|3 Months Ended|
Mar. 31, 2022
|Business Combination and Asset Acquisition [Abstract]|
NOTE 3 – ACQUISITIONS
Kind Therapeutics USA LLC
In December 2021, the Company entered into a membership interest purchase agreement with the members of Kind Therapeutics USA LLC, the Company’s client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (“Kind”), to acquire 100% of the equity ownership of Kind in exchange for $13.5 million payable in cash (subject to adjustment) 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. Upon execution of the membership interest purchase agreement, the Company deposited, in escrow, the sum of $5.0 million as a contract down-payment.
In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the acquisition was consummated by the parties. Accordingly, Kind will be consolidated into the financial results of the Company commencing on the closing date of the acquisition. Following the closing of the transaction, the Maryland litigation between the Company and the members of Kind was dismissed as further discussed in Note 20 – Commitments and Contingencies.
Simultaneous with the Kind membership purchase agreement, the Company entered into a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ownership interest in (i) Mari Holdings MD LLC (“Mari-MD”), the Company’s majority owned subsidiary that owns production and retail cannabis facilities in Hagerstown, MD and Annapolis, MD, and (ii) Mia Development LLC (“Mia”), the Company’s majority owned subsidiary that owns production and retail cannabis facilities in Wilmington, DE. The purchase price of $2 million in the aggregate is expected to be paid, and the transaction consummated, upon the dismissal of the derivative claims in the DiPietro lawsuit in June 2022, as further discussed in Note 20 – Commitments and Contingencies. After this transaction is consummated, the Company’s ownership of Mari-MD and Mia shall increase to 99.7% and 94.3%, respectively.
The Harvest Foundation LLC
In 2019, the Company entered into a purchase agreement to acquire 100% of the ownership interests of The Harvest Foundation LLC (“Harvest”), the Company’s cannabis-licensed client in the state of Nevada. The acquisition is conditioned upon state regulatory approval of the transaction and other closing conditions. Upon approval, and the fulfillment of other closing conditions, the ownership of Harvest will be transferred to the Company, and the operations of Harvest will begin to be consolidated into the Company’s financial statements. There is no assurance that the closing conditions to the Company’s acquisition of Harvest, including regulatory approval, will be achieved or that the acquisition will be consummated.
The purchase price is comprised of the issuance of (i) 1.2 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. shares of the Company’s common stock, in the aggregate, to the two owners of Harvest, which as a good faith deposit, were issued upon execution of the purchase agreement, (ii) $
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 shares of the Company’s common stock, valued at approximately $94,000, and $10,000 in cash. In 2019, the Company had acquired a 70.0% ownership interest in Meditaurus in exchange for $2.8 million of cash and stock.
The carrying value of the noncontrolling interest of approximately $975,000 was eliminated on the date such interest was acquired in September 2021, and since there was no change in control of Meditaurus from this transaction, the resulting gain on bargain purchase was recognized in Additional Paid-In Capital on the balance sheet. As part of this transaction, the initial purchase agreement was amended whereby any and all future license fees and payments to Meditaurus were eliminated.
Beverly Asset Purchase
In November 2021, the Company entered into an asset purchase agreement to acquire the cannabis license, property lease, and other assets and rights of, and to assume the liabilities and operating obligations associated with, a cannabis dispensary that is currently operating in Beverly, MA. The purchase price is comprised of shares of the Company’s common stock and $5.1 million in cash, with the cash amount to be paid on a monthly basis as a percentage of the business’ monthly gross sales.
The purchase is contingent upon the approval of the Massachusetts Cannabis Control Commission, which is expected during the third quarter of 2022. Concurrent with the execution of this agreement, the parties entered into a consulting agreement pursuant whereby the Company shall provide certain oversight services related to the development, staffing, and operation of the business in exchange for a monthly fee.
Green Growth Group Inc.
In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the equity ownership of Green Growth Group Inc., an entity that holds a wholesale cannabis license in the state of Illinois, in exchange for $1.9 million in cash and shares of the Company’s common stock valued at $1.5 million. The Company made a good faith deposit of $100,000 on the agreement date, which comprises the balance of non-current Investments on the balance sheet.
In March 2022, the acquisition was approved by the Illinois Department of Agriculture, and in April 2022, the parties consummated the transaction.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef