MARIMED INC. 10-K

ITEM 8. FINANCIAL STATEMENTS. CONTENTS Report of Independent Registered Public Accounting Firm (PCAOB ID No. 2738 ) 26 Consolidated Balance Sheets 28 Consolidated Statements of Operations 29 Consolidated Statements of Stockholders’ Equity 30 Consolidated Statements of Cash Flows 31 Notes To Consolidated Financial Statements 32 ( 25 ) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of MariMed Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of MariMed Inc. (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. ( 26 ) Revenue Recognition As discussed in Note 2 to the financial statements, when another party is involved in providing goods or services to the Company’s clients, a determination is made as to who is acting in the capacity as the principal in the sales transaction. Auditing management’s evaluation of agreements with customers involves significant judgment, given the fact that some agreements require management’s evaluation of principal versus agent. To evaluate the appropriateness and accuracy of the assessment by management, we evaluated management’s assessment in relationship to the relevant agreements. Inventory As discussed in Notes 2 & 7, the Company allocates a certain percentage of overhead cost to its manufactured inventory. Auditing management’s allocation of overhead involves significant judgements and estimates to determine the proper allocation. To evaluate the appropriateness of the allocation of overhead to inventory, we evaluated management’s significant judgments and estimates in what parts of overhead should be included and the allocation of these costs. Mezzanine Equity As discussed in Notes 13, the Company has issued and outstanding Series B Convertible Preferred Shares that contain redemption rights, cumulative fixed rate interest, voting rights and conversion rights. Auditing management’s evaluation of the preferred shares involves significant judgements and estimates in determining the proper classification of the preferred shares that include both debt and equity qualities. To evaluate the appropriateness and accuracy of the classification of the preferred shares, we evaluated management’s assessment of the debt and equity like characteristics. M&K CPAS, PLLC We have served as the Company’s auditor since 2018. Houston, TX March 16, 2022 ( 27 ) MariMed Inc. Consolidated Balance Sheets December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 29,683,014 $ 2,999,053 Accounts receivable, net 1,666,248 6,675,512 Deferred rents receivable 1,677,715 1,940,181 Note receivable, current portion 126,713 658,122 Inventory 9,767,856 6,830,571 Investments 250,600 1,357,193 Other current assets 1,440,831 582,589 Total current assets 44,612,977 21,043,221 Property and equipment, net 62,150,146 45,636,529 Intangibles, net 2,230,303 2,228,560 Investments - 1,165,788 Note receivable, less current portion 8,986,557 965,008 Right-of-use assets under operating leases 5,081,230 5,247,152 Right-of-use assets under finance leases 45,737 78,420 Other assets 97,951 80,493 Total assets $ 123,204,901 $ 76,445,171 Liabilities, mezzanine equity, and stockholders’ equity Current liabilities: Accounts payable $ 5,098,533 $ 5,044,918 Accrued expenses 1,348,673 2,725,544 Income taxes payable 16,467,264 895,725 Sales and excise taxes payable 1,797,755 1,053,693 Debentures payable - 1,032,448 Notes payable, current portion 9,891 8,859,175 Mortgages payable, current portion 1,400,331 1,387,014 Operating lease liabilities, current portion 1,071,079 1,008,227 Finance lease liabilities, current portion 27,123 38,412 Due to related parties - 1,157,815 Other current liabilities 1,920 23,640 Total current liabilities 27,222,569 23,226,611 Notes payable, less current portion 448,341 10,682,234 Mortgages payable, less current portion 16,813,466 14,744,136 Operating lease liabilities, less current portion 4,573,857 4,822,064 Finance lease liabilities, less current portion 22,455 44,490 Other liabilities 100,200 100,200 Total liabilities 49,180,888 53,619,735 Mezzanine equity: Series B convertible preferred stock, $ 0.001 par value; 4,908,333 shares authorized, issued and outstanding at December 31, 2021 and 2020 14,725,000 14,725,000 Series C convertible preferred stock, $ 0.001 par value; 6,216,216 and zero shares authorized, issued and outstanding at December 31, 2021 and 2020, respectively 23,000,000 - Total mezzanine equity 37,725,000 14,725,000 Stockholders’ equity: Undesignated preferred stock, $ 0.001 par value; 38,875,451 and 45,091,667 shares authorized at December 31, 2021 and 2020, respectively; zero shares issued and outstanding at December 31, 2021 and 2020 - - Common stock, $ 0.001 par value; 700,000,000 and 500,000,000 shares authorized at December 31, 2021 and 2020, respectively; 334,030,348 and 314,418,812 shares issued and outstanding at December 31, 2021 and 2020, respectively 334,030 314,419 Common stock subscribed but not issued; zero and 11,413 shares at December 31, 2021 and 2020, respectively - 5,365 Additional paid-in capital 134,920,382 112,974,329 Accumulated deficit ( 97,392,017 ) ( 104,616,538 ) Noncontrolling interests ( 1,563,382 ) ( 577,139 ) Total stockholders’ equity 36,299,013 8,100,436 Total liabilities, mezzanine equity, and stockholders’ equity $ 123,204,901 $ 76,445,171 See accompanying notes to consolidated financial statements. ( 28 ) MariMed Inc. Consolidated Statements of Operations Year Ended December 31, 2021 2020 Revenues $ 121,464,158 $ 50,895,151 Cost of revenues 55,201,078 19,570,257 Gross profit 66,263,080 31,324,894 Operating expenses: Personnel 8,351,397 5,501,756 Marketing and promotion 1,625,111 410,626 General and administrative 27,560,665 9,899,367 Bad debts 1,862,417 982,488 Total operating expenses 39,399,590 16,794,237 Operating income 26,863,490 14,530,657 Non-operating income (expenses): Interest expense ( 2,355,904 ) ( 9,810,475 ) Interest income 108,219 156,345 Loss on obligations settled with equity ( 2,546 ) ( 44,678 ) Equity in earnings of investments - 98,813 Change in fair value of investments ( 1,106,593 ) ( 349,638 ) Other 309,212 ( 84,708 ) Total non-operating expenses, net ( 3,047,612 ) ( 10,034,341 ) Income before income taxes 23,815,878 4,496,316 Provision for income taxes 16,192,327 2,067,049 Net income $ 7,623,551 $ 2,429,267 Net income attributable to noncontrolling interests $ 399,030 $ 285,278 Net income attributable to MariMed Inc. $ 7,224,521 $ 2,143,989 Net income per share Basic $ 0.02 $ 0.01 Diluted $ 0.02 $ 0.01 Weighted average common shares outstanding Basic 326,466,794 266,980,197 Diluted 372,396,731 324,160,525 See accompanying notes to consolidated financial statements. ( 29 ) MariMed Inc. Consolidated Statements of Stockholders’ Equity Common Stock Common Stock Subscribed But Not Issued Additional Paid-In Accumulated Non- Controlling Total Stockholders’ Shares Par Value Shares Amount Capital Deficit Interests Equity Balances at December 31, 2019 228,408,024 $ 228,408 3,236,857 $ 1,168,074 $ 112,245,730 $ ( 106,760,527 ) $ ( 553,465 ) $ 6,328,220 Issuance of subscribed shares 3,236,857 3,237 ( 3,236,857 ) ( 1,168,074 ) 1,164,837 - - - Stock grants 97,797 98 11,413 5,365 15,996 - - 21,459 Stock forfeitures ( 1,297,447 ) ( 1,297 ) - - 1,297 - - - Exercise of stock options 550,000 550 - - 75,450 - - 76,000 Exercise of warrants Exercise of warrants, shares Amortization of option grants - - - - 969,136 - - 969,136 Issuance of stand-alone warrants - - - - 2,179 - - 2,179 Issuance of warrants attached to debt - - - - 708,043 - - 708,043 Issuance of warrants with stock Discount on debentures payable - - - - 28,021 - - 28,021 Beneficial conversion feature on debentures payable - - - - 379,183 - - 379,183 Conversion of debentures payable 77,766,559 77,766 - - 9,997,522 - - 10,075,288 Conversion of common stock to preferred stock ( 4,908,333 ) ( 4,908 ) - - ( 14,720,092 ) - - ( 14,725,000 ) Conversion of promissory notes 2,525,596 2,525 - - 457,525 - - 460,050 Extinguishment of promissory notes 3,639,759 3,640 - - 910,302 - - 913,942 Common stock issued to settle obligations 4,400,000 4,400 - - 739,200 - - 743,600 Purchase of property and equipment with stock Purchase of property and equipment with stock, shares Fees paid with stock Fees paid with stock, shares Return of stock Return of stock, shares Equity issuance costs Acquisition of 30% interest in subsidiary Acquisition of 30% interest in subsidiary, shares Distributions - - - - - - ( 308,952 ) ( 308,952 ) Net income - - - - - 2,143,989 285,278 2,429,267 Balances at December 31, 2020 314,418,812 $ 314,419 11,413 $ 5,365 $ 112,974,329 $ ( 104,616,538 ) $ ( 577,139 ) $ 8,100,436 Balances 314,418,812 $ 314,419 11,413 $ 5,365 $ 112,974,329 $ ( 104,616,538 ) $ ( 577,139 ) $ 8,100,436 Issuance of subscribed shares 11,413 11 ( 11,413 ) ( 5,365 ) 5,354 - - - Stock grants 256,591 257 - - 235,096 - - 235,353 Exercise of stock options 277,373 277 - - 38,323 - - 38,600 Exercise of warrants 980,062 980 - - 91,795 - - 92,775 Amortization of option grants - - - - 12,494,209 - - 12,494,209 Issuance of stand-alone warrants - - - - 832,105 - - 832,105 Issuance of warrants with stock - - - - 654,681 - - 654,681 Conversion of debentures payable 4,610,645 4,611 - - 1,351,841 - - 1,356,452 Conversion of promissory notes 11,399,268 11,399 - - 3,810,046 - - 3,821,445 Common stock issued to settle obligations 71,691 72 - - 53,474 - - 53,546 Purchase of property and equipment with stock 750,000 750 - - 704,250 - - 705,000 Fees paid with stock 1,234,308 1,234 - - 1,106,459 - - 1,107,693 Return of stock ( 79,815 ) ( 80 ) - - ( 9,857 ) - - ( 9,937 ) Equity issuance costs - - - ( 386,983 ) - - ( 386,983 ) Acquisition of 30 % interest in subsidiary 100,000 100 - - 965,260 - ( 975,360 ) ( 10,000 ) Distributions - - - - - - ( 409,913 ) ( 409,913 ) Net income - - - - - 7,224,521 399,030 7,623,551 Balances at December 31, 2021 334,030,348 $ 334,030 - $ - $ 134,920,382 $ ( 97,392,017 ) $ ( 1,563,382 ) $ 36,299,013 Balances 334,030,348 $ 334,030 - $ 134,920,382 ( 97,392,017 ) ( 1,563,382 ) $ 36,299,013 The above statement does not show columns for shares and par value of undesignated preferred stock as the balances were zero and there was no activity in the reported periods. See accompanying notes to consolidated financial statements. ( 30 ) MariMed Inc. Consolidated Statements of Cash Flows Year Ended December 31, 2021 2020 Cash flows from operating activities: Net income attributable to MariMed Inc. $ 7,224,521 $ 2,143,989 Net income attributable to noncontrolling interests 399,030 285,278 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,097,702 1,791,610 Asset writeoff - 84,708 Amortization of intangibles 690,327 390,481 Amortization of stock grants 235,353 21,459 Amortization of option grants 12,494,209 969,136 Amortization of stand-alone warrant issuances 832,105 2,179 Amortization of warrants attached to debt 539,272 1,090,754 Amortization of warrants issued with stock 654,681 - Amortization of beneficial conversion feature 176,522 3,243,446 Amortization of original issue discount 51,753 339,791 Bad debt expense 1,862,417 982,488 Fees paid with stock 1,107,693 - Loss on obligations settled with equity 2,546 44,678 Equity in earnings of investments - ( 98,813 ) Gain on investment ( 309,212 ) - Change in fair value of investments 1,106,593 349,638 Changes in operating assets and liabilities: Accounts receivable ( 4,697,063 ) ( 5,988,861 ) Deferred rents receivable 262,466 ( 143,356 ) Due from third parties - 9,937 Inventory ( 2,937,285 ) ( 5,611,142 ) Other current assets ( 868,179 ) ( 390,221 ) Other assets ( 17,458 ) 95,412 Accounts payable 104,615 1,071,660 Accrued expenses ( 1,433,723 ) 472,237 Income taxes payable 15,571,539 895,725 Sales and excise taxes payable 744,062 1,051,193 Operating lease payments ( 19,433 ) 53,706 Finance lease interest payments 1,504 4,034 Other current liabilities ( 21,720 ) 219,157 Net cash provided by operating activities 35,854,837 3,380,303 Cash flows from investing activities: Purchase of property and equipment ( 17,873,636 ) ( 4,687,795 ) Purchase of cannabis licenses ( 692,070 ) ( 255,000 ) Return on investment 1,475,000 - Acquisition of 30 % interest in subsidiary ( 10,000 ) - Proceeds from notes receivable 476,868 479,630 Net cash used in investing activities ( 16,623,838 ) ( 4,463,165 ) Cash flows from financing activities: Issuance of preferred stock 23,000,000 - Equity issuance costs ( 386,983 ) - Issuance of promissory notes 35,096 6,549,763 Payments on promissory notes ( 15,806,617 ) ( 12,371,149 ) Proceeds from issuance of debentures - 935,000 Proceeds from mortgages 2,700,000 13,897,282 Payments on mortgages ( 617,353 ) ( 5,102,862 ) Exercise of stock options 38,600 76,000 Exercise of warrants 92,775 - Due to related parties ( 1,157,815 ) ( 296,898 ) Finance lease principal payments ( 34,828 ) ( 34,957 ) Distributions ( 409,913 ) ( 308,952 ) Net cash provided by financing activities 7,452,962 3,343,227 Net change to cash and cash equivalents 26,683,961 2,260,365 Cash and cash equivalents at beginning of period 2,999,053 738,688 Cash and cash equivalents at end of period $ 29,683,014 $ 2,999,053 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,975,193 $ 3,267,199 Cash paid for income taxes $ 620,788 $ 1,171,324 Non-cash activities: Trade receivables converted to notes receivable $ 7,843,910 $ - Conversion of promissory notes $ 3,821,445 $ 460,050 Conversion of debentures payable $ 1,356,452 $ 10,075,288 Acquisition of 30 % interest in subsidiary $ 975,360 $ - Purchase of property with stock $ 705,000 $ - Operating lease right-of-use assets and liabilities $ 466,105 $ - Common stock issued to settle obligations $ 51,000 $ 698,922 Return of stock $ 9,937 $ - Issuance of common stock associated with subscriptions $ 5,365 $ 1,168,074 Cashless exercise of warrants $ 180 $ - Cashless exercise of stock options $ 106 $ - Exchange of common stock to preferred stock $ - $ 14,725,000 Conversion of accrued interest to promissory notes $ - $ 3,908,654 Common stock issued to settle debt $ - $ 913,942 Discount on promissory notes $ - $ 708,043 Beneficial conversion feature on debentures payable $ - $ 379,183 Discount on debentures $ - $ 28,021 See accompanying notes to consolidated financial statements. ( 31 ) MariMed Inc. Notes to Consolidated Financial Statements NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS MariMed Inc. (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. Upon 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. Over 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. To 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. The 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. The 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 Baked brand. 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. The 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. The Company’s stock is quoted on the OTCQX market under the ticker symbol MRMD. The Company was incorporated in Delaware in January 2011 under the name Worlds Online Inc. Initially, the Company developed and managed online virtual worlds. By early 2014, this line of business effectively ceased operating, and the Company pivoted into the legal cannabis industry. 1 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 of the Year. 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. 2 Source: LeafLink Insights 2020. ( 32 ) NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain reclassifications have been made to prior periods’ data to conform to the current period presentation. These reclassifications had no effect on reported income (losses) or cash flows. Principles of Consolidation The accompanying consolidated financial statements include the accounts of MariMed Inc. and the following majority-owned subsidiaries at December 31, 2021: SCHEDULE OF MAJORITY OWNED SUBSIDIARIES Subsidiary: Percentage Owned MariMed Advisors Inc. 100.0 % Mia Development LLC 89.5 % Mari Holdings IL LLC 100.0 % Mari Holdings MD LLC 97.4 % Mari Holdings NJ LLC 100.0 % Mari Holdings NV LLC 100.0 % Mari Holdings Metropolis LLC 70.0 % Mari Holdings Mt. Vernon LLC 100.0 % Mari Mfg LLC 100.0 % Hartwell Realty Holdings LLC 100.0 % iRollie LLC 100.0 % ARL Healthcare Inc. 100.0 % KPG of Anna LLC 100.0 % KPG of Harrisburg LLC 100.0 % MariMed OH LLC 100.0 % MariMed Hemp Inc. 100.0 % MediTaurus LLC 100.0 % Intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts within the financial statements and disclosures thereof. Actual results could differ from these estimates or assumptions. 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. At December 31, 2021 and 2020, cash of approximately $ 5,101,000 and $ 101,000 , respectively, was held in escrow. The 2021 balance was primarily comprised of a $ 5,000,000 escrow deposit in connection with the acquisition of Kind Therapeutics USA Inc. as further discussed in Note 3 – Acquisitions . The Company’s cash and cash equivalents are maintained with recognized financial institutions located in the United States. In the normal course of business, the Company may carry balances with certain financial institutions that exceed federally insured limits. The Company has not experienced losses on balances in excess of such limits and management believes the Company is not exposed to significant risks in that regard. Accounts Receivable Accounts receivable consist of trade receivables and are carried at their estimated collectible amounts. The Company provides credit to its clients in the form of payment terms. The Company limits its credit risk by performing credit evaluations of its clients and maintaining a reserve, if deemed necessary, for potential credit losses. Such evaluations include the review of a client’s outstanding balances with consideration towards such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Based on such evaluations, the Company maintained a reserve of approximately $ 41.4 million and $ 40.0 million at December 31, 2021 and 2020, respectively. For further discussion on receivable reserves, please refer to Note 18 – Bad Debts and the Bankruptcy Claim section of Note 21 – Commitments and Contingencies . ( 33 ) Inventory Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company allocates a certain percentage of overhead cost to its manufactured inventory; such allocation is based on square footage and other industry-standard criteria. The Company reviews physical inventory for obsolescence and/or excess and will record a reserve if necessary. As of the date of this report, no reserve was deemed necessary. Investments Investments are comprised of equity holding of public and private companies. These investments are recorded at fair value on the Company’s consolidated balance sheet, with changes to fair value included in income. Investments are evaluated for permanent impairment and are written down if such impairments are deemed to have occurred. Revenue Recognition The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 606, Revenue from Contract with Customers, as amended by subsequently issued Accounting Standards Updates. This revenue standard requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The recognition of revenue is determined by performing the following consecutive steps: ● Identify the contract(s) with a customer; ● Identify the performance obligations in the contract(s); ● Determine the transaction price; ● Allocate the transaction price to the performance obligations in the contract(s); and ● Recognize revenue as the performance obligation is satisfied. Additionally, when another party is involved in providing goods or services to the Company’s clients, a determination is made as to who—the Company or the other party—is acting in the capacity as the principal in the sale transaction, and who is merely the agent arranging for goods or services to be provided by the other party. The Company is typically considered the principal if it controls the specified good or service before such good or service is transferred to its client. The Company may also be deemed to be the principal even if it engages another party (an agent) to satisfy some of the performance obligations on its behalf, provided the Company (i) takes on certain responsibilities, obligations, and risks, (ii) possesses certain abilities and discretion, or (iii) other relevant indicators of the sale. If deemed an agent, the Company would not recognize revenue for the performance obligations it does not satisfy. The Company’s main sources of revenue are comprised of the following: ● Product Sales – direct sales of cannabis and cannabis-infused products by the Company’s retail dispensaries and wholesale operations in Massachusetts and Illinois, and sales of hemp and hemp-infused products. This revenue is recognized when products are delivered or at retail points-of-sale. ● Real 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. Rental income is generally a fixed amount per month that escalates over the respective lease terms, while additional rental fees are based on a percentage of tenant revenues that exceed specified amounts. ● Management – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production, and dispensary operations. These fees are based on a percentage of such clients’ revenue and are recognized after services have been performed. ● Supply 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. The Company recognizes this revenue after the delivery and acceptance of goods by the purchaser. ● Licensing – royalties from the licensed distribution of the Company’s branded products including Kalm Fusion and Betty’s Eddies, and from sublicensing of contracted brands including Healer and Tikun Olam, to regulated dispensaries throughout the United States and Puerto Rico. The recognition of this revenue occurs when the products are delivered. ( 34 ) Research and Development Costs Research and development costs are charged to operations as incurred. Property and Equipment Property and equipment are stated at cost less accumulated depreciation, with depreciation recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term, if applicable. When assets are retired or disposed, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Repairs and maintenance are charged to expense in the period incurred. The estimated useful lives of property and equipment are generally as follows: buildings and building improvements, forty years; tenant improvements, the remaining duration of the related lease ; furniture and fixtures, seven to ten years; machinery and equipment, ten years. Land is not depreciated. The Company’s property and equipment are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from the undiscounted future cash flows of such asset over the anticipated holding period. An impairment loss is measured by the excess of the asset’s carrying amount over its estimated fair value. Impairment analyses are based on management’s current plans, asset holding periods, and currently available market information. If these criteria change, the Company’s evaluation of impairment losses may be different and could have a material impact to the consolidated financial statements. For the years ended December 31, 2021 and 2020, based on the results of management’s impairment analyses, there were no impairment losses. Leases The consolidated financial statements reflect the Company’s adoption of ASC 842, Leases , as amended by subsequent accounting standards updates. Under ASC 842, arrangements that are determined to be leases with a term greater than one year are accounted for by the recognition of right-of-use assets, that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities, that represent the Company’s obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately. Right-of-use assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term, utilizing the Company’s incremental borrowing rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Impairment of Long-Lived Assets The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets . Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values. Fair Value of Financial Instruments The Company follows the provisions of ASC 820, Fair Value Measurement , to measure the fair value of its financial instruments, and ASC 825, Financial Instruments, for disclosures on the fair value of its financial instruments. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by ASC 820 are: Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data. ( 35 ) The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values due to the short maturity of these instruments. The fair value of option and warrant issuances are determined using the Black-Scholes pricing model and employing several inputs such as the expected life of instrument, the exercise price, the expected risk-free interest rate, the expected dividend yield, the value of the Company’s common stock on issuance date, and the expected volatility of such common stock. The following table summarizes the range of inputs used by the Company during the prior two fiscal years: SCHEDULE OF ASSUMPTIONS USED 2021 2020 Life of instrument 1.5 to 5.0 years 0.8 to 4.3 years Volatility factors 1.198 to 1.266 1.059 to 1.180 Risk-free interest rates 0.4 % to 1.3 % 0.3 % to 1.3 % Dividend yield 0 % 0 % The expected life of an instrument is calculated using the simplified method pursuant to Staff Accounting Bulletin Topic 14, Share-Based Payment , which allows for using the mid-point between the vesting date and expiration date. The volatility factors are based on the historical two-year movement of the Company’s common stock prior to an instrument’s issuance date. The risk-free interest rate is based on U.S. Treasury rates with maturity periods similar to the expected instruments life on the issuance date. The Company amortizes the fair value of option and warrant issuances on a straight-line basis over the requisite service period of each instrument. Extinguishment of Liabilities The Company accounts for extinguishment of liabilities in accordance with ASC 405-20, Extinguishments of Liabilities. When the conditions for extinguishment are met, the liabilities are written down to zero and a gain or loss is recognized. Stock-Based Compensation The Company accounts for stock-based compensation using the fair value method as set forth in ASC 718, Compensation—Stock Compensation, which requires a public entity to measure the cost of employee services received in exchange for an equity award based on the fair value of the award on the grant date, with limited exceptions. Such value will be incurred as compensation expense over the period an employee is required to provide service in exchange for the award, usually the vesting period. No compensation cost is recognized for equity awards for which employees do not render the requisite service. ( 36 ) Income Taxes The Company uses the asset and liability method to account for income taxes in accordance with ASC 740, Income Taxes . Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits for the years ended December 31, 2021 and 2020. Certain of the Company’s subsidiaries are subject to the provisions of Section 280E of the Internal Revenue Code, as amended, which prohibits businesses from deducting certain expenses associated with the trafficking of controlled substances within the meaning of Schedule I and II of the Controlled Substances Act. Such non-deductibility of certain ordinary business expenses results in permanent differences and can cause the Company’s effective tax rate to be highly variable and not necessarily correlated with pre-tax income. Related Party Transactions The Company follows ASC 850, Related Party Disclosures , for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements. Comprehensive Income The Company reports comprehensive income and its components following guidance set forth by ASC 220, Comprehensive Income , which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. There were no items of comprehensive income applicable to the Company during the period covered in the financial statements. Earnings Per Share Earnings per common share is computed pursuant to ASC 260, Earnings Per Share . Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the sum of the weighted average number of shares of common stock outstanding plus the weighted average number of potentially dilutive securities during the period. At December 31, 2021 and 2020, there were potentially dilutive securities convertible into shares of common stock comprised of (i) stock options – convertible into 39,821,671 and 9,805,750 shares, respectively, (ii) warrants – convertible into 26,351,571 and 16,917,168 shares, respectively, (iii) Series B preferred stock – convertible into 4,908,333 shares in both periods, (iv) Series C preferred stock – convertible into 31,081,080 and zero shares, respectively, (v) debentures payable – convertible into zero and 4,610,645 shares, respectively, and (vi) promissory notes – convertible into 1,142,857 and 15,503,282 shares, respectively. For the years ended December 31, 2021 and 2020, the aforementioned potentially dilutive securities increased the number of weighted average common shares outstanding on a diluted basis by approximately 45.9 million and 57.2 million net shares of common stock, respectively. Such share amounts were reflected in the calculation of diluted net income per share for the years ended December 31, 2021 and 2020. Commitments and Contingencies The Company follows ASC 450, Contingencies , which requires the Company to assess the likelihood that a loss will be incurred from the occurrence or non-occurrence of one or more future events. Such assessment inherently involves an exercise of judgment. In assessing possible loss contingencies from legal proceedings or unasserted claims, the Company evaluates the perceived merits of such proceedings or claims, and of the relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss will be incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. While not assured, management does not believe, based upon information available at this time, that a loss contingency will have material adverse effect on the Company’s financial position, results of operations or cash flows. ( 37 ) Beneficial Conversion Features on Convertible Debt Convertible instruments that are not bifurcated as a derivative pursuant to ASC 815, Derivatives and Hedging , and not accounted for as a separate equity component under the cash conversion guidance are evaluated to determine whether their conversion prices create an embedded beneficial conversion feature at inception, or may become beneficial in the future due to potential adjustments. A beneficial conversion feature is a nondetachable conversion feature that is “in-the-money” at the commitment date. The in-the-money portion, also known as the intrinsic value, is recorded in equity, with an offsetting discount to the carrying amount of convertible debt to which it is attached. The discount is amortized to interest expense over the life of the debt with adjustments to amortization upon full or partial conversions of the debt. Risk and Uncertainties The Company is subject to risks common to companies operating within the legal and medical cannabis industries, including, but not limited to, federal laws, government regulations and jurisdictional laws. Noncontrolling Interests Noncontrolling interests represent third-party minority ownership of the Company’s consolidated subsidiaries. Net income attributable to noncontrolling interests is shown in the consolidated statements of operations; and the value of net assets owned by noncontrolling interests are presented as a component of equity within the balance sheets. Off Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements. Recent Accounting Pronouncements The Company has reviewed all 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. ( 38 ) NOTE 3 – ACQUISITIONS 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 Company’s cannabis-licensed client in the state of Nevada. The acquisition is conditioned upon state regulatory approval of the transaction and other closing conditions. Upon approval, and the fulfillment of other closing conditions, 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 closing conditions to the Company’s acquisition of Harvest, including regulatory approval, will be achieved or that the acquisition will be consummated. The purchase price is comprised of the issuance of (i) 1,000,000 shares of the Company’s common stock, in the aggregate, to two owners of Harvest, which as a good faith deposit, were issued 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 legislative approval of the transaction, 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 legislative approval of the transaction. The issued shares were recorded at par value. Such shares are restricted and will be returned to the Company in the event the transaction does not close. Kind Therapeutics USA Inc. In 2016, the Company and the members of Kind Therapeutics USA Inc., the Company’s client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (“Kind”), agreed to a partnership/joint venture whereby Kind would be owned 70 .0% by the Company and 30.0 % by the members of Kind, subject to approval by the Maryland Medical Cannabis Commission (“MMCC”). In reliance thereon, the Company purchased, designed, and developed a 180,000 square foot cultivation and production facility in Hagerstown, MD for occupancy and use by Kind, which became operational in late 2017, and the Company further agreed to manage and finance all aspects of Kind’s cannabis business, as Kind had no background or experience in the industry. In 2018, prior to finalizing the documents confirming the partnership/joint venture the Company and the members of Kind negotiated and entered into a memorandum of understanding (“MOU”) for the Company to acquire 100 % of the membership interests of Kind. Also at that time, the parties entered into a management services agreement for the Company to provide Kind with comprehensive management services in connection with the business and operations of Kind, and a 20 -year lease agreement for Kind’s utilization of the Company’s 180,000 square foot cultivation and production facility in Hagerstown, MD. Additionally, in 2019, the Company purchased a 9,000 square foot building in Anne Arundel County, MD, which is currently under construction, for the development of a dispensary which would be leased to Kind. In 2019, the members of Kind sought to renegotiate the terms of the MOU and subsequently sought to renege on both the original partnership/joint venture and the MOU. The Company engaged with the member of Kind in good faith in an attempt to reach updated terms acceptable to both parties, however the members of Kind failed to reciprocate in good faith, resulting in an impasse. Incrementally, both parties through counsel further sought to resolve the impasse, however such initiative resulted in both parties commencing legal proceedings. 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 $ 13,500,000 payable in cash (subject to adjustment) and $ 6,500,000 payable by the issuance of four-year 6.0% promissory notes to the members of Kind. The notes shall be secured by a first priority lien on the Company’s property in Hagerstown, MD. Upon execution of the membership interest purchase agreement, the Company deposited, in escrow, the sum of $ 5,000,000 as a contract down-payment. Simultaneously, 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. The purchase price for the interests in Mari-MD and Mia is $ 2,000,000 in the aggregate, payable in cash. Giving effect to the purchase of these interests, the Company will own approximately 99.7 % and 94.3 %, respectively, of Mari-MD and Mia. The closings under the foregoing agreements are subject to the fulfilment of closing conditions including, but not limited to, approval by the MMCC, which is pending. There is no assurance that the approval of the MMCC will be obtained or that the further closing conditions will be met. Simultaneous with the closing of the transactions contemplated by the foregoing agreements, the aforementioned litigation between the parties will be dismissed. For further information, see Note 21 – Commitment and Contingencies . MediTaurus LLC In 2019, the Company acquired a 70.0 % ownership interest in MediTaurus LLC (“MediTaurus”), a company formed by Jokubas Ziburkas PhD, a neuroscientist and leading authority on cannabidiol (“CBD”) and the endocannabinoid system, in exchange for $ 2.8 million of cash and stock. The Company currently sells CBD products developed by MediTaurus under its Florance™ brand . In September 2021, the Company acquired the remaining 30.0 % ownership interest of 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, and since there was no change in control of MediTaurus from this transaction, the resulting gain on bargain purchase was recognized in Additional Paid-In Capital on the September 30, 2021 balance sheet. The shares and cash were issued and paid in November 2021. As part of this transaction, the initial purchase agreement was amended whereby any and all future license fees and payments to MediTaurus were eliminated. 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 the liabilities and operating obligations associated with, a cannabis dispensary that is currently operating in Beverly, MA. The purchase price is comprised of 2,000,000 shares of the Company’s common stock and $ 5.1 million, with the cash amount to be paid over time on a monthly basis as a percentage of the business’ monthly gross sales. The purchase is contingent upon the approval of the Massachusetts Cannabis Control Commission, which is expected by the summer of 2022. Concurrent with the execution of this agreement, the parties entered into a consulting agreement pursuant whereby the Company shall provide certain oversight services related to the development, staffing, and operation of the business in exchange for a monthly fee. ( 39 ) NOTE 4 – INVESTMENTS At December 31, 2021 and 2020, the Company’s investments were comprised of the following: SCHEDULE OF INVESTMENTS 2021 2020 Current investments: Flowr Corp. (formerly Terrace Inc.) $ 250,600 $ 1,357,193 Non-current investments: MembersRSVP LLC - 1,165,788 Total investments $ 250,600 $ 2,522,981 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”). Under the terms of the transaction, each shareholder of Terrace received 0.4973 of a share in Flowr for each Terrace share held. This investment is carried at fair value. The decrease in fair value of this investment during the years ended December 31, 2021 and 2020 of approximately $ 1,107,000 and $ 92,000 , respectively, was reflected in the Change In Fair Value Of Investments on the statement of operations. MembersRSVP LLC During 2020, the Company owned a 23.0 % member interest in MembersRSVP LLC (“MRSVP”), an entity that developed cannabis-specific customer relationship management software, which was accounted for under the equity method. Based on the Company’s equity in MRSVP’s net income during this period, the Company recorded earnings in 2020 of approximately $ 99,000 , which comprised the balance of Equity in Earnings of Investments on the statement of operations. In January 2021, the Company and MRSVP entered into an agreement whereby the Company assigned and transferred 11.0 % of its member interests to MRSVP in exchange for a release from all further obligation by the Company to make future investments or payments 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. In light of the Company no longer having the ability to exercise significant influence over MRSVP, the Company discontinued accounting for this investment under the equity method as of January 1, 2021. In September 2021, MRSVP sold substantially all of its assets pursuant to an asset purchase agreement. In furtherance of the transaction, the Company received cash proceeds of $ 1,475,000 , representing the Company’s pro rata share of the cash consideration received by MRSVP upon the closing of the transaction. As an ongoing member of MRSVP, the Company will receive its pro rata share of any additional consideration received by MRSVP pursuant to the asset purchase agreement, which may include securities or other forms of non-cash or in-kind consideration and holdback amounts, if and when it is received and distributed by MRSVP. Upon receipt of the cash consideration, the Company reduced the investment balance to zero and recorded a gain of approximately $ 309,000 which comprised Other non-operating expenses on the statement of operations. In February 2022, the Company received its pro rata share of additional consideration received by MRSVP pursuant to the asset purchase agreement which is further discussed in Note 22 – Subsequent Events . ( 40 ) NOTE 5 – DEFERRED RENTS RECEIVABLE The Company is the lessor under 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 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 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 cannabis cultivation, processing, and dispensary facility which is leased to a cannabis-licensed client under a triple net lease that expires in 2035 . ● Maryland – a 180,000 square foot cultivation and processing facility which is leased to a licensed cannabis client under a triple net lease that expires 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 that expires in October 2022 . The Company subleases the following properties: ● Delaware – a 4,000 square foot cannabis dispensary which is subleased to its cannabis-licensed client under a 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, and is developing the remaining space into processing facility, 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. ● 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. As of December 31, 2021 and 2020, cumulative fixed rental receipts under such leases approximated $ 18.7 million and $ 13.9 million, respectively, compared to revenue recognized on a straight-line basis of approximately $ 20.4 million and $ 15.8 million, respectively. Accordingly, the deferred rents receivable balance approximated $ 1.7 million and $ 1.9 million at December 31, 2021 and 2020, respectively. Future minimum rental receipts for non-cancellable leases and subleases as of December 31, 2021 were: SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON-CANCELABLE LEASES AND SUBLEASES 2022 $ 4,854,549 2023 4,563,372 2024 4,625,608 2025 4,695,107 2026 3,915,790 Thereafter 35,829,822 Total $ 58,484,248 ( 41 ) NOTE 6 – NOTES RECEIVABLE At December 31, 2021 and 2020, notes receivable, including accrued interest, consisted of the following: SCHEDULE OF RECEIVABLES AND ACCRUED INTEREST 2021 2020 First State Compassion Center (initial note) $ 402,992 $ 468,985 First State Compassion Center (secondary note) 7,843,910 - Healer LLC 866,368 899,226 High Fidelity Inc. - 254,919 Total notes receivable 9,113,270 1,623,130 Notes receivable, current portion 126,713 658,122 Notes receivable, less current portion $ 8,986,557 $ 965,008 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 in the amount of $ 700,000 bearing interest at a rate of 12.5 % per annum, as amended. The monthly payments of approximately $ 10,000 will continue through April 2026, at which time the note will be paid in full. At December 31, 2021 and 2020, the current portion of this note approximated $ 75,000 and $ 66,000 , respectively, and was included in Notes Receivable, Current Portion on the respective balance sheets. In December 2021, financed trade accounts receivable balances from FSCC of approximately $ 7.8 million in the aggregate were converted into notes receivable whereby FSCC issued promissory notes to the Company in the aggregate amount of approximately $ 7.8 million bearing interest at a rate of 6.0 % per annum. The promissory notes call for the payment of principal and interest throughout the term of the note which matures in December 2025. At December 31, 2021, the entire balance of the note was long-term. Healer LLC In 2018 and 2019, the Company loaned an aggregate of $ 800,000 to Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak, an integrative medicine physician and nationally renowned cannabis practitioner (“Healer”). Healer issued promissory notes to the Company for the aggregate amount loaned that bear interest at a rate of 6.0 % per annum, with principal and interest payable on maturity dates three years from the respective loan dates. In March 2021, the Company was issued a revised promissory note from Healer in the principal amount of approximately $ 894,000 representing the previous loans extended to Healer by the Company plus accrued interest through the revised promissory note issuance date. The revised promissory note bears interest at a rate of 6 .0% per annum and requires quarterly payments of interest through the maturity date in April 2026 . Additionally, the Company has the right to offset any licensing fees owed to Healer by the Company 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 promissory note, reducing the principal amount to approximately $ 866,000 . At December 31, 2021 and 2020, the total amount of principal and accrued interest due under the aforementioned promissory notes approximated $ 866,000 and $ 899,000 , respectively, of which approximately $ 52,000 and $ 337,000 , respectively, was current. High Fidelity In August 2021, the Company was fully repaid on a loan to High Fidelity Inc., an entity with cannabis operations in the state of Vermont. The loan had a principal balance of $ 250,000 and bore interest at a rate of 10.0 % per annum, ( 42 ) NOTE 7 – INVENTORY At December 31, 2021 and 2020, inventory was comprised of the following: SCHEDULE OF INVENTORY 2021 2020 Plants $ 1,014,576 $ 3,352,425 Ingredients and other raw materials 261,609 176,338 Work-in-process 4,661,542 468,377 Finished goods 3,830,129 2,833,431 Total inventory $ 9,767,856 $ 6,830,571 NOTE 8 – PROPERTY AND EQUIPMENT At and December 31, 2021 and 2020, property and equipment consisted of the following: SCHEDULE OF PROPERTY AND EQUIPMENT 2021 2020 Land $ 4,449,810 $ 3,988,810 Buildings and building improvements 35,231,277 29,309,856 Tenant improvements 9,744,860 8,844,974 Furniture and fixtures 1,887,796 619,880 Machinery and equipment 7,220,962 4,620,924 Construction in progress 10,569,182 3,140,807 69,103,887 50,525,251 Less: accumulated depreciation ( 6,953,741 ) ( 4,888,722 ) Property and equipment, net $ 62,150,146 $ 45,636,529 During the year ended December 31, 2021 and 2020, additions to property and equipment approximated $ 18,579,000 and $ 4,688,000 , respectively. The 2021 additions were primarily comprised of (i) the development of facilities in Metropolis, IL and Milford, DE, and (ii) purchases of building improvements, machinery, and equipment at the facilities in Hagerstown, MD and New Bedford, MA. The 2020 additions consisted primarily of (i) the commencement of construction in Mt. Vernon, IL, and (ii) machinery and equipment purchases for facilities in Massachusetts, Maryland, Illinois, and Delaware. The construction in progress balances of approximately $ 10,569,000 million and $ 3,141,000 at December 31, 2021 and 2020, respectively, consisted of the commencement of construction of properties in Milford, DE and Annapolis, MD. Depreciation expense for the year ended December 31, 2021 and 2020 approximated $ 2,098,000 and $ 1,792,000 , respectively. ( 43 ) NOTE 9 – INTANGIBLES At December 31, 2021 and 2020, intangible assets were comprised of (i) the carrying value of cannabis license fees, and (ii) goodwill arising from the Company’s acquisitions. The Company’s cannabis licenses are issued from the states of Illinois and Massachusetts and require the payment of annual fees. These fees, comprised of a fixed component and a variable component based on the level of operations, are capitalized and amortized over the respective twelve-month periods. At December 31, 2021 and 2020, the carrying value of these cannabis licenses approximated $ 163,000 and $ 161,000 , respectively. The goodwill associated with acquisitions is reviewed on a quarterly basis for impairment. Based on this review and other factors, the goodwill of approximately $ 2,068,000 December 31, 2021 and 2020 was deemed to be unimpaired. NOTE 10 – MORTGAGES At December 31, 2021 and 2020, mortgage balances, including accrued interest, were comprised of the following: SCHEDULE OF MORTGAGE AND ACCRUED INTEREST 2021 2020 Bank of New England – New Bedford, MA and Middleboro, MA properties $ 12,498,900 $ 12,834,090 Bank of New England – Wilmington, DE property 1,462,949 1,575,658 DuQuoin State Bank – Anna, IL and Harrisburg, IL properties 778,084 814,749 DuQuoin State Bank – Metropolis, IL property 2,657,600 - South Porte Bank – Mt. Vernon, IL property 816,264 906,653 Total mortgages payable 18,213,797 16,131,150 Mortgages payable, current portion ( 1,400,331 ) ( 1,387,014 ) Mortgages payable, less current portion $ 16,813,466 $ 14,744,136 In November 2017, the Company entered into a 10 -year mortgage agreement with Bank of New England in the amount of $ 4,895,000 (the “Initial Mortgage”) for the purchase of a 138,000 square foot industrial property in New Bedford, MA, within which the Company has built a 70,000 square foot cannabis cultivation and processing facility. Pursuant to the Initial Mortgage, the Company made monthly payments of (i) interest-only from the mortgage date through May 2019 at a rate equal to the prime rate plus 2 .0%, with a floor of 6.25 % per annum, and (ii) principal and interest payments from May 2019 to July 2020 at a rate equal to the prime rate on May 2, 2019 plus 2 .0%, with a floor of 6.25 % per annum. In July 2020, at which time the Initial Mortgage had a remaining principal balance of approximately $ 4.8 million, the parties consummated an amended and restated mortgage agreement, secured by the Company’s properties in New Bedford and Middleboro in the amount of $ 13.0 million bearing interest at a rate of 6.5 % per annum that matures in August 2025 (the “Refinanced Mortgage”). Proceeds from the Refinanced Mortgage were used to pay down the Initial Mortgage and approximately $ 7.2 million of promissory notes as further in Note 11 – Promissory Notes . At December 31, 2021 and 2020, the outstanding principal balance of the Refinanced Mortgage approximated $ 12,499,000 and $ 12,834,000 , respectively, of which approximately $ 358,000 and $ 335,000 , respectively, was current. The Company maintains another mortgage with Bank of New England from the 2016 purchase of a 45,070 square foot building in Wilmington, DE which was developed into a cannabis seed-to-sale facility and is currently leased to the Company’s cannabis-licensed client in that state. The mortgage matures in 2031 with monthly principal and interest payments at a rate of 5.25 % per annum through September 2021, and thereafter the rate adjusting every five years to the then prime rate plus 1.5 % with a floor of 5.25 % per annum. For the remainder of 2021, the interest rate on this mortgage remained at 5.25 %. At December 31, 2021 and 2020, the outstanding principal balance on this mortgage approximated $ 1,463,000 and $ 1,576,000 , respectively, of which approximately $ 130,000 and $ 114,000 , respectively, was current. ( 44 ) In May 2016, the Company entered into a mortgage agreement with DuQuoin State Bank (“DSB”) for the purchase of properties in Anna, IL and Harrisburg, IL which the Company developed into two 3,400 square foot free-standing retail dispensaries. On May 5 th of each year, this mortgage is due to be repaid unless it is renewed for another year at a rate determined by DSB’s executive committee. The mortgage was renewed in May 2021 at a rate of 6.75 % per annum. At December 31, 2021 and 2020, the outstanding principal balance on this mortgage approximated $ 778,000 and $ 815,000 respectively, of which approximately $ 33,000 and $ 31,000 , respectively, was current. 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 of approximately $ 1.6 million. In connection with this purchase, the Company entered into another mortgage agreement with DSB in the amount of $ 2.7 million that matures in July 2041 and initially bears interest at a rate of 6.25 % per annum which is adjusted each year based on a certain interest rate index plus a margin. As part of this transaction, the seller was provided with a 30.0 % ownership interest in Mari Holdings Metropolis LLC (“Metro”), the Company’s subsidiary that owns the property and related mortgage obligation, reducing the Company’s ownership interest in Metro to 70 .0%. At December 31, 2021, the outstanding principal balance on this mortgage approximated $ 2,658,000 , of which approximately $ 73,000 was current. In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, IL. Pursuant to the amended mortgage agreement, the mortgage shall be repaid in monthly installments of principal and interest of approximately $ 6,000 which began in August 2021 and continues through its maturity in June 2022, at which time all remaining principal, interest and fees shall be due. NOTE 11 – PROMISSORY NOTES Promissory Notes Issued by the Company and its MariMed Hemp Inc. Subsidiary In February 2020, the Company and MariMed Hemp Inc., its wholly-owned subsidiary (“MMH”), amended a secured $ 10.0 million promissory note (the $10.0M Note”) issued to an unaffiliated party (the “Noteholder”) in 2019. The $10.0M Note, which provided for the repayment of principal plus a payment of $ 1.5 million (the “$1.5M Payment”), was amended whereby the Company and MMH issued a restated promissory note maturing in June 2020 in the principal amount of $ 11.5 million (the “$11.5M Note”), comprised of the principal amount of the $10.0M Note and the $1.5M Payment. The $11.5M Note bore interest at a rate of 15 .0% per annum, requiring periodic interest payments and minimum amortization payments of $ 3,000,000 in the aggregate, which the Company made in the first half of 2020. The Company entered into a second amendment agreement with the Noteholder in June 2020, whereby (i) $ 352,000 of outstanding principal of the $11.5M Note was converted into 1,900,000 shares of the Company’s common stock (which did not result in a material extinguishment gain or loss as the conversion price approximated the price of the Company’s common stock on the agreement date), and (ii) the Company and MMH issued a second amended and restated promissory note in the principal amount of approximately $ 8.8 million, comprised of the outstanding principal and unpaid interest balances of the $11.5M Note, plus an extension fee of approximately $ 330,000 , bearing interest at a rate of 15 .0% per annum and maturing in June 2022 (the “$8.8M Note”). In addition, the Company issued three -year warrants to the Noteholder to purchase up to 750,000 shares of common stock at an exercise price of $ 0.50 per share. The fair value of these warrants on the issuance date of approximately $ 66,000 was recorded as a discount to the $8.8M Note, and amortized to interest expense over the life of the $8.8M Note. The Company made a required principal payment of $ 4,000,000 in July 2020 with a portion of proceeds of the Refinanced Mortgage previously discussed in Note 10 – Mortgages , and additional principal payments of $ 600,000 in the aggregate in calendar 2020. Accordingly, the carrying value of the $8.8M Note was approximately $ 4.2 million at December 31, 2020. The Noteholder had the option to convert the $8.8M Note, in whole or in part, into shares of the Company’s common stock at a conversion price of $ 0.30 per share, subject to certain conversion limitations. This non-detachable conversion feature of the $8.8M Note had no intrinsic value on the agreement date, and therefore no beneficial conversion feature arose. In March 2021, the Noteholder converted $ 1,000,000 of principal and approximately $ 10,000 of accrued interest into 3,365,972 shares of the Company’s common stock, reducing the carrying value of the $8.8M Note to approximately $ 3.2 million. The Company entered into a third amendment agreement with the Noteholder in April 2021 whereby the Company and MMH issued a third amended and restated promissory note in the principal amount of approximately $ 3.2 million (the “$3.2M Note”) which bears interest at a rate of 0.12 % per annum and matures in April 2023 . The Noteholder has the option to convert, subject to certain conversion limitations, all or a portion of the $3.2M Note into shares of the Company’s common stock at a conversion price of $ 0.35 per share, such conversion price subject to adjustment in the event of certain transactions by the Company. The third amended agreement resulted in a decrease in the fair value of the embedded conversion feature of the $3.2M Note and therefore no accounting was required for such conversion feature. On or after the one-year anniversary of the $3.2M Note, upon twenty days prior written notice to the Noteholder, the Company can prepay all of the outstanding principal and unpaid interest of the $3.2M Note, along with a prepayment premium equal to 10.0 % of the principal amount being prepaid. The Noteholder shall remain entitled to convert the $3.2M Note during such notice period. On or after the one-year anniversary of the $3.2M Note, the Noteholder has the right to require the redemption in cash of up to $ 125,000 of principal and unpaid interest thereon per calendar month. In 2021, the Noteholder converted approximately $ 2.8 million of principal on the $3.2M Note into 8,033,296 shares of the Company’s common stock, reducing the carrying value of the $3.2M Note to approximately $ 400,000 at December 31, 2021. All note conversions were effected in accordance with the terms of their respective note agreements, and therefore the Company was not required to record a gain or loss on such conversions. ( 45 ) Promissory Notes Issued Pursuant to an Exchange Agreement In February 2020, pursuant to an exchange agreement as further described in Note 13 – Mezzanine Equity , the Company issued two promissory notes in the aggregate principal amount of approximately $ 4.4 million, bearing interest at 16.5 % per annum and maturing in August 2021 (the “$4.4M Notes”), in exchange for a loan in the same amount. At December 31, 2020, the principal and accrued interest balance of the $4.4M Notes approximated $ 4.6 million. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 13 – Mezzanine Equity, the $4.4M Notes were fully paid down, along with accrued interest through the repayment date. Promissory Notes Issued for Operating Liquidity In April 2020, the Company entered into a note extension agreement (the “Initial Extension Agreement”) with the unaffiliated holder (the “Holding Party”) of a secured $ 6.0 million promissory note (the “$6.0M Note”) issued by the Company in 2019. The $6.0M Note bore interest at a rate of 13.0 % per annum and required the payment of a service fee of $ 900,000 (the “Service Fee”). Pursuant to the Initial Extension Agreement, (i) the $6.0M Note’s due date was extended to September 2020, and the $6.0M Note was modified to include unpaid accrued interest of $ 845,000 through the modification date and interest at a rate of 10.0 % per annum (the “$6.8M Note”), and (iii) a new convertible note in the amount of $ 900,000 (the “$900k Note”) was issued evidencing the Service Fee, bearing interest at a rate of 12.0 % per annum. The Company satisfied the $900k Note and accrued interest of $ 20,100 in full as of the June 2020 maturity date by the payment in July 2020 of $ 460,050 in cash, representing one-half of the principal and accrued interest, and the issuance in June 2020 of 2,525,596 shares of the Company’s common stock, in payment of the other half of the principal and accrued interest. Prior to the issuance of the $6.0M Note, the Company raised $ 3.0 million from the issuance of a secured promissory note to the Holding Party in 2018, bearing interest at a rate of 10.0 % per annum (the “$3.0M Note”). The maturity date of the $3.0M Note, initially in March 2020, was extended for an additional six months in accordance with its terms, with the interest rate increasing to 12.0 % per annum during the extension period. Pursuant to the Initial Extension Agreement, the maturity date of the $3.0M Note was extended to December 2020. ( 46 ) The Company and the Holding Party entered into a second note extension agreement in October 2020 (the “Second Extension Agreement”) whereby the Company (i) paid $ 1 million of principal and all outstanding accrued interest of approximately $ 333,000 on the $6.8M Note; (ii) issued an amended and restated senior secured promissory note in the principal amount of $ 5,845,000 (the “$5.8M Note”) to replace the $6.8M Note; and (iii) amended and restated the $3M Note (the “New $3.0M Note”, and together with the $5.8M Note, the “Amended Notes”). The Amended Notes bore interest at a rate of 12.0 % per annum with initial maturity dates in September 2022 . In consideration of the Second Extension Agreement, the Company (i) issued four -year warrants to the Holding Party’s designees to purchase up to 5,000,000 shares of the Company’s common stock at an exercise price of $ 0.25 per share; (ii) paid the Holding Party a fee of $ 100,000 ; and (iii) extended the security interest in certain Company properties and the pledge of certain equity interests to secure the Amended Notes. The Company recorded a discount on the Amended Notes of approximately $ 573,000 based on the fair value of such warrants on the issuance date, of which approximately $ 75,000 was amortized as of the end of 2020, and the remainder to be amortized over the life of the Amended Notes. Accordingly, the carrying value of the Amended Notes approximated $ 8.3 million at December 31, 2020, of which $ 1.9 million was current. The Company made a required principal payment of $ 400,000 on the $5.8M Note in February 2021. In March 2021, utilizing a portion of the proceeds from the Hadron transaction discussed in Note 13 – Mezzanine Equity, the Amended Notes were fully paid down, along with accrued interest through the repayment date. In addition, the remaining discount of approximately $ 450,000 on this note was fully amortized on the payment date. Promissory Notes Issued to Purchase Commercial Vehicles In August 2020, the Company entered into a note agreement with First Citizens’ Federal Credit Union for the purchase of a commercial vehicle. The note bears interest at a rate of 5.74 % per annum and matures in July 2026 . At December 31, 2021 and 2020, the balance of this note approximated $ 26,000 and $ 30,000 , respectively, of which approximately $ 5,000 was current in both periods. In June 2021, the Company entered into a note agreement with Ally Financial for the purchase of a second commercial vehicle. The note bears interest at the rate of 10.0 % per annum and matures in May 2027. At December 31, 2021, the balance of this note approximated $ 33,000 , of which approximately $ 5,000 was current. Promissory Note Issued by MMH In September 2020, the Company paid down $ 500,000 of principal on a $ 1,000,000 promissory note (the “$1.0M Note”) issued by MMH in 2019 to an unaffiliated party. At December 31, 2020, $ 500,000 of principal on the $1.0M Note remained outstanding. In March 2021, the Company paid interest on the $1.0M Note of $ 200,000 , and utilizing a portion of the proceeds from the Hadron transaction discussed in Note 12 – Mezzanine Equity, paid off remaining principal of $ 500,000 . At December 31, 2021, the Company was carrying an accrued interest balance of approximately $ 125,000 to cover interest due on the $1.0M Note as of such date. Other Promissory Note Issuances In addition to the above transactions, at the start of 2020, the Company was carrying $ 3,190,000 of principal on promissory notes bearing interest at rates ranging from 6.5 % to 18.0 % per annum (the “Existing Notes”). During 2020, the Company (i) raised approximately $ 2,147,000 from the issuance of new promissory notes bearing interest at interest rates of 12.0 % and 15.0 % per annum (the “New 2020 Notes”), (ii) repaid $ 2,100,000 of the Existing Notes, (iii) retired $ 500,000 of the Existing Notes through the issuance of common stock at a conversion price equal to the market price of the Company’s common stock on the conversion date of $ 0.32 per share, and (iv) repaid $ 700,000 of the New 2020 Notes. Accordingly, the remaining balance on the Existing Notes and New 2020 Notes approximated $ 2,037,000 in the aggregate at December 31, 2020. This balance along with accrued interest through the repayment date of approximately $ 200,000 were fully paid down in March 2021 utilizing a portion of the proceeds from the Hadron transaction discussed in Note 13 – Mezzanine Equity . ( 47 ) Debt Maturities As of December 31, 2021, the aggregate scheduled maturities of the Company’s total debt outstanding were: SCHEDULE OF MATURITY TABLES 2022 $ 1,410,222 2023 1,032,523 2024 670,613 2025 717,209 2026 760,988 Thereafter 14,080,474 Total $ 18,672,029 NOTE 12 – DEBENTURES PAYABLE In a series of transactions from the period October 2018 through February 2020, the Company sold an aggregate of $ 21.0 million of convertible debentures (the “$21M Debentures”) to an unaffiliated investor pursuant to an amended securities purchase agreement. The following table as of December 31, 2021 summarizes the purchase dates and selected terms of each debenture agreement that comprised the $21M Debentures: SCHEDULE OF DEBENTURE TRANSACTION Issue Date Maturity Date Initial Principal Interest Rate Issue Discount Warrant Discount Beneficial Conversion Feature 10/17/18 10/16/20 $ 5,000,000 6.0 % 1.0 % $ 457,966 $ 1,554,389 11/07/18 11/06/20 5,000,000 6.0 % 1.0 % 599,867 4,015,515 05/08/19 05/07/21 5,000,000 6.0 % 1.0 % 783,701 2,537,235 06/28/19 06/27/21 2,500,000 0.0 % 7.0 % 145,022 847,745 08/20/19 08/19/21 2,500,000 0.0 % 7.0 % 219,333 850,489 02/21/20 02/20/21 1,000,000 6.5 % 6.5 % 28,021 379,183 As of December 31, 2021, the holder of the $21M Debentures (the “Holder”) had converted all of the $21M Debentures into the Company’s common stock at conversion prices equal to 80.0 % of a calculated average of the daily volume-weighted price preceding the date of conversion. Specifically, over the life of the $21M Debentures, the Holder converted, in several transactions, an aggregate of $ 21.0 million of principal and approximately $ 836,000 of accrued interest into 92,704,035 shares of common stock at conversion prices ranging from $ 0.11 to $ 3.06 per share. Of these conversions, (i) during 2020, an aggregate of $ 9.7 million of principal and approximately $ 365,000 of accrued interest was converted into 77,766,559 shares of common stock at conversion prices ranging from $ 0.11 and $ 0.34 per share, and (ii) during 2021, an aggregate of $ 1.3 million of principal and approximately $ 56,000 of accrued interest was converted into 4,610,645 shares of common stock at a conversion price of $ 0.29 per share. All of the aforementioned conversions were effected in accordance with the terms of the debenture agreements, and therefore the Company was not required to record a gain or loss on such conversions. The conversions were limited in any given month to certain agreed-upon amounts based on the conversion price, and the Holder was also limited from beneficially owning more than 4.99 % of the Company’s outstanding common stock. In conjunction with the issuance of the $21M Debentures, the Company issued the Holder three -year warrants to purchase an aggregate of 1,354,675 shares of the Company’s common stock at exercise prices ranging from $ 0.75 to $ 5.50 per share, of which warrants to purchase 180,000 shares of common stock at an exercise price of $ 0.75 were issued in 2020. The fair value of the warrants of approximately $ 2.2 million was recorded as a discount to the carrying amount of the $21M Debentures and are amortized to interest expense over the respective term of the individual debentures comprising the $21M Debentures. ( 48 ) Based on the conversion prices of the $21M Debentures in relation to the market value of the Company’s common stock, the $21M Debentures provided the Holder with a beneficial conversion feature, as the embedded conversion option was in-the-money on the commitment date. The aggregate intrinsic value of the beneficial conversion feature of approximately $ 10.2 million was recorded as a discount to the carrying amount of the $21M Debentures, and amortized to interest expense over the respective term of the individual debentures comprising the $21M Debentures. During 2020, amortization of the beneficial conversion features, after adjustment for the aforementioned conversions, approximated $ 3.2 million; amortization of the warrant discounts approximated $ 805,000 ; amortization of original issue discounts approximated $ 321,000 ; and interest expense approximated $ 224,000 . At December 31, 2020, the aggregate outstanding principal balance of the $21M Debentures was $ 1.3 million. Also on such date, the unamortized balances of the beneficial conversion features, the warrant discounts, and original issue discounts were approximately $ 177,000 , $ 39,000 , and $ 52,000 , respectively. Accordingly, at December 31, 2020, the carrying value of the $21M Debentures approximated $ 1,032,000 , all of which was current. During 2021, amortization of the beneficial conversion features, after adjustment for the aforementioned conversions, approximated $ 177,000 ; amortization of the warrant discounts approximated $ 39,000 ; amortization of original issue discounts approximated $ 52,000 ; and interest expense approximated $ 1,000 . ( 49 ) NOTE 13 – MEZZANINE EQUITY Series B Convertible Preferred Stock In February 2020, the Company entered into an exchange agreement with two institutional shareholders (the “TIS Exchange Agreement”) whereby the Company (i) exchanged 4,908,333 shares of the Company’s common stock previously acquired by the two institutional shareholders for an equal number of shares of newly designated Series B convertible preferred stock, and (ii) issued the $4.4M Notes previously discussed in Note 11 – Promissory Notes . In connection with the TIS Exchange Agreement, the Company filed (i) a certificate of designation with respect to the rights and preferences of the Series B convertible preferred stock, and (ii) a certificate of elimination to return all shares of the Series A convertible preferred stock, of which no shares were issued or outstanding at the time of filing, to the status of authorized and unissued shares of undesignated preferred stock. The holders of Series B convertible preferred stock (the “Series B Holders”) are entitled to cast the number of votes equal to the number of shares of common stock into which the shares of Series B convertible preferred stock are convertible, together with the holders of common stock as a single class, on most matters. However, the affirmative vote or consent of the Series B Holders voting separately as a class is required for certain acts taken by the Company, including the amendment or repeal of certain charter provisions, liquidation or winding up of the Company, creation of stock senior to the Series B convertible preferred stock, and/or other acts defined in the certificate of designation. The Series B convertible preferred stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the Company’s common stock. The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company unless the Series B Holders then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B convertible preferred stock in an amount calculated pursuant to the certificate of designation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Series B Holders then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of common stock by reason of their ownership thereof, an amount per share equal to $ 3.00 , plus any dividends declared but unpaid thereon, with any remaining assets distributed pro-rata among the holders of the shares of Series B convertible preferred stock and common stock, based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock. At any time on or prior to the six-year anniversary of the issuance date of the Series B convertible preferred stock, (i) the Series B Holders have the option to convert their shares of Series B convertible preferred stock into common stock at a conversion price of $ 3.00 per share, without the payment of additional consideration, and (ii) the Company has the option to convert all, but not less than all, shares of Series B convertible preferred stock into common stock at a conversion price of $3.00 if the daily volume weighted average price of common stock (the “VWAP”) exceeds $4.00 per share for at least twenty consecutive trading days prior to the date on which the Company gives notice of such conversion to the Series B Holders. On the day following the six-year anniversary of the issuance of the Series B convertible preferred stock, all outstanding shares of Series B convertible preferred stock shall automatically convert into common stock as follows: If the sixty-day VWAP is less than or equal to $0.50 per share, the Company shall have the option to (i) convert all shares of Series B convertible preferred stock into common stock at a conversion price of $1.00 per share, and pay cash to the Series B Holders equal to the difference between the 60-day VWAP and $3.00 per share, or (ii) pay cash to the Series B Holders equal to $3.00 per share. If the sixty-day VWAP is greater than $0.50 per share, the Company shall have the option to (i) convert all shares of Series B convertible preferred stock into common stock at a conversion price per share equal to the quotient of $3.00 per share divided by the sixty-day VWAP, or (ii) pay cash to the Series B Holders equal to $3.00 per share, or (iii) convert all shares of Series B convertible preferred stock into common stock at a conversion price per share equal to the sixty-day VWAP per share and pay cash to the Series B Holders at the difference between $3.00 per share and the sixty-day VWAP per share. The Company shall at all times when the Series B convertible preferred stock is outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B convertible preferred stock, such number of its duly authorized shares of common stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B convertible preferred stock. ( 50 ) Series C Convertible Preferred Stock In 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. At the closing of the transaction in March 2021, Hadron purchased $ 23.0 million of Units at a price of $ 3.70 per Unit. Each 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. The fair value of the warrants of approximately $ 9.5 million on the issuance date was allocated to the proceeds and recorded as additional paid-in capital. The Company incurred costs of approximately $ 387,000 relative to the issuance of the aforementioned shares to Hadron which was recorded as a reduction to additional paid-in capital in March 2021. In 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. Of the $ 23.0 million of proceeds received by the Company in March 2021, approximately (i) $ 7.8 million was designated to fund construction and upgrades of certain of the Company’s owned and managed facilities, which was expended in 2021, and (ii) $ 15.2 million was used to pay down debt and obligations, comprised of principal and interest on the $4.4M Notes, the $1.0M Note, the New $3.0M Note, the $5.8M Note, the Existing Notes, the New 2020 Notes (all referred to in Note 11 – Promissory Notes ), and a portion of the Due To Related Parties balance discussed in Note 19 – Related Party Transactions . A portion of the balance of the facility is available to fund the Kind acquisition previously discussed in Note 3 – Acquisitions , provided such acquisition is 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. Provided that as at least 50.0 % 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. The 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. ( 51 ) NOTE 14 – STOCKHOLDERS’ EQUITY Stockholder Resolutions At the Company’s 2021 annual meeting of stockholders in September 2021 (the “Annual Meeting”), stockholders approved an amendment to the Company’s certificate of incorporation increasing the number of authorized shares of common stock from 500,000,000 to 700,000,000 . Also at the Annual Meeting, stockholders approved an amendment to the Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “Plan”) increasing the aggregate number shares reserved for issuance under the Plan from 40,000,000 to 70,000,000 . Undesignated Preferred Stock In February 2020, the Company filed a certificate of elimination to return all shares of formerly designated Series A convertible preferred stock to the status of authorized and unissued shares of undesignated preferred stock. Common Stock In February 2020, pursuant to the TIS Exchange Agreement discussed in Note 13 – Mezzanine Equity , the 4,908,333 shares of common stock exchanged for shares of Series B convertible preferred stock were treated as an increase to treasury stock of $ 14,725,000 ($ 3.00 per share), and then immediately cancelled, thereby reducing treasury stock to zero, with corresponding reductions to common stock of approximately $ 5,000 (the par value of the exchanged common shares) and additional paid-in capital of approximately $ 14,720,000 . In 2021 and 2020, the Company granted 11,374 and 109,210 shares of common stock, respectively, to an employee for services in lieu of salary. The fair value of these shares of approximately $ 9,000 in 2021 and $ 21,000 in 2020 was charged to compensation expense. Of the shares granted in 2020, 11,413 shares, with a fair value of approximately $ 5,000 , were yet to be issued at December 31, 2020, and were included in Common Stock Subscribed But Not Issued on the balance sheet at that date. In 2021, the Company granted 245,217 shares of restricted common stock to three employees. The fair value of these restricted shares of approximately $ 226,000 was charged to compensation expense. No shares of restricted common stock were issued in 2020. In 2021 and 2020, the Company issued 71,691 and 4,400,000 shares of common stock, respectively, to settle obligations of $ 51,000 and approximately $ 699,000 , respectively. Based on the price of the Company’s common stock on the settlement dates, the Company incurred non-cash losses of approximately $ 2,500 in 2021 and $ 45,000 in 2020, which were reflected under Loss On Obligations Settled with Equity on the statement of operations for each period. In 2021, the Company issued (i) 1,125,000 shares of common stock valued at approximately $ 1,016,000 in exchange for consulting services, and (ii) 109,308 shares valued at approximately $ 92,000 to pay for licensing fees. No such services or fees were paid with common stock in 2020. In 2021, 79,815 shares of common stock were returned to the Company from the adjustment of a previously converted debenture. In 2020, 90,000 shares of common stock granted to employees and 1,297,447 shares of common stock issued from the exercise of stock options by a related party, were returned by the holders of such common stock. In 2021, the Company issued 750,000 shares of common stock as part of the purchase price for land and buildings located in Metropolis, IL. No stock was issued to purchased fixed assets in 2020. In 2021 and 2020, the Company issued 11,413 and 3,236,857 shares of common stock, respectively, associated with previously issued subscriptions on common stock with a value of approximately $ 5,000 and $ 1,168,000 , respectively. As previously disclosed in Note 3 – Acquisitions, the Company issued 100,000 shares of common stock as part of the purchase price to acquire the remaining 30.0 % ownership interest of MediTaurus. As previously disclosed in Note 11 – Promissory Notes , the Company issued (i) 1,900,000 shares of common stock in 2020 to extinguish $ 352,000 of principal on the $11.5M Note, (ii) 2,525,596 shares common stock in 2020 upon the conversion of $ 460,050 of principal and interest on the $900k Note, (iii) 1,739,759 shares of common stock in 2020 to retire $ 500,000 of the Existing Notes, (iv) 3,365,972 shares of common stock in 2021 upon the conversion of approximately $ 1,010,000 of principal and interest on the $8.8M Note, (v) 8,033,296 shares of common stock in 2021 upon the conversion of approximately $ 2,812,000 of principal on the $3.2M Note, As previously disclosed in Note 12 – Debentures Payable , the holder of the $21M Debentures converted (i) approximately $ 10.1 million of principal and interest in 2020 into 77,766,559 shares of common stock, and (ii) approximately $ 1.4 million of principal and interest in 2021 into 4,610,645 shares of common stock. As further disclosed in Note 15 – Options , in 2021 and 2020, 277,373 and 550,000 shares of common stock, respectively, were issued in connection with the exercise of stock options. As further disclosed in Note 16 – Warrants , warrants to purchase 980,062 shares of common stock were exercised in 2021. No warrants were exercised in 2020. Common Stock Issuance Obligations At December 31, 2020, the Company was obligated to issue 11,413 shares of common stock, valued at approximately $ 5,000 , in connection with stock grants to an employee. These shares were issued in February 2021. The Company had no such obligation at December 31, 2021. ( 52 ) NOTE 15 – STOCK OPTIONS During 2021, the Company granted three - and five -year options to purchase up to 30,873,921 shares of common stock at exercise prices ranging from $ 0.30 to $ 1.00 per share. The fair value of these options of approximately $ 18,690,000 in the aggregate is being amortized to compensation expense over the respective option vesting periods, of which approximately $ 12,281,000 was amortized in 2021. Additionally, compensation expense in 2021 for options issued in previous years, and continuing to be amortized over their respective vesting periods, approximated $ 235,000 . During 2020, five -year options to purchase up to 4,494,500 shares of common stock were issued to employees at exercise prices ranging from $ 0.14 to $ 0.30 per share. The fair value of these options of approximately $ 501,000 in the aggregate is being amortized to compensation expense over their respective vesting periods, of which approximately $ 282,000 was amortized in 2020. Additionally, compensation expense in 2020 for options issued in previous years, and continuing to be amortized over their respective vesting periods, approximated $ 801,000 . During 2021, options to purchase 496,000 shares of common stock were exercised at prices ranging from $ 0.14 to $ 0.63 per share. Of these exercised options, 325,000 were exercised on a cashless basis with the exercise prices paid via the surrender of 218,627 shares of common stock. During 2019, options to purchase 3,667,499 shares of common stock were exercised at prices ranging from $ 0.8 to $ 0.77 per share. Of these exercised options, 2,167,499 were exercised on a cashless basis with the exercise prices paid via the surrender of 405,691 shares of common stock. During 2021 and 2020, options to purchase 362,000 and 200,000 shares of common stock, respectively, were forfeited or expired, resulting in an aggregate reduction of amortized compensation expense of approximately $ 42,000 in 2021 and $ 113,000 in 2020. Stock options outstanding and exercisable as of December 31, 2021 were: SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE Exercise Price Shares Under Option Remaining Life per Share Outstanding Exercisable in Years $ 0.140 80,000 80,000 3.52 $ 0.149 500,000 500,000 4.00 $ 0.169 200,000 200,000 3.87 $ 0.225 2,000,000 1,437,500 3.86 $ 0.250 50,000 50,000 3.17 $ 0.250 20,000 20,000 3.41 $ 0.250 50,000 25,000 3.82 $ 0.250 800,000 800,000 3.87 $ 0.250 80,000 80,000 3.90 $ 0.300 398,000 398,000 3.25 $ 0.417 900,000 900,000 2.98 $ 0.505 100,000 75,000 4.01 $ 0.505 800,000 300,000 4.03 $ 0.590 15,000 15,000 2.93 $ 0.690 15,000 - 4.92 $ 0.693 500,000 - 4.94 $ 0.700 650,000 50,000 4.92 $ 0.740 520,000 425,625 4.33 $ 0.755 1,050,000 550,000 4.98 $ 0.770 200,000 200,000 1.00 $ 0.800 25,000 - 4.89 $ 0.830 287,000 215,250 4.23 $ 0.830 600,000 150,000 4.41 $ 0.840 878,921 600,000 4.54 $ 0.840 99,000 39,600 4.59 $ 0.850 90,000 41,250 4.45 $ 0.850 72,500 - 4.88 $ 0.870 250,000 - 5.00 $ 0.880 11,550,000 5,925,000 4.52 $ 0.880 15,000 625 4.62 $ 0.880 410,000 - 4.84 $ 0.890 10,000 2,500 4.06 $ 0.892 40,000 20,000 4.05 $ 0.895 25,000 18,750 4.07 $ 0.898 11,250,000 5,625,000 4.75 $ 0.900 50,000 50,000 1.36 $ 0.910 50,000 50,000 0.81 $ 0.920 300,000 18,750 4.51 $ 0.928 500,000 100,000 4.61 $ 0.950 50,000 50,000 1.00 $ 0.970 100,000 75,000 4.45 $ 0.983 145,000 36,250 4.49 $ 0.990 500,000 - 4.72 $ 0.992 300,000 300,000 2.74 $ 1.000 15,000 15,000 2.46 $ 1.000 125,000 125,000 2.84 $ 1.350 100,000 100,000 1.58 $ 1.950 375,000 375,000 1.50 $ 2.320 100,000 100,000 1.69 $ 2.450 2,000,000 2,000,000 0.98 $ 2.500 100,000 100,000 1.65 $ 2.650 200,000 200,000 1.73 $ 2.850 56,250 56,250 0.95 $ 2.850 100,000 100,000 1.95 $ 3.000 25,000 25,000 1.96 $ 3.725 100,000 100,000 1.94 39,821,671 22,720,350 ( 53 ) NOTE 16 – WARRANTS During 2021, the Company issued warrants to Hadron to purchase up to 15,540,540 shares of common stock at an exercise price of $ 1.087 per share, expiring four years from issuance, as part of the Hadron transaction previously discussed in Note 13 – Mezzanine Equity . The fair value of these warrants on the issuance date of approximately $ 9.5 million was allocated to the warrant of the $ 23.0 million of proceeds from the Hadron transaction and recorded in additional paid in capital. Also during 2021, the Company issued warrants to purchase up to 2,100,000 shares of common stock at exercise prices ranging from $ 0.50 to $ 0.83 per share, expiring three and five years from issuance. The fair value of these warrants on their issuance dates approximated $ 1,487,000 in the aggregate which was charged to compensation expense. During 2020, in conjunction with the $21M Debentures discussed in Note 12 – Debentures Payable , the Company issued three -year warrants to purchase up to 180,000 shares of common stock at an exercise price of $ 0.75 per share. Also during 2020, as discussed in Note 11– Promissory Notes, (i) in conjunction with the $8.8M Note, the Company issued three -year warrants to purchase up to 750,000 shares of common stock at an exercise price of $ 0.50 per share, and (ii) in consideration of the Second Extension Agreement, the Company issued four -year warrants to purchase up to 5,000,000 shares of the Company’s common stock at an exercise price of $ 0.25 per share. The fair value of these warrants on their issuance dates approximated $ 639,000 in the aggregate, of which approximately $ 10,000 was amortized to interest expense in the period and the remainder to be amortized over the terms of the respective debt instruments. During 2021, warrants to purchase 1,237,500 shares of common stock were exercised at exercise prices ranging from $ 0.11 to $ 0.55 per share. Of these exercised warrants, 437,500 were exercised on a cashless basis with the exercise prices paid via the surrender of 257,438 shares of common stock. No warrants were exercised in 2020. During 2021, warrants to purchase 6,968,637 shares of common stock with exercise prices ranging from $ 0.90 to $ 5.50 per share were forfeited or expired. During 2020, warrants to purchase 817,939 shares of common stock with exercise prices ranging from $ 0.40 to $ 2.25 per share were forfeited or expired. At December 31, 2021 and 2020, warrants to purchase up to 26,351,571 and 16,917,168 shares of common stock, respectively, were outstanding with exercise prices ranging from $ 0.11 to $ 5.50 per share across both periods. NOTE 17 – REVENUES For the years ended December 31, 2021 and 2020, the Company’s revenues were comprised of the following major categories: SCHEDULE OF REVENUES COMPRISED OF MAJOR CATEGORIES 2021 2020 Product sales - retail $ 82,127,513 $ 28,980,763 Product sales - wholesale 26,118,751 10,419,963 Real estate rentals 6,548,047 6,776,697 Management fees 3,078,925 1,481,897 Supply procurement 2,107,969 1,549,856 Licensing fees 1,482,648 1,684,792 Other 305 1,183 Total revenues $ 121,464,158 $ 50,895,151 For the years ended December 31, 2021 and 2020, revenues from two clients represented 11 % and 20 %, respectively, of total revenues. ( 54 ) NOTE 18 – BAD DEBTS The Company maintains two types of reserves to address uncertain collections of amounts due—an allowance against trade accounts receivable (the “AR Allowance”), and a reserve against cash advanced by the Company to its cannabis-licensed clients for working capital purposes (the WC Reserve”). During 2021, the Company increased (i) the AR Allowance by $ 1,400,000 , as a general reserves against aging receivable balances, and (ii) the WC Reserve by approximately $ 462,000 , to reserve the working capital balance of Harvest. During 2020, the Company increased (i) the AR Allowance by $ 500,000 , which was comprised of increases to the specific allowances against Kind and Harvest receivables of approximately $ 790,000 and $ 76,000 , respectively, offset by a reduction to the general allowance of approximately $ 366,000 , and (ii) the WC Reserve by approximately $ 482,000 , to reserve the working capital balance of Harvest. The increases to the AR Allowance and WC Reserve were charged to Bad Debts on the statement of operations for the year ended December 31, 2020 NOTE 19 – INCOME TAXES At December 31, 2021 and 2020, the Company’s cumulative federal net operating losses were approximately $ 24.0 million and $ 10.6 million, respectively. At December 31, 2021, the Company recorded a provision for income taxes of approximately $ 16.2 million, due in part to the aforementioned impact of Section 280E of the Internal Revenue Code, which prohibits the deduction certain ordinary business expenses. At December 31, 2020, no income tax provision was recorded. The reconciliations between the Company’s effective tax rates and the statutory tax rate for the years ended December 31, 2021 and 2020 were as follows: SCHEDULE OF RECONCILIATION OF INCOME TAXES 2021 2020 U.S federal taxes at the statutory rate 21.0 % 21.0 % State taxes net of federal benefit 16.5 % 46.0 % Section 280E adjustment 14.7 % 43.6 % Stock based compensation 10.5 % 30.0 % Other 0.9 % ( 1.0 )% Valuation allowance 0.0 % ( 93.6 )% Total 63.6 % 46.0 % The approximate income tax effect of the Company’s loss carryforwards and temporary differences at December 31, 2021 and 2020 were as follows: SCHEDULE OF DEFERRED TAX ASSET 2021 2020 Deferred tax assets: Net operating loss carryforwards $ 6,981,492 2,235,987 Allowance for doubtful accounts 11,810,425 11,400,555 Stock compensation 2,556,946 2,758,541 Loss on equity investments 8,632,902 8,629,490 Goodwill writeoffs 1,262,877 1,138,419 Change in fair value of investments 598,957 282,291 Lease payments 170,543 151,936 Reserves 147,982 - Deferred tax liabilities: Depreciation (2,520,188 ) ( 1,717,596 ) Real estate revenue (999,739 ) ( 997,590 ) Net deferred tax asset 28,642,197 23,882,033 Valuation allowance (28,642,197 ) ( 23,882,033 ) Total $ - $ - ( 55 ) Federal net operating losses carryforward indefinitely, subject to an annual limitation of 80 % of taxable income, while state net operating losses expire at various dates beginning in 2031 . These tax attributes are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under IRC Section 382. The Company recorded a valuation allowance against its net deferred tax assets at December 31, 2021 and 2020 due to the uncertainty regarding the realization of such assets. The Company’s assessment of the realization of its deferred tax assets of future periods may differ in light of changing circumstances. The Company files income tax returns in the U.S. federal tax jurisdiction and various state jurisdictions. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended 2017 through 2020. ( 56 ) NOTE 20 – RELATED PARTY TRANSACTIONS Effective July 1, 2021, the Company entered into employment agreements with its CEO, CFO, and COO, expiring in June 2024, that provide for an annual base salary of $ 350,000 , $ 325,000 , and $ 300,000 , respectively, and the ability to receive annual bonuses of up to 75 % of the executive’s annual base salary for each year during the term, based on reaching certain performance goals established by the Company. Pursuant to the agreements, the CEO, CFO, and COO were granted (i) on the effective date, options to purchase up to 5,000,000 , 5,000,000 , and 1,250,000 shares, respectively, of the Company’s common stock, at an exercise price of $ 0.88 per share, that vest over one year and expire in July 2026 , and (ii) in October 2021, options to purchase up to 5,000,000 , 5,000,000 , and 1,250,000 shares, respectively, of the Company’s common stock, at an exercise price of $ 0.90 per share, that vest over one year and expire in September 2026 . Additionally, the agreements (i) provide these officers with additional grants on each anniversary of the effective date of the agreements in the sole discretion of the Company’s Compensation Committee, and contain covenants not to compete, non-solicitation provisions, and termination obligations, among other terms and conditions. In July 2021, the Company granted five -year options to purchase up to 100,000 shares of common stock to each of the Company’s three independent board members at an exercise price of $ 0.88 per share. In December 2021, the CEO and CFO each exercised options to purchase 100,000 shares of common stock on a cashless basis. The exercise price of $ 0.63 per share was paid via the surrender by each individual of 73,256 shares of common stock. Also in this month, an independent board member allowed to expire options to purchase up to 100,000 of commons stock at an exercise price of $ 0.63 per share. In April 2020, the Company issued options to purchase up to 50,000 shares of common stock to its COO, with an exercise price of $ 0.30 per share and expiring three years from grant date. The fair value of these options of approximately $ 6,000 was charged to compensation expense over the annual vesting period. No options were issued to related parties in 2021. In 2020, options to purchase an aggregate of 550,000 shares of common stock were exercised by the Company’s CEO, CFO, and an independent board member at exercise prices of $ 0.13 and $ 0.14 per share. The Company’s corporate offices are leased from an entity in which the Company’s CFO has an investment interest. This lease expires in October 2028 and contains a five-year extension option. In 2021 and 2020, expenses incurred under this lease approximated $ 156,000 in both years. The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s COO. The aggregate purchases from this entity in 2021 and 2020 approximated $ 4.9 million and $ 2.5 million, respectively. The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the Company’s COO and its SVP of Sales under a royalty agreement. This agreement was amended effective January 1, 2021 whereby, among other modifications, the royalty percentage changed from 2.5% on all sales of Betty’s Eddies products to (i) 3.0% and 10.0% of wholesale sales of existing products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively, and (ii) 0.5% and 1.0% of wholesale sales of future developed products within the product line if sold directly by the Company, or licensed by the Company for sale by third-parties, respectively. The aggregate royalties due to this entity in 2021 and 2020 approximated $ 266,000 and $ 615,000 , respectively. In 2021 and 2020, one of the Company’s majority owned subsidiaries paid aggregate distributions of approximately $ 44,000 and $ 30,000 , respectively, to the Company’s CEO and CFO, who own minority equity interests in such subsidiary. In 2021, another of the Company’s majority owned subsidiaries paid distributions of approximately $ 7,000 to a current employee who owns a minority equity interest in such subsidiary. In 2021 and 2020, the Company purchased fixed assets and consulting services of approximately $ 836,000 and $ 938,000 , respectively, in the aggregate from two entities owned by two of the Company’s general managers. In 2021 and 2020, the Company purchased fixed assets of approximately $ 642,000 and $ 182,000 from an entity owned by an employee. The balance of Due To Related Parties at December 31, 2020 of approximately $ 1.2 million was comprised of amounts owed of approximately (i) $ 460,000 to the Company’s CEO, (ii) $ 653,000 to entities owned by the Company’s CEO and CFO, and (iii) $ 45,000 to a stockholder of the Company. All amounts owed were repaid in March 2021. The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the Company’s CEO and CFO. ( 57 ) NOTE 21 – COMMITMENTS AND CONTINGENCIES Lease Commitments The Company is the lessee under six operating leases and four finance leases . These leases contain rent holidays and customary escalations of lease payments for the type of facilities being leased. The Company recognizes rent expense on a straight-line basis over the expected lease term, including cancelable option periods which the Company fully expects to exercise. Certain leases require the payment of property taxes, insurance and/or maintenance costs in addition to the rent payments. The details of the Company’s operating lease agreements are as follows: ● Delaware – 4,000 square feet of retail space in a multi-use building under a five-year lease that expires in April 2027 that the Company has developed into a cannabis dispensary which is subleased to its cannabis-licensed client. ● Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility, and is developing the remaining space into processing facility, subleased to its cannabis-licensed client. The lease expires in March 2030, with an option to extend the term for three additional five-year periods . ● Delaware – a 12,000 square foot premises which the Company developed into a cannabis production facility with offices, and is subleases to its cannabis-licensed client. The lease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term. ● Nevada – 10,000 square feet of an industrial building that the Company has built-out into a cannabis cultivation facility and plans to rent to its cannabis-licensed client under a sublease which will be coterminous with this lease expiring in 2024 . ● Massachusetts – 10,000 square feet of office space which the Company utilizes as its corporate offices under a lease with a related party expiring in 2028 , with an option to extend the term for an additional five-year period. ● Maryland – a 2,700 square foot two-unit apartment under a lease that expires in July 2022 . The Company leases machinery and office equipment under finance leases that expire in February 2022 through June 2024 with such terms being a major part of the economic useful life of the leased property. The components of lease expense for the year ended December 31, 2021 were as follows: SCHEDULE OF COMPONENTS OF LEASE EXPENSE 2021 Operating lease cost $ 1,097,620 Finance lease cost: Amortization of right-of-use assets $ 32,683 Interest on lease liabilities 5,088 Total finance lease cost $ 37,771 The weighted average remaining lease term for operating leases is 7.4 years, and for the finance leases is 2.0 years. The weighted average discount rate used to determine the right-of-use assets and lease liabilities was between 7.5 % to 12 .0% for all leases. Future minimum lease payments as of December 31, 2021 under all non-cancelable leases having an initial or remaining term of more than one year were: SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER ALL NON-CANCELABLE OPERATING LEASES Operating Leases Finance Leases 2021 $ 1,132,909 $ 27,123 2022 1,119,003 23,201 2023 1,049,635 3,229 2024 1,025,054 - 2025 969,584 - Thereafter 2,611,297 - Total lease payments 7,907,482 $ 53,553 Less: imputed interest ( 2,262,546 ) ( 3,975 ) $ 5,644,936 $ 49,578 In November 2021, the Company entered into lease agreements for six retail properties, each with square footage between 4,000 and 6,000 square feet, in the state of Ohio (each an “Ohio Lease” and collectively the “Ohio Leases”). Each Ohio Lease has an initial lease period of eleven months, with a minimum rent of $ 31.00 per square foot which increases 3.0% annually. Should the Company be awarded one or more cannabis licenses by the state of Ohio prior to the end of the initial lease period, it can extend the term of one or more of the Ohio Leases to ten years (with two additional five-year options to extend) upon the payment of $ 50,000 for each extended Ohio Lease, and develop the premises of such extended lease(s) into a cannabis dispensary. As of December 31, 2021, the lease terms of the Ohio Leases were all less than one year, and accordingly the Company was not required to record a right-of-use asset and corresponding lease liability on its balance sheet. The future lease payments of the Ohio Leases are excluded from the table of future minimum lease payments shown above. ( 58 ) Terminated Employment Agreement An employment agreement which commenced in 2012 with Thomas Kidrin, the former CEO of the Company, was terminated by the Company in 2017. Since the termination date, the Company had maintained an accrual of approximately $ 1,043,000 for any amounts that may be owed under this agreement. In July 2019, Mr. Kidrin, also a former director of the Company, filed a complaint in the Massachusetts Superior Court, which alleged the Company failed to pay all wages owed to him and breached the employment agreement, and requested multiple damages, attorney fees, costs, and interest. The Company moved to dismiss certain counts of the complaint and asserted counterclaims against Mr. Kidrin alleging breach of contract, breach of fiduciary duty, money had and received, and unjust enrichment. While the Company’s motion to dismiss was pending, the parties entered into a settlement agreement and general release in August 2021 whereby, among other conditions, (i) Mr. Kidrin’s complaint was dismissed with prejudice, (ii) the Company issued to Mr. Kidrin five-year warrants to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $ 0.50 per share, (iii) the Company irrevocably transferred intangible assets relating to the online virtual worlds business the Company had conducted in early 2014, prior to its pivot into the legal cannabis industry (such assets had zero carrying value on the Company’s balance sheet), and (iv) each party released and discharged the other from all claims, losses, and liabilities. In August 2021, the fair value of the warrants of approximately $ 776,000 was charged to compensation expense, and the Company reversed its accrual of approximately $ 1,043,000 Maryland Litigation As previously disclosed in Note 3 – Acquisitions , the members of Kind had sought to renege on the parties’ original agreement to a partnership/joint venture made in 2016 and subsequent MOU. The Company engaged with the members of Kind in good faith in an attempt to reach updated terms acceptable to both parties, however the members of Kind failed to reciprocate in good faith, resulting in an impasse. Incrementally, both parties through counsel further sought to resolve the impasse, however such initiative resulted in both parties commencing legal proceedings. In November 2019, Kind commenced an action by filing a complaint against the Company 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) (the “Complaint”). The Complaint, as amended, alleges breach of contract, breach of fiduciary duty, unjust enrichment, intentional misrepresentation, rescission, civil conspiracy, and seeking an accounting and declaratory judgment and damages in excess of $ 75,000 (the Court has subsequently dismissed Kind’s claims for declaratory judgment on the lease, rescission of the lease, and civil conspiracy). 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. At the time the Complaint and Counterclaims were filed, both parties, the Company (including its subsidiaries Mari-MD 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 management 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 the Court denied in December 2021, leaving the preliminary injunction order 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. In March 2021, the Kind parties filed motions to modify the preliminary injunction order or, alternatively, for direction from the Court based on Kind’s claim to have terminated the MSA. In September 2021, the court denied the motion to modify the preliminary injunction and granted, in part, the motion for direction, but only with respect to Kind’s request to pay litigation costs. The preliminary injunction remains in full effect, and the Company filed a petition for civil contempt against the Kind parties for interfering with the Company’s management of Kind. The contempt petition is currently pending. On December 31, 2021, the parties to the foregoing Maryland litigation entered into a global Confidential Settlement and Release Agreement, along with the parties to the DiPietro lawsuit (described below). Also on such date, as previously discussed in Note 3 -- Acquisitions in this report, the Company entered into (i) a membership interest purchase agreement with the members of Kind to acquire 100 % of the equity ownership of Kind, and (ii) a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ownership interest Mari-MD and Mia. On January 4, 2022, the Maryland court entered an order staying the litigation and rescheduling the jury trial to October 24, 2022, to November 4, 2022, in the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated. Otherwise, simultaneous with the closing of the transactions contemplated by the Confidential Settlement and Release Agreement , the foregoing Maryland litigation will be dismissed with prejudice, along with the DiPietro lawsuit. In the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated, the Company intends to aggressively prosecute and defend the action. DiPietro Lawsuit In August 2020, Jennifer DiPietro, directly and derivatively on behalf of Mari-MD and Mia, commenced a suit against the Company’s CEO, CFO, and wholly-owned subsidiary MariMed Advisors Inc. (“MMA”), in Suffolk Superior Court, Massachusetts. ( 59 ) In this action, DiPietro, a party to prior ongoing litigation in Maryland involving the Company and Kind as discussed above, brings claims for breach of fiduciary duty, breach of contract, fraud in the inducement, aiding and abetting the alleged breach of fiduciary duty, and also seeks access to books and records and an accounting related to her investments in Mari-MD and Mia. DiPietro seeks unspecified money damages and rescission of her interest in Mari-MD, but not of her investment in Mia, which has provided substantial returns to her as a member. The Company has answered the complaint and MMA filed counterclaims against DiPietro on its own behalf and derivatively on behalf of Mari-MD for breach of her fiduciary duties to each of those entities, and for tortious interference with Mari-MD’s lease and MMA’s management services agreement with Kind. On December 31, 2021, the parties to the foregoing Massachusetts litigation entered into a global Confidential Settlement and Release Agreement, along with the parties to the Maryland lawsuit described above. Because the Massachusetts litigation involves derivative claims, the Massachusetts Superior Court must approve the parties’ proposed dismissal of those claims. The parties to the Massachusetts litigation have filed a joint motion seeking to dismiss the derivative claims. Simultaneous with the closing of the transactions contemplated by the Confidential Settlement and Release Agreement, all direct claims in the foregoing Massachusetts litigation will be dismissed with prejudice, along with the Maryland lawsuit. In the event the transactions contemplated by the Confidential Settlement and Release Agreement are not consummated, the Company believes that the allegations of the complaint in the foregoing Massachusetts litigation 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 Maryland lawsuit. Bankruptcy Claim During 2019, the Company’s MMH subsidiary sold and delivered hemp seed inventory to GenCanna Global Inc., a Kentucky-based cultivator, producer, and distributor of hemp (“GenCanna”). At the time of sale, the Company owned a 33.5 % ownership interest in GenCanna. The Company recorded a related party receivable of approximately $ 29.0 million from the sale, which was fully reserved on December 31, 2019. In February 2020, GenCanna USA, GenCanna’s wholly-owned operating subsidiary, under pressure from certain of its creditors including MGG Investment Group LP, GenCanna’s senior lender (“MGG”), agreed to convert a previously-filed involuntary bankruptcy proceeding with the U.S. Bankruptcy Court in the Eastern District of Kentucky (the “Bankruptcy Court”) into a voluntary Chapter 11 proceeding. In addition, GenCanna and GenCanna USA’s subsidiary, Hemp Kentucky LLC (collectively with GenCanna and GenCanna USA, the “GenCanna Debtors”), filed voluntary petitions under Chapter 11 in the Bankruptcy Court. In May 2020, after an abbreviated solicitation/bid/sale process, the Bankruptcy Court, over numerous objections by creditors and shareholders of the GenCanna Debtors which included the Company, entered an order authorizing the sale of all or substantially all of the assets of the GenCanna Debtors to MGG. After the consummation of the sale of all or substantially all of their assets and business, the GenCanna Debtors n/k/a OGGUSA, Inc. and OGG, Inc. (the “OGGUSA Debtors”) filed their liquidating plan of reorganization (the “Liquidating Plan”) to collect various prepetition payments and commercial claims against third parties, liquidate the remaining assets of the ODDUSA Debtors, and make payments to creditors. The Company and the unsecured creditors committee filed objections to such Liquidating Plan, including opposition to the release of litigation against the OGGUSA Debtors’ senior lender, MGG, for lender liability, equitable subordination, and return of preference. As a part of such plan confirmation process, the OGGUSA Debtors filed various objections to proofs of claims filed by various creditors, including the proof of claim in the amount of approximately $ 33.6 million filed by the Company. Through intense and lengthy negotiations with the OGGUSA Debtors and the unsecured creditors committee regarding the objections to the Liquidating Plan, the Company reached an agreement with the OGGUSA Debtors to withdraw the objections to the Company’s claim and to have it approved by the Bankruptcy Court as a general unsecured claim in the amount of $ 31.0 million. Since the approval of the Liquidating Plan, the OGGUSA Debtors have been in the process of liquidating the remaining assets, negotiating and prosecuting objections to other creditors’ claims, and pursuing the collection of accounts receivable and Chapter 5 bankruptcy avoidance claims. In January 2022, the Company, at the request of the Liquidating Plan administrator for the OGGUSA Debtors, executed a written release of claims, if any, of the Company against Huron Consulting Group (“Huron”), a financial consulting and management company retained by the senior lender of the OGGUSA Debtors to perform loan management services for the lender and OGGUSA Debtors prior to and during their Chapter 11 bankruptcy cases. Such release was executed in connection with a comprehensive settlement agreement between the OGGUSA Debtors and Huron. In consideration for the Company’s execution of the release, Huron paid an additional $ 40,000 to the bankruptcy estates of the OGGUSA Debtors to be included in the funds to be distributed to creditors, including the Company. As of the date of this filing, there is still insufficient information as to what portion, if any, of the Company’s allowed claim will be paid upon the completion of the liquidation of the remaining assets of the OGGUSA Debtors. ( 60 ) NOTE 22 – SUBSEQUENT EVENTS Acquisition In 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 (“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. Property Purchase 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. Upon 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. Return on Investment 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. The shares were received for no consideration, and represent the Company’s pro rata share of additional consideration received by MRSVP pursuant to the asset purchase agreement previously discussed in Note 4 – Investments . Promissory Note Conversion In February 2022, the noteholder of the $3.2M Note converted $ 400,000 of principal into 1,142,858 shares of the Company’s common stock. Such conversion was effected in accordance with the terms of the note agreement, and therefore the Company was not required to record a gain or loss upon conversion. Upon this conversion, the $3.2M Note no longer had an outstanding balance and was fully retired. Cannabis License In February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio, and is awaiting the final verification process to be completed by the state. Equity Transactions Subsequent to December 31, 2021, (i) options to purchase 10,000 shares of common stock were exercised at an exercise price of $ 0.30 per share. ( 61 ) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.