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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)
Delaware27-4672745
(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 classTicker symbol(s)Name of each exchange on which registered
Not ApplicableNot ApplicableNot 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 filerx
Non-accelerated filer o
Smaller reporting companyx
Emerging growth companyx
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
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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, net6,560 1,666 
Deferred rents receivable725 1,678 
Notes receivable, current portion134 127 
Inventory18,309 9,768 
Investments, current274 251 
Other current assets3,768 1,440 
Total current assets40,883 44,613 
Property and equipment, net70,396 62,150 
Intangible assets, net9,469 162 
Goodwill8,079 2,068 
Notes receivable, net of current9,160 8,987 
Operating lease right-of-use assets4,954 5,081 
Finance lease right-of-use assets747 46 
Other assets1,010 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 payable7,973 5,099 
Accrued expenses and other3,265 3,149 
Income taxes payable11,663 16,467 
Operating lease liabilities, current portion1,284 1,071 
Finance lease liabilities, current portion241 27 
Total current liabilities27,251 27,223 
Mortgages and notes payable, net of current23,048 17,262 
Operating lease liabilities, net of current4,214 4,574 
Finance lease liabilities, net of current483 22 
Other liabilities100 100 
Total liabilities55,096 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 equity37,725 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 issued41  
Additional paid-in capital141,652 134,920 
Accumulated deficit(88,675)(97,392)
Noncontrolling interests(1,480)(1,563)
Total stockholders’ equity51,877 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,
2022202120222021
Revenue$33,912 $33,208 $98,180 $90,420 
Cost of revenue17,748 15,027 50,035 39,647 
Gross profit16,164 18,181 48,145 50,773 
Operating expenses:
Personnel3,746 1,481 10,170 5,266 
Marketing and promotion1,402 563 2,854 1,058 
General and administrative5,097 9,481 16,890 16,934 
Acquisition-related and other143  897  
Bad debt40 36 54 1,855 
Total operating expenses10,428 11,561 30,865 25,113 
Income from operations5,736 6,620 17,280 25,660 
Interest and other (expense) income:
Interest expense(518)(300)(1,271)(2,077)
Interest income239 26 720 96 
Other (expense) income, net(251)(214)24 (631)
Total interest and other expense(530)(488)(527)(2,612)
Income before income taxes5,206 6,132 16,753 23,048 
Provision for income taxes2,484 4,009 7,894 9,026 
Net income2,722 2,123 8,859 14,022 
Less: Net income attributable to noncontrolling interests16 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:
Basic339,025329,454337,111324,340
Diluted381,071378,934379,868370,204
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 stockCommon stock
subscribed but
 not issued
Additional
paid-in
capital
Accumulated
deficit
Non-
controlling
interests
Total
stockholders’
equity
SharesPar valueSharesAmount
Balances at January 1, 2022334,030,348$334 $ $134,920 $(97,392)$(1,563)$36,299 
Exercise of stock options55,00010 10 
Cashless exercise of stock options200,000 
Cashless exercise of warrants234,961 
Release of shares under stock grants357,077 
Common stock subscribed but not issued74,58141 41 
Shares issued as purchase consideration - business acquisition2,343,7503 1,497 1,500 
Purchase of minority interests in certain of the Company’s subsidiaries(2,165)165 (2,000)
Obligations settled with common stock906,3931 636 637 
Conversion of promissory notes to stock1,142,8581 399 400 
Distributions to non-controlling interests(224)(224)
Stock-based compensation6,355 6,355 
Net income8,717 142 8,859 
Balances at September 30, 2022339,270,387$339 74,581$41 $141,652 $(88,675)$(1,480)$51,877 
Nine months ended September 30, 2021
Common stockCommon stock
subscribed but
 not issued
Additional
paid-in
capital
Accumulated
deficit
Non-
controlling
interests
Total
stockholders’
equity
SharesPar valueSharesAmount
Balances at January 1, 2021314,418,812$314 11,413$5 $112,975 $(104,617)$(577)$8,100 
Issuance of subscribed shares11,413(11,413)(5)5  
Exercise of stock options178,88531 31 
Exercise of warrants980,0621 92 93 
Release of shares under stock grants152,094102,20495 138 233 
Issuance of standalone warrants832 832 
Issuance of warrants with stock655 655 
Conversion of debentures payable to equity4,610,6455 1,352 1,357 
Conversion of promissory notes to equity10,042,12510 3,337 3,347 
Common stock issued to settle obligations71,69154 54 
Common stock issued to purchase property and equipment750,0001 704 705 
Obligations settled with common stock409,3081 374 375 
Common stock returned to the Company(79,815)(10)(10)
Equity issuance costs(387)(387)
Acquisition of interest in subsidiary100,00094 871 (975)(10)
Distributions to non-controlling interests(301)(301)
Stock-based compensation6,208 6,208 
Net income13,733 289 14,022 
Balances at September 30, 2021331,545,220$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,
20222021
Cash flows from operating activities:
Net income attributable to common stockholders$8,717 $13,733 
Net income attributable to noncontrolling interests142 289 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization of property and equipment2,469 1,499 
Amortization of intangible assets854 518 
Stock-based compensation6,396 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 expense54 1,855 
Obligations settled with common stock637 375 
Loss on obligations settled with equity 3 
Gain on sale of investment (309)
Loss on changes in fair value of investments930 937 
Other investment income(954) 
Changes in operating assets and liabilities:
Accounts receivable, net(4,856)(3,886)
Deferred rents receivable111 192 
Inventory(4,215)(4,163)
Other current assets(1,973)(1,641)
Other assets(113)(17)
Accounts payable2,372 2,098 
Accrued expenses and other(193)8,069 
Income taxes payable(4,804) 
Net cash provided by operating activities5,574 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 receivable130 407 
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MariMed Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
Nine months ended
September 30,
20222021
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 mortgages3,000 2,700 
Proceeds from exercise of stock options10 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 year29,683 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 escrow2,444 
Severance paid from escrow556 
Less cash acquired(2,310)
Net cash consideration10,818 
Note payable5,634 
Write-off accounts receivable658 
Write-off of deferred accounts receivable842 
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 equipment622 
Intangible assets:
Tradename and trademarks2,041 
Licenses and customer base4,700 
Non-compete agreements42 
Goodwill6,011 
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 endedNine months ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Weighted average shares outstanding - basic339,025 329,454 337,111 324,340 
Potential dilutive common shares42,046 49,480 42,757 45,864 
Weighted average shares outstanding - diluted381,071 378,934 379,868 370,204 


(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 
20231,170 
20241,196 
20251,199 
20261,051 
Thereafter6,131 
$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 LLC866 866 
Total notes receivable9,294 9,114 
Notes receivable, current portion134 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 materials2,582 262 
Work-in-process8,071 4,661 
Finished goods5,071 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 improvements39,497 35,231 
Tenant improvements17,005 9,745 
Furniture and fixtures1,986 1,888 
Machinery and equipment9,689 7,221 
Construction in progress7,084 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)
 CostAccumulated
amortization
Net
carrying
value
Tradename and trademarks3.00$2,041 $283 $1,758 
Licenses and customer base8.268,100 422 7,678 
Non-compete agreements2.0042 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 
20231,712 
20241,698 
20251,239 
20261,011 
Thereafter3,381 
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):
20222021
Balance at January 1,$2,068 $2,068 
Kind Acquisition6,011  
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 property1,374 1,463 
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties759 778 
DuQuoin State Bank – Metropolis, IL property2,541 2,658 
Du Quoin State Bank - Mt. Vernon, IL property2,990  
South Porte Bank – Mt. Vernon, IL property808 816 
Total mortgages payable20,703 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 $