Item 3. Legal Proceedings
ITEM
3. LEGAL PROCEEDINGS.
In
July 2019, Thomas Kidrin, the former chief executive officer and a former director of the Company, filed a complaint in the Massachusetts
Superior Court, Suffolk County, captioned Thomas Kidrin v. MariMed Inc., et. al., Civil Action No. 19-2173D. In the complaint,
Mr. Kidrin alleges that the Company failed to pay all wages owed to him and breached his employment agreement, dated August 30,
2012, and requests multiple damages, attorney fees, costs, and interest. The Company has moved to dismiss certain counts of the
complaint and has asserted counterclaims against Mr. Kidrin alleging breach of contract, breach of fiduciary duty, money had and
received, and unjust enrichment. The Company believes that the allegations in the complaint are without merit and intends to vigorously
defend this matter and prosecute its counterclaims. While the Company’s motion to dismiss was pending, the parties reached
a settlement in principle and the court has issued a nisi order of dismissal for March 30, 2021. The parties have not yet
competed the settlement agreement. If the parties are for any reason unable to do so, then the Company will continue vigorously
to defend this matter and prosecute its counterclaims.
In November 2019, Kind commenced
an action in the Circuit Court for Washington County, MD captioned Kind Therapeutics USA, Inc. vs. MariMed, Inc., et al.
(Case No. C-21-CV-19-000670) asserting claims against the Company, including breach of contract, breach of fiduciary duty,
unjust enrichment, and seeking an accounting and declaratory judgment and damages in excess of $75,000. On November
15, 2019, the Company filed counterclaims against Kind and a third-party complaint against the members of Kind
(Jennifer DiPietro, Susan Zimmerman, and Sophia Leonard-Burns) and William Tham (the “Counterclaims”). The
Counterclaims, as amended, allege breach of contract with respect to each of the partnership/joint venture
agreement, the MOU, the MSA, the Lease, and the Licensing and Manufacturing Agreement
(“LMA”), unjust enrichment, promissory estoppel/detrimental reliance, fraud in the inducement, breach of
fiduciary duty, and seeks reformation of the MSA, a declaratory judgment regarding enforceability of the
partnership/joint venture arrangement and/or the MOU, specific performance of the parties’ various
contracts, and the establishment of a constructive trust for the Company’s benefit. The Counterclaims also
seek damages. Both parties, MariMed (including MariMed Holdings MD, LLC and MariMed Advisors Inc.) and Kind, brought motions
for a temporary restraining order and a preliminary injunction. By Opinion and Order entered on November 21, 2019, the Court
denied both parties motions for a temporary restraining order. In its opinion, the Court specifically noted that, contrary to
Kind’s allegations, the MSA and the Lease “appear to be independent, valid and enforceable contracts.”
A hearing on the parties’ cross-motions
for preliminary injunction was held in September 2020 and November 2020. Also in November 2020, the Court granted the Company’s
motion for summary judgment as to the Lease, determining that the Lease is valid and enforceable. Based on this ruling, the Company
is seeking judgment at trial in the amount of approximately $5.4 million for past due rent and expenses owed
by Kind under the Lease.
In December 2020, the Court entered a Preliminary
Injunction Order, accompanied by a Memorandum Opinion, denying Kind’s motion for a preliminary injunction (which
Kind had withdrawn at the conclusion of the hearing) and granting the Company’s request for preliminary injunction. The
Court determined that the Company is likely to succeed with respect to the validity and enforceability of the MSA and the LMA,
that the Company would suffer substantial and irreparable harm without the preliminary injunction, and that the balance of convenience
and public interest both warranted the issuance of a preliminary injunction in the Company’s favor. The Court ordered,
inter alia, that the MSA and LMA are in effect pending judgment after trial on the merits, and that Kind and its members,
and their attorneys, agents, employees, and representatives, are prohibited from (a) interfering with the Company’s duties
and responsibilities under the MSA and (b) withdrawing funds, making any distribution, paying any loans, returning any capital,
or making any payment towards a debt from any Kind bank or other financial account(s) without written consent of the Company or
Order of the Court, thereby preserving the Company’s control of Kind’s operations and finances at least through
the jury trial currently scheduled to begin on March 28, 2022. Further, the Court ordered Kind to pay management and licensing
fees to the Company beginning January 1, 2021. Kind has noted an appeal of the Order to the Maryland Court of Special Appeals,
which is pending; however, the preliminary injunction order remains in effect.
In addition to the favorable rulings on the
Lease, MSA, and LMA, the Company believes that its claims for declaratory relief, specific performance, and/or breach
of contract with respect to the partnership/joint venture agreement claims are meritorious. Further, the Company believes
that Kind’s claims against the Company are without merit. On March 18, 2021, the Court issued an opinion and order on
Kind’s motion for summary judgment finding that the MOU was not enforceable by the Company against Kind as a final binding
agreement. The Company is evaluating an appeal of this ruling which under Maryland rules can only be pursued upon final judgment.
The Company intends to aggressively prosecute and defend the action. Trial has been scheduled from March 28, 2022 to
April 11, 2022.
In August 2020, Jennifer DiPietro,
directly and derivatively on behalf of Mari Holdings MD LLC (“Mari-MD”) and Mia Development LLC (“Mia”),
commenced an action against the Company’s CEO, CFO, and wholly-owned subsidiary MariMed Advisors Inc. (“MMA”),
in Suffolk Superior Court, Massachusetts (C.A. No. 20-1865). In this action, DiPietro, a party to prior ongoing litigation
in Maryland involving the Company and Kind as discussed above, asserts claims for breach of fiduciary duty, breach of contract,
fraud in the inducement, aiding and abetting the alleged breach of fiduciary duty, seeks access to books and records, and
an accounting related to her investments in Mari-MD and Mia. DiPietro seeks unspecified monetary damages and rescission
of her interest in Mari-MD, but not of her investment in Mia, which has provided substantial returns to its members. The
Company has answered the complaint and MMA has moved for leave to file counterclaims against DiPietro on its own behalf and derivatively
on behalf of Mari-MD for DiPietro’s breach of her fiduciary duties to each of those entities, for tortious interference
with Mari-MD’s lease and MMA’s management services agreement with Kind, and for breach of Mari-MD’s operating
agreement. The Company believes that the allegations of the complaint are without merit and intends to defend the case vigorously.
The Company’s counterclaim seeks monetary damages from DiPietro, including the Company’s legal fees in the Kind action.
ITEM
4. MINE SAFETY DISCLOSURES
Not
Applicable.
( 16 )
PART
II