UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period ended March 31, 2021

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

For the transition period from __________________ to __________________

Commission File number 0-54433

MARIMED INC.

(Exact Name of Registrant as Specified in Its Charter)

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

10 Oceana Way

Norwood, MA 02062

(Address of Principal Executive Offices)

617-795-5140

(Registrant’s Telephone Number, Including Area Code)

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

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

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

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

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

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

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

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

As of May 17, 2021, 322,725,060 shares of the registrant’s common stock were outstanding.

MariMed Inc.

Table of Contents

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020	3

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	44

Item 4.	Controls and Procedures	44

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

Signatures		50

MariMed Inc.

Condensed Consolidated Balance Sheets

	March 31,			December 31,
	2021			2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	12,318,717		$	2,999,053
Accounts receivable, net		7,341,124			6,675,512
Deferred rents receivable		1,876,049			1,940,181
Notes receivable, current portion		374,978			658,122
Inventory		7,454,328			6,830,571
Investments		1,312,028			1,357,193
Other current assets		1,016,162			582,589
Total current assets		31,693,386			21,043,221

Property and equipment, net		47,490,375			45,636,529
Intangibles, net		2,689,828			2,228,560
Investments		1,165,788			1,165,788
Notes receivable, less current portion		1,212,829			965,008
Right-of-use assets under operating leases		5,564,376			5,247,152
Right-of-use assets under finance leases		70,249			78,420
Other assets		97,951			80,493
Total assets	$	89,984,782		$	76,445,171

Liabilities, mezzanine equity, and stockholders’ equity
Current liabilities:
Accounts payable	$	6,050,126		$	5,044,918
Accrued expenses		4,663,951			3,621,269
Sales and excise taxes payable		1,286,349			1,053,693
Debentures payable		-			1,032,448
Notes payable, current portion		4,856			8,859,175
Mortgages payable, current portion		1,382,411			1,387,014
Operating lease liabilities, current portion		1,129,611			1,008,227
Finance lease liabilities, current portion		36,618			38,412
Due to related parties		-			1,157,815
Other current liabilities		-			23,640
Total current liabilities		14,553,922			23,226,611

Notes payable, less current portion		3,235,972			10,682,234
Mortgages payable, less current portion		14,616,387			14,744,136
Operating lease liabilities, less current portion		5,013,417			4,822,064
Finance lease liabilities, less current portion		38,184			44,490
Other liabilities		100,200			100,200
Total liabilities		37,558,082			53,619,735

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

Stockholders’ equity:
Undesignated preferred stock, $0.001 par value; 38,875,451 and 45,091,667 shares authorized at March 31, 2021 and December 31, 2020, respectively; zero shares issued and outstanding at March 31, 2021 and December 31, 2020		-			-
Common stock, $0.001 par value; 500,000,000 shares authorized at March 31, 2021 and December 31, 2020; 322,499,699 and 314,418,812 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		322,500			314,419
Common stock subscribed but not issued; 6,877 and 11,413 shares at March 31, 2021 and December 31, 2020, respectively		5,365			5,365
Additional paid-in capital		115,340,044			112,974,329
Accumulated deficit		(100,396,635	)		(104,616,538	)
Noncontrolling interests		(569,574	)		(577,139	)
Total stockholders’ equity		14,701,700			8,100,436
Total liabilities, mezzanine equity, and stockholders’ equity	$	89,984,782		$	76,445,171

See accompanying notes to condensed consolidated financial statements.

MariMed Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

	2021			2020
	Three Months Ended March 31,
	2021			2020

Revenues	$	24,642,564		$	7,466,019

Cost of revenues		11,456,646			2,597,917

Gross profit		13,185,918			4,868,102

Operating expenses:
Personnel		1,727,141			1,513,383
Marketing and promotion		224,369			112,384
General and administrative		3,170,724			2,235,009
Bad debts		1,025,415			-
Total operating expenses		6,147,649			3,860,776

Operating income		7,038,269			1,007,326

Non-operating income (expenses):
Interest expense		(1,512,022	)		(2,691,145	)
Interest income		34,027			46,031
Loss on obligations settled with equity		(1,286	)		-
Change in fair value of investments		(45,165	)		(687,002	)
Total non-operating income (expenses), net		(1,524,446	)		(3,332,116	)

Income (loss) before income taxes		5,513,823			(2,324,790	)
Provision for income taxes		1,203,797			12,926
Net income (loss)	$	4,310,026		$	(2,337,716	)

Net income (loss) attributable to noncontrolling interests	$	90,123		$	83,728
Net income (loss) attributable to MariMed Inc.	$	4,219,903		$	(2,421,444	)

Net income (loss) per share
Basic		0.01			(0.01	)
Diluted		0.01			(0.01	)

Weighted average common shares outstanding
Basic		305,212,269			230,829,366
Diluted		340,825,940			230,829,366

See accompanying notes to condensed consolidated financial statements.

MariMed Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

	Shares			Par Value			Shares			Amount			Capital			Deficit			Interests			Equity
	Common Stock						Common Stock Subscribed But Not Issued						Additional Paid-In			Accumulated			Non-Controlling			Total Stockholders’
	Shares			Par Value			Shares			Amount			Capital			Deficit			Interests			Equity
Balances at December 31, 2019		228,408,024		$	228,408			3,236,857		$	1,168,074		$	112,245,730		$	(106,760,527	)	$	(553,465	)		6,328,220
Issuance of subscribed shares		3,236,857			3,237			(3,236,857	)		(1,168,074	)		1,164,837			-			-			-
Stock grants		-			-			30,307			5,365			-			-			-			5,365
Exercise of warrants		-
Amortization of option grants		-			-			-			-			317,355			-			-			317,355
Issuance of stand-alone warrants
Discount on debentures payable		-			-			-			-			28,021			-			-			28,021
Beneficial conversion feature on debentures payable		-			-			-			-			379,183			-			-			379,183
Conversion of debentures payable		8,584,276			8,584			-			-			1,796,073			-			-			1,804,657
Conversion of common stock to preferred stock		(4,908,333	)		(4,908	)		-			-			(14,720,092	)		-			-			(14,725,000	)
Conversion of promissory notes		-
Common stock issued to settle obligations		-
Equity issuance costs
Distributions		-			-			-			-			-			-			(100,905	)		(100,905	)
Net income (loss)		-			-			-			-			-			(2,421,444	)		83,728			(2,337,716	)
Balances at March 31, 2020		235,320,824		$	235,321			30,307		$	5,365		$	101,211,107		$	(109,181,971	)	$	(570,642	)	$	(8,300,820	)

	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	$	314,419		11,413		$	5,365		$	112,974,329		$	(104,616,538	)	$	(577,139	)		8,100,436
Issuance of subscribed shares		11,413		11		(11,413	)		(5,365	)		5,354			-			-			-
Stock grants		-		-		6,877			5,365			-			-			-			5,365
Exercise of warrants		50,000		50		-			-			7,450			-			-			7,500
Amortization of option grants		-		-		-			-			294,598			-			-			294,598
Issuance of stand-alone warrants		-		-		-			-			55,786			-			-			55,786
Conversion of debentures payable		4,610,645		4,611		-			-			1,351,841			-			-			1,356,452
Conversion of promissory notes		3,365,972		3,366		-			-			1,006,426			-			-			1,009,792
Common stock issued to settle obligations		42,857		43		-			-			31,243			-			-			31,286
Equity issuance costs		-		-		-			-			(386,983	)		-			-			(386,983	)
Distributions		-		-		-			-			-			-			(82,558	)		(82,558	)
Net income (loss)		-		-		-			-			-			4,219,903			90,123			4,310,026
Balances at March 31, 2021		322,499,699	$	322,500		6,877		$	5,365		$	115,340,044		$	(100,396,635	)	$	(569,574	)	$	14,701,700

The above statements do not show columns for undesignated preferred stock

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

See accompanying notes to condensed consolidated financial statements.

MariMed Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	2021			2020
	Three Months Ended March 31,
	2021			2020
Cash flows from operating activities:
Net income (loss) attributable to MariMed Inc.	$	4,219,903		$	(2,421,444	)
Net income (loss) attributable to noncontrolling interests		90,123			83,728
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		462,423			484,091
Amortization of intangibles		177,302			79,079
Amortization of stock grants		5,365			5,365
Amortization of option grants		294,598			317,355
Amortization of stand-alone warrant issuances		55,786			-
Amortization of warrants attached to debt		539,273			223,363
Amortization of beneficial conversion feature		176,522			990,846
Amortization of original issue discount		51,753			56,808
Bad debt expense		1,025,415			-
Loss on obligations settled with equity		1,286			-
Change in fair value of investments		45,165			687,002
Changes in operating assets and liabilities:
Accounts receivable, net		(1,691,027	)		(842,914	)
Deferred rents receivable		64,132			(204,253	)
Due from third parties		-			(99,320	)
Inventory		(623,757	)		(1,496,168	)
Other current assets		(433,573	)		19,314
Other assets		(17,458	)		(32,000	)
Accounts payable		1,035,208			21,180
Accrued expenses		1,074,913			855,127
Sales and excise taxes payable		232,656			619,489
Operating lease payments, net		(4,487	)		79,523
Finance lease interest payments		1,504			2,087
Other current liabilities		(23,640	)		164,637
Net cash provided by (used in) operating activities		6,759,385			(407,105	)

Cash flows from investing activities:
Purchase of property and equipment		(2,308,098	)		(1,363,169	)
Purchase of cannabis licenses		(638,570	)		(25,000	)
Interest on notes receivable		69,338			34,397
Net cash used in investing activities		(2,877,330	)		(1,353,772	)

Cash flows from financing activities:
Proceeds from issuance of preferred stock		23,000,000			-
Equity issuance costs		(386,983	)		-
Proceeds from issuance of promissory notes		-			4,517,500
Repayments of promissory notes		(15,800,579	)		(2,400,000	)
Proceeds from issuance of debentures		-			935,000
Proceeds from mortgages		-			235,900
Payments on mortgages		(132,352	)		(60,381	)
Proceeds from exercise of warrants		7,500			-
Due to related parties		(1,157,815	)		(240,547	)
Finance lease principal payments		(9,604	)		(9,603	)
Distributions		(82,558	)		(100,905	)
Net cash provided by financing activities		5,437,609			2,876,964

Net change to cash and cash equivalents		9,319,664			1,116,087
Cash and cash equivalents at beginning of period		2,999,053			738,688
Cash and cash equivalents at end of period	$	12,318,717		$	1,854,775

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,091,927		$	380,084
Cash paid for income taxes	$	14,075		$	13,000

Non-cash activities:
Conversions of debentures payable	$	1,356,452		$	1,804,657
Conversion of promissory notes	$	1,009,792		$	-
Operating lease right-of-use assets and liabilities	$	466,105		$	-
Common stock issued to settle obligations	$	30,000		$	-
Issuance of common stock associated with subscriptions	$	5,365		$	1,168,074
Exchange of common stock to preferred stock	$	-		$	14,725,000
Conversion of accrued interest to promissory notes	$	-		$	1,500,000
Beneficial conversion feature on debentures payable	$	-		$	379,183
Discount on debentures payable	$	-		$	28,021

See accompanying notes to condensed consolidated financial statements.

MariMed Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

MariMed Inc. (the “Company”) is a multi-state operator in the United States cannabis industry. The Company develops, operates, manages, and optimizes over 300,000 square feet of state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of medicinal and recreational cannabis. The Company 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 as ongoing regulatory, accounting, real estate, human resources, and administrative services.

In 2018, the Company made the strategic decision to transition from a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations (hereinafter referred to as the “Consolidation Plan”). The Consolidation Plan calls for the acquisition of its cannabis-licensed clients located in Delaware, Illinois, Maryland, Massachusetts, and Nevada. In addition, the Consolidation Plan includes the potential acquisition of a Rhode Island asset. All of these acquisitions are subject to state approval, and once consolidated, the entities will operate under the MariMed banner.

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

A goal in completing this transition from a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations is to present a simpler, more transparent financial picture of the full breadth of the Company’s efforts, with a clearer representation of the revenues, earnings, and other financial metrics the Company has generated for its clients. The Company has played a key role in the successes of these entities, from the securing of their cannabis licenses, to the development of facilities that are models of excellence, to providing operational and corporate guidance. Accordingly, the Company believes it is well suited to own these facilities and manage the continuing growth of their operations.

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

The Company’s proprietary cannabis genetics produce flowers and concentrates under the brand name Nature’s Heritage™, and cannabis-infused products under the brand names Kalm Fusion®, in the form of chewable tablets and drink powder mixes, and the award-winning¹ Betty’s Eddies® brand of all natural fruit chews. Both cannabis-infused brands are top selling products in Maryland and Massachusetts²and the Company intends to introduce additional products under these brands in 2021. The Company’s brand of hemp-infused cannabidiol (“CBD”) products, Florance™, is distributed in the United States and abroad.

The Company also has exclusive sublicensing rights in certain states to distribute 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 intends to continue licensing and distributing its brands as well as other top brands in the Company’s current markets and in additional legal markets worldwide.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The spread of the virus in the United States and the measures implemented to contain it—including business shutdowns, indoor capacity restrictions, social distancing, and diminished travel—have negatively impacted the economy and have created significant volatility and disruption in financial markets. Consequently, the Company’s implementation of its aforementioned Consolidation Plan has been delayed. Additionally, while the cannabis industry has been deemed an essential business, and is not expected to suffer severe declines in revenue, the Company’s business, operations, financial condition, and liquidity have been impacted, as further discussed in this report.

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

The Company was incorporated in Delaware in January 2011 under the name Worlds Online Inc. Initially, the Company developed and managed online virtual worlds. By early 2014, this line of business effectively ceased operating, and the Company pivoted into the legal cannabis industry.

¹Awards won by the Company’s Betty’s Eddies® brand include LeafLink 2020 Industry Innovator, Explore Maryland Cannabis 2020 Edible of the Year, and LeafLink 2019 Best Selling Medical Product.

²Source: LeafLink Insights 2020.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

In accordance with GAAP, interim financial statements are not required to contain all of the disclosures normally required in annual financial statements. In addition, the results of operations of interim periods may not necessarily be indicative of the results of operations to be expected for the full year. Accordingly, these interim financial statements should be read in conjunction with the Company’s most recent audited annual financial statements and accompanying notes for the year ended December 31, 2020.

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

Principles of Consolidation

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

SCHEDULE OF MAJORITY OWNED SUBSIDIARIES

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

Intercompany accounts and transactions have been eliminated.

Use of Estimates

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

Cash Equivalents

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

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

Accounts Receivable

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

The Company provides credit to its clients in the form of payment terms. The Company limits its credit risk by performing credit evaluations of its clients and maintaining a reserve, if deemed necessary, for potential credit losses. Such evaluations include the review of a client’s outstanding balances with consideration towards such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Based on such evaluations, the Company maintained a reserve of approximately $40.9 million and $40.0 million at March 31, 2021 and December 31, 2020, respectively. Please refer to Note 17 – Bad Debts for further discussion on receivable reserves.

Inventory

Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company allocates a certain percentage of overhead cost to its manufactured inventory; such allocation is based on square footage and other industry-standard criteria. The Company reviews physical inventory for obsolescence and/or excess and will record a write-down if necessary.

Investments

Investments are comprised of equity holdings in private companies. These investments are recorded at fair value on the Company’s consolidated balance sheet, with changes to fair value included in income. Investments are evaluated for permanent impairment and are written down if such impairments are deemed to have occurred.

Revenue Recognition

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

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

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

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

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

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

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

	●	Management – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production, and dispensary operations. These fees are based on a percentage of such clients’ revenue and are recognized after services have been performed.

	●	Supply Procurement – the Company maintains volume discounts with top national vendors of cultivation and production resources, supplies, and equipment, which the Company acquires and resells to its clients or third parties within the cannabis industry. The Company recognizes this revenue after the delivery and acceptance of goods by the purchaser.

	●	Licensing – royalties from the licensed distribution of the Company’s branded products including Kalm Fusion® and Betty’s Eddies®, and from sublicensing of contracted brands including Healer and Tikun Olam, to regulated dispensaries throughout the United States and Puerto Rico. The recognition of this revenue occurs when the products are delivered.

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 of the estimated useful life of the asset or the lease term, if applicable. When assets are retired or disposed, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Repairs and maintenance are charged to expense in the period incurred.

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

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

Impairment analyses are based on management’s current plans, asset holding periods, and currently available market information. If these criteria change, the Company’s evaluation of impairment losses may be different and could have a material impact to the consolidated financial statements.

For the three months ended March 31, 2021 and 2020, based on the results of management’s impairment analyses, there were no impairment losses.

Leases

The consolidated financial statements reflect the Company’s adoption of ASC 842, Leases, as amended by subsequent accounting standards updates, utilizing the modified retrospective transition approach.

ASC 842 is intended to improve financial reporting of leasing transactions. The most prominent change from previous accounting guidance is the requirement to recognize right-of-use assets and lease liabilities on the consolidated balance sheet representing the rights and obligations created by operating leases that extend more than twelve months in which the Company is the lessee. The Company elected the package of practical expedients permitted under ASC 842. Accordingly, the Company accounted for its existing operating leases that commenced before the effective date as operating leases under the new guidance without reassessing (i) whether the contracts contain a lease, (ii) the classification of the leases (iii) the accounting for indirect costs as defined in ASC 842.

The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately. Right-of-use assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term, utilizing the Company’s incremental borrowing rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

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

Fair Value of Financial Instruments

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

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

Level 2	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

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

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, 2021 and 2020:

SCHEDULE OF ASSUMPTIONS USED

	2021		2020
Life of instrument		3.0 to 5.0 years		3.0 years
Volatility factors		1.230 to 1.266		1.059
Risk-free interest rates		0.36% to 0.85%		1.30%
Dividend yield		0%		0%

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

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

Extinguishment of Liabilities

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

Stock-Based Compensation

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

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 no adjustments to unrecognized income tax liabilities or benefits for the three months ended March 31, 2021 and 2020.

Related Party Transactions

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

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

Comprehensive Income

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

Earnings Per Share

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

As of March 31, 2021 and 2020, there were potentially dilutive securities convertible into shares of common stock comprised of (i) stock options – convertible into 11,017,750 and 6,241,250 shares, respectively, (ii) warrants – convertible into 32,282,708 and 11,960,107 shares, respectively, (iii) Series B preferred stock – convertible into 4,908,333 shares in both periods, (iv) Series C preferred stock – convertible into 31,081,080 and zero shares, respectively, (v) debentures payable – convertible into zero and 79,324,861 shares, respectively, and (vi) promissory notes – convertible into 10,705,513 and 1,464,435 shares, respectively.

For the three months ended March 31, 2021, the aforementioned potentially dilutive securities increased the number of weighted average common shares outstanding on a diluted basis by 35,613,671 million shares, determined in accordance with ASC 260, which are included in the calculation of diluted net income per share for this period. For the three months ended March 31, 2020, the potentially dilutive securities had an anti-dilutive effect on earnings per share, and in accordance with ASC 260, were excluded from the diluted net income per share calculations, resulting in identical basic and fully diluted net income per share for that period.

Commitments and Contingencies

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

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

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

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.

NOTE 3 – ACQUISITIONS

The Harvest Foundation LLC

In August 2019, the Company entered into a purchase agreement to acquire 100% of the ownership interests of The Harvest Foundation LLC (“Harvest”), the Company’s cannabis-licensed client in the state of Nevada. The acquisition is conditioned upon legislative approval of the transaction. At this time, the state has paused the processing of cannabis license transfers, without indicating when it will resume. Upon the resumption of these activities and the ensuing approval by the state, the Company expects to consummate this transaction whereby the operations of Harvest will be consolidated into the Company’s financial statements.

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

Kind Therapeutics USA Inc.

In the fall of 2016, the members of Kind Therapeutics USA Inc., the Company’s cannabis-licensed client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (“Kind”), and the Company agreed to a partnership/joint venture whereby Kind would be owned 70% by the Company and 30% by the members of Kind, subject to approval by the Maryland Medical Cannabis Commission (“MMCC”). Prior to finalizing the documents confirming the partnership/joint venture, in December 2018, the Company and the members of Kind negotiated and entered into a memorandum of understanding (“MOU”) for the Company to acquire 100% of the membership interests of Kind. The MOU provides for a total purchase price of $6.3 million in cash, 2,500,000 shares of the Company’s common stock, and other consideration. The acquisition is subject to approval by the MMCC, which will be applied for following the resolution of the litigation with Kind discussed below.

Also in December 2018, (i) MariMed Advisors Inc., the Company’s wholly owned subsidiary, and Kind entered into a management services agreement to provide Kind with comprehensive management services in connection with the business and operations of Kind (“the MSA”), and (ii) Mari Holdings MD LLC, the Company’s majority-owned subsidiary, entered into a 20-year lease with Kind for Kind’s utilization of the Company’s 180,000 square foot cultivation and production facility in Hagerstown, MD (“the Lease”), which the Company purchased, designed, and developed for occupancy and use by Kind commencing in late 2017. Additionally, in October 2019, Mari Holdings MD LLC purchased a 9,000 square foot building in Anne Arundel County, MD, which is currently under constructions, for the development of a dispensary which would be leased to Kind.

In 2019, the members of Kind sought to renegotiate the terms of the MOU and have subsequently sought to renege on both the original partnership/joint venture and the MOU. The Company engaged with Kind in good faith in an attempt to reach updated terms acceptable to both parties, however Kind failed to reciprocate in good faith, resulting in an impasse. Incrementally, both parties through counsel further sought to resolve the impasse, however such initiative resulted in both parties commencing legal proceedings. As a result, the consummation of this acquisition has been delayed and may not ultimately be completed. The litigation is further discussed in Note 19 – Commitments and Contingencies.

MediTaurus LLC

In May 2019, the Company entered into a purchase agreement to acquire MediTaurus LLC (“MediTaurus”), a company formed and owned by Jokubas Ziburkas PhD, a neuroscientist and leading authority on CBD and the endocannabinoid system. The Company sells CBD products developed by MediTaurus in the United States and Europe under its Florance™ brand.

Pursuant to the purchase agreement, the Company acquired 70% of MediTaurus on June 1, 2019. The purchase price was $2.8 million, comprised of cash payments totaling $720,000 and 520,000 shares of the Company’s common stock valued at $2,080,000. The Company expects to complete the acquisition of the remining 30% of MediTaurus in 2021.

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

Cash and cash equivalents	$	64,196
Accounts receivable		5,362
Inventory		519,750
Goodwill		2,662,669
Accounts payable		(777	)
Total value of MediTaurus		3,251,200
Noncontrolling interests in MediTaurus		(975,360	)
Total fair value of consideration	$	2,275,840

Based on a valuation of MediTaurus in late 2019, the goodwill recorded in connection with the transaction was written off.

NOTE 4 – INVESTMENTS

At March 31, 2021 and December 31, 2020, the Company’s investments were comprised of the following:

SCHEDULE OF INVESTMENTS

	March 31, 2021		December 31, 2020
Current investments:
Flowr Corp. (formerly Terrace Inc.)	$	1,312,028	$	1,357,193

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

Total investments	$	2,477,816	$	2,522,981

Flowr Corp. (formerly Terrace Inc.)

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

This investment is carried at it fair value. During the three months ended March 31, 2021 and 2020, the decrease in fair value of this investment of approximately $45,000 and $687,000, respectively, was reflected in Change In Fair Value Of Investments on the statement of operations.

MembersRSVP LLC

In August 2018, the Company invested $300,000 and issued 378,259 shares of its common stock, valued at approximately $915,000, in exchange for a 23% ownership in MembersRSVP LLC (“MRSVP”), an entity that has developed cannabis-specific customer relationship management software, branded under the name Sprout.

During the three months ended March 31, 2020, the investment was accounted for under the equity method. There was no change to the carrying value of the investment during this period.

In January 2021, the Company and MRSVP entered into an agreement whereby the Company assigned and transferred membership interests comprising an 11% ownership in MRSVP in exchange for a release from all further obligation by the Company to make future investments or payments and certain other non-monetary consideration. Following the interest transfer, the Company’s ownership interest in MRSVP was reduced to 12% on a fully diluted basis.

As part of the agreement, the Company relinquished its right to appoint a member to the board of MRSVP. In light of the Company no longer having the ability to exercise significant influence over MRSVP, the Company no longer accounts for this investment under the equity method. The Company’s share of MRSVP’s future earnings or losses shall not be recorded, and the earnings and losses previously recorded will remain part of the carrying amount of the investment of approximated $1,166,000.

In accordance with ASC 321, Investments – Equity Securities, the Company elected the measurement alternative to value this equity investment without a readily determinable fair value. Following the termination of equity accounting, there has been no impairment to this investment, nor any observable price changes to investments in the entity. Accordingly, this investment continued to be carried at approximately $1,166,000 at March 31, 2021.

The Company will continue to apply the alternative measurement guidance until this investment does not qualify to be so measured. The Company may subsequently elect to measure this investment at fair value, with changes in fair value recognized in net income.

NOTE 5 – DEFERRED RENTS RECEIVABLE

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

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

The Company leases the following owned properties:

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

	●	Maryland – a 180,000 square foot former manufacturing facility purchased in January 2017 and developed by the Company into a cultivation and processing facility which is leased to a licensed cannabis client under a triple net lease that commenced 2018 and expires in 2037.

	●	Massachusetts – a 138,000 square foot industrial property of which approximately half of the available square footage is leased to a non-cannabis manufacturing company under a lease that commenced in 2017 and expires in 2022.

The Company subleases the following properties:

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

	●	Delaware – a 100,000 square foot warehouse which the Company is developing into a cultivation and processing facility to be subleased to its cannabis-licensed client. The lease expires in March 2030, with an option to extend the term for three additional five-year periods.

	●	Delaware – a 12,000 square foot premises which the Company developed into a cannabis production facility with offices, and is subleased to its cannabis-licensed client. The lease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.

As of March 31, 2021 and December 31, 2020, cumulative fixed rental receipts under such leases approximated $15.1 million and $13.9 million, respectively, compared to revenue recognized on a straight-line basis of approximately $17.0 and 15.8 million. Accordingly, the deferred rents receivable balance approximated $1.9 million at March 31, 2021 and December 31, 2020.

Future minimum rental receipts for non-cancelable leases and subleases as of March 31, 2021 were:

		2021
2021	$	3,593,589
2022		4,712,200
2023		4,417,620
2024		4,476,205
2025		4,543,917
Thereafter		39,589,047
Total	$	61,332,578

NOTE 6 – NOTES RECEIVABLE

At March 31, 2021 and December 31, 2020, notes receivable, including accrued interest, consisted of the following:

SCHEDULE OF NOTES RECEIVABLE

	March 31, 2021		December 31, 2020
First State Compassion Center	$	453,248	$	468,985
Healer LLC		879,640		899,226
High Fidelity Inc.		254,919		254,919
Total notes receivable		1,587,807		1,623,130
Notes receivable, current portion		374,978		658,122
Notes receivable, less current portion	$	1,212,829	$	965,008

First State Compassion Center

The Company’s cannabis-licensed client in Delaware, First State Compassion Center, issued a 10-year promissory note to the Company in May 2016 in the amount of $700,000 bearing interest at a rate of 12.5% per annum, as amended. The monthly payments of approximately $10,000 will continue through April 2026, at which time the note will be fully paid down. At March 31, 2021 and December 31, 2020, the current portion of this note approximated $68,000 and $66,000, respectively, and was included in Notes Receivable, Current Portion on the respective balance sheets.

Healer LLC

In 2018 and 2019, the Company loaned an aggregate of $800,000 to Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak, an integrative medicine physician and nationally renowned cannabis practitioner (“Healer”). Healer issued promissory notes to the Company for the aggregate amount loaned that bear interest at 6% per annum, with principal and interest payable on maturity dates three years from the respective loan dates.

In March 2021, the Company was issued a revised promissory note from Healer in the principal amount of approximately $894,000 representing the previous loans extended to Healer by the Company plus accrued interest through the revised promissory note issuance date. The revised promissory note bears interest at a rate of 6% per annum and requires quarterly payments of interest from April 2021 through the maturity date in April 2026.

Additionally, the Company has the right to offset any licensing fees owed to Healer by the Company in the event Healer fails to make any timely payment. 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 March 31, 2021 and December 30, 2020, the total amount of principal and accrued interest due under the aforementioned promissory notes approximated $880,000 and $899,000, respectively, of which approximately $52,000 and $337,000 was current, respectively.

High Fidelity

In August 2019, the Company loaned $250,000 to High Fidelity Inc., an entity that owns and operates two seed-to sale medical marijuana facilities in the state of Vermont and produces its own line of CBD products. The note bears interest at a rate of 10.0% per annum, with interest-only month payments through its extended maturity in June 2021, at which time the principal amount is due.

Maryland Health & Wellness Center Inc.

In 2019, the Company provided Maryland Health & Wellness Center Inc. (“MHWC”), an entity that has been pre-approved by the state of Maryland for a cannabis dispensing license, with a $300,000 construction loan bearing interest at a rate of 8% per annum. In June 2020, MHWC repaid the principal and accrued interest thereon, at which time the parties agreed to terminate their business relationship and release each other from all other previously executed agreements.

NOTE 7 – INVENTORY

At March 31, 2021 and December 31, 2020, inventory was comprised of the following:

SCHEDULE OF INVENTORY

	March 31, 2021		December 31, 2020
Plants	$	3,713,877	$	3,352,425
Ingredients and other raw materials		234,826		176,338
Work-in-process		424,435		468,377
Finished goods		3,081,190		2,833,431
Total inventory	$	7,454,328	$	6,830,571

NOTE 8 – PROPERTY AND EQUIPMENT

At March 31, 2021 and December 31, 2020, property and equipment consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	March 31, 2021			December 31, 2020
Land	$	3,988,810		$	3,988,810
Buildings and building improvements		29,447,594			29,309,856
Tenant improvements		8,825,911			8,844,974
Furniture and fixtures		671,986			619,880
Machinery and equipment		5,111,005			4,620,924
Construction in progress		4,788,041			3,140,807
		52,833,347			50,525,251
Less: accumulated depreciation		(5,342,972	)		(4,888,722	)
Property and equipment, net	$	47,490,375		$	45,636,529

During the three months ended March 31, 2021 and December 31, 2020, additions to property and equipment approximated $2,308,000 and $572,000, respectively.

The 2021 and 2020 additions were primarily comprised of (i) construction in Mt. Vernon, IL, and (ii) machinery and equipment purchases for facilities in Massachusetts, Maryland, Illinois, and Delaware. The 2019 additions consisted primarily of (i) the commencement of construction in Milford, DE and Annapolis, MD, (ii) the continued buildout of properties in Hagerstown, MD, New Bedford, MA, and Middleborough, MA, and (ii) improvements to the Wilmington, DE and Las Vegas, NV properties.

The construction in progress balances of approximately $4.8 million and $3.1 million at March 31, 2021 and December 31, 2020, respectively, consisted of the commencement of construction of properties in Metropolis, IL, Milford, DE, and Annapolis, MD.

Depreciation expense for the three months ended March 31, 2021 and 2020 approximated $462,000 and $484,000, respectively.

NOTE 9 – INTANGIBLES

At March 31, 2021 and December 31, 2020, intangible assets were comprised of (i) the carrying value of cannabis license fees, and (ii) goodwill arising from the Company’s acquisitions.

The Company’s cannabis licenses are issued from the states of Illinois and Massachusetts and require the payment of annual fees. These fees, comprised of a fixed component and a variable component based on the level of operations, are capitalized and amortized over the respective twelve-month periods. At March 31, 2021 and December 31, 2020, the carrying value of these cannabis licenses approximated $622,000 and $161,000, respectively.

The goodwill associated with acquisitions is reviewed on a quarterly basis for impairment. Based on this review and other factors, the goodwill of approximately $2.1 million at March 31, 2021 and December 31, 2020 was deemed to be unimpaired.

NOTE 10 – DEBT

Mortgages Payable

At March 31, 2021 and December 31, 2020, mortgage balances, including accrued interest, were comprised of the following:

SCHEDULE OF MORTGAGES PAYABLE

	March 31, 2021			December 31, 2020
Bank of New England – Massachusetts properties	$	12,749,474		$	12,834,090
Bank of New England – Delaware property		1,547,757			1,575,658
DuQuoin State Bank – Illinois properties		806,980			814,749
South Porte Bank – Illinois property		894,587			906,653
Total mortgages payable		15,998,798			16,131,150
Mortgages payable, current portion		(1,382,411	)		(1,387,014	)
Mortgages payable, less current portion	$	14,616,387		$	14,744,136

In November 2017, the Company entered into a 10-year mortgage agreement with Bank of New England in the amount of $4,895,000 (the “Initial Mortgage”) for the purchase of a 138,000 square foot industrial property in New Bedford, Massachusetts, within which the Company has built a 70,000 square foot cannabis cultivation and processing facility. Pursuant to the Initial Mortgage, the Company made monthly payments of (i) interest-only from the mortgage date through May 2019 at a rate equal to the prime rate plus 2%, with a floor of 6.25% per annum, and (ii) principal and interest payments from May 2019 to July 2020 at a rate equal to the prime rate on May 2, 2019 plus 2%, with a floor of 6.25% per annum. In July 2020, at which time the Initial Mortgage had a remaining principal balance of approximately $4.8 million, the parties consummated an amended and restated mortgage agreement, secured by the Company’s properties in New Bedford and Middleboro in the amount of $13.0 million bearing interest at a rate of 6.5% per annum that matures in August 2025 (the “Refinanced Mortgage”). Proceeds from the Refinanced Mortgage were used to pay down the Initial Mortgage and approximately $7.2 million of promissory notes as further described below. At March 31, 2021 and December 31, 2020, the outstanding principal balance of the Refinanced Mortgage approximated $12.7 million and $12.8 million, respectively, of which approximately $341,000 and $335,000, respectively, was current.

The Company maintains another mortgage with Bank of New England for the 2016 purchase of a 45,070 square foot building in Wilmington, Delaware which was developed into a cannabis seed-to-sale facility and is currently leased to the Company’s cannabis-licensed client in that state. The mortgage matures in 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 March 31, 2021 and December 31, 2020, the outstanding principal balance on this mortgage approximated $1.5 million and $1.6 million, respectively, of which approximately $115,000 and $114,000, respectively, was current.

In May 2016, the Company entered into a mortgage agreement with DuQuoin State Bank (“DSB”) for the purchase of two properties which the Company developed into two 3,400 square foot free-standing retail dispensaries in Illinois. On May 5^thof 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, 2021 and December 31, 2020, the outstanding principal balance on this mortgage approximated $807,000 and $815,000 respectively, of which approximately $32,000 and $31,000, respectively, was current.

In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, IL. Pursuant to amendments to the mortgage agreement, the Company is making interest-only monthly payments at a rate of 5.5% per annum through the amended maturity date in May 2021, at which time the parties are expected to enter into a one-year renewal agreement.

Notes Payable

In February 2020, pursuant to an exchange agreement as further described in Note 12 – Mezzanine Equity, the Company issued two promissory notes in the aggregate principal amount of approximately $4.4 million, bearing interest at 16.5% per annum and maturing in August 2021 (the “$4.4M Notes”), in exchange for a loan in the same amount. At December 31, 2020, the principal and accrued interest balance of the $4.4M Notes approximated $4.6 million. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 12 – Mezzanine Equity, the $4.4M Notes were fully paid down, along with accrued interest through the repayment date.

In June 2019, the Company and MariMed Hemp Inc., its wholly-owned subsidiary (“MMH”), issued a secured promissory note in the principal amount of $10.0 million (the “$10M Note”) to an unaffiliated party (the “Noteholder”). The $10M Note provided for the repayment of principal plus a payment of $1.5 million (the “$1.5M Payment”) on the maturity date of January 31, 2020. Such payment was charged to interest expense over the life of the $10M Note.

As part of the $10M Note transaction, the Company issued three-year warrants to purchase up to 375,000 shares of common stock at an exercise price of $4.50 per share to the Noteholder. The fair value of these warrants on the issuance date of approximately $601,000 was recorded as a discount to the $10M Note. Approximately $523,000 of the warrant discount was amortized to interest expense in 2019, with the remainder in January 2020.

The Company entered into an amendment agreement with the Noteholder in February 2020, whereby the Company and MMH issued an amended and restated promissory note maturing in June 2020 in the principal amount of $11,500,000 (the “$11.5M Note”), comprised of the principal amount of the $10M Note and the $1.5M Payment. The $11.5M Note bore interest at a rate of 15% per annum, requiring periodic interest payments and minimum amortization payments of $3,000,000 in the aggregate, which the Company made in the first half of 2020.

The Company entered into a second amendment agreement with the Noteholder in June 2020, whereby (i) $352,000 of outstanding principal of the $11.5M Note was converted into 1,900,000 shares of the Company’s common stock (which did not result in a material extinguishment gain or loss as the conversion price approximated the price of the Company’s common stock on the agreement date), and (ii) the Company and MMH issued a second amended and restated promissory note in the principal amount of approximately $8.8 million (the “$8.8M Note”), comprised of the outstanding principal and unpaid interest balances of the $11.5M Note, plus an extension fee of approximately $330,000. In addition, the Company issued three-year warrants to the Noteholder to purchase up to 750,000 shares of common stock at an exercise price of $0.50 per share. The fair value of these warrants on the issuance date of approximately $66,000 was recorded as a discount to the $8.8M Note, which is being amortized to interest expense over the life of the $8.8M Note.

The $8.8M Note bears interest at a rate of 15% per annum, matures in June 2022, and required a minimum amortization payment of $4,000,000 in July 2020, which the Company paid with a portion of proceeds of the Refinanced Mortgage discussed earlier in this footnote. The Company can prepay all, or a portion, of the outstanding principal and unpaid interest of the $8.8M Note, however if any prepayment is made prior to December 25, 2021, the Company shall be required to pay a prepayment premium equal to 10% of the principal amount being prepaid. The Noteholder has the right to require the redemption of up to $250,000 of principal and unpaid interest thereon per calendar month (the “Discretionary Monthly Redemptions”), which shall be paid in common stock if certain defined conditions of the $8.8M Note and of the Company’s common stock are met, or else in cash. As of December 31, 2020, the Company paid Discretionary Monthly Redemptions of $600,000 in the aggregate, and accrued interest through such date of approximately $405,000, all in cash. Accordingly, the carrying value of the $8.8M Note was approximately $4.2 million at December 31, 2020.

The Noteholder has the option to convert the $8.8M Note, in whole or in part, into shares of the Company’s common stock at a conversion price of $0.30 per share, subject to certain conversion limitations. This non-detachable conversion feature of the $8.8M Note had no intrinsic value on the agreement date, and therefore no beneficial conversion feature arose.

During the three months ended March 2021, the Noteholder converted $1,000,000 of principal and approximately $10,000 of accrued interest into 3,365,972 shares of the Company’s common stock. Also during this period, the Company paid accrued interest of approximately $104,000 in cash. Accordingly, the principal balance of the $8.8M Note was approximately $3.2 million at March 31, 2021.

The Company entered into a third amendment agreement with the Noteholder in April 2021 whereby the Company and MMH issued a third amended and restated promissory note in the principal amount of approximately $3.2 million (the “$3.2M Note”), comprised of the remaining principal balance on the $8.8M Note. The $3.2M Note bears interest at a rate of 0.12% per annum and matures in April 2023. The Noteholder has the option to convert, subject to certain conversion limitations, all or a portion of the $3.2M Note into shares of the Company’s common stock at a conversion price of $0.35 per share, such conversion price subject to adjustment in the event of certain transactions by the Company. On or after the one-year anniversary of the $3.2M Note, upon twenty days prior written notice to the Noteholder, the Company can prepay all of the outstanding principal and unpaid interest of the $3.2M Note, along with a prepayment premium equal to 10% of the principal amount being prepaid. The Noteholder shall remain entitled to convert the $3.2M Note during such notice period. On or after the one-year anniversary of the $3.2M Note, the Noteholder has the right to require the redemption in cash of up to $125,000 of principal and unpaid interest thereon per calendar month.

In April 2019, MMH issued a secured promissory note in the principal amount of $1,000,000 (the “$1M Note”) to an unaffiliated party. The principal balance plus a payment of $180,000, initially due in December 2019, was extended to March 2020 in accordance with the terms of the $1M Note, requiring an additional payment of $30,000 (the “$30,000 Fee”). Prior to the extended due date, the parties agreed that the $1M Note would continue on a month-to-month basis bearing interest at a rate of 15% per annum. In September 2020, the Company paid down $500,000 of principal on the $1M Note. At December 31, 2020, the outstanding balance consisted of $500,000 of principal and approximately $467,000 of unpaid accrued interest which included the $30,000 Fee. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 12 – Mezzanine Equity, the remaining principal of $500,000 was paid down, along with $200,000 of accrued interest.

In March 2019, the Company raised $6.0 million through the issuance of a secured promissory note (the “$6M Note”) to an unaffiliated party (the “Holding Party”) bearing interest at a rate of 13% per annum and a service fee of $900,000 (the “Service Fee”). The $6M Note’s initial maturity date of December 31, 2019 was extended to April 2020 in accordance with its terms, with the Company paying a $300,000 extension fee in December 2019 which was charged to interest expense.

The Company and the Holding Party entered into a note extension agreement in April 2020 (the “Initial Extension Agreement”) pursuant to which (i) the $6M Note’s due date was extended to September 2020, and the $6M Note was modified to include unpaid accrued interest of $845,000 through the modification date and interest at a rate of 10% per annum (the “$6.8M Note”), and (iii) a new convertible note in the amount of $900,000 (the “$900k Note”) was issued evidencing the Service Fee, bearing interest at a rate of 12% per annum. The Company satisfied the $900k Note and accrued interest of $20,100 in full as of the June 2020 maturity date by the payment in July 2020 of $460,050 in cash, representing one-half of the principal and accrued interest, and the issuance in June 2020 of 2,525,596 shares of the Company’s common stock, in payment of the other half of the principal and accrued interest.

In September 2018, the Company raised $3.0 million from the issuance of a secured promissory note to the Holding Party, bearing interest at a rate of 10% per annum (the “$3M Note”). The maturity date of the $3M Note, initially in March 2020, was extended for an additional six months in accordance with its terms, with the interest rate increasing to 12% per annum during the extension period. Pursuant to the Initial Extension Agreement, the maturity date of the $3M Note was extended to December 2020.

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

In October 2020, the Company and the Holding Party entered into a second note extension agreement (the “Second Extension Agreement”) whereby the Company (i) paid $1 million of principal and all outstanding accrued interest of approximately $333,000 on the $6.8M Note; (ii) issued an amended and restated senior secured promissory note in the principal amount of $5,845,000 (the “$5.8M Note”) to replace the $6.8M Note; and (iii) amended and restated the $3M Note (the “New $3M Note”, and together with the $5.8M Note, the “Amended Notes”). The Amended Notes bear interest at a rate of 12% per annum with maturity dates in September 2022, and can be prepaid in whole or in part at any time.

In consideration of the Second Extension Agreement, the Company (i) issued four-year warrants to the Holding Party’s designees to purchase up to 5,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share; (ii) paid the Holding Party a fee of $100,000; and (iii) extended the security interest in certain Company properties and the pledge of certain equity interests to secure the Amended Notes. The Company recorded a discount on the Amended Notes of approximately $573,000 based on the fair value of such warrants on the issuance date, of which approximately $75,000 was amortized as of the end of 2020, and the remainder to be amortized over the life of the Amended Notes. Accordingly, the carrying value of the Amended Notes approximated $8.3 million at December 31, 2020, of which $1.9 million was current.

The Company made a required principal payment of $400,000 on the $5.8M note in February 2021. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 12 – Mezzanine Equity, the Amended Notes were fully paid down, along with accrued interest through the repayment date. In addition, the remaining discount of approximately $450,000 on this note was fully amortized on the payment date.

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 5.74% per annum and matures in July 2026. At March 31, 2021 and December 31, 2020, the balance of this note approximated $24,000 and $26,000, respectively.

In addition to the above transactions, at the start of 2020, the Company was carrying $3,190,000 of principal on promissory notes issued to accredited investors bearing interest at rates ranging from 6.5% to 18% per annum (the “Existing Notes”). During 2020, the Company (i) raised approximately $2,147,000 from the issuance of new promissory notes to accredited investors bearing interest at 12% and 15% per annum (the “New 2020 Notes”), (ii) r