What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-16 compared with 2021-03-23 · 278 added, 322 removed, 33 unchanged (95% of the section changed)

1 unchanged sentence

Looking Statements

used in this form 10-K and in future filings by the Company with the Commission, words or phrases such as “anticipate,”

“believe,” “could,” “would,” “should,” “estimate,” “expect,”

“intend,” “may,” “plan,” “predict,” “project,” “will”

or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities

Litigation Reform Act of 1995.

Readers are cautioned not to place undue reliance on any such forward looking statements, each

of which speak only as of the date made.

Such statements are subject to certain risks and uncertainties that could cause actual

results to differ materially from historical earnings and those presently anticipated or projected.

The Company has no obligation

to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or

unanticipated events or circumstances occurring after the date of such statements.

forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be

materially different.

These factors include, but are not limited to, changes that may occur to general economic and business conditions;

changes in current pricing levels that we can charge for our services and products or which we pay to our suppliers and business

changes in political, social and economic conditions in the jurisdictions in which we operate;

changes to regulations

that pertain to our operations;

changes in technology that render our technology relatively inferior, obsolete or more expensive

compared to others;

changes in the business prospects of our business partners and customers;

increased competition, including

from our business partners;

used in this form 10-K and in future filings by the Company with the Commission, words or phrases such as “anticipate,” “believe,”

“could,” “would,” “should,” “estimate,” “expect,” “intend,” “may,”

“plan,” “predict,” “project,” “will” or similar expressions are intended to identify

“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Readers are cautioned

not to place undue reliance on any such forward looking statements, each of which speak only as of the date made.

Such statements are

subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently

anticipated or projected.

The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking

statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.

These forward-looking statements involve known and

unknown risks, uncertainties and other factors that may cause actual results to be materially different.

These factors include, but are

not limited to, changes that may occur to general economic and business conditions;

changes in current pricing levels that the Company

can charge for its services and products or which it pays to its suppliers and business partners;

changes in political, social and economic

conditions in the jurisdictions in which the Company operates;

changes to regulations that pertain to its operations;

changes in technology

that render the Company’s technology relatively inferior, obsolete or more expensive compared to others;

changes in the business

prospects of the Company’s business partners and customers;

increased competition, including from the Company’s business

and enforcement of federal cannabis related laws.

following discussion should be read in conjunction with the financial statements and related notes which are included in this

report under Item 8.

do not undertake to update our forward-looking statements or risk factors to reflect future events or circumstances.

following discussion should be read in conjunction with the financial statements and related notes which are included in this report

under Item 8.

The Company does not undertake to update its

forward-looking statements or risk factors to reflect future events or circumstances.

(the “Company”) is a multi-state operator in the United States cannabis industry.

The Company develops,

operates, manages, and optimizes over 300,000 square feet of state-of-the-art, regulatory-compliant facilities for the cultivation,

production and dispensing of medicinal and recreational cannabis.

The Company also licenses its proprietary brands of cannabis

and hemp-infused products, along with other top brands, in several domestic markets and overseas.

its entry into the cannabis industry in 2014, the Company was an advisory firm that procured state-issued cannabis licenses on

behalf of its clients, developed cannabis facilities which it leased to these newly-licensed companies, and provided industry-leading

expertise and oversight in all aspects of their cannabis operations.

The Company also provided its clients with as ongoing regulatory,

accounting, real estate, human resources, and administrative services.

In 2018, the Company made the strategic decision

to transition from a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations (hereinafter

referred to as the “Consolidation Plan”).

The Consolidation Plan calls for the acquisition of its cannabis-licensed

clients located in Delaware, Illinois, Maryland, Massachusetts, and Nevada.

In addition, the Consolidation Plan includes the

potential acquisition of a Rhode Island asset.

All of these acquisition are subject to state approval, and once consolidated,

the entities will operate under the MariMed banner.

To date, acquisitions of the licensed businesses

in Massachusetts and Illinois have been completed and establish the Company as a fully integrated seed-to-sale multi-state operator,

The acquisitions of the remaining entities located in Maryland, Nevada, and Delaware are at various stages of completion and subject

to each state’s laws governing the ownership transfer of cannabis licenses, which in the case of Delaware requires a modification

of current cannabis ownership laws to permit for-profit ownership.

Meanwhile, the Company continues to expand these businesses

and maximize the Company’s revenue from rental income, management fees, and licensing royalties.

A goal in completing this transition from

a consulting business to a direct owner of cannabis licenses and operator of seed-to-sale operations is to present a simpler,

more transparent financial picture of the full breadth of the Company’s efforts, with a clearer representation of the revenues,

earnings, and other financial metrics the Company has generated for its clients.

The Company has played a key role in the successes

of these entities, from the securing of their cannabis licenses, to the development of facilities that are models of excellence,

to providing operational and corporate guidance.

Accordingly, the Company believes it is well suited to own these facilities and

manage the continuing growth of their operations.

The Company has also created its own brands

of cannabis flower, concentrates, and precision-dosed products utilizing proprietary strains and formulations.

These products

are developed by the Company in cooperation with state-licensed operators who meet the Company’s strict standards, including

all natural—not artificial or synthetic—ingredients.

The Company licenses its brands and product formulations

only to certified manufacturing professionals who follow state cannabis laws and adhere to the Company’s precise scientific

formulations and trademarked product recipes.

The Company’s proprietary cannabis

genetics produce flowers and concentrates under the brand name Nature’s Heritage™, and cannabis-infused products under

the brand names Kalm Fusion®, in the form of chewable tablets and drink powder mixes, and the award-winning 1 Betty’s

Eddies® brand of all natural fruit chews.

Both cannabis-infused brands are top selling products in Maryland and Massachusetts 2

and the Company intends to introduce additional products under these brands in 2021.

The Company’s brand of hemp-infused

cannabidiol (“CBD”) products, Florance™, is distributed in the US and abroad.

The Company also has exclusive sublicensing

rights in certain states to distribute the Binske® line of cannabis products crafted from premium artisan ingredients, the

Healer™ line of medical full-spectrum cannabis tinctures, and the clinically tested medicinal cannabis strains developed

in Israel by global medical cannabis research pioneer Tikun Olam™.

The Company intends to continue licensing and distributing

its brands as well as other top brands in the Company’s current markets and in additional legal markets worldwide.

In March 2020, the

World Health Organization declared the outbreak of COVID-19 a global pandemic.

The spread of the virus in the United States and

the measures implemented to contain it—including business shutdowns, indoor capacity restrictions, social distancing, and

diminished travel—have negatively impacted the economy and have created significant volatility and disruption in financial

Consequently, the Company’s implementation of its aforementioned Consolidation Plan has been delayed.

Additionally,

while the cannabis industry has been deemed an essential business, and is not expected to suffer severe declines in revenue, the

Company’s business, operations, financial condition, and liquidity have been impacted, as further discussed in this report.

1 Awards won by the Company’s

Betty’s Eddies® brand include LeafLink 2020 Industry Innovator, Explore Maryland Cannabis 2020 Edible of the Year, and

LeafLink 2019 Best Selling Medical Product.

The Company develops, operates, manages,

and optimizes over 300,000 square feet of state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing

of medicinal and recreational cannabis.

The Company also licenses its proprietary brands of cannabis and hemp-infused products, along

with other top brands, in several domestic markets and overseas.

its entry into the cannabis industry in 2014, the Company was an advisory firm that procured state-issued cannabis licenses on behalf

of its clients, developed cannabis facilities which it leased to these newly-licensed companies, and provided industry-leading expertise

and oversight in all aspects of their cannabis operations.

The Company also provided its clients with ongoing regulatory, accounting,

real estate, human resources, and administrative services.

the last few years, the Company made the strategic decision to transition from a consulting business to a direct owner and operator of

cannabis licenses in high-growth states.

Core to this transition is the acquisition and consolidation of the Company’s clients

(the “Consolidation Plan”).

Among several benefits, the Consolidation Plan would present a simpler, more transparent financial

picture of the full breadth of the Company’s efforts, with a clearer representation of the revenues, earnings, and other financial

metrics the Company has generated for its clients.

The Company has played a key role in the successes of these entities, from the securing

of their cannabis licenses, to the development of facilities that are models of excellence, to funding their operations, and to providing

operational and corporate guidance.

Accordingly, the Company believes it is well suited to own these businesses and manage the continuing

growth of their operations.

date, the acquisition and consolidation of the Company’s client businesses in Massachusetts and Illinois have been completed.

The acquisition of a client business in Maryland has been contracted, and the Company is awaiting approval by the Maryland Cannabis

Control Commission, which is pending.

Upon approval, this entity will be consolidated.

The acquisitions of the remaining businesses

located in Nevada and Delaware are at various stages of completion and subject to each state’s laws governing the ownership

transfer of cannabis licenses and other closing conditions.

Delaware will require a modification of current cannabis ownership laws

to permit for-profit ownership, which is expected to occur when the state legalizes recreational adult-use cannabis.

Until the law changes and the acquisition is approved, the

Company continues to generate revenue from rental income, management fees, and licensing royalties.

transition to a fully integrated muti-state cannabis operator (“MSO”) is part of a strategic growth plan (the “Strategic

Growth Plan”) the Company is implementing to drive its revenues and profitability.

The Strategic Growth Plan has four components:

(i) complete the Consolidation Plan, (ii) increase revenues in existing states, by spending capital to increase the Company’s cultivation

and production capacity, and develop additional assets within those states, (iii) expand the Company’s footprint in additional

legal cannabis states through new applications and acquisitions of existing cannabis businesses, and (iv) optimize the Company’s

brand portfolio and licensing revenue by expanding into additional states with legal cannabis programs.

The Company has created its own brands of cannabis flower, concentrates, and precision-dosed products utilizing proprietary

strains and formulations.

These products are developed by the Company in cooperation with state-licensed operators who meet the Company’s

strict quality standards, including all natural—not artificial or synthetic—ingredients.

The Company licenses its brands

and product formulations only to certified manufacturing professionals who follow state cannabis laws and adhere to the Company’s

precise scientific formulations and product recipes.

Company markets its high-quality cannabis flowers and concentrates under the award-winning 1 Nature’s

Heritage brand;

cannabis-infused chewable tables and powder drink mixes under the brand names Kalm Fusion and K Fusion;

all natural fruit

chews under the award-winning 1 Betty’s Eddies brand;

and brownies, cookies, and other social sweets under the Bubby’s

The Company’s cannabis-infused brands have been top-selling products in Maryland and Massachusetts.

2 The Company

intends to introduce additional product lines under these brands in the foreseeable future.

Company also has strategic alliances with prominent brands.

The Company has partnered with renowned ice cream maker Emack & Bolio’s®

to create a line-up of cannabis-infused vegan and dairy ice cream.

Additionally, the Company has secured distribution rights for the

Binske® line of cannabis products crafted from premium artisan ingredients, the Healer line of medical full-spectrum cannabis tinctures,

and the clinically-tested medicinal cannabis strains developed in Israel by global medical cannabis research pioneer Tikun Olam.

Awards won by the Company’s Betty’s Eddies brand include LeafLink 2021 Best Selling Medical Product, Reddit Sparkie

2021 Best Edible, Respect My Region 2021 Hottest Edible, LeafLink 2020 Industry Innovator, and Explore Maryland Cannabis 2020 Edible

Awards won by the Company’s Nature’s Heritage brand include the Cultivators Cup 2021 Silver Medal and the High

Times Cannabis Cup 2021 Bronze Medal.

LeafLink Insights 2020.

Company’s revenues are primarily comprised of the following categories:

Sales – direct sales of cannabis and cannabis-infused products by the Company’s dispensary and wholesale operations

in Massachusetts and Illinois, and sales of hemp and hemp-infused products.

Future product sales are expected to include the

Company’s planned cannabis-licensee acquisitions in Maryland, Nevada, and Delaware (upon this state’s amendment

to permit for-profit ownership of cannabis entities).

Sales – direct sales of cannabis and cannabis-infused products by the Company’s dispensary and wholesale operations in

Massachusetts and Illinois, and sales of hemp and hemp-infused products.

Future product sales are expected to include the Company’s

planned cannabis-licensee acquisitions in Maryland, Nevada, and Delaware (upon this state’s amendment to permit for-profit

ownership of cannabis entities).

Estate – rental income and additional rental fees generated from leasing of the Company’s state-of-the-art, regulatory-compliant

cannabis facilities to its cannabis-licensed clients.

– fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation,

production, and dispensary operations.

Along with this oversight, the Company provides human resources, regulatory, marketing,

and other corporate services.

Procurement – the Company maintains volume discounts with top national vendors of cultivation and production resources,

supplies, and equipment, which the Company acquires and resells to its clients or third parties within the cannabis industry.

– revenue from the sale of precision-dosed, cannabis-infused products—such as Kalm Fusion®, Nature’s

Heritage™, and Betty’s Eddies®—to regulated dispensaries throughout the United States and Puerto Rico.

– fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production,

and dispensary operations.

Along with this oversight, the Company provides human resources, regulatory, marketing, and other corporate

Procurement – resale of cultivation and production resources, supplies, and equipment, acquired by the Company from top national

vendors at volume discounted prices, to its clients and third-parties within the cannabis industry.

– revenue from the sale of precision-dosed, cannabis-infused products—such as Betty’s Eddies, Kalm Fusion,

and Nature’s Heritage—to regulated dispensaries throughout the United States

and Puerto Rico.

Company classifies its expenses into three general categories:

of Revenues – the direct costs associated with the generation of the Company’s revenues.

Expenses – comprised of the sub-categories of personnel, marketing and promotion, general and administrative, bad debts,

and goodwill write-downs.

Expenses – comprised of the sub-categories of personnel, marketing and promotion, general and administrative, and bad debts.

Non-operating

Income and Expenses – comprised of the sub-categories of interest expense, interest income, losses on debt settlements,

earnings and losses on equity investments, changes in the fair value of non-consolidated investments, and other non-recurring

gains or losses.

Income and Expenses – comprised of the sub-categories of interest expense, interest income, losses on obligations settled with

equity, equity in earnings of investments, changes in the fair value of non-consolidated investments, and other non-recurring gains

and Capital Resources

Company produced significant improvements to its liquidity in the reported periods:

and cash equivalents increased four-fold to approximately $3.0 million at December 31, 2020, from approximately $739,000 at

December 31, 2019.

2020, the Company’s operating activities provided positive cash flow of approximately $3.4 million, compared to approximately

$24.1 million of negative cash flow used by such activities in 2019, a positive swing of approximately $27.5 million.

Company successfully restructured the terms of its short term promissory notes payable in 2020, whereby approximately $10.7

million of payments were deferred to 2021 and beyond.

These amounts were repaid in full in March 2021 using a portion of the

proceeds from the Hadron financing transaction referred to below.

Company refinanced a mortgage agreement and entered into a new mortgage agreement which generated approximately $13.9 million

of proceeds which were used to pay down outstanding short-term debt.

aforementioned improvements to cash and cash equivalents and operating cash flow, as well as a year-over-year improvement of

working capital of approximately $27.2 million, were primarily the result of increases in revenues and profitability generated

by the Company’s cannabis operations in the states of Illinois and Massachusetts.

These operations were acquired as part

of the Company’s aforementioned Consolidation Plan to transition from a consulting business to a direct owner of

cannabis licenses and operator of seed-to-sale operations.

In addition, the section below entitled Non-GAAP Measurements

discusses two additional financial measurements that are not defined by GAAP which the Company’s management uses

to evaluate liquidity.

further improve the Company’s liquidity, in March 2021, the Company entered into a securities purchase agreement with Hadron

Healthcare Master Fund (“Hadron”) whereby Hadron will provide funding of up to $46.0 million to repay existing non-mortgage

debt, to fund expansion plans of existing operations, and to finance planned acquisitions.

In March 2021, Hadron funded $23.0

million under the facility.

This transaction is further discussed in below under the section entitled Financing Transaction.

cash provided by operating activities in 2020 approximated $3.4 million, compared to net cash used in operating activities of

approximately $24.1 million in 2019.

The year-over-year improvement was primarily attributable to the increase in cannabis-derived

profits in 2020 generated by the acquisition of the KPGs in Illinois and ARL in Massachusetts, coupled with improved collections

on trade accounts receivable, and offset primarily by the increase cannabis inventory due to expanded cannabis operations.

cash used in investing activities in 2020 approximated $4.5 million, compared to approximately $12.5 million in 2019.

and cash equivalents increased nearly ten-fold to $29.7 million at December 31, 2021, from $3.0 million

at December 31, 2020.

2021, the Company’s operating activities provided positive cash flow of $35.9 million, compared to $3.4 million

December 31, 2021, working capital increased to $17.4 million from a working capital deficit of $2.2 million at December 31, 2020,

a positive swing of $19.6 million.

Company generated net income of $7.6 million in 2021, an increase of 214% from net income of $2.4 million in 2020.

aforementioned improvements to the Company’s liquidity were primarily the result of increases in revenues and profitability

generated by the Company’s cannabis operations in the states of Illinois and Massachusetts.

These operations launched as

part of the Company’s aforementioned Consolidation Plan to transition from a consulting business to a direct owner of cannabis

licenses and operator of seed-to-sale operations.

The liquidity improvements were also attributable to $23.0 million of equity

capital raised from Hadron Healthcare Master Fund (“Hadron”), further discussed under the Financing Activities section

addition to the above, the Company evaluates liquidity using the financial measurement of Adjusted EBITDA, a commonly used

metric to assess liquidity that is not defined by generally accepted accounting principles.

The section below entitled Non-GAAP

Measurement discusses the components of this measurement in further detail.

cash provided by operating activities was $35.9 million in 2021, compared to $3.4 million in 2020.

The year-over-year

decrease in the use of cash was due to the investments in Healer, MHWC, MediTaurus and another cannabis entity in 2019.

investments were made in 2020.

The year-over-year decrease is also due to reduced property and equipment purchases in 2020.

cash provided by financing activities in 2020 approximated $3.3 million, compared to approximately $33.3 million in 2019.

Company raised approximately $21.4 million from debt financings in 2020, offset by approximately $17.4 million of promissory note

and mortgage repayments during the year.

In 2019, the Company raise approximately $32.1 million in the aggregate with no repayments

proceeds from the aforementioned financings were used to execute on the Company’s strategy to become a fully integrated

multistate operator of seed-to-sale cannabis operations, to continue the development of its regulated facilities, to pay down

its debt, to expand its branded licensing business, and for working capital purposes.

improvement was primarily attributable to the increase in cannabis-derived profits in 2021 generated by the Company’s

four active dispensaries in Illinois, and its retail and wholesale operations in Massachusetts.

Net cash used in investing

activities was $16.6 million in 2021, compared to $4.5 million in 2020.

The year-over-year increase was attributable to an increase in

property and equipment expenditures in 2021 for the Company’s facilities in Delaware, Illinois, Maryland, and Massachusetts, offset

by $1.2 million of proceeds from the asset sale of a Company-owned investment.

cash provided by financing activities was $7.5 million in 2021, compared to $3.3 million in 2020.

In March 2021,

the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) whereby Hadron will

provide funding of up to $46.0 million to repay existing non-mortgage debt, to fund expansion plans of existing operations, and to finance

planned acquisitions.

In March 2021, Hadron funded $23.0 million under this facility.

The Company also raised $2.7 million

from a new mortgage.

These proceeds were offset by the repayment of $17.0 million of debt in 2021.

Company raised $21.4 million from debt financings,

offset by $17.4 million of promissory note and mortgage repayments during the year.

proceeds from the aforementioned financings were used to execute on the Company’s strategy to become a fully integrated multistate

operator of seed-to-sale cannabis operations, to continue the development of its regulated facilities, to pay down its debt, to expand

its branded licensing business, and for working capital purposes.

of Operations

ended December 31, 2021 compared to year ended December 31, 2020

revenues in 2020 approximated $50.9 million compared to approximately $45.6 million in 2019, an increase of approximately $5.3

million or 11.6%.

As discussed in Note 20 – Related Party Transactions within the audited financial statements at

December 31, 2020, the Company generated approximately $29.0 million of revenues in 2019 from the sale of large quantities of

hemp seed inventory to GenCanna, a related party (the “Seed Transactions”).

Such revenues were fully reserved at December

31, 2019, as a result of GenCanna’s filing under Chapter 11 as discussed in Note 21 – Commitments and Contingencies

within the audited financial statements.

the Seed Transactions, core revenues in 2020 grew to approximately $50.9 million from approximately $16.6 million in 2019, an

increase of approximately $34.3 million or 207.1%.

The year-over-year increase was due to aggregate cannabis sales in 2020 of

approximately $39.4 million generated by the Company’s cannabis-licensee acquisitions of the KPGs in Illinois and ARL in

Massachusetts.

The cannabis sales were offset by decreases in procurement revenue and management fees charged to Kind, the Company’s

cannabis-licensed client in Maryland, and with whom the Company is currently engaged in litigation.

Cost of revenues in 2020 approximated $19.6

million compared to approximately $26.9 million in 2019, a decrease of approximately $7.3 million or 27.3%.

The year-over-year variance was primarily attributable to the cost of seeds incurred by the Company in 2019 of approximately $20.8

million as part of the Seed Transactions.

Excluding the Seed Transactions, cost of revenues in 2020 increased to approximately

$19.6 million from approximately $6.2 million in 2019.

As a percentage of revenue, these costs increased slightly to

38.5% in 2020 from 37.1% in 2019, primarily due a non-recurring cost increase of approximately $1.8 million due to the expansion

of the Company’s cultivation capacity in Massachusetts.

As a result of the foregoing, gross profit

approximated $31.3 million, or 61.5% of total revenues in 2020, from approximately $18.7 million, or 41.0% of total

revenues in 2019.

Excluding the Seed Transactions, gross profit increased to approximately $31.3 million in 2020 from approximately

$10.4 million for the same period a year ago, an increase of approximately $20.9 million or 200.6%.

expenses increased to approximately $5.5 million in 2020 from approximately $3.8 million in 2019.

The increase was primarily due

to the hiring of additional staff to support (i) higher levels of revenue, and (ii) the Company’s expansion into a direct

owner and operator of seed-to-sale cannabis businesses.

As a percentage of revenues excluding the Seed Transactions, personnel

expenses dropped significantly to 10.8% in 2020 from to 23.2% in 2019.

and promotion costs increased slightly to approximately $411,000 in 2020 from approximately $370,000 in 2019.

grew to $121.5 million in 2021, an increase of $70.6 million or 139%, compared to $50.9 million in 2020.

The year-over-year

increase was primarily due to the nearly three-fold expansion of the Company’s cannabis sales to $108.2 million in 2021, compared

to $39.4 million in 2020.

This growth was primarily attributable to sales increases of (i) $38.3 million generated by the Company’s

dispensaries in Illinois, where one new dispensary commenced operations in May 2021, and three ongoing dispensaries experienced an 80%

year-over-year increase in customer visits, (ii) $14.0 million generated from the Company’s dispensary in Massachusetts, which

experienced a nearly six-fold year-over-year increase in customer visits, and (iii) $15.7 million generated by the Company’s wholesale

operations in Massachusetts, which experience a 151% increase in customers in 2021 compared to 2020.

year-over-year increase in revenues was also the result of the continued growth of rental income, management fees, and supply procurement

revenue, generated primarily from the Company’s cannabis clients in Delaware and Maryland.

of revenues were $55.2 million in 2021 compared to $19.6 million in 2020, an increase of $35.6 million.

The year-over-year variance was

primarily attributable to the higher level of revenues as these costs are largely variable in nature and fluctuate in-step with revenues.

As a percentage of revenues, these costs increased to 45.4% in 2021 from 38.5% in the same period in 2020, primarily due to the

change in the relative mix of revenue categories in each period.

Specifically, in 2021, (a) 88.2% of revenues were comprised of product

sales, which historically have had corresponding costs of revenue of in the range of 45.0% to 50.0%, and (b) 8.6% of revenues were comprised

of real estate and management revenue, which have no corresponding cost of revenue.

This compares to revenues in 2020 that were comprised

of (x) 77.4% of product sales and (y) 16.2% of real estate and management revenues.

While the cost rate is higher for product sales,

the level of product sales able to be generated by the Company is several multiples higher than the level of real estate and management

revenues able to be generated, resulting in significantly higher gross profit dollars to be generated by the Company.

gross profit grew to $66.3 million in 2021 from $31.3 million in 2020.

expenses increased to $8.4 million in 2021 from $5.5 million in 2020.

The increase was primarily due to the

hiring of additional staff to support (i) higher levels of revenue, and (ii) the Company’s expansion into a direct owner and operator

of seed-to-sale cannabis businesses, offset by the reversal of an approximate $1.0 million accrual related to the settlement in August

2021 of an employment-related complaint.

As a percentage of revenues, personnel expenses decreased to 6.9% in 2021

from to 10.8% in 2020.

and promotion costs increased to $1.6 million in 2021 from $411,000 in 2020.

The increase is primarily the result

of increased spending on branding and design consulting, customer loyalty programs, social media, and local outdoor advertising.

a percentage of revenues, these costs increased to 1.3% in 2021 from 0.8% in 2020.

General and administrative costs increased to

$27.6 million in 2021 from approximately $9.9 million in 2020.

This change is primarily due to increases of (i) $13.2 million in non-cash

equity compensation expense associated with option grants and warrant issuances, (ii) $1.2 million in credit card processing fees from

a significant increase in credit card sales at the Company’s cannabis dispensaries, (iii) $1.1 million in facility costs on additional

properties in service in 2021, (iv) $965,000 in net professional fees primarily due to the hiring of investment bankers, offset by a

reduction in legal costs, and (v) $514,000 in depreciation and amortization expenses from higher levels of property, equipment, and intangibles.

debt expense increased to $1.9 million in 2021 from $982,000 in 2020.

The change is due to the increase of reserves recorded

against aging trade accounts receivable and against the working capital balance of the Company’s client in Nevada.

As a percentage

of revenues excluding the Seed Transactions, these costs fell to 0.8% in 2020 from 2.2% in 2019.

and administrative costs increased to approximately $9.9 million in 2020 from approximately $8.8 million in 2019.

This increase is primarily due to taxes paid on the Company’s cannabis operations, and higher depreciation expenses and

facility costs on additional properties owned and in service in 2020.

As a percentage of revenues excluding the Seed Transactions,

these costs fell significantly to 19.5% in 2020 from 53.2% in 2019.

debt expense decreased to approximately $982,000 in 2020 from approximately $44.5 million in 2019.

As discussed in Note 18

– Bad Debts within the audited financial statements, in 2019, the Company reserved receivables of approximately

$29.0 associated with the Seed Transactions, and aggregate amounts due from (i) Kind of approximately $11.2 million, in light

of the current litigation between the Company and Kind, and Harvest of approximately $2.1 million, based on the expected impact

of the pandemic.

In 2020, the Company increased the reserve against amounts owed from Kind and Harvest.

2019, the Company wrote off approximately $2.7 million of goodwill associated with its acquisitions of MediTaurus as discussed

in Note 3 – Acquisitions within the audited financial statements.

No goodwill was written off in 2020.

As a result of the foregoing, the Company

generated operating income of approximately $14.5 million in 2020 compared to an operating loss of approximately $41.5

of revenues, this expense decreased to 1.5% in 2021 from 1.9% in 2020.

a result of the foregoing, the Company generated operating income of $26.9 million in 2021 compared to $14.5

million in 2020.

Excluding the Seed Transactions, the Company generated operating income of approximately $14.5 million

in 2020 compared to an operating loss of approximately $20.8 million in 2019, a positive swing of approximately $35.3 million.

Net non-operating expenses decreased to approximately

$10.0 million in 2020 from approximately $40.3 million in 2019.

The decrease is primarily due to the approximate $30.2 million

write-down in 2019 of the Company’s investment in GenCanna.

of the foregoing, the Company generated income before income taxes of approximately $4.5 million in 2020,

compared to a loss before income taxes of approximately $81.8 million in 2019.

After a tax provision of approximately $2.1

million in 2020 and approximately $67,000 in 2019, net income was approximately $2.4 million in 2020, compared to a net loss of approximately $81.9 million in

2019, a positive swing of approximately $84.3 million.

addition to the financial information reflected this report, which is prepared in accordance with GAAP, the Company is providing

two additional financial measurements that are not defined by GAAP – EBITDA and EBITDA Excluding GenCanna

(defined below).

The Company is providing these non-GAAP financial measurements as a supplement to the preceding discussion of

the Company’s financial results,

Company’s management uses these non-GAAP measurements to understand and compare operating results across accounting periods,

for financial and operational decision making, for planning and forecasting purposes, and to evaluate its financial performance

and liquidity.

The presentation of these non-GAAP measurements is not intended to be considered in isolation or as a substitute

for the financial information prepared in accordance with GAAP.

believes that investors and analysts benefit from considering these non-GAAP measurements in assessing the Company’s financial

results and its ongoing business as it allows for meaningful comparisons and analysis of trends in the business.

These non-GAAP

measurements are used by many investors and analysts themselves, along with other metrics, to compare financial results across

accounting periods and to those of peer companies.

believes EBITDA is a useful measure to assess the performance and liquidity of the Company as it provides meaningful operating

Net non-operating expenses decreased to $3.0 million

in 2021 from $10.0 million in 2020.

The change is primarily due to a $7.5 million reduction of interest expense from lower levels of

outstanding debt, coupled with a $309,000 gain on a nonconsolidated private company investment, offset by a $757,000 decrease in the

fair value of nonconsolidated public company investment.

a result of the foregoing, the Company generated income before income taxes of $23.8 million in 2021 and $4.5 million in

After a tax provision of $16.2 million in 2021 and $2.1 million in 2020, net income was $7.6 million in 2020 and $2.4 million in 2020.

addition to the financial information reflected in this report, which is prepared in accordance with generally accepted accounting principles

in the United States (“GAAP”), the Company is providing a non-GAAP financial measurement of profitability – Adjusted

EBITDA – as a supplement to the preceding discussion of the Company’s financial results.

defines Adjusted EBITDA as net income (loss), determined in accordance with GAAP, excluding the following:

income and interest expense;

of fixed assets and amortization of intangibles;

expenses on debt and equity issuances;

or write-downs of intangible assets;

gains and losses on investments and currency translations;

or losses from the extinguishment of debt via the issuance of equity;

and acquisition-related transaction expenses.

believes Adjusted EBITDA is a useful measure to assess the performance and liquidity of the Company as it provides meaningful operating

results by excluding the effects of expenses that are not reflective of its operating business performance.

Management defines

EBITDA as net income (loss) before interest, income taxes, depreciation, and amortization.

believes EBITDA Excluding GenCanna is another useful measure to assess the performance of the Company as it provides more meaningful

operating results by excluding the effects of the Company’s investment in GenCanna, the Seed Transactions, and GenCanna’s

Chapter 11 filing.

Management believes that it is appropriate to exclude these items as they are not indicative of the Company’s

ongoing operating business performance.

there are no standardized methods of calculating these non-GAAP measurements, the Company’s calculations may differ from

those used by others, and accordingly, the use of these measurements may not be directly comparable to similarly titled measures

used by others.

Accordingly, these non-GAAP measurements are intended to provide additional information and should not be considered

in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

In addition, the Company’s

management uses Adjusted EBITDA to understand and compare operating results across accounting periods, and for financial and operational

decision making.

The presentation of Adjusted EBITDA is not intended to be considered in isolation or as a substitute for the financial

information prepared in accordance with GAAP.

believes that investors and analysts benefit from considering Adjusted EBITDA in assessing the Company’s financial results and

its ongoing business as it allows for meaningful comparisons and analysis of trends in the business.

Adjusted EBITDA is used by many

investors and analysts themselves, along with other metrics, to compare financial results across accounting periods and to those of peer

there are no standardized methods of calculating non-GAAP measurements, the Company’s calculations may differ from those used by

analysts, investors, and other companies, even those within the cannabis industry, and therefore may not be directly comparable to similarly

titled measures used by others.

Reconciliation

of EBITDA and EBITDA Excluding GenCanna (Non- GAAP Measurements) To Net Income (Loss)

table below reconciles Net Income (Loss) to EBITDA and EBITDA Excluding GenCanna for year ended December 31, 2020 and 2019:

Year Ended December 31,

Net income (loss)

$ (81,880,925 )

of Net Income to Adjusted EBITDA (a Non-GAAP Measurement)

table below reconciles Net Income to Adjusted EBITDA for the years ended December 31, 2021 and 2020:

Interest expense, net

Depreciation and amortization

(68,366,008 )

Exclude effects of GenCanna:

Profit on Seed Transactions

Reserve against GenCanna accounts receivable

Loss on investment in GenCanna

EBITDA Excluding GenCanna (Loss)

$ (17,311,692 )

EBITDA Excluding GenCanna for the year ended December 31, 2020 approximated $16.3 million compared with an EBITDA Excluding

GenCanna Loss of approximately $17.3 million for the year ended December 31, 2019, an improvement of approximately $33.6

The primary contributors to this improvement were the completion of the consolidations of Illinois and Massachusetts

core cannabis operations in 2020 as part of the Company’s Consolidation Plan.

The Illinois acquisition was completed

in the fall of 2019 and the Massachusetts operations opened in late 2019 and reached full production capacity in mid-2020.

factors contributing to the improvement in performance include (i) the opening of a third cannabis dispensary in Illinois in September

2020, (ii) introduction of recreational cannabis sales in Massachusetts in January 2020, and (iii) opening of the Middleborough

dispensary in Massachusetts in March 2020, and (iv) growth in the Company’s managed operations.

2021, the Company’s focus will to be on the following key areas:

Earnings before interest, taxes, depreciation, and amortization

Amortization of stock grants

Amortization of option grants

Amortization of stand-alone warrant issuances

Amortization of warrants issued with stock

Loss on equity issued to settle obligations

Equity in earnings of investments

Asset write-down

Legal settlement

Change in fair value of investments

Adjusted EBITDA

2022, the Company’s focus will be on the following key areas:

to the applicable state approvals, continue the execution of its Consolidation Plan.

and open two new dispensary locations in Massachusetts that can service both the medical and adult-use marketplaces.

a fourth dispensary location in Illinois, to be located in the city of Metropolis.

sales and profits in Delaware by expanding cultivation and processing facilities.

the acquisition of Maryland and proceed with a plan to expand the cultivation and processing facilities as well as adding

Additionally,

the Company plans to begin expansion of its New Bedford, MA cultivation and processing facility in the fourth quarter

of 2022 and complete the project in 2023.

and open a cultivation and processing facility in Mt.

Vernon, Illinois and begin the production and sale of MariMed’s award-winning

branded products in both their retail dispensaries and through wholesale channels.

fees paid by its managed services client in Delaware by expanding cultivation and processing facilities.

the acquisition in Maryland and proceed with a plan to expand the cultivation and processing facilities as well as adding

a dispensary location.

licensing fees through the expansion of the Company’s Nature’s Heritage branded flower and popular infused-product

brands Betty’s Eddies® and Kalm Fusion® into the Company’s owned and managed facilities, and with strategic

partners into additional markets.

Expand the exclusively licensed Tropizen® and Binske® brands.

brands Betty’s Eddies and Kalm Fusion into the Company’s owned and managed facilities, and with strategic partners

into additional markets.

Expand the licensed Tropizen® and Binske® brands.

acquisition opportunities in other states.

1 unchanged sentence

following transactions occurred in early 2022:

March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”)

with respect to a financing facility of up to $46.0 million in exchange for newly-designated Series C convertible preferred stock

of the Company and warrants to purchase the Company’s common stock.

the closing of the transaction in March 2021, Hadron purchased $23.0 million of Units at a price of $3.70 per Unit.

is comprised of one share of Series C preferred stock and a four-year warrant to purchase two and one-half shares of common stock.

Accordingly, the Company issued to Hadron 6,216,216 shares of Series C preferred stock and warrants to purchase up to an aggregate

of 15,540,540 shares of common stock.

Each share of Series C preferred stock is convertible, at Hadron’s option, into five

shares of common stock, and each warrant is exercisable at an exercise price of $1.087 per share.

The warrants shall be subject

to early termination if certain milestones are attained and the market value of the Company’s common stock reaches certain

predetermined levels.

connection with the closing of the transaction, the Company filed a certificate of designation with respect to the rights and

preferences of the Series C convertible preferred stock.

Such stock is zero coupon, non-voting.

and has a liquidation preference

equal to its investment amount plus declared but unpaid dividends.

Holders of Series C convertible preferred stock are entitled

to receive dividends on an as-converted basis.

the $23.0 million of proceeds received by the Company in March 2021, approximately (i) $7.8 will fund construction and upgrades

of certain of the Company’s owned and managed facilities, and (ii) $15.2 million was used to pay down debt and obligations,

comprised of the $4.4M Notes, the $1M Note, the New $3M Note, the $5.8M Note, the Existing Notes, a portion of the Third Party

Notes (all referred to in Note 11 – Debt ), and a portion of the Due To Related Parties balance discussed in

Note 20 – Related Party Transactions .

balance of the committed facility of up to an additional $23.0 million is intended to fund the Company’s specific targeted

acquisitions provided such acquisitions are contracted in 2021 and consummated, including obtaining the necessary regulatory approvals,

no later than the end of 2022.

Such funds shall be provided by Hadron on the same aforementioned terms as the initial proceeds.

that as at least 50% of the shares of Series C convertible preferred stock remain outstanding, the holders shall have the right

to appoint one observer to the Company’s board and to each of its board committees, and appoint a member to the Company’s

board if and when a seat becomes available, at which time the observer roles shall terminate.

transaction imposes certain covenants on the Company with respect to the incurrence of new indebtedness, the issuance of additional

shares of any designation of preferred stock, and the payment of distributions.

February 2021, the Company entered into a five-year lease agreement for a 12,000 square foot premises located in Wilmington, DE

which the Company intends to develop into a cannabis production facility with offices, and sublease to its cannabis-licensed

client in this state.

The lease contains an option to negotiate an extension at the end of the lease term.

January 2022, the Company entered into a stock purchase agreement to acquire 100% of the ownership interests of Green Growth Group Inc.,

an entity that has been awarded a craft grow cannabis license issued by the Illinois Department of Agriculture (the “IDA”)

for cultivation, production, and transporting of cannabis and cannabis-infused products in Illinois.

The purchase price of $3,400,000

shall be comprised of $1,900,000 in cash and shares of the Company’s common stock valued at $1,500,000.

The acquisition is

conditioned upon the approval by the IDA, among other closing conditions, which is expected to occur by July 2022.

in January 2022, the Company entered into an agreement to purchase a 30-acre parcel of land located in Mt.

Vernon, IL containing a

33,000 square foot manufacturing facility and a 13,000 square foot storage warehouse, in exchange for $1,495,000 in cash.

execution of the agreement, the Company provided a deposit of $100,000 to the seller.

The transaction is expected to close in the

second quarter of 2022, after the Company has performed a complete inspection and feasibility review.

If such review determines that

the premises will not satisfy the Company’s requirements, the Company shall have the right to terminate the agreement with no

other obligation other than the loss of the deposit.

Sheet Arrangements

Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial

condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures or capital

resources that is material to investors.

the opinion of management, inflation has not had a material effect on the Company’s financial condition or results of its

the opinion of management, the Company’s financial condition and results of its operations are not materially impacted by

seasonal sales.

condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures or capital resources

that is material to investors.

the opinion of management, inflation has not had a material effect on the Company’s financial condition or results of its operations.

the opinion of management, the Company’s financial condition and results of its operations are not materially impacted by seasonal

Accounting Pronouncements

Company has reviewed all other recently issued, but not yet effective, accounting pronouncements, and does not believe the future

adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations.

Company has reviewed all other recently issued, but not yet effective, accounting pronouncements, and does not believe the future adoption

of any such pronouncements will have a material impact on its financial condition or the results of its operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Company is a “smaller reporting company” as defined by Regulation S-K and, as such, is not required to provide the

information contained in this item pursuant to Regulation S-K.

Company is a “smaller reporting company” as defined by Regulation S-K and, as such, is not required to provide the information

contained in this item pursuant to Regulation S-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis