or cash-based awards. Awards can be granted under the 2018 Plan to the Company’s employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries.

Warrants

At September 30, 2022, warrants to purchase up to 23,951,571 shares of common stock were outstanding, with a weighted average exercise price of $0.85.

In April 2022, 750,000 warrants were exercised in a cashless transaction, under which the Company withheld 515,039 shares underlying such warrants and issued 234,961 shares of common stock.

Stock Options

At September 30, 2022, options to purchase up to 40,081,173 shares of common stock were outstanding, with a weighted average exercise price of $0.91 and a weighted average remaining life of approximately three years.

In August 2022, 45,000 stock options were exercised, and the Company received $7,100 in connection with these exercises.

In June 2022, 312,248 stock options were exercised in a cashless transaction, under which the Company withheld 112,248 shares underlying such stock options and issued 200,000 shares of common stock.

In February 2022, 10,000 stock options were exercised, and the Company received $3,000 in connection with these exercises.

The grant date fair values of options to purchase common stock granted in the three and nine months ended September 30, 2022 were estimated using the Black-Scholes valuation model with the following assumptions:

Three months ended September 30, 2022Nine months ended September 30, 2022
Estimated life (in years)5.05.0
Volatility89.4 %90.0 %
Risk-free interest rates3.0 %3.0 %
Dividend yield— — 

Stock-Based Compensation

The Company recorded stock-based compensation of $1.4 million and $6.4 million in the three and nine months ended September 30, 2022, respectively, and $5.6 million and $7.2 million in the three and nine months ended September 30, 2021, respectively.


(14) REVENUE

The Company’s main sources of revenue are comprised of the following:

•Product sales (retail and wholesale) – direct sales of cannabis and cannabis-infused products primarily by the Company’s retail dispensaries and wholesale operations in Massachusetts, Illinois and, as of the Kind Acquisition Date, Maryland. This revenue is recognized when products are delivered or at retail points-of-sale.
24
•Real estate rentals – rental income generated from leasing of the Company’s state-of-the-art, regulatory compliant cannabis facilities to its cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms. Prior to the third quarter of 2022, the Company charged additional rental fees based on a percentage of tenant revenues that exceeded specified amounts.
•Management fees – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations. These fees are based on a percentage of such clients’ revenue and are written down if such impairments are deemedrecognized after services have been performed.
•Supply procurement – resale of cultivation and production resources, supplies and equipment, acquired by the Company from top national vendors at discounted prices, to have occurred.

Revenue Recognition

its clients and third parties within the cannabis industry. The Company recognizes this revenue in accordance withafter the delivery and acceptance of goods by the purchaser.

•Licensing fees – revenue from the licensing of the Company’s branded products, including Betty’s Eddies, Bubby's Baked, Vibations, and Kalm Fusion, to wholesalers and to regulated dispensaries throughout the United States and Puerto Rico. This revenue is recognized when the products are delivered.

The Financial Accounting Standards Board’sBoard Accounting Standards Codification (“ASC”) 606, Revenue from Contract with Customers, as amended by subsequently issued Accounting Standards Updates. This revenue standardUpdates, requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The recognition of revenue is determined by performing the following consecutive steps:


●Identify the contract(s) with a customer;
●Identify the performance obligations in the contract(s);
●Determine the transaction price;
●Allocate the transaction price to the performance obligations in the contract(s); and
●Recognize revenue as the performance obligation is satisfied.

•

Identify the contract(s) with a customer;

•Identify the performance obligations in the contract(s);
•Determine the transaction price;
•Allocate the transaction price to the performance obligations in the contract(s); and
•Recognize revenue as the performance obligation is satisfied.

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

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

The Company’s main sources of revenue are

Revenue for the three and nine months ended September 30, 2022 and 2021 was comprised of the following:

●Product Sales – direct sales of cannabis and cannabis-infused products primarily by the Company’s retail dispensaries and wholesale operations in Massachusetts and Illinois. This revenue is recognized when products are delivered or at retail points-of-sale.
●Real Estate – rental income and additional rental fees generated from leasing of the Company’s state-of-the-art, regulatory-compliant cannabis facilities to its cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms, while additional rental fees are based on a percentage of tenant revenues that exceed specified amounts.
●Management – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production, and dispensary operations. These fees are based on a percentage of such clients’ revenue and are recognized after services have been performed.
●Supply Procurement – resale of cultivation and production resources, supplies, and equipment, acquired by the Company from top national vendors at volume discounted prices, to its clients and third-parties within the cannabis industry. The Company recognizes this revenue after the delivery and acceptance of goods by the purchaser.
●Licensing – revenue from the sale of Company’s branded products including Betty’s Eddies and Kalm Fusion, and from the sublicensing of contracted brands including Healer and Tikun Olam, to regulated dispensaries throughout the United States and Puerto Rico. The recognition of this revenue occurs when the products are delivered.

9
following (in thousands):

Three months endedNine months ended
September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Product revenue:
Product revenue - retail$23,593 $23,454 $68,121 $59,230 
Product revenue - wholesale9,009 6,633 23,029 20,536 
Total product revenue32,602 30,087 91,150 79,766 
Other revenue:
Real estate rentals434 1,726 2,867 5,397 
Supply procurement815 528 2,825 1,446 
Management fees9 685 843 2,562 
Licensing fees52 182 495 1,249 
Total other revenue1,310 3,121 7,030 10,654 
Total revenue$33,912 $33,208 $98,180 $90,420 



25
(15) MAJOR CUSTOMERS
Research and Development Costs

Research and development costs are charged to operations as incurred.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation, with depreciation recognized on a straight-line basis over the shorter

The Company did not have any customers that contributed 10% or more of total revenue in any of the estimated useful lifethree- and nine-month periods ended September 30, 2022 and 2021.

At September 30, 2022, one customer accounted for 10% or more of the assetCompany’s accounts receivable balance, representing approximately 54% of the total accounts receivable. At December 31, 2021, one customer accounted for 10% or more of the lease term, if applicable. When assets are retired or disposed,Company’s accounts receivable balance, representing approximately 28% of total accounts receivable in the costaggregate. The Company performs ongoing credit evaluations of its customers and accumulated depreciation are removed from thegenerally does not require collateral on accounts receivable. The Company maintains an allowance for doubtful accounts and any resulting gains orhistorical losses are included in income. Repairs and maintenance are charged to expense in the period incurred.

The estimated useful lives of property and equipment are generally as follows: buildings and building improvements, forty years; tenant improvements, the remaining duration of the related lease; furniture and fixtures, seven to ten years; and machinery and equipment, ten years. Land is not depreciated.

The Company’s property and equipment are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from the undiscounted future cash flows of such asset over the anticipated holding period. An impairment loss is measured by the excess of the asset’s carrying amount over its estimated fair value.

Impairment analyses are based onhave been within 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.expectations.



(16) LEASES
In
the three months ended March 31, 2022 and 2021, based on the results of management’s impairment analyses, there were 0impairment losses.

Leases

The consolidated financial statements reflect the Company’s adoption of ASC 842, Leases, as amended by subsequent accounting standards updates. Under ASC 842, arrangements

Arrangements that are determined to be leases with a term greater than one year are accounted for by the recognition of right-of-use assets that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities, that represent the Company’s obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately.

Right-of-use assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term, utilizing the Company’s incremental borrowing rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.

Fair Value of Financial Instruments

The Company follows the provisions of ASC 820, Fair Value Measurement, to measure the fair value of its financial instruments, and ASC 825, Financial Instruments, for disclosures on the fair value of its financial instruments. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by ASC 820 are:

Level 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3Pricing inputs that are generally observable inputs and not corroborated by market data.

10


The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable, approximate their fair values due to the short maturity of these instruments.

The fair value of option and warrant issuances are determined using the Black-Scholes pricing model and employing several inputs such as the expected life of instrument, the exercise price, the expected risk-free interest rate, the expected dividend yield, the value of the Company’s common stock on issuance date, and the expected volatility of such common stock. The following table summarizes the range of inputs used by the Company during the three months ended March 31, 2022 and 2021:

SCHEDULE OF ASSUMPTIONS USED

  Three Months Ended
March 31,		 
  2022  2021 
Life of instrument  *   3.0 to 5.0 years 
Volatility factors  *   1.230 to 1.266 
Risk-free interest rates  *   0.36% to 0.85% 
Dividend yield  *   0% 

*No options or warrants were issued by the Company during the three months ended March 31, 2022.

The expected life of an instrument is calculated using the simplified method pursuant to Staff Accounting Bulletin Topic 14, Share-Based Payment, which allows for using the mid-point between the vesting date and expiration date. The volatility factors are based on the historical two-year movement of the Company’s common stock prior to an instrument’s issuance date. The risk-free interest rate is based on U.S. Treasury rates with maturity periods similar to the expected instruments life on the issuance date.

The Company amortizes the fair value of option and warrant issuances on a straight-line basis over the requisite service period of each instrument.

Extinguishment of Liabilities

The Company accounts for extinguishment of liabilities in accordance with ASC 405-20, Extinguishments of Liabilities. When the conditions for extinguishment are met, the liabilities are written down to zero and a gain or loss is recognized.

Stock-Based Compensation

The Company accounts for stock-based compensation using the fair value method as set forth in ASC 718, Compensation—Stock Compensation, which requires a public entity to measure the cost of employee services received in exchange for an equity award based on the fair value of the award on the grant date, with limited exceptions. Such value will be incurred as compensation expense over the period an employee is required to provide service in exchange for the award, usually the vesting period. No compensation cost is recognized for equity awards for which employees do not render the requisite service.

11

Income Taxes

The Company uses the asset and liability method to account for income taxes in accordance with ASC 740, Income Taxes. Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. The Company did not take any uncertain tax positions and had 0 adjustments to unrecognized income tax liabilities or benefits for the three months ended March 31, 2022 and 2021.

Certain of the Company’s subsidiaries are subject to the provisions of Section 280E of the Internal Revenue Code, as amended, which prohibits businesses from deducting certain expenses associated with the trafficking of controlled substances within the meaning of Schedule I and II of the Controlled Substances Act. Such non-deductibility of certain ordinary business expenses results in permanent differences and can cause the Company’s effective tax rate to be highly variable and not necessarily correlated with pre-tax income.

Related Party Transactions

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.

Comprehensive Income

The Company reports comprehensive income and its components following guidance set forth by ASC 220, Comprehensive Income, which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. There were no items of comprehensive income applicable to the Company during the periods covered in the financial statements.

Earnings Per Share

Earnings per common share is computed pursuant to ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus the weighted average number of potentially dilutive securities during the period.

At March 31, 2022 and 2021, there were potentially dilutive securities convertible into shares of common stock comprised of (i) stock options – convertible into 39,811,671 and 11,017,750 shares, respectively, (ii) warrants – convertible into 26,351,571 and 32,282,708 shares, respectively, (iii) Series B preferred stock – convertible into 4,908,333 shares in both periods, (iv) Series C preferred stock – convertible into 31,081,080 shares in both periods, and (v) promissory notes – convertible into 0 and 10,705,513 shares, respectively.

For the three months ended March 31, 2022 and 2021, the aforementioned potentially dilutive securities increased the number of weighted average common shares outstanding on a diluted basis by 44,127,540 and 35,613,671 shares, respectively. Such share amounts were reflected in the calculation of diluted net income per share for such periods.

Commitments and Contingencies

The Company follows ASC 450, Contingencies, which requires the Company to assess the likelihood that a loss will be incurred from the occurrence or non-occurrence of one or more future events. Such assessment inherently involves an exercise of judgment. In assessing possible loss contingencies from legal proceedings or unasserted claims, the Company evaluates the perceived merits of such proceedings or claims, and of the relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss will be incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

While not assured, management does not believe, based upon information available at this time, that a loss contingency will have material adverse effect on the Company’s financial position, results of operations or cash flows.

12

Beneficial Conversion Features on Convertible Debt

Convertible instruments that are not bifurcated as a derivative pursuant to ASC 815, Derivatives and Hedging, and not accounted for as a separate equity component under the cash conversion guidance are evaluated to determine whether their conversion prices create an embedded beneficial conversion feature at inception, or may become beneficial in the future due to potential adjustments.

A beneficial conversion feature is a nondetachable conversion feature that is “in-the-money” at the commitment date. The in-the-money portion, also known as the intrinsic value, is recorded in equity, with an offsetting discount to the carrying amount of convertible debt to which it is attached. The discount is amortized to interest expense over the life of the debt with adjustments to amortization upon full or partial conversions of the debt.

Risk and Uncertainties

The Company is subject to risks common to companies operating within the legal and medical marijuana industries, including, but not limited to, federal laws, government regulations and jurisdictional laws.

Noncontrolling Interests

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

Off Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

The Company has reviewed all 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.

13

NOTE 3 – ACQUISITIONS

Kind Therapeutics USA LLC

In December 2021, the Company entered into a membership interest purchase agreement with the members of Kind Therapeutics USA LLC, the Company’s client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (“Kind”), to acquire 100% of the equity ownership of Kind in exchange for $13.5 millionpayable in cash (subject to adjustment) and $6.5 millionpayable by the issuance of four-year 6.0% promissory notes to the members of Kind, secured by a first priority lien on the Company’s property in Hagerstown, MD. Upon execution of the membership interest purchase agreement, the Company deposited, in escrow, the sum of $5.0 millionas a contract down-payment.

In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the acquisition was consummated by the parties. Accordingly, Kind will be consolidated into the financial results of the Company commencing on the closing date of the acquisition. Following the closing of the transaction, the Maryland litigation between the Company and the members of Kind was dismissed as further discussed in Note 20 – Commitments and Contingencies.

Simultaneous with the Kind membership purchase agreement, the Company entered into a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ownership interest in (i) Mari Holdings MD LLC (“Mari-MD”), the Company’s majority owned subsidiary that owns production and retail cannabis facilities in Hagerstown, MD and Annapolis, MD, and (ii) Mia Development LLC (“Mia”), the Company’s majority owned subsidiary that owns production and retail cannabis facilities in Wilmington, DE. The purchase price of $2 million in the aggregate is expected to be paid, and the transaction consummated, upon the dismissal of the derivative claims in the DiPietro lawsuit in June 2022, as further discussed in Note 20 – Commitments and Contingencies. After this transaction is consummated, the Company’s ownership of Mari-MD and Mia shall increase to 99.7% and 94.3%, respectively.

The Harvest Foundation LLC

In 2019, the Company entered into a purchase agreement to acquire 100% of the ownership interests of The Harvest Foundation LLC (“Harvest”), the Company’s cannabis-licensed client in the state of Nevada. The acquisition is conditioned upon state regulatory approval of the transaction and other closing conditions. Upon approval, and the fulfillment of other closing conditions, the ownership of Harvest will be transferred to the Company, and the operations of Harvest will begin to be consolidated into the Company’s financial statements. There is no assurance that the closing conditions to the Company’s acquisition of Harvest, including regulatory approval, will be achieved or that the acquisition will be consummated.

The purchase price is comprised of the issuance of (i) 1,000,000 shares of the Company’s common stock, in the aggregate, to the two owners of Harvest, which as a good faith deposit, were issued upon execution of the purchase agreement, (ii) $1.2 million of the Company’s common stock at closing, based on the closing price of the common stock on the day prior to legislative approval of the transaction, and (iii) warrants to purchase 400,000 shares of the Company’s common stock at an exercise price equal to the closing price of the Company’s common stock on the day prior to legislative approval of the transaction. The issued shares were recorded at par value. Such shares are restricted and will be returned to the Company in the event the transaction does not close.

Meditaurus LLC

In September 2021, the Company acquired the remaining 30.0% ownership interest of Meditaurus LLC, a developer of CBD products sold under the Florance brand name (“Meditaurus”), in exchange for 100,000 shares of the Company’s common stock, valued at approximately $94,000, and $10,000 in cash. In 2019, the Company had acquired a 70.0% ownership interest in Meditaurus in exchange for $2.8 million of cash and stock.

The carrying value of the noncontrolling interest of approximately $975,000 was eliminated on the date such interest was acquired in September 2021, and since there was no change in control of Meditaurus from this transaction, the resulting gain on bargain purchase was recognized in Additional Paid-In Capital on the balance sheet. As part of this transaction, the initial purchase agreement was amended whereby any and all future license fees and payments to Meditaurus were eliminated.

Beverly Asset Purchase

In November 2021, the Company entered into an asset purchase agreement to acquire the cannabis license, property lease, and other assets and rights of, and to assume the liabilities and operating obligations associated with, a cannabis dispensary that is currently operating in Beverly, MA. The purchase price is comprised of 2,000,000 shares of the Company’s common stock and $5.1 million in cash, with the cash amount to be paid on a monthly basis as a percentage of the business’ monthly gross sales.

The purchase is contingent upon the approval of the Massachusetts Cannabis Control Commission, which is expected during the third quarter of 2022. Concurrent with the execution of this agreement, the parties entered into a consulting agreement pursuant whereby the Company shall provide certain oversight services related to the development, staffing, and operation of the business in exchange for a monthly fee.

Green Growth Group Inc.

In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the equity ownership of Green Growth Group Inc., an entity that holds a wholesale cannabis license in the state of Illinois, in exchange for $1.9 million in cash and shares of the Company’s common stock valued at $1.5 million. The Company made a good faith deposit of $100,000 on the agreement date, which comprises the balance of non-current Investments on the balance sheet. 

In March 2022, the acquisition was approved by the Illinois Department of Agriculture, and in April 2022, the parties consummated the transaction.

14

NOTE 4 – INVESTMENTS

At March 31, 2022 and December 31, 2021, the Company’s investments were comprised of the following (in thousands):

SCHEDULE OF INVESTMENTS

  March 31,
2022		  December 31,
2021		 
Current investments:        
Flowr Corp. (formerly Terrace Inc.) $299  $251 
WM Technology Inc.  954   - 
Total current investments  1,253   251 
         
Non-current investments:        
Green Growth Group, Inc.  100   - 
MembersRSVP LLC  -   - 
         
Total investments $1,353  $251 

Flowr Corp. (formerly Terrace Inc.)

In December 2020, Terrace Inc., a Canadian cannabis entity in which the Company had an ownership interest of 8.95% (“Terrace”), was acquired by Flowr Corp. (TSX.V: FLWR; OTC: FLWPF), a Toronto-headquartered cannabis company with operations in Canada, Europe, and Australia (“Flowr”). Under the terms of the deal, each shareholder of Terrace received 0.4973 of a share in Flowr for each Terrace share held.

This investment is carried at fair value. The increase in fair value of approximately $48,000 during the three months ended March 31, 2022, and the decrease in fair value of approximately $45,000 during the three months ended March 31, 2021, were reflected in the Gain (Loss) On Change In Fair Value Of Investment on the respective statement of operations.

Green Growth Group Inc.

In January 2022, the Company made a good faith deposit of $100,000 in connection with the acquisition of Green Growth Group, Inc. as previously discussed in Note 3 – Acquisitions.

MembersRSVP LLC

In January 2021, the Company and MembersRSVP LLC, an entity that develops cannabis-specific software (“MRSVP”), in which the Company owned a 23.0% membership interest, entered into an agreement whereby the Company returned membership interests comprising 11% ownership in MRSVP in exchange for a release from all further obligation by the Company to make future investments, payments, and certain other non-monetary consideration.

In addition to the reduction of the Company’s ownership interest to 12.0%, the Company relinquished its right to appoint a member to the board of MRSVP. In light of the Company no longer having the ability to exercise significant influence over MRSVP, the Company discontinued accounting for this investment under the equity method as of January 1, 2021.

In September 2021, MRSVP sold substantially all of its assets pursuant to an asset purchase agreement. As a result of this agreement, the Company received cash proceeds of $1,475,000, representing the Company’s pro rata share of the cash consideration received by MRSVP at the closing of the transaction. The cash proceeds reduced the Company’s MRSVP investment balance to zero and resulted in a gain of approximately $309,000.

As an ongoing member of MRSVP, the Company was entitled to its pro rata share of any additional consideration received by MRSVP pursuant to the asset purchase agreement, which may include securities or other forms of non-cash or in-kind consideration and holdback amounts, if and when it is received and distributed by MRSVP. In February 2022, the Company received 121,968 shares of common stock of WM Technology Inc. (Nasdaq: MAPS), a technology and software infrastructure provider to the cannabis industry, representing the Company’s pro rata share of the additional consideration received by MRSVP pursuant to the asset purchase agreement. The fair value of these shares at March 31, 2022 of approximately $954,000 was reflected in current Investments on the balance sheet, and the corresponding gain comprised the balance of Other Investment Income on the statement of operations for the three months ended March 31, 2022.

15

NOTE 5 – DEFERRED RENTS RECEIVABLE

The Company is the lessor under operating leases which contain escalating rents over time, rent holidays, options to renew, requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based on a percentage of monthly tenant revenues. The Company is not the lessor under any finance leases.

The Company recognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term. Differences between amounts received and amounts recognized are recorded under Deferred Rents Receivable on the balance sheet. Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.

The Company leases the following owned properties:

●Delaware – a 45,000 square foot cannabis cultivation, processing, and dispensary facility which is leased to a cannabis-licensed client under a triple net lease that expires in 2035.
●Maryland – a 180,000 square foot cultivation and processing facility which is leased to a licensed cannabis client under a triple net lease that expires in 2037.
●Massachusetts – a 138,000 square foot industrial property of which approximately half of the available square footage is leased to a non-cannabis manufacturing company under a lease that expires in October 2022.

The Company subleases the following properties:

●Delaware – a 4,000 square foot cannabis dispensary which is subleased to its cannabis-licensed client under a under a sublease expiring in April 2027.
●Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility that is subleased to its cannabis-licensed client. The sublease expires in March 2030, with an option to extend the term for three additional five-year periods.The Company intends to develop the remaining space into a processing facility.
●Delaware – a 12,000 square foot cannabis production facility with offices which is subleased to its cannabis-licensed client. The sublease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.

At March 31, 2022 and December 31, 2021, cumulative fixed rental receipts under such leases approximated $19.9 million and $18.7 million, respectively, compared to revenue recognized on a straight-line basis of approximately $21.5 million and $20.4 million, respectively. Accordingly, the deferred rents receivable balance approximated $1.6 million and $1.7 million at March 31, 2022 and December 31, 2021, respectively.

Future minimum rental receipts for non-cancellable leases and subleases as of March 31, 2022 were (in thousands):

SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON CANCELABLE LEASE AND SUBLEASE

     
2022 $3,620 
2023  4,563 
2024  4,626 
2025  4,695 
2026  3,916 
Thereafter  35,830 
Total $57,250 

16

NOTE 6 – NOTES RECEIVABLE

At March 31, 2022 and December 31, 2021, notes receivable, including accrued interest, consisted of the following (in thousands):

SCHEDULE OF NOTES RECEIVABLES

  March 31,
2022		  December 31,
2021		 
First State Compassion Center (initial note) $385  $403 
First State Compassion Center (secondary note)  7,982   7,845 
Healer LLC  866   866 
High Fidelity Inc.  -   - 
Total notes receivable  9,233   9,114 
Notes receivable, current portion  129   127 
Notes receivable, less current portion $9,104  $8,987 

First State Compassion Center

The Company’s cannabis-licensed client in Delaware, First State Compassion Center (“FSCC”), issued a 10-year promissory note to the Company in May 2016 in the amount of $700,000 bearing interest at a rate of 12.5% per annum, as amended. The monthly payments of approximately $10,000 will continue through April 2026, at which time the note will be paid in full. At March 31, 2022 and December 31, 2021, the current portion of this note approximated $77,000 and $75,000, respectively, and was included in Notes Receivable, Current Portion on the respective balance sheets.

In December 2021, financed trade accounts receivable balances from FSCC of approximately $7,845,000 in the aggregate were converted into notes receivable whereby FSCC issued promissory notes to the Company in the aggregate amount of approximately $7.8 million bearing interest at a rate of 6.0% per annum. The promissory notes call for the periodic payment of principal and interest throughout the term of the note which matures in December 2025. At March 31, 2022, the balance of the note included approximately $138,000 of unpaid accrued interest.

Healer LLC

In March 2021, the Company was issued a promissory note in the principal amount of approximately $894,000 from Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak, an integrative medicine physician and nationally renowned cannabis practitioner (“Healer”). The principal balance of the note represents previous loans extended to Healer by the Company of $800,000 plus accrued interest through the revised promissory note issuance date of approximately $94,000. The revised promissory note bears interest at a rate of 6.0% per annum and requires quarterly payments of interest through the maturity date in April 2026.

Additionally, the Company has the right to offset any licensing fees owed to Healer by the Company in the event Healer fails to make any payment when due. In March 2021, the Company offset approximately $28,000 of licensing fees payable to Healer against the principal balance of the revised promissory note, reducing the principal amount to approximately $866,000. At both March 31, 2022 and December 31, 2021, approximately $52,000was current.

High Fidelity

In August 2021, the Company was fully repaid on a loan to High Fidelity Inc., an entity with cannabis operations in the state of Vermont. The loan had a principal balance of $250,000 and bore interest at a rate of 10.0% per annum,

17

NOTE 7 – INVENTORY

At March 31, 2022 and December 31, 2021, inventory was comprised of the following (in thousands):

SCHEDULE OF INVENTORY

  March 31,
2022		  December 31,
2021		 
Plants $2,413  $1,015 
Ingredients and other raw materials  494   262 
Work-in-process  4,066   4,661 
Finished goods  5,265   3,830 
Total inventory $12,238  $9,768 

NOTE 8 – PROPERTY AND EQUIPMENT

At March 31, 2022 and December 31, 2021, property and equipment consisted of the following (in thousands):

SCHEDULE OF PROPERTY AND EQUIPMENT

  March 31,
2022		  December 31,
2021		 
Land $4,450  $4,450 
Buildings and building improvements  37,674   35,231 
Tenant improvements  16,819   9,745 
Furniture and fixtures  1,909   1,888 
Machinery and equipment  8,632   7,221 
Construction in progress  3,635   10,569 
   73,119   69,104 
Less: accumulated depreciation  (7,637)  (6,954)
Property and equipment, net $65,482  $62,150 

During the three months ended March 31, 2022 and December 31, 2021, additions to property and equipment approximated $4,015,000 and $3,224,000, respectively.

The 2022 additions were primarily comprised of (i) the development of facilities in Annapolis, MD and Beverly, MA, and (ii) purchases of building improvements, machinery, and equipment at the facilities in Hagerstown, MD and New Bedford, MA. The 2021 additions consisted primarily of (i) the development of facilities in Annapolis, MD and Milford, DE, and (ii) purchases of building improvements, machinery, and equipment at the Hagerstown, MD facility and both facilities in Massachusetts.

The construction in progress balances of approximately $3,635,000 and $10,569,000 at March 31, 2022 and December 31, 2021, respectively, consisted of development of facilities in Annapolis, MD, Beverly, MA, and Milford, DE.

Depreciation expense for the three months ended March 31, 2022 and 2021 approximated $702,000 and $462,000, respectively.

18

NOTE 9 – INTANGIBLES

At March 31, 2022 and December 31, 2021, intangible assets were comprised of (i) the carrying value of cannabis license fees, and (ii) goodwill arising from the Company’s acquisitions.

The Company’s cannabis licenses are issued from the states of Illinois and Massachusetts and require the payment of annual fees. These fees, comprised of a fixed component and a variable component based on the level of operations, are capitalized and amortized over the respective twelve-month periods. At March 31, 2022 and December 31, 2021, the carrying value of these cannabis licenses approximated $327,000 and $162,000, respectively.

The goodwill associated with acquisitions is reviewed on a quarterly basis for impairment. Based on this review and other factors, the goodwill of approximately $2,068,000 at March 31, 2022 and December 31, 2021 was deemed to be unimpaired.

NOTE 10 – MORTGAGES

At March 31, 2022 and December 31, 2021, mortgage balances, including accrued interest, were comprised of the following (in thousands):

SCHEDULE OF MORTGAGES

  March 31,
2022		  December 31,
2021		 
Bank of New England – New Bedford, MA and Middleboro, MA properties $12,409  $12,499 
Bank of New England – Wilmington, DE property  1,434   1,463 
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties  770   778 
DuQuoin State Bank – Metropolis, IL property  2,607   2,658 
South Porte Bank – Mt. Vernon, IL property  820   816 
Total mortgages payable  18,040   18,214 
Mortgages payable, current portion  1,416   1,400 
Mortgages payable, less current portion $16,624  $16,814 

The Company maintains an amended and restated mortgage agreement with the Bank of New England bearing interest at a rate of 6.5% per annum that matures in August 2025. This mortgage is secured by the Company’s properties in New Bedford, MA and Middleboro, MA. Proceeds from this mortgage were used to pay down a previous mortgage with the Bank of New England of approximately $4.8 million on the New Bedford property, and approximately $7.2 million of promissory notes as further discussed in Note 11 – Promissory Notes. At March 31, 2022 and December 31, 2021, the outstanding principal balance of this note approximated $12,409,000 and $12,499,000, respectively, of which approximately $364,000 and $358,000, respectively, was current.

The Company has a second mortgage with Bank of New England that is secured by the Company’s property in Wilmington, DE. The mortgage matures in 2031 with monthly principal and interest payments at a rate of 5.25% per annum through September 2021, and thereafter the rate adjusting every five years to the then prime rate plus 1.5% with a floor of 5.25% per annum. At September 2021, the interest rate remained at 5.25%. At March 31, 2022 and December 31, 2021, the outstanding principal balance on this mortgage approximated $1,434,000 and $1,463,000, respectively, of which approximately $122,000 and $120,000, respectively, was current.

19

The Company maintains a mortgage agreement with DuQuoin State Bank (“DSB”) for its purchase of properties in Anna, IL and Harrisburg, IL. On May 5th of each year, this mortgage is due to be repaid unless it is renewed for another year at a rate determined by DSB’s executive committee. The mortgage was renewed in May 2021 at a rate of 6.75% per annum. At March 31, 2022 and December 31, 2021, the outstanding principal balance on this mortgage approximated $770,000 and $778,000 respectively, of which approximately $34,000 and $33,000, respectively, was current.

In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, IL. The purchase price consisted of 750,000 shares of the Company’s common stock, which were valued at $705,000 on the date of the transaction, and payoff of the seller’s remaining mortgage of approximately $1.6 million. In connection with this purchase, the Company entered into a second mortgage agreement with DSB in the amount of $2.7 million that matures in July 2041 and initially bears interest at a rate of 6.25% per annum which is adjusted each year based on a certain interest rate index plus a margin. As part of this transaction, the seller was provided with a 30.0% ownership interest in Mari Holdings Metropolis LLC (“Metro”), the Company’s subsidiary that owns the property and related mortgage obligation, reducing the Company’s ownership interest in Metro to 70.0%. At March 31, 2022 and December 31, 2021, the outstanding principal balance on this mortgage approximated $2,607,000 and $2,658,000, respectively, of which approximately $76,000 and $73,000 was current.

In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, IL. Pursuant to the amended mortgage agreement, the mortgage shall be repaid in monthly installments of principal and interest of approximately $6,000, which began in August 2021 and continues through its maturity in June 2022, at which time all remaining principal, interest and fees shall be due.

NOTE 11 – PROMISSORY NOTES

Promissory Note Retirements

In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 13 – Mezzanine Equity, the Company retired approximately $15.2 million of principal and interest on promissory notes issued in previous fiscal years to accredited individual and institutional investors. Additionally, a remaining debt discount of approximately $450,000 on one of the retired promissory notes (such discount having arisen from the issuance of warrants attached to such promissory note) was fully amortized in this month.

Promissory Note Conversions

During the three months ended March 31, 2021, the noteholder of an $8.8 million promissory note issued by the Company in June 2020 converted approximately $1.0 millionof principal and $10,000 of accrued interest into 3,365,972 shares of the Company’s common stock. After such conversion and cash payments of $4.6 million in the second half of fiscal 2020, this $8.8 million promissory note was amended and restated into a new $3.2 million promissory note.

During 2021, in a series of transactions, the noteholder converted $2.8 million of principal into 8,033,296 shares of the Company’s common stock. At December 31, 2021, the outstanding balance on this note was $400,000.

During the three months ended March 31, 2022, the noteholder converted the remaining principal balance of $400,000 into 1,142,858 shares of the Company’s common stock. Upon this conversion, the $3.3 million note no longer had an outstanding balance and was retired. All of the aforementioned note conversions were effected within the terms of their respective note agreements, and the Company was not required to record a gain or loss on such conversions.

Promissory Notes Issued to Purchase Commercial Vehicles

In August 2020, the Company entered into a note agreement with First Citizens’ Federal Credit Union for the purchase of a commercial vehicle. The note bears interest at a rate of 5.74% per annum and matures in July 2026. At March 31, 2022 and December 31, 2021, the balance of this note approximated $24,000 and $26,000, respectively, of which approximately $5,000 was current in both periods.

In June 2021, the Company entered into a note agreement with Ally Financial for the purchase of a second commercial vehicle. The note bears interest at the rate of 10.0% per annum and matures in May 2027. At March 31, 2022 and December 31, 2021, the balance of this note approximated $31,000 and $33,000, of which approximately $5,000 was current in both periods.

Promissory Note Issued by MariMed Hemp Inc.

In September 2020, the Company paid down $500,000 of principal on a $1.0 millionpromissory note issued in 2019 by MariMed Hemp Inc., the Company’s wholly-owned subsidiary. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 13 – Mezzanine Equity, the Company paid interest on this note of $200,000 and paid off the remaining principal of $500,000.

At March 31, 2022 and December 31, 2021, the Company was carrying an accrued interest balance of approximately $125,000 to cover interest due on this note.

20

Debt Maturities

At March 31, 2022, the aggregate scheduled maturities of the Company’s total debt outstanding were (in thousands):

SCHEDULE OF MATURITIES OF OUTSTANDING DEBT

     
2022 $1,267 
2023  635 
2024  673 
2025  720 
2026  764 
Thereafter  14,037 
Total  18,096 

NOTE 12 – DEBENTURES PAYABLE

In a series of transactions from the period October 2018 through February 2020, the Company sold an aggregate of $21.0 million of convertible debentures (the “$21M Debentures”) to an unaffiliated investor pursuant to an amended securities purchase agreement.

As of March 31, 2021, the holder of the $21M Debentures had converted the entire $21.0 million of principal and related accrued interest into the Company’s common stock in a series of conversions, at conversion prices equal to 80.0% of a calculated average of the daily volume-weighted price preceding the date of conversion. Of these conversions, $1.3 million of principal and approximately $56,000 of accrued interest were converted into 4,610,645 shares of common stock at a conversion price of $0.29 per share during the three months ended March 31, 2021. Additionally, a remaining (i) original issue discount of approximately $52,000, (ii) debt discount of approximately $39,000 (such discount having arisen from the issuance of warrants attached to the $21M Debentures), and (iii) beneficial conversion feature of approximately $177,000 (such conversion feature having arisen from an in-the-money embedded conversion option on the commitment date), were fully amortized upon the final conversion of the $21M Debentures. All conversions were effected within the terms of the debenture agreements, and accordingly the Company was not required to record a gain or loss on such conversions.

NOTE 13 – MEZZANINE EQUITY

Series B Convertible Preferred Stock

In 2020, the Company entered into an exchange agreement with two institutional shareholders (the “Exchange Agreement”) whereby the Company (i) issued $4.4 million of promissory notes to the two institutional shareholders (such notes were retired in March 2021 as part of the promissory note retirements discussed in Note 11 – Promissory Notes), and (ii) exchanged 4,908,333 shares of the Company’s common stock previously acquired by the two institutional shareholders for an equal number of shares of newly designated Series B convertible preferred stock.

In connection with the Exchange Agreement, the Company filed (i) a certificate of designation with respect to the rights and preferences of the Series B 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.

21

The Series B convertible preferred stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the Company’s common stock. The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company unless the Series B Holders then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B convertible preferred stock in an amount calculated pursuant to the certificate of designation.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Series B Holders then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share equal to $3.00, plus any dividends declared but unpaid thereon, with any remaining assets distributed pro-rata among the holders of the shares of Series B convertible preferred stock and common stock, based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock.

At any time on or prior to the six-year anniversary of the issuance date of the Series B convertible preferred stock, (i) the Series B Holders have the option to convert their shares of Series B convertible preferred stock into common stock at a conversion price of $3.00 per share, without the payment of additional consideration, and (ii) the Company has the option to convert all, but not less than all, shares of Series B convertible preferred stock into common stock at a conversion price of $3.00 if the daily volume weighted average price of common stock (the “VWAP”) exceeds $4.00 per share for at least twenty consecutive trading days prior to the date on which the Company gives notice of such conversion to the Series B Holders.

On the day following the six-year anniversary of the issuance of the Series B convertible preferred stock, all outstanding shares of Series B convertible preferred stock shall automatically convert into common stock as follows:

●

If the sixty-day VWAP is less than or equal to $0.50 per share, the Company shall have the option to (i) convert all shares of Series B convertible preferred stock into common stock at a conversion price of $1.00 per share, and pay cash to the Series B Holders equal to the difference between the 60-day VWAP and $3.00 per share, or (ii) pay cash to the Series B Holders equal to $3.00 per share.

●

If the sixty-day VWAP is greater than $0.50 per share, the Company shall have the option to (i) convert all shares of Series B convertible preferred stock into common stock at a conversion price per share equal to the quotient of $3.00 per share divided by the sixty-day VWAP, or (ii) pay cash to the Series B Holders equal to $3.00 per share, or (iii) convert all shares of Series B convertible preferred stock into common stock at a conversion price per share equal to the sixty-day VWAP per share and pay cash to the Series B Holders at the difference between $3.00 per share and the sixty-day VWAP per share.

The Company shall at all times when the Series B convertible preferred stock is outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B convertible preferred stock, such number of its duly authorized shares of common stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B convertible preferred stock.

Series C Convertible Preferred Stock

In March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) with respect to a financing facility of up to $46.0 million in exchange for newly-designated Series C convertible preferred stock of the Company and warrants to purchase the Company’s common stock.

At the closing of the transaction in March 2021, Hadron purchased $23.0 million of Units at a price of $3.70 per Unit. Each Unit is comprised of one share of Series C preferred stock and a four-year warrant to purchase two and one-half shares of common stock. Accordingly, the Company issued to Hadron 6,216,216 shares of Series C preferred stock and warrants to purchase up to an aggregate of 15,540,540 shares of common stock. Each share of Series C preferred stock is convertible, at Hadron’s option, into five shares of common stock, and each warrant is exercisable at an exercise price of $1.087 per share. The warrants shall be subject to early termination if certain milestones are attained, and the market value of the Company’s common stock reaches certain predetermined levels. The fair value of the warrants of approximately $9.5 million on the issuance date was allocated to the proceeds and recorded as additional paid-in capital. The Company incurred costs of approximately $387,000 relative to the issuance of the aforementioned shares to Hadron which was recorded as a reduction to additional paid-in capital in March 2021.

In connection with the closing of the transaction, the Company filed a certificate of designation with respect to the rights and preferences of the Series C convertible preferred stock. Such stock is zero coupon, non-voting. and has a liquidation preference equal to its investment amount plus declared but unpaid dividends. Holders of Series C convertible preferred stock are entitled to receive dividends on an as-converted basis.

Of the $23.0 million of proceeds received by the Company in March 2021, approximately (i) $7.3 million was designated to fund construction and upgrades of certain of the Company’s owned and managed facilities, which was expended in 2021, and (ii) $15.7 million was used to pay down debt and related interest as discussed in Note 11 – Promissory Notes.

22

The balance of the facility was designated to fund future acquisitions, including the Kind acquisition, on the same aforementioned terms as the initial proceeds. Notwithstanding, Hadron did not fund the cash portion of the Kind purchase price, and the Company is currently in negotiations with Hadron to amend and extend the facility to be utilized for future expansion opportunities. There is no assurance that any extension will be implemented.

The transaction imposes certain covenants on the Company with respect to the incurrence of new indebtedness, the issuance of additional shares of any designation of preferred stock, and the payment of distributions.

NOTE 14 – STOCKHOLDERS’ EQUITY

Stockholder Resolutions

At the Company’s 2021 annual meeting of stockholders in September 2021 (the “Annual Meeting”), stockholders approved an amendment to the Company’s certificate of incorporation increasing the number of authorized shares of common stock from 500 million 700 million.

Also at the Annual Meeting, stockholders approved an amendment to the Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “Plan”) increasing the aggregate number shares reserved for issuance under the Plan from 40 millionto 70 million.

Undesignated Preferred Stock

In February 2020, the Company filed a certificate of elimination to return all shares of formerly designated Series A convertible preferred stock to the status of authorized and unissued shares of undesignated preferred stock.

Common Stock

During the three months ended March 31, 2022 and 2021, the Company granted 2,717 and 6,877 shares of common stock, respectively, to an employee for services in lieu of salary. These granted shares, with a fair value of approximately $2,000 in 2022 and $5,000 in 2021, were yet to be issued by the end of the respective quarter, and were reflected in Common Stock Subscribed But Not Issued on the balance sheet.

In March 2022, the Company issued 375,000 shares of common stock valued at approximately $274,000 in exchange for consulting services, In February 2021, the Company issued 42,857 shares of common stock to settle a $30,000 obligation. Based on the price of the Company’s common stock on the date of issuance, the Company incurred a non-cash loss of approximately $1,000 which was reflected under Loss On Obligations Settled with Equity on the statement of operations.

During the three months ended March 31, 2021, the Company issued 11,413 shares of common stock associated with previously issued subscriptions on common stock with a fair value of approximately $5,000. No such issuances were made during the three months ended March 31, 2022.

As previously disclosed in Note 11 – Promissory Notes, during the three months ended March 31, 2022 and 2021, the Company issued 1,142,858 shares common stock upon the conversion of $400,000 of principal in 2022 and 3,365,972 shares of common stock upon the conversion of approximately $1,010,000 of principal and interest in 2021 on promissory notes.

As previously disclosed in Note 12 – Debentures Payable, during the three months ended March 31, 2021, the Company issued 4,610,645 shares common stock upon the conversion of $1.3 million of principal and approximately $56,000 of accrued interest of the $21M Debentures.

As further disclosed in Note 15 – Options, during the three months ended March 31, 2022, 10,000 shares of common stock were issued in connection with the exercise of stock options. NaN stock options were exercised during the three months ended March 31, 2021.

As further disclosed in Note 16 – Warrants, during the three months ended March 31, 2021, warrants to purchase 50,000 shares of common stock were exercised. NaN warrants were exercised during the three months ended March 31, 2022.

Common Stock Issuance Obligations

At March 31, 2022 and 2021, the Company was obligated to issue 2,717 and 6,877 shares of common stock, valued at approximately $2,000 and $5,000, respectively, in connection with stock grants to an employee. The 2022 obligation was issued in May 2022; the 2021 obligations was issued in April 2021.

23

NOTE 15 – STOCK OPTIONS

During the three months ended March 31, 2021, the Company granted five-year options to purchase up to 1,262,000 shares of common stock at exercise prices ranging from $0.51 to $0.90 per share. The fair value of these options of approximately $541,000 in the aggregate is being amortized to compensation expense over their vesting periods, of which approximately $170,000 was amortized during the three months ended March 31, 2021. No stock options were granted during the three months ended March 31, 2022.

Compensation expense in the first quarter of 2022 and 2021 for options issued in previous periods, and continuing to be amortized over their respective vesting periods, approximated $2,469,000 and $124,000, respectively.

During the three months ended March 31, 2022, options to purchase 10,000 shares of common stock were exercised at an exercise price of $0.30. No stock options were exercised during the three months ended March 31, 2021.

During the three months ended March 31, 2021, options to purchase 50,000 shares of common stock expired. NaN stock options expired during the three months ended March 31, 2022.

Stock options outstanding and exercisable as of March 31, 2022 were:

SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE

Exercise Price  Shares Under Option  Remaining Life 
per Share  Outstanding  Exercisable  in Years 
 $0.140   80,000   80,000   3.28 
 $0.149   500,000   500,000   3.76 
 $0.169   200,000   200,000   3.62 
 $0.225   2,000,000   1,625,000   3.61 
 $0.250   50,000   50,000   2.92 
 $0.250   20,000   20,000   3.17 
 $0.250   50,000   25,000   3.57 
 $0.250   800,000   800,000   3.62 
 $0.250   80,000   80,000   3.65 
 $0.300   388,000   388,000   3.00 
 $0.417   900,000   900,000   2.74 
 $0.505   100,000   100,000   3.76 
 $0.505   800,000   400,000   3.78 
 $0.590   15,000   15,000   2.69 
 $0.690   15,000   -   4.68 
 $0.693   500,000   -   4.69 
 $0.700   650,000   50,000   4.67 
 $0.740   520,000   425,625   4.08 
 $0.755   1,050,000   550,000   4.73 
 $0.770   200,000   200,000   0.75 
 $0.800   25,000   -   4.64 
 $0.830   287,000   287,000   3.98 
 $0.830   600,000   150,000   4.16 
 $0.840   878,921   878,921   4.29 
 $0.840   99,000   59,400   4.34 
 $0.850   90,000   49,375   4.21 
 $0.850   72,500   14,375   4.63 
 $0.870   250,000   -   4.76 
 $0.880   11,550,000   5,925,000   4.28 
 $0.880   15,000   7,500   4.37 
 $0.880   410,000   102,500   4.59 
 $0.890   10,000   5,000   3.81 
 $0.892   40,000   30,000   3.81 
 $0.895   25,000   25,000   3.82 
 $0.898   11,250,000   5,625,000   4.50 
 $0.900   50,000   50,000   1.11 
 $0.910   50,000   50,000   0.56 
 $0.920   300,000   37,500   4.27 
 $0.928   500,000   200,000   4.36 
 $0.950   50,000   50,000   0.75 
 $0.970   100,000   100,000   4.21 
 $0.983   145,000   61,250   4.24 
 $0.990   500,000   125,000   4.47 
 $0.992   300,000   300,000   2.49 
 $1.000   15,000   15,000   2.21 
 $1.000   125,000   125,000   2.59 
 $1.350   100,000   100,000   1.33 
 $1.950   375,000   375,000   1.25 
 $2.320   100,000   100,000   1.45 
 $2.450   2,000,000   2,000,000   0.73 
 $2.500   100,000   100,000   1.41 
 $2.650   200,000   200,000   1.48 
 $2.850   56,250   56,250   0.70 
 $2.850   100,000   100,000   1.70 
 $3.000   25,000   25,000   1.71 
 $3.725   100,000   100,000   1.69 
     39,811,671   23,837,696     

24

NOTE 16 – WARRANTS

During the three months ended March 31, 2021, the Company issued four-year warrants to Hadron to purchase up to 15,540,540 shares of common stock at an exercise price of $1.087 per share as part of the Hadron transaction previously discussed in Note 13 – Mezzanine Equity. Of the $23.0 million of proceeds from the Hadron transaction, $9.5 million was allocated to the warrant (such mount representing the fair value of the warrants on the issuance date) and recorded in Additional Paid-In Capital. Also during 2021, the Company issued warrants to purchase up to 2,100,000 shares of common stock at exercise prices ranging from $0.50 to $0.83 per share, expiring three and five years from issuance. The fair value of these warrants on their issuance dates of approximately $1,487,000 in the aggregate was charged to compensation expense. No warrants were granted during the three months ended March 31, 2022.

During the three months ended March 31, 2021, warrants to purchase 50,000 shares of common stock were exercised at an exercise price of $0.15 per share. NaN warrants were exercised during the three months ended March 31, 2022.

During the three months ended March 31, 2021, warrants to purchase 225,000 shares of common stock with exercise prices of $0.90 and $1.15 per share expired. NaN warrants expired during the three months ended March 31, 2022.

At March 31, 2022 and 2021, warrants to purchase up to 26,351,571 and 32,282,708 shares of common stock, respectively, were outstanding with exercise prices ranging from $0.25 to $5.50 per share across both periods.

NOTE 17 – REVENUES

For the three months ended March 31, 2022 and 2021, the Company’s revenues were comprised of the following major categories (in thousands):

SCHEDULE OF REVENUES COMPRISED OF MAJOR CATEGORIES

  

Three Months Ended

March 31,

 
  2022  2021 
Product sales - retail $21,441  $15,224 
Product sales - wholesale  6,062   5,725 
Real estate rentals  1,587   1,809 
Supply procurement  1,190   520 
Management fees  753   896 
Licensing fees  249   469 
Total revenues $31,282  $24,643 

For the three months ended March 31, 2022 and 2021, revenues from two clients represented 12% and 14%, respectively, of total revenues.

NOTE 18 – BAD DEBTS

The Company maintains two types of reserves to address uncertain collections of amounts due—an allowance against trade accounts receivable (the “AR Allowance”), and a reserve against cash advanced by the Company to its cannabis-licensed clients for working capital purposes (the WC Reserve”).

During the three months ended March 31, 2022, the Company made no change to the AR Allowance, and increased the WC Reserve by approximately $14,000, to reserve the working capital balance of Harvest. During the three months ended March 31, 2021, the Company increased the AR Allowance by $850,000, and the WC Reserve by approximately $175,000. The aggregate of these two amounts of approximately $1,025,000 was charged to Bad Debts on the statement of operations for this period.

25

NOTE 19 – RELATED PARTY TRANSACTIONS

In July 2021, the Company granted five-year options to purchase up to 100,000 shares of common stock to each of the Company’s three independent board members at an exercise price of $0.88 per share.

In December 2021, the CEO and CFO each exercised options to purchase 100,000 shares of common stock on a cashless basis. The exercise price of $0.63 per share was paid via the surrender by each individual of 73,256 shares of common stock.

The Company’s corporate offices are leased from an entity in which the Company’s CFO has an investment interest. This lease expires in October 2028 and contains a five-year extension option. During the three months ended March 31, 2022 and 2021, expenses incurred under this lease approximated $39,000 in both periods.

The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s COO. The aggregate purchases from this entity during the three months ended March 31, 2022 and 2021 approximated $872,000 and $825,000, respectively.

The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the Company’s COO and its SVP of Sales under a royalty agreement. This agreement was amended effective January 1, 2021 whereby, among other modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies products to (i) 3.0% and 10.0% of wholesale sales of existing products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively, and (ii) 0.5% and 1.0% of wholesale sales of future developed products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively. The aggregate royalties due to this entity in the three months ended March 31, 2022 and 2021approximated $56,000 and $83,000, respectively.

During the three months ended March 31, 2022 and 2021, one of the Company’s majority-owned subsidiaries paid aggregate distributions of approximately $11,000 and $9,000, respectively, to the Company’s CEO and CFO, who own minority equity interests in such subsidiary. During the three months ended March 31, 2022, another of the Company’s majority owned subsidiaries paid distributions of approximately $3,000 to a current employee who owns a minority equity interest in such subsidiary.

During the three months ended March 31, 2022 and 2021, the Company purchased fixed assets and consulting services of approximately $392,000 and $265,000, respectively, in the aggregate from two entities owned by two of the Company’s general managers.

During the three months ended March 31, 2022 and 2021, the Company purchased fixed assets of approximately $82,000 and $310,000 from an entity owned by an employee.

The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the Company’s CEO and CFO.

26

NOTE 20 – COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company is the lessee under six operating leases and foursix 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 detailsCompany leases the following facilities under operating leases:

•Delaware – 4,000 square feet of retail space in a multi-use building under a five-year lease that expires in April 2027 that the Company has developed into a cannabis dispensary which is subleased to its cannabis-licensed client.
•Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility that is being subleased to its cannabis-licensed client. The lease expires in March 2030, with an option to extend the term for three additional years.
•Delaware – a 12,000 square foot premises which the Company developed into a cannabis production facility with offices, and which it subleases to its cannabis-licensed client. The lease expires in January 2026 and contains an option to negotiate an extension at the end of the Company’s operatinglease.
•Nevada – 10,000 square feet of an industrial building that the Company has built out into a cannabis cultivation facility which it plans to rent and then sublease to the cannabis-licensed entity, which will be coterminous with this lease agreements areexpiring in 2024.
•Massachusetts – 10,000 square feet of office space which the Company utilizes as follows:its corporate offices under a lease with a related party expiring in 2028 with an option to extend the term for an additional five-year period.

•

●Delaware – 4,000 square feet of retail space in a multi-use building under a five-year lease that expires in April 2027 that the Company has developed into a cannabis dispensary which is subleased to its cannabis-licensed client.
●Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility that is being subleased to its cannabis-licensed client. The lease expires in March 2030, with an option to extend the term for three additional five-year periods.
●Delaware – a 12,000 square foot premises which the Company developed into a cannabis production facility with offices, and is subleases to its cannabis-licensed client. The lease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.
●Nevada – 10,000 square feet of an industrial building that the Company has built-out into a cannabis cultivation facility and plans to rent to its cannabis-licensed client under a sublease which will be coterminous with this lease expiring in 2024.
●Massachusetts – 10,000 square feet of office space which the Company utilizes as its corporate offices under a lease with a related party expiring in 2028, with an option to extend the term for an additional five-year period.
●Maryland – a 2,700 square foot two-unit apartment under a lease that expires in July 2022.

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

The Company leases machinery and office equipment under finance leases that expire infrom February 2024 through February 2026November 2027, with such terms being a major part of the economic useful life of the leased property.
26
The components of lease expense for the three and nine months ended March 31,September 30, 2022 and 2021 were as follows (in thousands):
Three months endedNine months ended
September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Operating lease expense$296 $277 $872 $821 
Finance lease expenses:
Amortization of right of use assets$48 $8 $108 $25 
Interest on lease liabilities14 1 32 4 
Total finance lease expense$62 $9 $140 $29 

SCHEDULE OF COMPONENTS OF LEASE EXPENSE

     
Operating lease cost $277 
     
Finance lease cost:    
Amortization of right-of-use assets $19 
Interest on lease liabilities  7 
Total finance lease cost $26 

The

At September 30, 2022, the weighted average remaining lease termterms for operating leases is 7.1and finance leases were 6.6 years and for finance leases is 3.8 years.3.3 years, respectively. The weighted average discount rate used to determine the right-of-use assets and lease liabilities iswas between 7.5% to 12.0%7.5% and 12.0% for all leases.

Future minimum lease payments as of March 31,September 30, 2022 under all non-cancelable leases having an initial or remaining term of more than one year were (in thousands):

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

  Operating Leases  

Finance

Leases

 
2022 $849  $135 
2023  1,119   173 
2024  1,050   153 
2025  1,025   150 
2026  970   21 
Thereafter  2,611   - 
Total lease payments  7,624  $632 
Less: imputed interest  (2,153)  (82)
  $5,471  $550 

27

Operating
leases		Finance
leases
Remainder of 2022$304 $61 
20231,298 238 
20241,199 217 
20251,179 216 
20261,128 88 
Thereafter3,214 40 
Total lease payments8,322 860 
Less: imputed interest(2,824)(136)
$5,498 $724 


In November 2021, the Company entered into lease agreements for six retail properties, each with square footage between 4,000 and 6,000 square feet, in the state of Ohio (each an “Ohio Lease” and collectively the “Ohio Leases”). Each Ohio Lease has an initial lease period of eleven months, with a minimum rent of $31.00$31.00 per square foot, which amount increases 3.0% annually. annually. In the event the Company is awarded one or more of the six Ohio cannabis licenses for which it had previously applied, the Company can extend the term of one or more of the Ohio Leases to ten years (with two additional five-year options to extend) upon the payment of $50,000$50,000 for each extended Ohio Lease, and develop the premises of such extended lease(s) into a cannabis dispensary.

In February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio. The Company is awaiting the final verification process to be completed by the state. As of March 31,September 30, 2022, the lease terms of the Ohio Leases were all less than one year, and accordingly the Company washas not required to recordrecorded a right-of-use asset and corresponding lease liability on its balance sheet.

In April 2022, the Company extended the term of one of the Ohio Leases to February 2023 (the "Extended Ohio Lease"), and the remaining five Ohio Leases were terminated.

Terminated Employment Agreement

An employment agreement The Company intends to enter into a ten-year lease on the Extended Ohio Lease property, which commenced in 2012 with Thomas Kidrin,will become effective upon the former CEOcompletion of the final verification process by the state, which is expected to occur in the first quarter of 2023.



(17) RELATED PARTY TRANSACTIONS

The Company’s corporate offices are leased from an entity in which the Company’s former Chief Financial Officer, now the Company’s President (the "President") has an investment interest. This lease expires in October 2028 and contains a five-year extension option. Expenses incurred under this lease were approximately $39,000 for both of the three-month periods ended September 30, 2022 and 2021, and approximately $117,000 for both of the nine-month periods ended September 30, 2022 and 2021.

27
The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s Chief Operating Officer (“COO”). Purchases from this entity totaled $1.1 million and $3.4 million in the three and nine months ended September 30, 2022, respectively, and $1.5 million and $3.8 million in the three and nine months ended September 30, 2021, respectively.

The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the Company’s COO and its Chief Revenue Officer (“CRO") under a royalty agreement. This agreement was terminatedamended effective January 1, 2021 whereby, among other modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies products to (i) 3.0% and 10.0% of wholesale sales of existing products within the product line if sold directly by the Company, in 2017. Since the termination date,or licensed by the Company had maintained an accrualfor sale by third parties, respectively, and (ii) 0.5% and 1.0% of approximately $1,043,000 for any amounts that may be owed under this agreement.

In July 2019, Mr. Kidrin, also a former directorwholesale sales of future developed products within the product line if sold directly by the Company, filed a complaint in the Massachusetts Superior Court, which allegedor licensed by the Company failedfor sale by third-parties, respectively. The aggregate royalties due to pay all wages owed to himthis entity were approximately $53,000 and breached$163,000 for the employment agreement,three and requested multiple damages, attorney fees, costs,nine months ended September 30, 2022, respectively, and interest. The Company moved to dismiss certain counts ofapproximately $48,000 and $210,000 for the complaintthree and asserted counterclaims against Mr. Kidrin alleging breach of contract, breach of fiduciary duty, money hadnine months ended September 30, 2021, respectively.


During the three and received, and unjust enrichment.

In August 2021, the parties entered into a settlement agreement and general release pursuant to which (i) Mr. Kidrin’s complaint was dismissed with prejudice, (ii) the Company issued to Mr. Kidrin five-year warrants to purchase up to 1,000,000 sharesnine months ended September 30, 2022, respectively, one of the Company’s common stock at an exercise pricemajority-owned subsidiaries paid distributions in the aggregate of $$4,200 and $27,300 to the Company’s Chief Executive Officer (“CEO”) and its President, who own minority equity interests in such subsidiary. During the three and nine months ended September 30, 2021, respectively, this majority-owned subsidiary paid aggregate distributions of approximately $13,000 and $34,000 to the Company’s CEO and President.

0.50
During the three and nine months ended September 30, 2022, one of the Company’s majority-owned subsidiaries paid distributions of $6,500 and $17,500, respectively, to a current employee who owns a minority equity interest in such subsidiary. During both the three and nine months ended September, the employee was paid $4,300 from such subsidiary.

per share, (iii)
During the three and nine months ended September 30, 2022, the Company irrevocably transferred intangiblepurchased fixed assets relating toand consulting services aggregating $267,000 and $926,000, respectively, from two entities owned by two of the online virtual worlds businessCompany’s general managers. During the three and nine months ended September 30, 2021, the Company had conducted in early 2014, prior to its pivot intopurchased fixed assets and consulting services from these entities aggregating approximately $150,000 and $723,000, respectively.

During the legal cannabis industry (suchthree and nine months ended September 30, 2022, the Company purchased fixed assets had zero carrying value onof $125,000 and $486,000, respectively, from an entity owned by an employee. During the three and nine months ended September 30, 2021, the Company purchased fix assets of approximately $78,000 and $438,000, respectively, from this employee.

The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the Company’s balance sheet), and (iv) each party released and discharged the other from all claims, losses, and liabilities.

In August 2021, the fair value of the warrants of approximately $776,000 was charged to compensation expense,CEO and the Company reversed its accrual of approximately $Company’s President.

1,043,000

(18) COMMITMENTS AND CONTINGENCIES

Maryland Litigation

Following the consummation of the Kind acquisition previously discussed in Note 3 – Acquisitions,Acquisition, in April 2022, the Maryland litigation between the Company and the members of Kind was dismissed in its entirety with prejudice, and the parties have released one another of any and all claims between them.

DiPietro Lawsuit

In April 2022, the parties agreed to dismiss all direct claims and counterclaims asserted in this litigation, as set forth below. In addition to their direct claims, the parties also asserted derivative claims, which may be dismissed only with the court’s approval. On April 12, 2022, the court approved the form of notice to be delivered to unit holders of Mia Development LLC (“Mia”) and Mari Holdings MD LLC (“Mari-MD”), majority-owned subsidiaries of the Company, and scheduled a hearing to approve dismissal of all derivative claims for June 8, 2022.

In this action, Jennifer DiPietro, one of the former members of Kind, directly and derivatively on behalf of Mari-MD and Mia, commenced a suit in August 2020 against the Company’s CEO, CFO, and wholly-owned subsidiary MariMed Advisors Inc. (“MMA”), in Suffolk Superior Court, Massachusetts. DiPietro brought claims for breach of fiduciary duty, breach of contract, fraud in the inducement, aiding and abetting the alleged breach of fiduciary duty, and also sought access to books and records and an accounting related to her investments in Mari-MD and Mia. DiPietro sought unspecified money damages and rescission of her interest in Mari-MD, but not of her investment in Mia, which had provided substantial returns to her as a member.

The Company answered the complaint and MMA filed counterclaims against DiPietro on its own behalf and derivatively on behalf of Mari-MD for breach of her fiduciary duties to each of those entities, and for tortious interference with Mari-MD’s lease and MMA’s management services agreement with Kind.

In December 2021, the parties to this action entered into a global confidential settlement and release agreement, along with the parties to the aforementioned Maryland litigation. As ofAt the same date, MMAthe Company’s wholly-owned subsidiary MariMed Advisors Inc. (“MMA”) and Jennifer DiPietro (“Ms. DiPietro”), one of the former members of Kind, entered into a membership interest purchase agreement pursuant to which the Company willwould purchase Ms. DiPietro’s interests in Mia and Mari-MD, as previously discussed in Note 3 – Acquisitions.Mari-MD. Upon the court’s approval onof the parties’ joint motion for approval, on June 8, 2022, the purchase of Ms. DiPietro’s interests shall be consummated, thewas consummated. The parties shall releasereleased all direct and derivative claims against one another, and the parties shall file stipulationsa stipulation dismissing all claims and counterclaims with prejudice within three dayswas filed with the court.

28

Bankruptcy Claim


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

In February 2020, GenCanna USA, GenCanna’s wholly-owned operating subsidiary, under pressure from certain of its creditors including MGG Investment Group LP, GenCanna’s senior lender (“MGG”), agreed to convert a previously-filed involuntary bankruptcy proceeding with the U.S. Bankruptcy Court in the Eastern District of Kentucky (the “Bankruptcy Court”) into a voluntary Chapter 11 proceeding. In addition, GenCanna and GenCanna USA’s subsidiary, Hemp Kentucky LLC (collectively with GenCanna and GenCanna USA, the “GenCanna Debtors”), filed voluntary petitions under Chapter 11 in the Bankruptcy Court.

In May 2020, after an abbreviated solicitation/bid/sale process, the Bankruptcy Court, over numerous objections by creditors and shareholders of the GenCanna Debtors which included the Company, entered an order authorizing the sale of all or substantially all of the assets of the GenCanna Debtors to MGG. After the consummation of the sale of all or substantially all of their assets and business, the GenCanna Debtors n/k/a OGGUSA, Inc. and OGG, Inc. (the “OGGUSA Debtors”) filed their liquidating plan of reorganization (the “Liquidating Plan”) to collect various prepetition payments and commercial claims against third parties, liquidate the remaining assets of the ODDUSA Debtors, and make payments to creditors. The Company and the unsecured creditors committee filed objections to such Liquidating Plan, including opposition to the release of litigation against the OGGUSA Debtors’ senior lender, MGG, for lender liability, equitable subordination, and return of preference. As a part of such plan confirmation process, the OGGUSA Debtors filed various objections to proofs of claims filed by various creditors, including the proof of claim in the amount of approximately $33.6$33.6 million filed by the Company. Through intense and lengthy negotiations with the OGGUSA Debtors and the unsecured creditors committee regarding the objections to the Liquidating Plan, the Company reached an agreement with the OGGUSA Debtors to withdraw the objections to the Company’s claim and to have it approved by the Bankruptcy Court as a general unsecured claim in the amount of $$31.0 million.
31.0
 million.

Since the approval of the Liquidating Plan, the OGGUSA Debtors have been in the process of liquidating the remaining assets, negotiating and prosecuting objections to other creditors’ claims, and pursuing the collection of accounts receivable and Chapter 5 bankruptcy avoidance claims.

In January 2022, the Company, at the request of the Liquidating Plan administrator for the OGGUSA Debtors, executed a written release of claims, if any, of the Company against Huron Consulting Group (“Huron”), a financial consulting and management company retained by the senior lender of the OGGUSA Debtors to perform loan management services for the lender and OGGUSA Debtors prior to and during their Chapter 11 bankruptcy cases. Such release was executed in connection with a comprehensive settlement agreement between the OGGUSA Debtors and Huron. In consideration for the Company’s execution of the release, Huron paid an additional $40,000$40,000 to the bankruptcy estates of the OGGUSA Debtors to be included in the funds to be distributed to creditors, including the Company.

On April 20, 2022, the Plan Administrator for the OGGUSA Debtors filed an adversary proceeding against the Company seeking to recover approximately $200,000 in certain alleged preferential transfers made to MariMed Hemp, Inc. prior to the filing of the Chapter 11 bankruptcy. After investigating the nature of these claims, the Company and its counsel do not believe that such claims have any factual or legal merit and intend to vigorously defend such preference action. In addition, by reason of the nature of the claims, the Company believes that it has certain counterclaims and possible third-party claims against the OGGUSA Debtors in relation to the facts asserted in the preference action. The Company and its counsel are continuing to have discussions with the Plan Administrator in an attempt to resolve this action without further litigation or expense. On October 19, 2022, counsel for the Plan Administrator requested a resumption of discussions between the parties regarding the settlement of the claims in question. It is not known at this time whether such matter can be resolved or if the Company will be required to proceed with its defense and counterclaims. In the event that the Company and the Plan Administrator are not able to reach a settlement agreement regarding the resolution of the claims, one or both of the parties will file an election notice with the bankruptcy court to allow the reference action to proceed.
As of the date of this filing, since the preference section is still in its initial states and no discovery has been conducted by either party, there is still insufficient information as to (a) the details of the factual or legal basis for the preference claim asserted by the Plan Administrator or (b) what portion, if any, of the Company’s allowed claim will be paid upon the completion of the liquidation of the remaining assets of the OGGUSA Debtors.
29

NOTE 21 –
(19) SUBSEQUENT EVENTS

Equity Transactions

Consummation of Kind Acquisition and Dismissal of Litigation

In April

Subsequent to September 30, 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind as previously discussed(i) 896,031 warrants were exercised in Note 3 – Acquisitions, and the acquisition was consummated by the parties. Accordingly, Kind will be consolidated into the financial results ofa cashless transaction, under which the Company commencing on the closing datewithheld 813,694 shares underlying such warrants and issued 82,337 shares of the acquisition. The cash portioncommon stock and (ii) 629 shares of the purchase price, $restricted common stock were issued as payment under a royalty agreement.
13.5
 million, was funded out
Payoff of available working capital. Additionally, following the consummation of the acquisition, the Maryland litigation betweenPromissory Note

In November 2022, the Company and the former membersholder of Kind was dismissed in its entirety with prejudice, and the parties released one another of any and all claims between them.

In April 2022,promissory note issued by MariMed Hemp Inc. reached an agreement under which the Company and DiPietro agreedwill pay approximately $227,000 to dismiss all direct claims and counterclaims asserted in a separate litigation between them, as previously discussed in Note 20 – Commitments and Contingencies. In addition to their direct claims, the parties also asserted derivative claims, which may be dismissed only with the court’s approval. On April 12, 2022, the court approved the formholder of notice to be delivered to unit holderssuch note. No additional amounts are due under this promissory note.


30
Table of Mia and Mari-MD, and scheduled a hearing to approve dismissal of all derivative claims for June 8, 2022. After such approval, the Company shall purchase DiPietro’s interests in Mia and Mari-MD, the parties shall release all direct and derivative claims against one another, and the parties shall file stipulations dismissing all claims and counterclaims with prejudice within three days of that ruling.

Consummation of Green Growth Group AcquisitionContents

In April 2022, the acquisition of Green Growth Group previously discussed in Note 3 – Acquisitions was consummated by the parties.

Lease Agreements

In April 2022, the Company extended the term of one of the Ohio Leases previously discussed in Note 20 – Commitments and Contingencies, and the remaining five Ohio Leases were terminated.

Equity Transactions

In April 2022, warrants to purchase 750,000 shares of common stock were exercised on a cashless basis. The exercise price of $0.50 per share was paid via the surrender of 515,039 shares of common stock, resulting in the issuance of 234,961 shares of common stock.

29

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

Forward Looking Statements

When used in this form 10-Q and in future filings by the Company with the Commission, the words or phrases such as “anticipate,” “believe,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or similar expressions are intended to identify “forward-looking statements” within the meaning

The following discussion of the Private Securities Litigation Reform Actfinancial condition and results of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, eachoperations 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 discussionMariMed Inc. should be read in conjunction with the unauditedcondensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021, which are included under Item 1 of this report.was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2022.


Overview

We do not undertake to update our forward-looking statements or risk factors to reflect future events or circumstances.

Overview

General

MariMed Inc. (the “Company”) isare a multi-state operator in the United States cannabis industry. The Company develops, operates, manages,We develop, operate, manage, and optimizes over 300,000 square feet ofoptimize state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of medicinal and recreationaladult use cannabis. The CompanyWe also licenses itslicense our proprietary brands of cannabis and hemp-infused products, along with other top brands, in several domestic markets and overseas.markets.


Upon its entry into the cannabis industry in 2014, the Company was an advisory firm that procured state-issued cannabis licenses on behalf of its clients, developed cannabis facilities which it leased to these newly-licensed companies, and provided industry-leading expertise and oversight in all aspects of their cannabis operations. The Company also provided its clients with ongoing regulatory, accounting, real estate, human resources, and administrative services.

Over the last few years, the Company made the strategic decision to transition from a consulting business to a direct owner and operator of cannabis licenses in high-growth states. Core to this transition is the acquisition and consolidation of the Company’s clients (the “Consolidation Plan”). Among several benefits, the Consolidation Plan would present a simpler, more transparent financial picture of the full breadth of the Company’s efforts, with a clearer representation of the revenues, earnings, and other financial metrics the Company has generated for its clients. The Company has played a key role in the successes of these entities, from the securing of their cannabis licenses, to the development of facilities that are models of excellence, to funding their operations, and to providing operational and corporate guidance. Accordingly, the Company believes it is well suited to own these businesses and manage the continuing growth of their operations.

To date, the Company’s acquisition and consolidation of its cannabis-licensed clients’ retail businesses in Illinois and retail and wholesale businesses in Massachusetts have been completed. In April 2022, the acquisition of its client’s wholesale business in Maryland, and a third-party wholesale business in Illinois were consummated. The acquisitions of clients’ retail and wholesale businesses in Nevada and Delaware are at various stages of completion and subject to each state’s laws governing the ownership transfer of cannabis licenses and other closing conditions. Delaware will require a modification of current cannabis ownership laws to permit for-profit ownership, which is expected to occur when the state legalizes recreational adult-use cannabis. Until the law changes and the acquisition is approved, the Company continues to generate revenue from rental income, management fees, and licensing royalties.

In addition to the aforementioned acquisitions of its cannabis-licensed clients, in February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio, for which it had previously applied. The Company is awaiting the final verification process to be completed by the state before commencing cannabis operations in this state.

The Company’s transition to a fully integrated muti-state cannabis operator (“MSO”) is part of a strategic growth plan (the “Strategic Growth Plan”) it is implementing to drive its revenues and profitability. The Strategic Growth Plan has four components: (i) complete the Consolidation Plan, (ii) increase revenues in existing states, by spending capital to increase the Company’s cultivation and production capacity, and develop additional assets within those states, (iii) expand the Company’s footprint in additional legal cannabis states through new applications and acquisitions of existing cannabis businesses, and (iv) optimize the Company’s brand portfolio and licensing revenue by expanding into additional states with legal cannabis programs.

The Company has created its own brands of cannabis flower, concentrates, and precision-dosed products utilizing proprietary strains and formulations. These products are developed by the Company in cooperation with state-licensed operators who meet the Company’s strict quality standards, including all natural—not artificial or synthetic—ingredients. The Company licenses its brands and product formulations only to certified manufacturing professionals who follow state cannabis laws and adhere to the Company’s precise scientific formulations and product recipes.

The Company markets its high-quality cannabis flowers and concentrates under the award-winning1 Nature’s Heritage brand; chewable tablets under the brand names Kalm Fusion and K Fusion; all natural fruit chews under the award-winning1 Betty’s Eddies brand; brownies, cookies, and other social sweets under the Bubby’s Baked brand; and powder drink mixes under the Vibations: High + Energy brand. The Company’s brands have been top-selling products in Maryland and Massachusetts.2 The Company intends to introduce additional product lines under these brands in the foreseeable future.

The Company also has strategic alliances with prominent brands. The Company has partnered with renowned ice cream maker Emack & Bolio’s® to create a line-up of cannabis-infused vegan and dairy ice cream. Additionally, the Company has secured distribution rights for the Binske® line of cannabis products crafted from premium artisan ingredients, the Healer line of medical full-spectrum cannabis tinctures, and the clinically-tested medicinal cannabis strains developed in Israel by global medical cannabis research pioneer Tikun Olam.

The Company was incorporated in Delaware in January 2011 under the name Worlds Online Inc. The Company’s

Our common stock is quoted on the OTCQX market under the ticker symbol MRMD. In April 2022, the Company applied to list its shares of common stockcommenced trading on the Canadian Securities Exchange effective July 12, 2022, under the ticker symbol MRMD, and continues to trade on the OTCQX under the same symbol.

On April 27, 2022 (the “Kind Acquisition Date”), we acquired Kind Therapeutics USA (“Kind”), our former client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (the “Kind Acquisition”). The financial results of Kind are included in our condensed consolidated financial statements for the periods subsequent to the Kind Acquisition Date.

On May 5, 2022, we completed the acquisition of 100% of the equity ownership of Green Growth Group Inc. (“Green Growth”), an entity that holds a craft cultivation and production cannabis license in the state of Illinois (the “Green Growth Acquisition”).

During the balance of 2022 and into 2023, we are focused on continuing to execute our strategic growth plan, with priority on activities that include the following:

•Continuing to consolidate the cannabis business that we have developed and manage.
•Expanding revenues, assets, and our footprint in the states in which applicationwe operate:

◦In Massachusetts, we intend to open two additional dispensaries and significantly expand the capacity and capability of our manufacturing facility.
◦In Delaware, we intend to develop an additional 40,000 square feet of cultivation and production capacity at our facility in Milford, which, upon completion, will be leased to our client in this state.
◦In Maryland, we opened a dispensary in Annapolis on October 18, 2022, and we intend to expand our manufacturing facility by 40,000 square feet. Under Maryland cannabis laws, we have the potential to add three additional dispensaries, for a total of four.
◦In Illinois, we recently closed on the acquisition of an Illinois craft cannabis license which will enable us to be vertically integrated and add cultivation, manufacturing, and distribution to our four existing retail cannabis operations in Illinois. Under Illinois cannabis laws, we have the potential to add six additional dispensaries, for a total of ten.
•Expanding into other legal states through mergers and acquisitions and by filing new applications in states where new licensing opportunities are available.
•Increasing revenues by producing and distributing our award-winning brands to qualified strategic partners or by acquiring production and distribution licenses.

31
Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is currently pending.based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment: accounts receivable; valuation of inventory; estimated useful lives and depreciation and amortization of property and equipment and intangible assets; accounting for acquisitions and business combinations; loss contingencies and reserves; stock-based compensation; and accounting for income taxes.

Accounts Receivable

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

Inventory

Our inventory is valued at the lower of cost or market, including consideration of factors such as shrinkage, the aging of and future demand for inventory, expected future selling price, what we expect to realize by selling the inventory and the contractual arrangements with customers. Reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts, and net realizable value. These estimates are judgmental in nature and are made at a point in time, using available information, expected business plans and expected market conditions. As a result, the actual amount received on sale could differ from the estimated value of inventory. Periodic reviews are performed on the inventory balance. The impact of any changes in inventory reserves is reflected in cost of goods sold.

Estimated Useful Lives and Depreciation and Amortization of Property, Equipment, and Intangible Assets

Depreciation and amortization of property, equipment, and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.

Acquisitions and Business Combinations

Classification of an acquisition as a business combination or an asset acquisition depends on whether the assets acquired constitute a business, which can be a complex judgment. Whether an acquisition is classified as a business combination or asset acquisition can have a significant impact on how we record the transaction.

We allocate the purchase price of acquired assets and companies to identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net amount of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits from other assets acquired in the acquisition or business combination that are not individually identified and separately recognized. Significant judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, which are principally based upon estimates of the future performance and cash flows expected from the acquired asset or business and applied discount rates. While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. If different assumptions are used, it could materially impact the purchase price allocation and our financial position and results of operations. Any adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period are included in operating results in the period in which the adjustments are determined.
32

1 Awards wonTable of Contents
Intangible assets typically are comprised of trademarks and tradenames, licenses and customer relationships, and non-compete agreements.

Loss Contingencies and Reserves

We are subject to ongoing business risks arising in the ordinary course of business that affect the estimation process of the carrying value of assets, the recording liabilities, and the possibility of various loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such amounts should be adjusted and record changes in estimates in the period they become known. We are subject to legal claims from time to time. We reserve for legal contingencies and legal fees when the amounts are probable and estimable.

Stock-Based Compensation

Our stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, which is generally the vesting period. We use the Black-Scholes valuation model for estimating the fair value of stock options as of the date of grant. Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions, including the volatility of our stock price, expected term of the stock option, risk-free interest rate and expected dividends. Changes in such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes, however, would not impact our cash flows.

Income Taxes

We use the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent our management concludes that it is more likely than not that the assets will not be realized. To assess the recoverability of any tax assets recorded on the balance sheet, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative income in the most recent years, changes in the business in which we operate and our forecast of future taxable income. In determining future taxable income, we make assumptions, including the amount of state and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our businesses.

Results of Operations

Three and nine months ended September 30, 2022 and 2021

Revenue

Our main sources of revenue are comprised of the following:

•Product sales (retail and wholesale) - direct sales of cannabis and cannabis-infused products primarily by our retail dispensaries and wholesale operations in Massachusetts, Illinois, and, as of the Kind Acquisition Date, Maryland. We recognize this revenue when products are delivered or at retain points-of-sale.
•Real estate rentals - rental income generated from leasing of our state-of-the-art, regulatory compliant cannabis facilities to our cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms. Prior to the third quarter of 2022, we charged additional rental fees based on a percentage of tenant revenues that exceeded specified amounts.
•Management fees - fees for providing our cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations. These fees are based on a percentage of such clients' revenue and are recognized after services have been performed.
33
•Supply procurement - resale of cultivation and production resources, supplies and equipment that we have acquired from top national vendors at discounted prices to our clients and third parties within the cannabis industry. We recognize this revenue after the delivery and acceptance of goods by the Company’s Betty’spurchaser.
•Licensing fees - revenue from the licensing of our branded products, including Betty's Eddies, brand include LeafLinkBubby's Baked, Vibations, and Kalm Fusion, to wholesalers and to regulated dispensaries throughout the United States and Puerto Rico. We recognize this revenue when the products are delivered.

Our revenue for the three and nine months ended September 30, 2022 and 2021 Best Selling Medical Product, Reddit Sparkie 2021 Best Edible, Respect My Region 2021 Hottest Edible, LeafLink 2020 Industry Innovator, and Explore Maryland Cannabis 2020 Edible of the Year. Awards won by the Company’s Nature’s Heritage brand include the Cultivators Cup 2021 Silver Medal and the High Times Cannabis Cup 2021 Bronze Medal.

2 Source: LeafLink Insights 2020.

30

Revenues

The Company’s revenues are primarilywas comprised of the following categories:

●Product Sales – direct sales of cannabis and cannabis-infused products primarily by the Company’s retail dispensaries and wholesale operations in Massachusetts and Illinois.
●Real Estate – rental income and additional rental fees generated from leasing of the Company’s state-of-the-art, regulatory-compliant cannabis facilities to its cannabis-licensed clients.
●Management – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production, and dispensary operations. Along with this oversight, the Company provides human resources, regulatory, marketing, and other corporate services.
●Supply Procurement – resale of cultivation and production resources, supplies, and equipment, acquired by the Company from top national vendors at volume discounted prices, to its clients and third-parties within the cannabis industry.
●Licensing – revenue from the sale of the Company’s branded products, including Betty’s Eddies and Kalm Fusion, and from the sublicensing of contracted brands including Healer and Tikun Olam, to regulated dispensaries throughout the United States and Puerto Rico.

Expenses

The Company classifies its expenses into three general categories:

●Cost of Revenues – the direct costs associated with the generation of the Company’s revenues.
●Operating Expenses – comprised of the sub-categories of personnel, marketing and promotion, general and administrative, and bad debts.
●Non-operating Income and Expenses – comprised of the sub-categories of interest expense, interest income, loss on obligations settled with equity, gain (loss) on changes in fair value of investment, and other investment income.

31
(in thousands):

Three months endedNine months ended
September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
Product revenue:
Product revenue - retail$23,593 $23,454 $68,121 $59,230 
Product revenue - wholesale9,009 6,633 23,029 20,536 
Total product revenue32,602 30,087 91,150 79,766 
Other revenue:
Real estate rentals434 1,726 2,867 5,397 
Supply procurement815 528 2,825 1,446 
Management fees9 685 843 2,562 
Licensing fees52 182 495 1,249 
Total other revenue1,310 3,121 7,030 10,654 
Total revenue$33,912 $33,208 $98,180 $90,420 


Liquidity and Capital Resources

The Company produced the following improvements to its liquidity in the reported periods:

●Cash and cash equivalents increased 13% to $33.5
Our total revenue increased $0.7 million at March 31, 2022, from $29.7 million at December 31, 2021.
●Working capital increased 16% to $20.1 million at March 31, 2022 from $17.4 million at December 31, 2021.
●Cash flow provided by operating activities increased 26% to $8.5 million in the three months ended March 31, 2022 from $6.8 million in the same period in 2021.
●Net income before income taxes increased 43% to $7.9 million in the three months ended March 31, 2022 from $5.5 million in the same period in 2021.

The aforementioned improvements to the Company’s liquidity were primarily the result of increases in revenues and profitability generated by the Company’s cannabis operations in the states of Illinois and Massachusetts. These operations launched as part of the Company’s aforementioned Consolidation Plan to transition from a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations.

Additionally, the section below entitled Non-GAAP Measurement discusses an additional financial measure not defined by GAAP which the Company’s management uses to evaluate liquidity.

Operating Activities

Net cash provided by operating activities in the three months ended March 31,September 30, 2022 was $8.5 million, compared to $6.8the three months ended September 30, 2021. Our total product revenue increased $2.5 million, or 8.4%, primarily attributable to higher wholesale revenue arising from the Kind Acquisition. This increase was partially offset by lower retail sales in the same periodMassachusetts due to increased competition. The decrease in 2021. The year-over-year improvementour other revenue was primarily attributable to rent and management fee reductions in connection with one of our clients and the increaseKind Acquisition, partially offset by higher supply procurement revenue primarily attributable to revenue generated from our cannabis clients in cannabis-derived profits generated byDelaware and, prior to the Company’s four active retail dispensariesKind Acquisition, in Illinois, and its retail and wholesale operations in Massachusetts.Maryland.


Investing Activities

Net cash used in investing activities

Our total revenue increased $7.8 million, or 8.6%, in the threenine months ended March 31, 2022 was $4.4 million, compared to $2.9 million in the same period in 2021. The increase was attributable to an increase in property and equipment expenditures in 2022 for the Company’s facilities in Delaware, Illinois, Maryland, and Massachusetts.

Financing Activities

Net cash used in financing activities in the three months ended March 31, 2022 was $329,000, compared with net cash provided by financing activities of $5.4 million in the same period in 2021. In early 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) whereby Hadron agreed to provide funding of up to $46.0 million to repay debt, to fund expansion plans of existing operations, and to finance planned acquisitions. The fluctuation in cash from financing activities was attributable to the receipt of $23.0 million under this facility, offset by issuance costs and debt repayments in March 2021. No financing was raised by the Company in 2022.

The balance of Hadron’s committed funding of $23.0 million was designated to fund future acquisitions, including the Kind acquisition, on the same aforementioned terms as the initial proceeds. Notwithstanding, Hadron did not fund the cash portion of the Kind purchase price and the Company is currently in negotiations with Hadron to amend and extend the facility to be utilized for future expansion opportunities. There is no assurance that any extension will be implemented.

32

Results of Operations

Three months ended March 31,September 30, 2022 compared to threethe nine months ended March 31, 2021

Revenues grew to $31.3 million in the first quarter of 2022, an increase of $6.6September 30, 2021. Our total product revenue increased $11.4 million, or 27%14.3%, compared to $24.6 million in the same period in 2021. The increase was primarily attributable to the growth of the Company’s (i)higher retail dispensary cannabis sales in Illinois whereand the inclusion of Kind’s sales in our results since the Kind Acquisition Date. Similar to our quarter-over-quarter results described above, the decrease in our other revenue was primarily attributable to rent and management fee reductions in connection with one new dispensary commenced operations in May 2021,of our clients and (ii)the Kind Acquisition, partially offset by higher supply procurement revenue primarily attributable to revenue generated primarily from the Company’sour cannabis clients in Delaware and, prior to the Kind Acquisition, in Maryland.


Cost of revenuesRevenue, Gross Profit and Gross Margin

Our cost of revenue represents the direct costs associated with the generation of our revenue, including licensing, packaging, supply procurement, manufacturing, supplies, depreciation, amortization of acquired intangible assets, and other product-related costs.

34
Our cost of revenue, gross profit and gross margin for the three and nine months ended September 30, 2022 and 2021 were $14.3 millionas follows (in thousands, except percentages):
Increase (decrease) from prior year
20222021$%
Three months ended September 30,
Cost of revenue$17,748 $15,027 $2,721 18.1 %
Gross profit$16,164 $18,181 $(2,017)(11.1)%
Gross margin47.7 %54.7 %
Nine months ended September 30,
Cost of revenue$50,035 $39,647 $10,388 26.2 %
Gross profit$48,145 $50,773 $(2,628)(5.2)%
Gross margin49.0 %56.2 %

Our cost of revenue increased in both the first quarter ofthree and nine months ended September 30, 2022 compared to $11.5 millionthe three and nine months ended September 30, 2021. Our higher cost of revenue in the same period in 2021, an increase ofcurrent year periods was primarily attributable to higher employee-related, facility and supply procurement costs aggregating $2.8 million or 25%. The variance wasand $10.2 million, respectively, in the three and nine months ended September 30, 2022. These higher costs were primarily due to thecontinuing supply chain issues and associated higher level of revenues as theseshipping costs, are largely variablecoupled with our increased headcount in natureconnection with our recent acquisitions and fluctuate in-step with revenues. As a percentage of revenues, these costs decreased slightly to 45.7%in-process expansions. These increases in 2022 from 46.5%cost and resulting decreases in the same period in 2021 due to increased operating efficiencies.

As a result of the foregoing, gross profit grewresulted in lower gross margins in both current year periods.


Operating Expenses

Our operating expenses are comprised of personnel, marketing and promotion, general and administrative, acquisition-related and other, and bad debt expenses. Our operating expenses for the three and nine months ended September 30, 2022 and 2021 were as follows (in thousands, except percentages):
Increase (decrease) from prior year
20222021$%
Three months ended September 30,
Personnel$3,746 $1,481 $2,265 152.9 %
Marketing and promotion1,402 563 839 149.0 %
General and administrative5,097 9,481 (4,384)(46.2)%
Acquisition-related and other143 — 143 100.0 %
Bad debt40 36 4 11.1 %
$10,428 $11,561 $(1,133)(9.8)%
Nine months ended September 30,
Personnel$10,170 $5,266 $4,904 93.1 %
Marketing and promotion2,854 1,058 1,796 169.8 %
General and administrative16,890 16,934 (44)(0.3)%
Acquisition-related and other897 — 897 100.0 %
Bad debt54 1,855 (1,801)(97.1 %)
$30,865 $25,113 $5,752 22.9 %

The increase in our personnel expenses in both the three and nine months ended September 30, 2022 compared to $17.0 million in the first quarter of 2022 from $13.2 million in the same period in 2021.

Personnel expenses increased to $3.0 million in the first quarter of 2022 from $1.7 million in the same period in 2021. The increasethree and nine months ended September 30, 2021 was primarily due to the hiring of additional staff to support higher levels of projected revenue from existing operations, as well as from the Kind acquisition. As a percentage of revenues, personnel expenses increased to 9.7% in the first quarter of 2022 from to 7.0% in the same period in 2021.

Marketing and promotionAcquisition. Personnel costs increased to $643,000approximately 11% of revenue in the first quarterthree months ended September 30, 2022, compared to approximately 5% of 2022 from $225,000revenue in the same periodthree months ended September 30, 2021, and approximately 10% of revenue in the nine months ended September 30, 2022, compared to approximately 6% of revenue in the nine months ended September 30, 2021.


35
The increase isin our marketing and promotion expenses in both the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 was primarily attributable to the Company’sour focused efforts to upgrade itsour marketing initiatives and personnel in order to expand branding and distribution of itsour licensed products. As a percentage of revenues, theseMarketing and promotion costs increased to 2.1%approximately 4% of revenue in three months ended September 30, 2022, compared to approximately 2% of revenue in the first quarterthree months ended September 30, 2021, and approximately 3% of revenue in the nine months ended September 30, 2022, from 0.9%compared to approximately 1% of revenue in the nine months ended September 30, 2021.

Our general and administrative expenses decreased by approximately $4 million in the three months ended September 30, 2022 compared to the same prior year period. This decrease was primarily attributable to lower costs in connection with our equity programs in the current year period. Our general and administrative expenses were essentially unchanged in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Acquisition-related and other expenses include those expenses related to acquisitions and other significant transactions that we would otherwise not have incurred, and include professional and services fees, such as legal, audit, consulting, paying agent and other fees. We incurred $0.1 million and $0.9 million of acquisition-related and other expenses in the three and nine months ended September 30, 2022, respectively, primarily related to the Kind Acquisition and the recent listing of our common stock on the Canadian Securities Exchange. We did not record any acquisition-related and other expenses in the three and nine months ended September 30, 2021.

We recorded nominal bad debt expense in both the three and nine months ended September 30, 2022, as well as in the three months ended September 30, 2021. We recorded $1.9 million in the nine months ended September 30, 2021 due to the higher reserve balances that were required in 2021 for aged trade receivable balances.

The increase in operating expenses, as detailed above, is the primary reason for the decrease in our net income for the nine months ended September 30, 2022, as compared to the same period in 2021.

General

Interest and administrative costs increasedOther (Expense) Income, Net

Interest expense primarily relates to $6.2 millioninterest on mortgages and notes payable. Interest income primarily relates to interest receivable in the first quarter of 2022 from $3.2 million in the same period in 2021. This change is primarily due to increases of (i) $2.1 million in non-cash equity compensation expense from option grants in fiscal 2021 that continued vest in the first quarter of 2022, and (ii) $275,000 inconnection with our notes receivable. Other (expense) income, net, professional fees primarily due to the hiring of consultants, offset by a reduction in legal costs. The increase is also due to smaller increases in insurance, facility costs, insurance, and depreciation that are in line with the growth of the Company.

Bad debt expense decreased to $14,000 in the first quarter of 2022 from $1,025,000 in the same period in 2021, due to higher reserve balances requiredincludes gains (losses) on aged trade receivable balances in 2021.

As a result of the foregoing, the Company generated operating income of $7.0 million in both the first quarter of 2022 and the same period in 2021.

Net non-operating income was $852,000 in the first quarter of 2022 compared to net non-operating expenses of $1,524,000 in the same period in 2021. The change is due to a $1,199,000 reduction of interest expense from lower levels of outstanding debt, non-cash income of $954,000 in 2022 from a nonconsolidated investment, and a $93,000 year-over-year increasechanges in the fair value of our investments and other investment-related income (expense).


Our net interest expense was virtually unchanged in the three months ended September 30, 2022 compared to the same prior year period. Our net interest expense decreased $1.4 million in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Higher interest expense was partially offset by higher interest income in the three months ended September 30, 2022 compared to the same prior year period. The decrease in net interest expense in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 was attributable to $0.6 million of higher interest income, coupled with $0.8 million of lower interest expense.

Our net other expense was $0.3 million and $0.2 million in the three months ended September 30, 2022 and 2021, respectively, and was primarily comprised of losses from the changes in the fair value of our investments. The three months ended September 30, 2021 also included a second nonconsolidated investment.

Asnominal loss on the extinguishment of debt. We recorded net other income of approximately $24,000 in the nine months ended September 30, 2022 and net other expense of $0.6 million in the nine months ended September 30, 2021. The current year-to-date amount is comprised of $1.0 million of non-cash income from the sale of an investment, virtually offset by a result$0.9 million loss from the change in fair value of other investments. The prior year amount is comprised of a $0.9 million loss from the foregoing,change in fair value of our investments and a nominal loss on the Company generatedextinguishment of debt. These losses were partially offset by a gain of $0.3 million on an asset sale.


Income Tax Provision

We recorded income before income taxestax provisions of $7.9 million and $9.0 million in the first quarternine months ended September 30, 2022 and 2021, respectively.

Liquidity and Capital Resources

We had cash and cash equivalents of $11.1 million and $29.7 million at September 30, 2022 and December 31, 2021, respectively. In addition to the discussions below of our cash flows from operating, investing, and financing activities
36
included here, please also see our discussion of non-GAAP Adjusted EBITDA in the section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by GAAP which our management also uses to measure our liquidity.

Cash Flows from Operating Activities

Our primary sources of cash from operating activities are from sales to customers in our dispensaries and cash collections from our wholesale customers. We expect cash flows from operating activities to be affected by increases and decreases in sales volumes and timing of collections, and by purchases of inventory and shipment of our products. Our primary uses of cash for operating activities are for personnel costs, purchases of packaging and other materials required for the production and sale of our products, and income taxes.

Our operating activities provided $5.6 million and $28.2 million of cash in the nine months ended September 30, 2022 and 2021, respectively. The change in cash from operating activities in the current year period compared to $5.5the prior year was primarily attributable to $12.6 million of cash utilized to pay income taxes in the current year period, compared to $0.4 million in the same prior year period, coupled with higher costs and operating expenses arising as we continue to increase and expand our sales activities, facilities and footprint both in the states where we currently operate and into other states.

Cash Flows from Investing Activities

Our investing activities used $23.7 million and $13.4 million of cash in the nine months ended September 30, 2022 and 2021, respectively. The increase in cash usage in the current year period was primarily attributable to $12.7 million of aggregate cash consideration paid for the Kind Acquisition and Green Growth Acquisition in April 2022 and May 2022, respectively.

Cash Flows from Financing Activities

Our financing activities used $0.4 million of cash in the nine months ended September 30, 2022 and provided $7.7 million of cash in the nine months ended September 30, 2021. AfterWe paid $2.0 million of cash to redeem the outstanding minority interests in one of our majority-owned subsidiaries in June 2022, made $1.0 million of aggregate principal payments on our outstanding mortgages and notes payable, made $0.2 million of distribution payments and $0.2 million of finance lease principal payments.

On August 4, 2022, we entered into a tax provisionSecond Amendment to the Purchase Agreement with Hadron pursuant to which, inter alia, (a) Hadron’s obligation to provide any further funding to the Company and the Company’s obligation to issue any further securities to Hadron was terminated, (b) Hadron’s right to appointment a designee to the Company’s board of $3.7directors was eliminated, and (c) certain covenants restricting the Company’s incurrence of new indebtedness were eliminated.

Based on our current expectations, we believe our current cash and future funding opportunities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at September 30, 2022, and our ability to raise additional cash through financing activities. Our contractual obligations at September 30, 2022 were primarily comprised of our outstanding mortgages and promissory notes, as well as our operating leases. Our mortgage and promissory note obligations totaled approximately $26 million at September 30, 2022, with payments aggregating approximately $500,000 in the remainder of 2022, $3 million in 2022 and $1.22023, $2 million in 2021, net income was $4.22024, $3 million in 2025, $1 million in 2026 and $17 million thereafter. Our operating lease obligations totaled approximately $8 million at September 30, 2022, with payments aggregating approximately $300,000 in the first quarterremainder of 2022, compared to $4.3$1 million in each of the same period in 2021.years 2023 through 2026, and $3 million thereafter. We anticipate devoting substantial capital resources to continue our efforts to execute our strategic growth plan as described above.

Non-GAAP Measurement

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

33


37
Management defines Adjusted EBITDA as net income, determined in accordance with GAAP, excluding the following:
•

interest income and interest expense;

-interest income and interest expense;
-income taxes;
-depreciation of fixed assets and amortization of intangibles;
-non-cash expenses on debt and equity issuances;
-impairment or write-downs of intangible assets;
-unrealized gains and losses on investments and currency translations;
-legal settlements;
-gains or losses from the extinguishment of debt via the issuance of equity;
-discontinued operations; and
-merger- and acquisition-related transaction expenses.

•

income tax provision;

•depreciation and amortization of property and equipment;
•amortization of acquired intangible assets;
•impairments or write-downs of acquired intangible assets;
•stock-based compensation;
•acquisition-related and other;
•legal settlements;
•other income (expense), net; and
•discontinued operations.

Management believes that Adjusted EBITDA is a useful measure to assess theour performance and liquidity, of the Company as it provides meaningful operating results by excluding the effects of expenses that are not reflective of itsour operating business performance. In addition, the Company’sour management uses Adjusted EBITDA to understand and compare operating results across accounting periods, and for financial and operational decision making.decision-making. The presentation of Adjusted EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP.

Management believes that investors and analysts benefit from considering Adjusted EBITDA in assessing the Company’sour financial results and itsour ongoing business, as it allows for meaningful comparisons and analysis of trends in the business. Adjusted EBITDA is used by many investors and analysts themselves, along with other metrics, to compare financial results across accounting periods and to those of peer companies.

As there are no standardized methods of calculating non-GAAP measurements, the Company’sour calculations may differ from those used by analysts, investors, and other companies, even those within the cannabis industry, and therefore may not be directly comparable to similarly titled measures used by others.

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

The table below reconciles Net Incomeincome to Adjusted EBITDA for the three and nine months ended March 31,September 30, 2022 and 2021 (in thousands):

  Three Months Ended
March 31,		 
  2022  2021 
  (unaudited) 
Net income $4,241  $4,310 
         
Interest expense, net  150   1,478 
Income taxes  3,660   1,204 
Depreciation and amortization  842   639 
Earnings before interest, taxes, depreciation, and amortization  8,893   7,631 
         
Amortization of stock grants  2   5 
Amortization of option grants  2,469   295 
Amortization of stand-alone warrant issuances  -   56 
Loss on equity issued to settle obligations  -   1 
Gain (loss) on change in fair value of investment  

(48

)  

45

 

Other investment income

  (954)  - 
Adjusted EBITDA $10,362  $8,033 

34

Three months endedNine months ended
September 30,
2022		September 30,
2021		September 30,
2022		September 30,
2021
GAAP Net income$2,722 $2,123 $8,859 $14,022 
Interest expense, net279 274 551 1,981 
Income tax provision2,484 4,009 7,894 9,026 
Depreciation and amortization of property and equipment917 536 2,469 1,499 
Amortization of acquired intangible assets429 172 854 518 
EBITDA (earnings before interest, taxes, depreciation and amortization)6,831 7,114 20,627 27,046 
Stock-based compensation1,372 5,552 6,396 7,152 
Settlement of litigation— (266)— (266)
Acquisition-related and other143 — 897 — 
Other expense (income), net251 214 (24)631 
Adjusted EBITDA$8,597 $12,614 $27,896 $34,563 


2022 Plans

For the balance of 2022 and into 2023, the Company’s focus will be to continue to execute its Strategic Growth Plan. The Company’s priority activities will include the following:

1)Continue to consolidate the cannabis businesses that the Company has developed and manages.
2)Expand revenue, assets, and its footprint in the states in which the Company is operating.
-In Massachusetts, the Company intends to open two additional dispensaries and significantly expand the capacity and capability of its manufacturing facility.
-In Delaware, the Company intends to develop an additional 40,000 square feet of cultivation and production at its facility in Milford.
-In Maryland, the Company intends to expand its manufacturing facility by 40,000 square feet and open a dispensary in Annapolis.
-In Illinois, the Company intends to go vertical by acquiring one or more craft licenses and to potentially add up to six more dispensaries up to the statutory limit of ten.
3)Expand into other legal states through M&A and filing new applications in states where new licensing opportunities arise.
4)Expand revenues by producing and distributing its award-winning brands to qualified strategic partners or acquiring production and distribution licenses.

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

Subsequent Events

Please refer to Note 21 – Subsequent Events of the Company’s financial statements included in this report for a discussion of material events that occurred after the balance sheet date.

The issuance of the shares of common stock described in Note 21 – Subsequent Events of the Company’s financial statements were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Sections 4(a)(2) and/or 4(a)(5) of the Securities Act. In accordance with Rule 144(d)(3)(ii) of the Securities Act, no legend restricting the sale, transfer, or other disposition of these shares was required.

Off-Balance Sheet Arrangements

The Company has

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

38
Inflation
Inflation

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

Seasonality

Seasonality

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

35


Item 3. Quantitative and Qualitative Disclosure About Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its CEOChief Executive Officer (“CEO”) and CFO,Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)Act of 1934, as amended (the “Exchange Act”)), as of March 31,September 30, 2022 (the “Evaluation Date”). Based upon that evaluation, the CEO and CFO concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

Over the past several years, the Company implemented significant measures to remediate past instances of ineffectiveness of the Company’s internal control over financial reporting, The remediation measures consisted of the hiring of a new CFO, the engagement of accounting consultants as needed to provide expertise on specific areas of the accounting guidance, the hiring of individuals with appropriate experience in internal controls over financial reporting, and the modification to the Company’s accounting processes and enhancement to the Company’s financial control. Further, the Company expanded its board of directors to include a majority of independent disinterested directors; established an audit, compensation, and corporate governance committee of the board of directors; and adopted a formal policy with respect to related party transactions.

Other than as described above, there was no change to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) that occurred during the fiscal quarter ended March 31,September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

36


PART II – OTHER INFORMATION

Item 1. Legal Proceedings.Proceedings

In April 2022, the Maryland litigation between the Company and the members of Kind was dismissed in its entirety with prejudice, and the parties released one another of any and all claims between them.

In April 2022, the Company and DiPietro agreed to dismiss all direct claims and counterclaims asserted in a separate litigation between them. In addition to their direct claims, the parties also asserted derivative claims, which may be dismissed only with the court’s approval. On April 12, 2022, the court approved the form of notice to be delivered to unit holders of Mia Development LLC and Mari Holdings MD LLC, majority-owned subsidiaries of the Company, and scheduled a hearing to approve dismissal of all derivative claims for June 8, 2022.

Other than the above, there

There has been no material change to the status of the Company’s previously reported legal proceedings.

Item 1A. Risk Factors

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

39

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

During the three months ended March 31,

On August 2, 2022, the Company issued (i) 1,142,858422,535 restricted common shares with a fair market value of $300,000 to a vendor as payment for services, and on September 8, 2022, the Company issued 108,858 restricted common stock upon the conversionshares with a fair market value of $400,000$61,069 to one of promissory notes, (ii) 10,000 shares of common stock in connection with the exercise of stock options at an exercise price of $0.30 per share, and (iii) 375,000 shares of common stock valued at $274,000 in exchange for consulting services.its partners as payment under a royalty agreement.

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

Item 3. Defaults Upon Senior Securities

None.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

37


None

40

Item 6. Exhibits

Exhibit No.Description
3.1Certificate of Incorporation of the Company (a)
(incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10-12G, File No. 000-54433, filed on June 9, 2011 with the SEC).
3.1.1Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 9, 2017 (b)
(incorporated by reference to Exhibit 3.1.1 to the Company’s Annual Report on Form 10-K filed on April 17, 2017 with the SEC).
3.1.2
Series B Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on February 27, 2020 (h)(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 28, 2020 with the SEC).
3.1.3
Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 (h)(incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on February 28, 2020 with the SEC).
3.1.4
Series C Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on March 1, 2021 (p)(incorporated by reference to Exhibit 3.1.4 to the Company’s Current Report on Form 8-K, filed on March 2, 2021 with the SEC).
3.1.5
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on April 25, 2017, effective as of May 1, 2017 (q)(incorporated by reference to Exhibit 3.1.5 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021 with the SEC).
3.1.6
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 24, 2021 (q)(incorporated by reference to Exhibit 3.1.6 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021 with the SEC).
3.2
By-Laws – Restated as Amended (a)
4.1Amended and Restated Promissory Note, dated February 10, 2020, in(incorporated by reference to Exhibit 3.2 to the principal amount of $11,500,000, issued by MariMed Hemp Inc. and MariMed Inc. (f)
4.1.1Promissory Note, dated February 27, 2020, inCompany’s Form 10-12G, filed on June 9, 2011 with the principal amount of $3,742,500, issued by MariMed Inc. to Navy Capital Green Fund, LP (h)SEC).
4.1.2Promissory 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)
4.1.312% Convertible Promissory Note, dated April 23, 2020, in the principal amount of $900,000, issued by MariMed Inc. to Best Buds Funding LLC (i)
4.2Second 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)
4.3Common Stock Purchase Warrant, dated June 24, 2020, issued by MariMed Inc.to SYYM LLC (k)
4.4Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $5,845,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
4.5Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $3,000,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
4.6Common Stock Purchase Warrant, dated September 30, 2020, issued by MariMed Inc.to Best Buds Funding, LLC. and/or its designees (m)
4.7Amended and Restated Common Stock Purchase Warrant, dated March 18, 2021, issued by MariMed Inc. to Hadron Healthcare Master Fund(q)
4.8Third Amended and Restated Promissory Note, dated April 1, 2021, in the principal amount of $3,211,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (r)
10.1
Amended and Restated 2018 Stock Award and Incentive Plan (d)
10.1.1Second Amendment to the Amended and Restated 2018 Stock Award and Incentive Plan, effective as of September 23, 2021 (q)
10.2Form of Stock Option Agreement, dated September 27, 2019, with each of David R. Allen, Eva Selhub, M.D., and Edward J. Gildea (e)

38

10.3Amendment 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)
10.4Exchange 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)
10.5Amendment Agreement dated June 24, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (l)
10.6Note Extension Agreement, effective as of September 30, 2020, among Best Buds Funding LLC, as lender, and each of MariMed Inc., Mari Holdings MD LLC, and MariMed Advisors Inc., as the borrower parties (n)
10.7Securities Purchase Agreement, dated March 1, 2021,August 4, 2022, by and between MariMed Inc. and Hadron Healthcare Master Fund (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q, filed on August 9, 2022 with the SEC).(q)
10.2 ***
10.8FirstForm of Third Amendment to Securities Purchase Agreement, dated March 18, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)
10.9Amendment Agreement dated April 1, 2021, between SYYM LLC, as noteholder and collateral agent, and MariMed, Inc. and MariMed Hemp, Inc., as co-borrowers (r)
10.10 ***Employment Agreement, between MariMed Inc. and Robert Fireman, dated July 9, 2021 (s)
10.11 ***Employment Agreementeffective as of September 7, 2022, between MariMed Inc. and Jon R. Levine dated July 9, 2021 (s)
10.12 ***Employment Agreement between MariMed Inc. and Timothy Shaw, dated July 9, 2021 (s)
10.13 ***Form of(incorporated by reference to Exhibit 10.1, filed on September 7, 2022 with the First Amendment to the Employment Agreement, effective as of September 22, 2021, between MariMed Inc. and each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)SEC).
10.14 ***Form of Stock Option Agreement, dated July 9, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.15 ***Form of Stock Option Agreement, dated October 1, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.16Settlement Agreement and General Release, dated August 19, 2021, between MariMed Inc. and Thomas Kidrin (q)
10.17Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Inc. and Jennifer DiPietro, Susan Zimmerman and Sophia Leonard-Burns (c)
10.18Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Advisors Inc. and Jennifer DiPietro (c)
31.1.
Rule 13a-14(a)/15d-14(a) CertificationsCertification of Chief Executive Officer *
31.2.
Rule 13a-14(a)/15d-14(a) CertificationsCertification of Chief Financial Officer *
32.1.
Section 1350 CertificationsCertification of Chief Executive Officer **
32.2.
Section 1350 CertificationsCertification of Chief Financial Officer **

101.INS XBRLInstance Document *
101.SCH XBRLTaxonomy Extension Schema *
101.CAL XBRLTaxonomy Extension Calculation Linkbase *
101.DEF XBRLTaxonomy Extension Definition Linkbase *
101.LAB XBRLTaxonomy Extension Label Linkbase *
101.PRE XBRLTaxonomy Extension Presentation Linkbase *
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *

* Filed herewith.

** Furnished herewith in accordance with Item 601 (32)(ii) of Regulation S-K.

*** This exhibit is a management contract or compensatory plan or arrangement.

39

41

(a)Previously filed as an exhibit to the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011 and incorporated herein by reference.
(b)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017 and incorporated herein by reference.
(c)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 16, 2022 and incorporated herein by reference.
(d)Previously filed as Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A, filed on August 26, 2019 and incorporated herein by reference.
(e)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019 and incorporated herein by reference.
(f)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(g)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(h)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 27, 2020 and incorporated herein by reference.
(i)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed on May 28, 2020 and incorporated herein by reference.
(j)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(k)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(l)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(m)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(n)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(o)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 29, 2013 and incorporated herein by reference.
(p)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 2, 2021 and incorporated herein by reference.
(q)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2021 filed on November 15, 2021 and incorporated herein by reference.
(r)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 23, 2021 and incorporated herein by reference.
(s)Previously filed as an exhibit to the Current Report on Form 8-K filed on July 9, 2021 and incorporated herein by reference.

40

SIGNATURES

SIGNATURES

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

Date: May 10,November 8, 2022

MARIMED INC.
MARIMED INC.
By:/s/ Robert FiremanSusan M. Villare
Susan M. VillareRobert Fireman

President and Chief Executive Officer

(Principal Executive Officer)

By:/s/ Jon R. Levine
Jon R. Levine

Chief Financial Officer


(Principal Financial Officer)

41

42

INDEX TO EXHIBITS

Exhibit No.Description
3.1Certificate of Incorporation of the Company (a)
3.1.1Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 9, 2017 (b)
3.1.2Series B Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on February 27, 2020 (h)
3.1.3Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 (h)
3.1.4Series C Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on March 1, 2021 (p)
3.1.5Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on April 25, 2017, effective as of May 1, 2017 (q)
3.1.6Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 24, 2021 (q)
3.2By-Laws – Restated as Amended (a)
4.1Amended 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)
4.1.1Promissory Note, dated February 27, 2020, in the principal amount of $3,742,500, issued by MariMed Inc. to Navy Capital Green Fund, LP (h)
4.1.2Promissory 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)
4.1.312% Convertible Promissory Note, dated April 23, 2020, in the principal amount of $900,000, issued by MariMed Inc. to Best Buds Funding LLC (i)
4.2Second 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)
4.3Common Stock Purchase Warrant, dated June 24, 2020, issued by MariMed Inc.to SYYM LLC (k)
4.4Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $5,845,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
4.5Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $3,000,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
4.6Common Stock Purchase Warrant, dated September 30, 2020, issued by MariMed Inc.to Best Buds Funding, LLC. and/or its designees (m)
4.7Amended and Restated Common Stock Purchase Warrant, dated March 18, 2021, issued by MariMed Inc. to Hadron Healthcare Master Fund(q)
4.8Third Amended and Restated Promissory Note, dated April 1, 2021, in the principal amount of $3,211,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (r)
10.1Amended and Restated 2018 Stock Award and Incentive Plan (d)
10.1.1Amendment to the Amended and Restated 2018 Stock Award and Incentive Plan, effective as of September 23, 2021 (q)
10.2Form of Stock Option Agreement, dated September 27, 2019, with each of David R. Allen, Eva Selhub, M.D., and Edward J. Gildea (e)

42

10.3Amendment 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)
10.4Exchange 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)
10.5Amendment Agreement dated June 24, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (l)
10.6Note Extension Agreement, effective as of September 30, 2020, among Best Buds Funding LLC, as lender, and each of MariMed Inc., Mari Holdings MD LLC, and MariMed Advisors Inc., as the borrower parties (n)
10.7Securities Purchase Agreement, dated March 1, 2021, between MariMed Inc. and Hadron Healthcare Master Fund(q)
10.8First Amendment to Securities Purchase Agreement, dated March 18, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)
10.9Amendment Agreement dated April 1, 2021, between SYYM LLC, as noteholder and collateral agent, and MariMed, Inc. and MariMed Hemp, Inc., as co-borrowers (r)
10.10 ***Employment Agreement between MariMed Inc. and Robert Fireman, dated July 9, 2021 (s)
10.11 ***Employment Agreement between MariMed Inc. and Jon R. Levine, dated July 9, 2021 (s)
10.12 ***Employment Agreement between MariMed Inc. and Timothy Shaw, dated July 9, 2021 (s)
10.13 ***Form of the First Amendment to the Employment Agreement, effective as of September 22, 2021, between MariMed Inc. and each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.14 ***Form of Stock Option Agreement, dated July 9, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.15 ***Form of Stock Option Agreement, dated October 1, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.16Settlement Agreement and General Release, dated August 19, 2021, between MariMed Inc. and Thomas Kidrin (q)
10.17Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Inc. and Jennifer DiPietro, Susan Zimmerman and Sophia Leonard-Burns (c)
10.18Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Advisors Inc. and Jennifer DiPietro(c)
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 XBRLInstance Document *
101.SCH XBRLTaxonomy Extension Schema *
101.CAL XBRLTaxonomy Extension Calculation Linkbase *
101.DEF XBRLTaxonomy Extension Definition Linkbase *
101.LAB XBRLTaxonomy Extension Label Linkbase *
101.PRE XBRLTaxonomy Extension Presentation Linkbase *
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *

* Filed herewith.

** Furnished herewith in accordance with Item 601 (32)(ii) of Regulation S-K.

*** This exhibit is a management contract or compensatory plan or arrangement.

43

(a)Previously filed as an exhibit to the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011 and incorporated herein by reference.
(b)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017 and incorporated herein by reference.
(c)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 16, 2022 and incorporated herein by reference.
(d)Previously filed as Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A, filed on August 26, 2019 and incorporated herein by reference.
(e)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019 and incorporated herein by reference.
(f)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(g)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(h)Previously filed as an exhibit to the Current Report on Form 8-K filed on February 27, 2020 and incorporated herein by reference.
(i)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed on May 28, 2020 and incorporated herein by reference.
(j)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(k)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(l)Previously filed as an exhibit to the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(m)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(n)Previously filed as an exhibit to the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(o)Previously filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 29, 2013 and incorporated herein by reference.
(p)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 2, 2021 and incorporated herein by reference.
(q)Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended September 30, 2021 filed on November 15, 2021 and incorporated herein by reference.
(r)Previously filed as an exhibit to the Current Report on Form 8-K filed on March 23, 2021 and incorporated herein by reference.
(s)Previously filed as an exhibit to the Current Report on Form 8-K filed on July 9, 2021 and incorporated herein by reference.

44