mrmd-20220930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period ended September 30, 2022

o 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 Incorporation or Organization)						(I.R.S. Employer 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

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 o

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

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

Large Accelerated filer o

Accelerated filer

Non-accelerated filer o

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. o

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

As of November 3, 2022, 339,353,353 shares of the registrant’s common stock were outstanding.

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MariMed Inc.

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		Page
PART I – FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements		3
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	39
Item 4.	Controls and Procedures	39

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signature		42

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

MariMed Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	September 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	11,113	$	29,683
Accounts receivable, net	6,560		1,666
Deferred rents receivable	725		1,678
Notes receivable, current portion	134		127
Inventory	18,309		9,768
Investments, current	274		251
Other current assets	3,768		1,440
Total current assets	40,883		44,613
Property and equipment, net	70,396		62,150
Intangible assets, net	9,469		162
Goodwill	8,079		2,068
Notes receivable, net of current	9,160		8,987
Operating lease right-of-use assets	4,954		5,081
Finance lease right-of-use assets	747		46
Other assets	1,010		98
Total assets	$	144,698	$	123,205

Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Mortgages and notes payable, current portion	$	2,825	$	1,410
Accounts payable	7,973		5,099
Accrued expenses and other	3,265		3,149
Income taxes payable	11,663		16,467
Operating lease liabilities, current portion	1,284		1,071
Finance lease liabilities, current portion	241		27
Total current liabilities	27,251		27,223
Mortgages and notes payable, net of current	23,048		17,262
Operating lease liabilities, net of current	4,214		4,574
Finance lease liabilities, net of current	483		22
Other liabilities	100		100
Total liabilities	55,096		49,181

Commitments and contingencies

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MariMed Inc.

Condensed Consolidated Balance Sheets (continued)

(in thousands, except share and per share amounts)

(unaudited)


	September 30, 2022		December 31, 2021
Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at September 30, 2022 and December 31, 2021	14,725		14,725
Series C convertible preferred stock $0.001 par value; 12,432,432 shares authorized; 6,216,216 shares issued and outstanding at September 30, 2022 and December 31, 2021	23,000		23,000
Total mezzanine equity	37,725		37,725

Stockholders’ equity
Undesignated preferred stock, $0.001 par value; 38,875,451 shares authorized; zero shares issued and outstanding at September 30, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value; 700,000,000 shares authorized; 339,270,387 and 334,030,348 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	339		334
Common stock subscribed but not issued	41		—
Additional paid-in capital	141,652		134,920
Accumulated deficit	(88,675)		(97,392)
Noncontrolling interests	(1,480)		(1,563)
Total stockholders’ equity	51,877		36,299
Total liabilities, mezzanine equity and stockholders’ equity	$	144,698	$	123,205

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021

Revenue	$	33,912	$	33,208	$	98,180	$	90,420
Cost of revenue	17,748		15,027		50,035		39,647
Gross profit	16,164		18,181		48,145		50,773

Operating expenses:
Personnel	3,746		1,481		10,170		5,266
Marketing and promotion	1,402		563		2,854		1,058
General and administrative	5,097		9,481		16,890		16,934
Acquisition-related and other	143		—		897		—
Bad debt	40		36		54		1,855
Total operating expenses	10,428		11,561		30,865		25,113

Income from operations	5,736		6,620		17,280		25,660

Interest and other (expense) income:
Interest expense	(518)		(300)		(1,271)		(2,077)
Interest income	239		26		720		96
Other (expense) income, net	(251)		(214)		24		(631)
Total interest and other expense	(530)		(488)		(527)		(2,612)

Income before income taxes	5,206		6,132		16,753		23,048
Provision for income taxes	2,484		4,009		7,894		9,026

Net income	2,722		2,123		8,859		14,022
Less: Net income attributable to noncontrolling interests	16		103		142		289
Net income attributable to common stockholders	$	2,706	$	2,020	$	8,717	$	13,733

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

Weighted average common shares outstanding:
Basic	339,025		329,454		337,111		324,340
Diluted	381,071		378,934		379,868		370,204

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Nine months ended September 30, 2022
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at January 1, 2022	334,030,348	$	334	—	$	—	$	134,920	$	(97,392)	$	(1,563)	$	36,299
Exercise of stock options	55,000						10						10
Cashless exercise of stock options	200,000												—
Cashless exercise of warrants	234,961												—
Release of shares under stock grants	357,077												—
Common stock subscribed but not issued				74,581	41								41
Shares issued as purchase consideration - business acquisition	2,343,750	3					1,497						1,500
Purchase of minority interests in certain of the Company’s subsidiaries							(2,165)				165		(2,000)
Obligations settled with common stock	906,393	1					636						637
Conversion of promissory notes to stock	1,142,858	1					399						400
Distributions to non-controlling interests											(224)		(224)
Stock-based compensation							6,355						6,355
Net income									8,717		142		8,859
Balances at September 30, 2022	339,270,387	$	339	74,581	$	41	$	141,652	$	(88,675)	$	(1,480)	$	51,877


	Nine months ended September 30, 2021
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at January 1, 2021	314,418,812	$	314	11,413	$	5	$	112,975	$	(104,617)	$	(577)	$	8,100
Issuance of subscribed shares	11,413			(11,413)	(5)		5						—
Exercise of stock options	178,885						31						31
Exercise of warrants	980,062	1					92						93
Release of shares under stock grants	152,094			102,204	95		138						233
Issuance of standalone warrants							832						832
Issuance of warrants with stock							655						655
Conversion of debentures payable to equity	4,610,645	5					1,352						1,357
Conversion of promissory notes to equity	10,042,125	10					3,337						3,347
Common stock issued to settle obligations	71,691						54						54
Common stock issued to purchase property and equipment	750,000	1					704						705
Obligations settled with common stock	409,308	1					374						375
Common stock returned to the Company	(79,815)						(10)						(10)
Equity issuance costs							(387)						(387)
Acquisition of interest in subsidiary				100,000	94		871				(975)		(10)
Distributions to non-controlling interests											(301)		(301)
Stock-based compensation							6,208						6,208
Net income									13,733		289		14,022
Balances at September 30, 2021	331,545,220	$	332	202,204	$	189	$	127,231	$	(90,884)	$	(1,564)	$	35,304

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine months ended
	September 30,
	2022		2021
Cash flows from operating activities:
Net income attributable to common stockholders	$	8,717	$	13,733
Net income attributable to noncontrolling interests	142		289
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of property and equipment	2,469		1,499
Amortization of intangible assets	854		518
Stock-based compensation	6,396		7,152
Amortization of standalone warrant issuances	—		776
Amortization of warrants attached to debt	—		539
Amortization of beneficial conversion feature	—		177
Amortization of original issue discount	—		52
Bad debt expense	54		1,855
Obligations settled with common stock	637		375
Loss on obligations settled with equity	—		3
Gain on sale of investment	—		(309)
Loss on changes in fair value of investments	930		937
Other investment income	(954)		—
Changes in operating assets and liabilities:
Accounts receivable, net	(4,856)		(3,886)
Deferred rents receivable	111		192
Inventory	(4,215)		(4,163)
Other current assets	(1,973)		(1,641)
Other assets	(113)		(17)
Accounts payable	2,372		2,098
Accrued expenses and other	(193)		8,069
Income taxes payable	(4,804)		—
Net cash provided by operating activities	5,574		28,248

Cash flows from investing activities:
Purchases of property and equipment	(9,985)		(14,649)
Business acquisitions, net of cash acquired	(12,746)		—
Advances toward future business acquisitions	(800)		—
Purchases of cannabis licenses	(330)		(638)
Proceeds from sale of investment	—		1,475
Proceeds from notes receivable	130		407

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MariMed Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)


	Nine months ended
	September 30,
	2022		2021
Net cash used in investing activities	(23,731)		(13,405)

Cash flows from financing activities:
Proceeds from issuance of preferred stock	—		23,000
Equity issuance costs	—		(387)
Proceeds from issuance of promissory notes	—		35
Principal payments of mortgages and promissory notes	(1,033)		(16,248)
Proceeds from mortgages	3,000		2,700
Proceeds from exercise of stock options	10		31
Proceeds from exercise of warrants	—		93
Repayment of loans from related parties	—		(1,158)
Principal payments of finance leases	(166)		(26)
Redemption of minority interests	(2,000)		—
Distributions	(224)		(301)
Net cash (used in) provided by financing activities	(413)		7,739

Net (decrease) increase in cash and cash equivalents	(18,570)		22,582
Cash and equivalents, beginning of year	29,683		2,999
Cash and cash equivalents, end of period	$	11,113	$	25,581

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,120	$	1,705
Cash paid for income taxes	$	12,582	$	419

Non-cash activities:
Stock issued as purchase consideration	$	1,500	$	—
Conversion of promissory notes	$	400	$	3,346
Conversion of debentures payable	$	—	$	1,356
Acquisition of interest in subsidiary	$	—	$	975
Purchases of property and equipment with stock	$	—	$	705
Operating lease right-of-use assets and liabilities	$	378	$	466
Finance lease right-of-use assets and liabilities	$	781	$	—
Common stock issued to settle obligations	$	—	$	51
Return of stock	$	—	$	10
Issuance of common stock associated with subscriptions	$	—	$	5
Cashless exercise of warrants	$	235	$	180
Cashless exercise of stock options	$	200	$	53

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) BASIS OF PRESENTATION

Business

MariMed Inc. (“MariMed” or the “Company”) is a multi-state operator in the United States cannabis industry. MariMed develops, operates, manages, and optimizes state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medical and adult use cannabis. MariMed also licenses its proprietary brands of cannabis and hemp-infused products, along with other top brands, in domestic markets.

Basis of Presentation

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

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

Interim results are not necessarily indicative of results for the full fiscal year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2022.

Certain reclassifications, not affecting previously reported net income or cash flows, have been made to the previously issued financial statements to conform to the current period presentation.

Significant Accounting Policies

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

Principles of Consolidation

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

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

Use of Estimates and Judgments

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

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Cash and Cash Equivalents

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

The Company had $0.1 million of cash held in escrow at September 30, 2022. At December 31, 2021, the Company had cash of $5.1 million held in escrow, of which $5.0 million was an escrow deposit in connection with the acquisition of Kind.

Fair Value of Financial Instruments

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

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

Level 1. Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

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

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

Recent Accounting Pronouncements

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

(2) ACQUISITIONS

Kind

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

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

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

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


Fair value of consideration transferred:
Cash consideration:
Cash paid at closing	$	10,128
Release of escrow	2,444
Severance paid from escrow	556
Less cash acquired	(2,310)
Net cash consideration	10,818
Note payable	5,634
Write-off accounts receivable	658
Write-off of deferred accounts receivable	842
Total fair value of consideration transferred	$	17,952


Fair value of assets acquired and (liabilities assumed):
Current assets, net of cash acquired	$	5,047
Property and equipment	622
Intangible assets:
Tradename and trademarks	2,041
Licenses and customer base	4,700
Non-compete agreements	42
Goodwill	6,011
Current liabilities	(511)
Fair value of net assets acquired	$	17,952

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

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

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

Green Growth Group Inc.

In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the equity ownership of Green Growth Group Inc. (“Green Growth”), an entity that holds a craft cultivation and production cannabis license issued by the

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Illinois Department of Agriculture, in exchange for cash of $1.9 million and shares of the Company’s common stock valued at $1.5 million. Concurrently, the Company made a good faith deposit of $100,000.

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

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

Meditaurus LLC

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

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

Pending Transactions

Beverly Asset Purchase

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

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

The Harvest Foundation LLC

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

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potentially moving forward with the acquisition. The Company is monitoring the status of Harvest matters which will require adjustments to the terms of the purchase agreement if the Company determines to proceed with the acquisition.

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

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

(3) EARNINGS PER SHARE

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

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


	Three months ended		Nine months ended
	September 30, 2022	September 30, 2021	September 30, 2022	September 30, 2021
Weighted average shares outstanding - basic	339,025	329,454	337,111	324,340
Potential dilutive common shares	42,046	49,480	42,757	45,864
Weighted average shares outstanding - diluted	381,071	378,934	379,868	370,204

(4) DEFERRED RENTS RECEIVABLE

The Company is the lessor under operating leases which contain escalating rents over time, rent holidays, options to renew, requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based on a percentage of monthly tenant revenues. The Company is not 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 in Deferred rents receivable in the condensed consolidated balance sheets. Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.

The Company leases the following owned properties:

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

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

•Massachusetts – a 138,000 square foot industrial property of which approximately half of the available square footage is leased to a non-cannabis manufacturing company under a lease that expires in February 2023.

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The Company subleases the following properties:

•Delaware – a 4,000 square foot cannabis dispensary which is subleased to its cannabis-licensed client under a sublease expiring in April 2027.

•Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility that is subleased to its cannabis-licensed client. The sublease expires in March 2030, with an option to extend the term for three additional five-year periods. The Company intends to develop the remaining space into a processing facility.

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

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

Future minimum rental receipts for non-cancellable leases and subleases as of September 30, 2022 were as follows (in thousands):


Year ending December 31,
Remainder of 2022	$	315
2023	1,170
2024	1,196
2025	1,199
2026	1,051
Thereafter	6,131
	$	11,062

(5) NOTES RECEIVABLE

Notes receivable, including accrued interest, at September 30, 2022 and December 31, 2021 consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
First State Compassion Center (initial note)	$	348	$	403
First State Compassion Center (secondary note)	8,080		7,845
Healer LLC	866		866
Total notes receivable	9,294		9,114
Notes receivable, current portion	134		127
Notes receivable, less current portion	$	9,160	$	8,987

First State Compassion Center

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

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

Healer LLC

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

The Company has the right to offset any licensing fees payable by the Company to Healer in the event Healer fails to make any payment when due. In March 2021, the Company offset approximately $28,000 of licensing fees payable to Healer against the principal balance of the Revised Healer Note, reducing the principal amount to approximately $866,000. Of the outstanding Revised Healer Note balance at both September 30, 2022 and December 31, 2021, approximately $52,000 was current.

High Fidelity

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

(6) INVENTORY

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


	September 30, 2022		December 31, 2021
Plants	$	2,585	$	1,015
Ingredients and other raw materials	2,582		262
Work-in-process	8,071		4,661
Finished goods	5,071		3,830
	$	18,309	$	9,768

(7) INVESTMENTS

The Company’s investments at September 30, 2022 and December 31, 2021 were all classified as current and were comprised of the following (in thousands):


	September 30, 2022		December 31, 2021

Flowr Corp. (formerly Terrace Inc.)	$	78	$	251
WM Technology Inc.	196		—
	$	274	$	251

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

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Flowr Corp. (formerly Terrace Inc.)

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

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

WM Technology Inc. (formerly MembersRSVP LLC)

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

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

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

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

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(8) PROPERTY AND EQUIPMENT, NET

The Company’s property and equipment, net, at September 30, 2022 and December 31, 2021 was comprised of the following (in thousands):


	September 30, 2022		December 31, 2021
Land	$	4,450	$	4,450
Buildings and building improvements	39,497		35,231
Tenant improvements	17,005		9,745
Furniture and fixtures	1,986		1,888
Machinery and equipment	9,689		7,221
Construction in progress	7,084		10,569
	79,711		69,104
Less: accumulated depreciation	(9,315)		(6,954)
Property and equipment, net	$	70,396	$	62,150

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

(9) INTANGIBLE ASSETS AND GOODWILL

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


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

Tradename and trademarks	3.00	$	2,041	$	283	$	1,758
Licenses and customer base	8.26	8,100		422		7,678
Non-compete agreements	2.00	42		9		33
	7.18	$	10,183	$	714	$	9,469

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


Year ending December 31,
Remainder of 2022	$	428
2023	1,712
2024	1,698
2025	1,239
2026	1,011
Thereafter	3,381
Total	$	9,469

The changes in the carrying value of the Company’s goodwill in the three months ended September 30, 2022 and 2021 were as follows (in thousands):


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

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(10) MORTGAGES AND NOTES PAYABLE

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

Mortgages

The Company’s mortgage balances, including accrued interest, at September 30, 2022 and December 31, 2021 were comprised of the following (in thousands):


	September 30, 2022		December 31, 2021
Bank of New England – New Bedford, MA and Middleboro, MA properties	$	12,231	$	12,499
Bank of New England – Wilmington, DE property	1,374		1,463
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties	759		778
DuQuoin State Bank – Metropolis, IL property	2,541		2,658
Du Quoin State Bank - Mt. Vernon, IL property	2,990		—
South Porte Bank – Mt. Vernon, IL property	808		816
Total mortgages payable	20,703		18,214
Less: Mortgages payable, current	(1,485)		(1,400)
Mortgages payable, less current portion	$	19,218	$	16,814

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

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

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

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

In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, IL. The purchase price consisted of 750,000 shares of the Company’s common stock, which were valued at $705,000 on the date of the transaction, and payoff of the seller’s remaining mortgage balance of $1.6 million. In connection with this purchase, the Company entered into a second mortgage agreement with DSB for $