UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2017

[  ] 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)

26 Ossipee Road, Suite 201

Newton, MA 02464

(Address of Principal Executive Offices)

617-795-5140

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] No [X]

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

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. (check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.): Yes [  ] No [X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold ($0.65 in February 2018) was approximately $51.3 million.

At March 30, 2018, the issuer had outstanding 179,705,933 shares of par value $.001 Common Stock.

TABLE OF CONTENTS

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve risks and uncertainties and our actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “estimate,” “could,” “should,” “would,” “project,” “predict,” “intend,” “plan,” “will,” “believe,” and similar language, including those set forth in the discussion under “Description of Business,” “Risk Factors” and “Management’s Discussion and Analysis or Plan of Operation” as well as those discussed elsewhere in this Form 10-K. We base our forward-looking statements on information currently available to us, and we believe that the assumption and expectations reflected in such forward-looking statements are reasonable, and we assume no obligation to update them. Statements contained in this Form 10-K that are not historical facts are forward-looking statements that are subject to the “safe harbor” created by the Private Securities Litigation Reform Act of 1995.

PART I

ITEM 1. BUSINESS.

General

MariMed Inc. (“we”, “our”, “us”, or the “Company”), a Delaware corporation, is an industry leader in the emerging legal cannabis industry. We are a professional management company that advises our clients in securing cannabis licenses, and in turn, we develop and manage state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of legal cannabis and cannabis-infused products. Along with this operational oversight, we provide our clients with legal, accounting, human resources, and other corporate and administrative services.

The Company has also created a custom brand of cannabis-infused products, under the brand name Kalm Fusion™, which are licensed and distributed nationally in those states where such products may legally be distributed. These products are precision-dosed and designed for specific medical conditions and related symptoms. In 2017, the Company acquired the Betty’s Eddies™ brand of cannabis-infused fruit chews, and expanded its distribution of Lucid Mood™ disposable vape pens, further expanding the Company’s brand portfolio and product line.

The Company’s stock is quoted on the OTCQB market under the ticker symbol MRMD.

Since focusing on the cannabis industry in 2014, the Company’s operations have increased significantly each year. For the year ended 2017, revenues increased 70% to $6.1 million, operating income increased 56% to $1.2 million, and total assets increased 276% to $32.2 million. Similarly, our client company revenues increased to $12.2 million, a 79.4% increase from the year ended 2016. The Company’s online portal business (discussed in the following sections) was basically dormant during 2017.

As a publicly traded company and with businesses in multiple states, we have become widely known as a nationwide leader in the emerging cannabis industry including:

The Company has been busy in 2017:

Interesting Facts about cannabis in the United States: 

Corporate History

The Company was originally formed in January 2011 as a wholly-owned subsidiary of Worlds Inc. (formerly Worlds.com Inc.) under the name Worlds Online Inc. In May 2011, Worlds Online Inc. commenced the spin-off of the Company, which was consummated after SEC review in May 2012.

The Company’s initial ticker symbol was WORX, and since inception, the Company has operated an online portal that offers multi-user virtual environments to users. Over time, however, this business model declined, and it has had insignificant operating activity since 2014.

In early 2014, the Company pivoted its operational focus to the emerging cannabis industry. In order to quickly gain traction into this new space, in May 2014, the Company, through its wholly-owned subsidiary MariMed Advisors Inc. (“MMA”), acquired Sigal Consulting LLC (“Sigal”), a company operating in the cannabis industry.

The purchase price paid to the former owners of Sigal consisted of (i) an aggregate amount of the Company’s common stock equal to 50% of the outstanding shares on the closing date of September 29, 2014, (ii) options to purchase three million shares of the Company’s common stock, exercisable over five years with exercise prices ranging from $0.15 to $0.35, and (iii) a 49% ownership interest in MMA.

This transaction was accounted for as a purchase acquisition where the Company was both the legal and accounting acquirer. Accordingly, the Company recorded as goodwill the value of the common stock and options issued in excess of the Sigal assets acquired and liabilities assumed. This goodwill was subsequently deemed impaired in full and written down to zero.

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

In June 2017, the Company purchased the remaining 49% interest in MMA in exchange for 75 million shares of common stock.

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

In late 2017, the Company acquired the intellectual property, formulations, recipes, proprietary equipment, and know-how of the Betty’s Eddies™ brand of cannabis-infused fruit chews which are handcrafted with all-natural ingredients and sweetened with non-GMO organic fruits and vegetables. The Company plans to roll out the Betty’s Eddies product line throughout its licensee network and to hundreds additional legal dispensaries in multiple states in 2018.

Business Activities

The Company offers a comprehensive suite of products in those states with newly passed medical marijuana regulations and/or recreational use marijuana. These services include fee-based assistance to applicants applying for state regulated cannabis licenses. For those who are awarded a license MariMed provides consultative services for all aspects required for the design, and operation of cannabis cultivation, production, and dispensing facilities.

The Company does not currently own licenses with respect to, nor sell, cannabis products. Our goal is to be an industry leader in providing professional management and advisory services to the cannabis industry. We have developed proprietary operating processes and procedures to provide best practices to our clients. These services are also offered to existing licensed marijuana facilities across the country. In such cases, we can reengineer such licensees’ facilities, or purchase and develop new ones to maximize the value of their licenses, while also providing ongoing advisory services.

Cannabis remains a Controlled Substance under federal law which makes conventional funding difficult to obtain. Accordingly, the demand for private funding in this industry is enormous, which the Company has been successful in raising.

The Company has developed a brand of cannabis-infused products that are designed to be precision-dosed for specific medical conditions and symptoms. These products are developed by the Company in cooperation with state-licensed facilities and operators who meet the Company’s strict standards: all natural— not artificial or synthetic — ingredients that are locally grown by knowledgeable growers who will apply our scientific formulations with trademarked product recipes.

The Company’s product line includes Kalm Fusion™, Mari Melts™, Powdered Tincture™, Kalm Corn™, and now Betty’s Eddies™. All of these branded products utilize ingredients that are infused with THC or CBD cannabis oil extracts designed for enjoyable, predictable relief.

MariMed is working to develop patient assessment programs for licensed facilities to support research in the industry We believe that tracking outcomes and maintaining a good regimen with the patient will assist dispensaries in safely providing safe and reliable products to patients.

Business Structure

MariMed creates private limited liability companies to fund and develop cultivation, processing, and dispensing facilities. These single facility LLCs are sometimes jointly owned by MariMed and investors with the share of ownership and the allocation of return negotiated on a deal specific basis. This structure was used in projects in Delaware, Illinois, Massachusetts, Maryland, and Nevada.

As of December 31, 2017, MariMed had developed and is managing for clients six operating cannabis facilities in Delaware, Illinois, Nevada, and Maryland with 5 additional facilities being developed currently in Maryland and Massachusetts, while assisting clients to develop additional licensed facilities in other state licensed programs.

Alliances

The Company has entered into a licensing agreement with Tikun Olam USA, the first developer of medical cannabis products in Israel. The agreement provides the Company with the ability to sublicense certain medical cannabis genetics developed in Israel to our Delaware client at its licensed facility.

The Company is currently expanding this relationship to develop programs in Maryland, Massachusetts, Rhode Island, and Illinois, although there is no assurance that this expansion will result in increased revenues for the Company.

Competition

The Company has a comprehensive suite of products and services for the cannabis industry. There are companies that provide some of these services and only a few others that provide the depth of such services in multiple states across the country. The emerging cannabis industry is growing at such a pace that there are more opportunities available than these businesses can support. With plenty of business for all, our Company at times works with others to insure a positive image in new and emerging states. Many forget that it is the black market and illegal cannabis traffickers that controlled this business from the shadows and is the competition that is in a downward spiral.

Intellectual Property

The Company has currently filed for trademark protection for its branded product lines. The Company maintains one trademark from it dormant online portal business.

Our proprietary processing, and manufacturing techniques and technologies, while not patented at this time, are kept strictly confidential. We enter into and enforce confidentiality agreement with key employees and consultants to protect our IP and general know-how.

Employees

During 2017, the Company expanded to twelve full time employees and retains a variety of consultants and professionals for support. The Company utilizes many of the employees of the license holders we advise to implement our policies and procedures.

ITEM 1A. RISK FACTORS

Our business is subject to numerous risks, including but not limited to those set forth below. Our operations and performance could also be subject to risks that do not exist as of the date of this report but emerge thereafter as well as risks that we do not currently deem material.

Risks related to our operations

Our auditors have expressed doubt about our ability to continue as a going concern. If we do not generate substantial revenue and are also unable to obtain capital from other resources, we will significantly curtail our operations or halt them entirely. 

Our operations require substantial funds to acquire and develop new facilities. We have only limited cash or cash equivalents. Our capital requirements for the development and commercialization of our cannabis-based business will continue to be significant. We will be dependent on financings to fund our development, working capital needs and the cost of acquiring and building out future facilities. Accordingly, if we do not acquire profitable companies or otherwise significantly increase our revenues, we would have to diminish our operations. The opinion of our auditors contains an explanatory paragraph regarding our ability to continue as a going concern.

Marijuana remains illegal under federal law.

Marijuana remains illegal under federal law. It is a Schedule I controlled substance. Even in those jurisdictions in which the use of medical marijuana has been legalized at the state level, its prescription is a violation of federal law. The United States Supreme Court has ruled that it is the federal government that has the right to regulate and criminalize cannabis, even for medical purposes. Therefore, federal law criminalizing the use of marijuana trumps state laws that legalize its use for even medicinal purposes. At present the states are standing tall against the federal government, maintaining existing laws and passing new ones in this area. States continue to exert this freedom notwithstanding Attorney General Sessions officially leaving prosecution discretion against state licensed cannabis facilities to local US Attorneys district by district. This was a change from the Obama administration which under Attorney General Holder, had a policy decision to allow states to implement these laws and not prosecute anyone operating in accordance with applicable state law. The United States House of Representatives continues to not fund in the budget any funds for the Department of Justice to prosecute state compliant licensed cannabis companies. However, we continually face election cycles, and a new administration or Congress could introduce a less favorable policy. A change in the federal attitude towards enforcement could cripple the industry. However, the medical marijuana industry is our primary target market, and if this industry was unable to operate, we would lose the majority of our potential clients, which would have a significantly negative impact on our business, operations and financial condition.

Our success is dependent on additional states legalizing marijuana.

Continued development of the marijuana market is dependent upon continued legislative authorization of marijuana at the state level for medical and adult recreational use. Any number of factors could slow or halt the progress. Further, progress, while encouraging, is not assured and the process normally encounters set-backs before achieving success. While there may be ample public support for legislative proposal, key support must be created in the legislative committee or a bill may never advance to a vote. Numerous factors impact the legislative process. Any one of these factors could slow or halt the progress and adoption of marijuana for medical and/or recreational purposes, which would limit the market for our products and negatively impact our business and revenues.

It will be difficult for you to evaluate us based on our past performance because we are a relatively new company with a limited operating history.

We have been actively engaged in the marijuana related business for a relatively short period of time and, accordingly, have only limited financial results on which you can evaluate our company and operations. We are subject to, and must be successful in addressing, the risks typically encountered by new enterprises and companies operating in the rapidly evolving cannabis marketplace, including those risks relating to:

The alternative medicine industry faces strong opposition.

It is believed by many that existing, entrenched, well-funded, businesses may have a strong economic opposition to the medical marijuana industry as currently formed. For example, we believe that the pharmaceutical industry does not want to cede control of any compound that could become a strong selling drug. Specifically, medical marijuana will likely adversely impact the existing market for Marinol, the current “marijuana pill” sold by mainstream pharmaceutical companies. Further, the medical marijuana industry could face a material threat from the pharmaceutical industry should marijuana displace other drugs or simply encroach upon the pharmaceutical industry’s market share for compounds such as marijuana and its component parts. The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical marijuana movement. Any inroads the pharmaceutical industry makes in halting or rolling back the medical marijuana movement could have a detrimental impact on the market for our products and thus on our business, operations and financial condition.

Our clients may have difficulty accessing the service of banks, which may make it difficult for them to purchase our products and services.

As discussed above, the use of marijuana is illegal under federal law. Therefore, there are banks that will not accept for deposit funds from sale of cannabis and may choose not to do business with our clients. While a member of Congress has stated he will seek an amendment to banking regulations and laws in order to allow banks to transact business with state-authorized medical marijuana businesses, there can be no assurance his legislation will be successful, that banks will decide to do business with medical marijuana retailers, or that in the absence of legislation state and federal banking regulators will not create issues on banks handling funds generated from an activity that is illegal under federal law. Notwithstanding, the Company has been able to secure state-chartered banks that are in compliance with federal law and provide certain banking services to companies in the cannabis industry. The inability of potential clients in our target market to open accounts and otherwise use the service of banks may make it difficult for them to purchase our products and services.

We may not be able to economically comply with any new government regulation that may be adopted with respect to the cannabis industry.

New legislation or regulation, or the application of existing laws and regulations to the medical and consumer cannabis industries could add additional costs and risks to doing business. We are subject to regulations applicable to businesses generally and laws or regulations directly applicable to communications over the Internet and access to e-commerce. Although there are currently few laws and regulations regulating the cannabis products, it is reasonable to assume that as cannabis use becomes more mainstream that the FDA and or other federal, state and local governmental agencies will impose regulations covering the cultivation, purity, privacy, quality control, security and many other aspects of the industry, all of which will likely raise the cost of compliance thereby reducing profits or even making it more difficult to continue operations, either of which scenarios, if they occur, could have a negative impact on our business and operations.

Our limited resources may restrict our ability to manage any growth we may experience.

Growth of our business may place a significant strain on our management systems and resources and may require us to implement new operating and financial systems, procedures and controls. Our failure to manage our growth and expansion could adversely affect our business, results of operations and financial condition. Failure to implement new systems effectively or within a reasonable period of time could adversely affect our business, results of operations and financial condition.

The market may not readily accept our products.

Demand and market acceptance for our licensed branded new cannabis infused products are subject to a high level of uncertainty. The successful introduction of any new product requires a focused, efficient strategy to create awareness of and desire for the products. For example, in order to achieve market acceptance for our marijuana products we will need to gain market and patient acceptance.

Our marketing strategy may be unsuccessful and is subject to change as a result of a number of factors, including changes in market conditions (including the emergence of new market segments which in our judgment can be readily exploited through the use of our technology), the nature of possible license and distribution arrangements and strategic alliances which may become available to us in the future and general economic, regulatory and competitive factors. There can be no assurance that our strategy will result in successful product commercialization or that our efforts will result in initial or continued market acceptance for our proposed products.

If we are unable to protect our intellectual property rights, competitors may be able to use our technology or trademarks, which could weaken our competitive position.

We rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. We also intend to enter into confidentiality or license agreements with our employees, consultants and customers, and control access to and distribution of our products, and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products.

If we lose our key employee or fail to hire and retain other talented employees when necessary, our operations could be harmed.

The success of our business is currently dependent, in large part, on the personal efforts of Messrs. Robert Fireman, Jon R. Levine, and Tim Shaw, our chief executive officer, chief financial officer, and chief operating officer, respectively. The loss of their services could have a material adverse effect on our business. The success of our business is currently dependent, in large part, upon our ability to hire and retain additional qualified management, marketing, technical, financial, and other personnel if and when our growth so requires. Competition for qualified personnel is intense and we may not be able to hire or retain such additional qualified personnel. Any inability to attract and retain qualified management and other personnel would have a material adverse effect on our ability to grow our business and operations.

In order to be successful, we must be able to enhance our existing products and develop and introduce new products and services to respond to changing market demand.

The markets in which we operate are characterized by frequently changing customer demand and the introduction of new products and services. In order to be successful, we must be able to enhance our existing services and products and develop and introduce new products and services to respond to changing market demand. The development and enhancement of services and products entails significant risks, including:

We currently have only limited resources to enhance our technology or to develop new products.

Risks related to our common stock

Possible issuances of our capital stock would cause dilution to our existing shareholders.

While we currently have only approximately 180 million shares of common stock outstanding we are authorized to issue up to 500,000,000 shares of common stock. Therefore, we will be able to issue a substantial number of additional shares without obtaining shareholder approval. In the event we elect to issue additional shares of common stock in connection with any financing, acquisition or otherwise, current shareholders could find their holdings substantially diluted, which means they will own a smaller percentage of our company. In addition, we are authorized to issue up to 50,000,000 shares of blank preferred stock that our board of directors can issue under any terms it wants and without any shareholder approval.

No dividends have been paid on our common stock.

We do not expect to declare or pay dividends on the common stock in the foreseeable future. In addition, the payment of cash dividends may be limited or prohibited by the terms of any future loan agreements.

We are subject to “penny stock” regulations which may adversely impact the liquidity and price of our common stock.

Our common stock is currently deemed a “penny stock.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information on penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell such securities to persons other than established customers and accredited investors (generally, those persons with assets in excess of $1,000,000 (excluding the value of their primary residence) or annual income exceeding $200,000 or $300,000 together with their spouse), the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.

These requirements could reduce the level of trading activity, if any, in the secondary market for our common stock. As a result of the foregoing, our shareholders may find it more difficult to sell their shares.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2. PROPERTIES.

The Company currently owns and leases the following properties throughout the country.

Wilmington, Delaware 

The Company owns a 45,070 square foot facility on 2.25 acres within a fenced-in business park which we purchased in September 2016 and developed into a cannabis cultivation, processing, and dispensary facility. The facility is leased to a cannabis licensee company occupying 100% of the space under a 20-year triple net lease with 16 years remaining.

Lewes, Delaware

The Company leases 4,122 square feet of retail space in a newly-built multi-use building. This five-year lease with a five-year option to extend the term commenced in October 2016. We built out the space into a cannabis dispensary which is sub-leased to the same licensed cannabis company occupying the Wilmington facility, under a five-year triple net lease with a five-year option to extend.

Anna, Illinois

In March 2016, the Company finalized construction of a 3,400 square foot free-standing retail dispensary on an acre of land. The facility is leased to a licensed cannabis dispensary under a 20-year lease with 18 years remaining.  

Harrisburg, Illinois

The Company finalized construction on a 3,400 square foot free-standing retail dispensary on an acre of land in February of 2016. The facility is leased to the same licensed cannabis tenant occupying the Anna facility under a 20-year lease with 18 years remaining.

Hagerstown, Maryland

In January 2017, the Company purchased a long-standing 180,000 square foot former manufacturing facility. The building, which had remained vacant over a decade, was rehabilitated by the Company into a cultivation and processing facility for a licensed cannabis tenant under a 20-year triple net lease that started January 1, 2018.

Clark, Nevada

The Company is leasing approximately 10,000 square feet of an industrial building that we built out into a cannabis cultivation facility. This facility is subleased to a licensed cannabis company under a sub-lease which is coterminous with the Company’s lease for 10 years with 6.25 years remaining.

New Bedford, Massachusetts

In November 2017, the Company closed on a 137,500 square foot industrial property located on 21.95 acres within the New Bedford Industrial Park. Approximately half of the available square footage is leased to a non-cannabis manufacturing company under a 5-year lease. The Company has started a buildout of the remaining half of the building into a cannabis cultivation and processing facility which is leased to a cannabis licensee under a 20-year triple net lease, the term of which will start after the completion of construction.

Middleborough, Massachusetts

In July 2017 the Company purchased a 22,700 square foot retail and warehouse building located on the main street of this municipality. We are currently constructing a 10,000 square foot retail dispensary which will be leased to the same cannabis licensee that leases our New Bedford facility under a 20-year lease starting mid-2018.

The Company’s corporate office is located at 26 Ossipee Road, Newton, MA 02464. The space is subleased from a related party at a cost of $24,000 per year. The lease for this office will expire in July 2018, and we are presently negotiating a lease for new space. We believe that each facility meets all current regulatory guidelines and is, along with the planned corporate office, adequate for its intended purpose.

ITEM 3. LEGAL PROCEEDINGS.

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The Company’s common stock began trading on the OTC Bulletin Board on May 2012 under the initial ticker symbol WORX. In June 2017, concurrent with the change of the Company name to MariMed Inc., the ticker symbol was changed to MRMD.

The common stock currently trades on the OTCQB market. The following table sets forth, for the periods indicated, the high and low bids for our common stock as reported by the OTC Markets Group, Inc. The quotations reflect inter-dealer quotations, without retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions.

Stockholders

As of March 30, 2018, we had 699 shareholders of record and 179,705,933 outstanding shares of common stock.

Dividends

We have never declared or paid a dividend on our common stock, and we do not anticipate paying cash or other dividends in the foreseeable future.

Recent Sales of Unregistered Securities

During the years ended December 31, 2017 and 2016, the Company issued subscriptions on 200,000 shares and 300,000 shares, respectively, of Series A convertible preferred stock at $1.00 per share. This preferred stock accrues an annual dividend of six percent until conversion.

The Series A convertible preferred stock shall be convertible, along with any accrued dividends, into common stock at a twenty-five percent discount to the selling price of the common stock in a qualified offering, as defined in the subscription agreement. In addition, the Company shall have the ability to force the conversion of preferred stock at such time the Company has a market capitalization in excess of $50 million for ten consecutive trading days. In such event, the conversion price shall be a 25% discount to the average closing price of the Company’s common stock over the ten trading days prior to the Company’s notice of its intent to convert.

During the year ended December 31, 2017, the Company issued 26,672,228 shares of common stock, at prices ranging from $0.18 to $0.50 per share, resulting in total proceeds of $6,578,000.

In June 2017, the Company issued 75 million shares of common stock to acquire the remaining 49% interest in its subsidiary MariMed Advisors Inc.

During the year ended December 31, 2017, the Company issued 1,007,597 shares in exchange for services rendered by third-parties or to otherwise settle outstanding obligations.

During 2017, the Company granted options to purchase 550,000 shares of common stock at exercise prices ranging from $0.26 to $0.55, vesting from the grant date through March 2019, and expiring between September 2020 to October 2021.

During 2017, the Company issued warrants to purchase approximately 3.1 million shares of common stock at exercise prices ranging from $0.40 to $0.62, expiring between March and December of 2020.

In October 2017, the Company issued subscriptions on 1,000,000 shares of common stock as part of the purchase price for the assets acquired of the Betty’s Eddies™ brand of cannabis-infused fruit chews.

During 2017 and 2016, the Company issued 12,778 and 2,500 Class A membership units of Mari Holdings MD LLC, a majority-owned subsidiary, for $1,150,000 and $200,000, respectively. These units represented ownership of 3.05% and 0.75% in this subsidiary at December 31, 2017 and 2016, respectively.

During the year ended December 31, 2016 the Company issued 31,954,237 shares of common stock related to the acquisition of all the outstanding equity of Sigal from its members. The acquisition occurred in 2014 but the shares were delivered in April 2016.

During 2016, the Company issued warrants to purchase 1.07 million shares of common stock at exercise prices ranging from $0.10 to $0.20, expiring between February 2019 and August 2021.

During the year ended December 31, 2016, two of the outstanding notes were converted into Mia Development Class A shares.

Company Equity Compensation Plans

The following table sets forth information as of December 31, 2017 with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

When used in this form 10-K and in future filings by the Company with the Commission, words or phrases such as “anticipate,” “believe,” “could,” “would,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.

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 and products 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 regulations that pertain to our operations; changes in technology that render our technology relatively inferior, obsolete or more expensive compared to others; changes in the business prospects of our business partners and customers; increased competition, including from our business partners; and enforcement of federal cannabis related laws.

The following discussion should be read in conjunction with the financial statements and related notes which are included in this report under Item 8.

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

Overview

General

We are a management advisory company in the emerging cannabis industry. We provide our clients with industry leading expertise in the design, development, operation, funding, and optimization of medical cannabis cultivation, production, and dispensary facilities. Our team acquires land and/or real estate for the purpose of developing state-of-the-art, regulatory-compliant legal cannabis facilities. These facilities are models of excellence in horticultural principals, cannabis production, product development, and dispensary operations. These facilities are leased to the Company’s clients who are entities that have been awarded legal and medical marijuana licenses from multiple states. Along with this operational oversight, the Company provides its clients with legal, accounting, human resources, and other corporate and administrative services

Please refer to the section of our December 31, 2017 Form 10-K entitled Item 2. Properties for a description of our active and currently in-development facilities.

In addition to our medical cannabis facilities, we are on the forefront of the development of precision-dosed cannabis medicine for the treatment of specific medical conditions and related symptoms. Our branded products, such as Kalm Fusion™ and the recently acquired Betty’s Eddies™, are licensed and distributed in cannabis-legal states across the country.

Since our inception in 2011, we have also operated an online portal that offers multi-user virtual environments to users. While this business segment owns a proprietary technology platform, select URLs and a vast inventory of digital assets, it has had insignificant operations since early 2014, and provides a negligible contribution to the business.

In May 2014, the Company, through its subsidiary MariMed Advisors Inc. (“MMA”), acquired Sigal Consulting LLC in exchange for (i) an aggregate amount of the Company’s common stock equal to 50% of the Company’s outstanding shares on the closing date, (ii) options to purchase three million shares of the Company’s common stock, exercisable over five years with exercise prices ranging from $0.15 to $0.35, and (iii) a 49% ownership interest in MMA.

In June 2017, we acquired the remaining 49% interest in MMA in exchange for 75 million shares of restricted common stock.

Revenues

Revenues are predominantly generated by our medical cannabis operating segment. Such revenues are generally comprised of: subleasing contracts with our cannabis licensee clients; consulting services to companies operating in the legal and medical cannabis industry; production arrangements for the procurement of cannabis resources; and licensing revenues from the sale of our branded products.

Subleasing revenue is derived from the rental of our regulatory-compliant, medical cannabis facilities to companies that have been awarded cannabis licenses, but who otherwise do not have the resources to develop such facilities.

Consulting revenue is generated from the guidance we provide entities to attain medical cannabis licenses, and from the expert services we deliver, which include best practices and standard operating procedures, in support of the cultivation and dispensing of medical cannabis.

Production revenue is generated from agreements with third parties to provide our medical cannabis clients with materials necessary for the production and dispensing of medical marijuana.

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

Revenue generated by our dormant online portal business were negligible.

Expenses

We classify our expenses into three broad categories:

Liquidity and Capital Resources

The Company raised in excess of $20 million during the year ended December 31, 2017 via the issuance of common stock, subscriptions on preferred stock, promissory notes, and membership interests in majority-owned subsidiaries. We are continuing to raise capital in 2018, as disclosed in our audited financial statements, and we plan to pursue additional sources of capital throughout 2018, although there can be no assurance that any such capital will become available.

Results of Operations

Year ended December 31, 2017 compared to year ended December 31, 2016

Revenues for the year ended December 31, 2017 increased over 70% to approximately $6.1 million for the year ended December 31, 2017, compared to $3.6 million from the same period a year ago. This significant increase was primarily due to the expanding operations of our medical cannabis clients from whom we earn subleasing, consulting, and production fees. For the year ended December 31, 2017, these clients’ revenues increased nearly 80% to approximately $12.2 million from $6.8 million for the same period in 2016.

Cost of revenues, including depreciation increased 58% from approximately $1.6 million for the year ended December 31, 2016 to approximately $2.6 million for the year ended December 31, 2017. The increase is in line with the increase in revenues, while also showing continued leveraging of our infrastructure to generate high margins. Gross profit increased by approximately $1.6 million year-over-year, and increased slightly as a percentage of revenue from 55% for the year ended December 31, 2016 to 58% for the year ended December 31, 2017.

Personnel expenses increased to approximately $737,000 for the year ended December 31, 2017 from $227,000 for the same period a year ago. This increase was the result of our investment in staffing and related resources to support the higher level of revenues.

Marketing and promotion costs decreased from approximately $293,000 for the year ended December 31, 2016 to $130,000 for the year ended December 31, 2017. This decrease is due to the lower need to use third-parties to promote the Company within the cannabis industry.

General and administrative costs increased to approximately $1,439,000 for the year ended December 31, 2017 from approximately $651,000 for the same period a year ago. This increase is commensurate our need to invest in an effective support structure to enable the growth of revenues and the overall business.

Non-operating expenses were primarily comprised of (i) interest expense on our mortgage and notes payable, offset by interest income on our note receivable, and (ii) two non-cash items: equity compensation representing the fair value of options and warrants issued; and losses arising from the settlements of debt by the issuance of common stock as determined by the fair value of the stock on the settlement dates. These non-cash items are required by generally accepted accounting principles, but have no effect on the operating earnings or liquidity of the Company. These non-cash items are the primary cause for the large year-over-year variation in non-operating expenses.

As a result of the foregoing, we incurred a net loss of approximately $1,029,000 for the year ended December 31, 2017, compared to net income of approximately $321,000 from the same period a year ago. The loss in the current period is due to the previously explained large non-cash expenses which had no impact on the Company’s operating income or cash flow. Without these non-cash items, net income would have been approximately $694,000 for the year ended December 31, 2017.

2018 Plans

During 2018, we expect the investments we have made in Maryland and Massachusetts to begin to generate significant revenue. We will continue to look to win additional licenses in states with new or expanded cannabis programs such as Pennsylvania, Ohio, Michigan, Virginia, and Florida.

We also expect to launch our licensed branded product lines into many additional states across the country. We will be open to forge strategic alliances and relationships, explore acquisition opportunities, develop additional products, and continue to extend our focus in the cannabis market through the growth of the Company’s existing sales channels and through a variety of additional sales relationships which are currently being explored.

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

Off-Balance Sheet Arrangements

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

Inflation

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

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 may be expected to cause a material impact on its financial condition or the results of its operations.

ITEM 8. FINANCIAL STATEMENTS.

CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Marimed Inc. And Subsidiaries

We have audited the accompanying consolidated balance sheets of Marimed Inc. And Subsidiaries (the “Company”) as of December 31, 2017 and 2016 and related consolidated statements of operations, stockholders’ equity, and cash flows for the two years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over consolidated financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over consolidated financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Marimed Inc. And Subsidiaries (a Delaware corporation) as of December 31, 2017 and 2016 and the consolidated results of its operations and its cash flows for two years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ L&L CPAS, PA

L&L CPAS, PA

Certified Public Accountants

Cornelius, NC

The United States of America

April 2, 2018

MariMed Inc.

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

MariMed Inc.

Consolidated Statements of Operations

See accompanying notes to consolidated financial statements.

MariMed Inc.

Consolidated Statements of Stockholders’ Equity

MariMed Inc.

Consolidated Statements of Cash Flows