MariMed Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Deferred Rents Receivable

Deferred Rents Receivable

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

NOTE 5 – DEFERRED RENTS RECEIVABLE

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

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

The Company leases the following owned properties:

	●	Delaware – a 45,000 square foot facility purchased in September 2016 and developed into a cannabis cultivation, processing, and dispensary facility which is leased to a cannabis-licensed client occupying 100% of the space under a 20-year triple net lease expiring in 2035.

	●	Illinois – two 3,400 square foot free-standing retail dispensaries in the cities of Anna and Harrisburg and leased to the KPGs each under a 20-year lease expiring in 2036. With the acquisition of the KPGs approved in October 2019, as disclosed in Note 3 – Acquisitions, this lease will be eliminated upon the consolidation of the KPGs starting in the fourth quarter of calendar 2018. Accordingly, the rental receipts on such leases have been removed from the table of future minimum rental receipts below.

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

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

The Company subleases the following property:

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

As of September 30, 2019 and December 31, 2018, cumulative fixed rental receipts under such leases approximated $8.5 million and $5.4 million, respectively, compared to revenue recognized on a straight-line basis of approximately $10.5 million and $7.5 million. Accordingly, the deferred rents receivable balances at September 30, 2019 and December 31, 2018 approximated $2.0 million and $2.1 million, respectively.

Future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2019 were:

2019	$	956,492
2020		3,896,550
2021		4,036,550
2022		3,959,709
2023		3,661,820
Thereafter		44,121,550
Total	$	60,632,671