NOTE 12 – EQUITY

Preferred Stock

In January 2017, the Company increased the number of authorized shares of preferred stock from 5 million to 50 million shares.

During 2017, the Company issued subscriptions on 200,000 shares of Series A convertible preferred stock at $1.00 per share. No subscriptions were issued during 2018.

The Series A convertible preferred stock accrues an annual dividend of 6% until conversion. The preferred stock is convertible, along with any accrued dividends, into common stock at a twenty-five percent discount to the selling price of the common stock in a qualified offering, as defined in the subscription agreement. In addition, the Company has the ability to force the conversion of preferred stock at such time the Company has a market capitalization in excess of $50 million for ten consecutive trading days. In such event, the conversion price shall be a 25% discount to the average closing price of the Company’s common stock over the ten trading days prior to the Company’s notice of its intent to convert.

In January 2018, all 500,000 shares of subscribed Series A convertible preferred stock were converted into 970,989 shares of common stock at a conversion price of $0.55 per share. The Company recorded a non-cash loss on conversion of approximately $34,000 based on the market value of the common stock on the conversion date. No shares were converted during 2017.

Common Stock

In January 2017, the Company increased the number of authorized shares of common stock from 100 million to 500 million shares.

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

During the year ended December 31, 2018 the Company sold 19,188,981 shares of common stock at prices ranging from $0.50 to $3.00 per share, resulting in total proceeds of $31.8 million. During the year ended December 31, 2017, the Company sold 26,672,228 shares of common stock, at prices ranging from $0.18 to $0.50 per share, resulting in total proceeds of $6,578,000.

During the years ended December 31, 2018 and 2017, the Company issued 3,420,526 and 1,007,597 shares, respectively, in exchange for services rendered by third-parties or to otherwise settle outstanding obligations. Based on the market value of the common stock on the dates of issuance, the Company recorded non-cash losses on these settlements of approximately $1,024,000 and $31,000, respectively.

As previously disclosed in Note 3 – Acquisitions, the Company issued common stock in 2018 for the acquisition of iRollie (264,317 shares), and in 2017 to acquire of the remaining 49% interest of MariMed Advisors Inc. (75 million shares) and to purchase certain assets of Betty’s Eddies™ (1 million shares).

As previously disclosed in Note 4 – Investments, the Company issued 378,259 shares of common stock as part of the purchase price of the investment in Sprout.

As previously disclosed in Note 10 – Debt, during 2018, holders of promissory notes with principal balances of $1,075,000 converted such promissory notes into 1,568,375 shares of common stock, and holders of promissory notes with principal balances of approximately $7.5 million and $95,000 of accrued interest received 2,596,313 shares of common stock and subscriptions on 79,136 share of common stock to retire such notes. During 2017, holders of promissory notes with principal balances of $2.05 million and approximately $262,000 of accrued interest converted such promissory notes into 4,385,823 shares of common stock, and holders of promissory notes with principal balances of $2.3 million and approximately 312,000 of accrued interest received 5,385,823 shares of common stock to retire such notes.

As previously disclosed in Note 11 – Debentures Payable, the Holder of the $10M Debentures converted $1,400,000 of principal and approximately $36,000 of accrued interest into 524,360 shares of common stock.

As further disclosed in Note 13 – Stock Options, during the years ended December 31, 2018 and 2017, options to purchase 760,000 and 4,800,000 shares of common stock, respectively, were exercised. Of these exercised options, during 2018 and 2017, 460,000 and 4,500,000 options, respectively, were cashless exercises.

As further disclosed in Note 14 – Warrants, during 2018, warrants to purchase 2,300,237 shares of common stock were exercised, of which 1,000,000 warrants were exercised on a cashless basis.

Common Stock Subscribed But Not Issued

At December 31, 2018, there were outstanding subscriptions on 79,136 shares of common stock related to the settlement of a previously issued promissory note with a principal balance of $50,000 and accrued interest of $1,454. These subscriptions had a value of approximately $95,000 based on the market value of the common stock on the settlement date. Also outstanding on such date were subscriptions on 18,000 shares of common stock, equivalent to an aggregate amount of $74,160, for the payment of rent for the months of September 2018 through January 2019 for a leased property in Massachusetts. The shares of common stock associated with all outstanding subscriptions at December 31, 2018 were issued in March 2019.

In October 2017, the Company issued subscriptions on 1,000,000 shares of common stock as part of the purchase price of the Betty’s Eddies™ acquired assets as further disclosed in Note 3 – Acquisitions. These subscriptions were valued at $370,000 based on the market value of the common stock on the transaction date. The shares of common stock associated with these subscriptions were issued in June 2018.

Membership Interests

In August 2018, an individual member of Mari Holdings MD LLC, a majority owned subsidiary of the Company (“Mari-MD”), exchanged his 0.5% membership interest in such subsidiary for 222,222 shares of the Company’s common stock.

In December 2018, a subscriptions receivable balance of $25,000 related to a member’s interest in a majority-owned subsidiary was written off, with a corresponding reduction of such member’s capital contribution account.

During 2017, the Company issued 12,778 Class A membership units of Mari-MD for $1,150,000, representing 3.05% ownership of this subsidiary at December 31, 2017.