Item 9A. Controls and Procedures
ITEM
9A. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
The
Company’s management, with the participation of its CEO and CFO, evaluated the effectiveness of the Company’s disclosure
controls and procedures (defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2021 (the “Evaluation
Date”). Based upon that evaluation, the CEO and CFO concluded that, as of the Evaluation Date, the Company’s disclosure controls
and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act (i) are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms and (ii) are accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow
timely decisions regarding required disclosure.
Management’s
Annual Report on Internal Control Over Financial Reporting
The
Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting and for
the assessment of the effectiveness of internal control over financial reporting. As defined by the SEC in Rule 13a-15(f) and 15d-15(f)
under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, the CEO and
CFO, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.
The
Company’s internal control system is designed to provide reasonable assurances to its management and the board of directors regarding
the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have
inherent limitations which may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide
only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The
Company’s CEO and CFO assessed the effectiveness of its internal control over financial reporting as of December 31, 2021. In making
this assessment, the CEO and CFO used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) in Internal Control—Integrated Framework . Based on that assessment and using the COSO criteria, the
CEO and CFO have concluded that, as of December 31, 2021, its internal control over financial reporting was not effective due to the
lack of a formalized and complete set of policy and procedure documentation evidencing the Company’s system of internal controls
over financial reporting (“Lack of Formal Documentation”). Such Lack of Formal Documentation is not uncommon in a company
of the Company’s size due to personnel and financial limitations.
The
Company’s management intends to work to remediate the Lack of Formal Documentation, which is expected to include the hiring of
an independent consulting or accounting firm to review and document its internal control system to ensure compliance with COSO. However,
the Company’s financial position could make it difficult for it to implement this remediation.
Changes
in Internal Control over Financial Reporting
Over
the past several years, the Company implemented significant measures to remediate past instances of ineffectiveness of the Company’s
internal control over financial reporting, The remediation measures consisted of the engagement of accounting consultants as needed to
provide expertise on specific areas of the accounting guidance, the hiring of individuals with appropriate experience in internal controls
over financial reporting, and the modification to the Company’s accounting processes and enhancement to the Company’s
financial control. Further, the Company expanded its board of directors to include a majority of independent disinterested directors;
established an audit, compensation, and corporate governance committee of the board of directors; and adopted a formal policy with respect
to related party transactions.
Other
than as described above, there was no change to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f)
or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) that occurred
during the fiscal year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Attestation
Report of the Registered Public Accounting Firm
Pursuant
to rules of the SEC that permit the Company to provide only its management’s report in this annual report on Form 10-K, an attestation
report of the Company’s independent registered public accounting firm regarding internal control over financial reporting is not
included in this Form 10-K.
ITEM
9B. OTHER INFORMATION.
None.
( 62 )
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The
following table sets forth the name, age and position of to the Company’s directors and executive officers. to the Company’s
directors are elected annually and serve until the next annual meeting of stockholders.
Name
Age
Position
Robert Fireman
73
President, Chief Executive Officer, and Chairman
Jon R. Levine
57
Chief Financial Officer, Treasurer, Secretary, and Director
Eva Selhub, M.D. (4) (5)
54
Director
David Allen (1) (5)
67
Director
Edward Gildea (2) (3)
70
Director
(1)
Chairman of the Audit Committee.
(2)
Member of the Audit Committee.
(3)
Chairman of the Compensation
Committee and the Nominating and Corporate Governance Committee.
(4)
Member of the Compensation
Committee.
(5)
Member of the Nominating
and Corporate Governance Committee.
Set
forth below is a brief description of the background and business experience of to the Company’s executive officers and directors:
Robert Fireman has
served as the Company’s president and chief executive officer since 2017 and as a director since its formation.
Mr. Fireman, and is a seasoned executive and an early pioneer and visionary in the cannabis industry. Under his leadership, the Company
has applied for and been awarded legal cannabis licenses in multiple states and has overseen the development of state of the art, regulatory
compliant cannabis cultivation, production, and retail facilities. Mr. Fireman was a founder and director of Consumer Card Marketing,
Inc., a pioneer in the development of retail loyalty marketing programs for the supermarket and drug store industries that was
sold to News America Marketing, a division of News Corp. Mr. Fireman has been a practicing attorney for over 30 years. Mr. Fireman’s
legal acumen and entrepreneurial experience in diverse industries serve as tremendous assets in navigating the Company through the complex,
regulated emerging cannabis industry. In addition, he draws on his experience in direct marketing and loyalty programs, identity security,
hydroponic farming, medical billing, and many other consumer facing applications to benefit the challenges and issues facing the Company’s
growth and success. Mr. Fireman’s experience in the emerging cannabis industry and his professional background make him well-qualified
to serve as chairman of the Company’s board of directors (the “Board”).
Jon
R. Levine has served as the Company’s chief financial officer, treasurer, and secretary since 2017 and has been a director
since 2016. Mr. Levine has over ten years of experience in the cannabis industry. He possesses over 20 years of experience
in commercial real estate development, management, and financial services. Mr. Levine was a partner at Equity Industrial Partners,
a national commercial real estate management group. He also has past experience in banking at US Trust Bank as an asset-based lender,
in the leasing industry with AT&T Financial Services, and with New Court Financial as a senior credit officer.
Mr. Levine’s experience in the cannabis industry and his professional background make him an important part of the Company’s
management team and make him well-qualified to serve as a member of the Board.
Eva
Selhub, M.D. has been a director since September 2019. Dr. Selhub is a board-certified physician, speaker, scientist, executive leadership
and performance coach, consultant in the field of corporate wellness and resilience, and an author. From August 1997 to November 2016,
she served as an instructor and lecturer of medicine at Harvard Medical School. During this period, Dr. Selhub simultaneously held other
positions at Tufts University, Massachusetts General Hospital, as well as other professional healthcare/medical organizations. From October
2006 to October 2017, she was a senior physician at Benson Henry Institute for Mind/Body Medicine at Massachusetts General Hospital.
From August 2016 to present, she has been an adjunct scientist of neuroscience at Jean Mayer USDA Human Nutrition Research Center on
Aging at Tufts University, one of six human nutrition research centers supported by the United States Department of Agriculture. Dr.
Selhub received a Bachelor of Arts degree in anthropology from Tufts University in 1989 and her M.D. degree from Boston University School
of Medicine in 1994. Dr. Selhub’s professional experience and background as a physician, scientist and in mind-body medicine allow
her to make valuable contributions to the Board and provide expertise to serve as one of the Company’s directors.
( 63 )
David Allen has been
a director since June 2019. He brings over 24 years of experience as a director, CEO and CFO of public companies. Mr. Allen
presently serves as Chief Financial Officer of Iconic Brands, Inc. From April 2019 to November 2021, Mr. Allen served as Chief
Financial Officer, board member, and audit committee chair of Iconic Brands, Inc. From May 2018 to April 2019, Mr. Allen served
as Chief Financial Officer of Iconic Brands, Inc. From December 2014 to January 2018, Mr. Allen served as the Chief Financial Officer
of WPCS International, Inc. From 2004 to 2017, Mr. Allen served as Chief Financial Officer of Bailey’s Express, Inc., a privately
held trucking corporation, which filed for Chapter 11 bankruptcy in July 2017. Mr. Allen served as the Chapter 11 Plan Administrator
for the bankruptcy case until December 2020, at which time the proceeding was closed. From June 2006 to June 2013, Mr. Allen served as
the Chief Financial Officer and Executive Vice President of Administration at Converted Organics, Inc., after serving as audit committee
chair of Converted Organics. Mr. Allen is currently an Assistant Professor of Accounting at Southern Connecticut State University (“SCSU”),
a position he has held since 2017. For the 12 years prior, he was an Adjunct Professor of Accounting at SCSU and Western Connecticut
State University. Mr. Allen is a licensed CPA and holds a bachelor’s degree in Accounting and a master’s degree in Taxation
from Bentley College. Mr. Allen’s background as a director, CEO and CFO of public companies allows him to make valuable contributions
to the Board.
Edward Gildea has
been a director since the Company’s formation. Mr. Gildea is currently a partner in the law firm Fisher Broyles LLP,
a position he has held since 2014. From 2006 to 2013, Mr. Gildea was President, Chief Executive Officer, and Chairman of Converted
Organics Inc., a publicly held green technology company that manufactured and sold an organic fertilizer made from recycled food waste.
Mr. Gildea contributes expertise in the areas of mergers & acquisitions, strategic planning, funding, business development,
and executive leadership. Mr. Gildea received a B.A. from The College of the Holy Cross and a J.D. from Suffolk University Law School.
Mr. Gildea’s executive business experience was instrumental in his selection as a member of the Board.
Family
Relationships
None
of the directors or executive officers are related by blood, marriage, or adoption.
Legal
Proceedings
None.
Code
of Ethics
The
Company has adopted a code of ethics (the “Code of Ethics”) that applies to its principal chief executive officer, principal
financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the Code of Ethics
can be found on the Company’s website at https://bit.ly/MRMDethics. The Code of Ethics was designed with the
intent to deter wrongdoing, and to promote the following:
●
Honest and ethical conduct,
including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
●
Full,
fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submit to, the
Commission and in other public communications the Company makes
●
Compliance with applicable
governmental laws, rules and regulations
●
The prompt internal reporting
of violations of the code to an appropriate person or persons identified in the code
●
Accountability for adherence
to the code
( 64 )
Director
Independence
The Board has determined
that Messrs. David Allen and Edward Gildea, and Dr. Eva Selhub are independent and represent a majority of its members. In determining
director independence, the Board applies the independence standards set by the Nasdaq Stock Market (“ NASDAQ ”). In
applying these standards, the Company’s Board considers all transactions with the independent directors and the impact of
such transactions, if any, on any of the independent directors’ ability to continue to serve on the Company’s Board.
Board
Committees
The
Board has three standing committees: an audit committee (the “Audit Committee”), a compensation committee (the “Compensation
Committee”) and a nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”).
Each committee is made up entirely of independent directors as defined under section 5605(a)(2) of the NASDAQ rules. The members of the
Audit Committee are Messrs. Allen and Gildea. Mr. Allen is also the chairman of the Audit Committee and qualifies as the “audit
committee financial expert” pursuant to Item 407(d)(5) of Regulation S-K. The members of the Compensation Committee are Mr. Gildea
and Dr. Selhub, and the members of the Nominating and Corporate Governance Committee are Messrs. Allen and Gildea and Dr. Selhub. Mr.
Gildea is the chairman of both of these committees.
The
Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee have, the responsibilities described
below.
Audit
Committee.
The
Audit Committee oversees the Company’s accounting and financial reporting processes, internal systems of accounting and
financial controls, relationships with auditors and audits of financial statements. Specifically, the Audit Committee’s responsibilities
include the following:
●
selecting, hiring and terminating the Company’s independent
auditors;
●
evaluating the qualifications, independence, and performance of the
Company’s independent auditors;
●
approving the audit and non-audit services to be performed by the independent auditors;
●
reviewing the design, implementation and adequacy and effectiveness
of the Company’s internal controls and critical policies;
●
overseeing and monitoring the integrity of the Company’s
financial statements and its compliance with legal and regulatory requirements as they relate to its financial statements and other
accounting matters;
●
with management and the Company’s independent auditors
reviewing any earnings announcements and other public announcements regarding its results of operations; and
●
preparing the report that the SEC requires in the Company’s
annual proxy statement.
A
copy of the Audit Committee charter is available on the Company’s website at www.marimedinc.com .
Compensation
Committee.
The
Compensation Committee assists the Board in determining the compensation of the Company’s officers and directors. The Compensation
Committee is comprised entirely of directors who satisfy the standards of independence applicable to Compensation Committee members established
under 162(m) of the Code and Section 16(b) of the Securities and Exchange Act of 1934, as amended (the “ Exchange Act ”).
Specific responsibilities include the following:
●
approving the compensation and benefits of its executive officers;
●
reviewing the performance objectives and actual performance of its officers; and
●
administering its stock option and other equity and incentive compensation plans.
( 65 )
Nominating
and Corporate Governance Committee.
The
Nominating and Corporate Governance Committee assists the Board by identifying and recommending individuals qualified to become members
of the Board. Specific responsibilities include the following:
●
evaluating
the composition, size and governance of the Board and its committees and making recommendations regarding future planning and the
appointment of directors to the Company’s committees;
●
establishing a policy for
considering stockholder nominees to the Board;
●
reviewing
the Company’s corporate governance principles and making recommendations to the Board regarding possible changes; and
●
reviewing and monitoring
compliance with the Company’s code of ethics and insider trading policy.
Board
Nominations
Prior
to the establishment of the Nominating and Corporate Governance Committee, the entire Board acted as the nominating committee for the
purposes of identifying and recommending director candidates. The Board was responsible for nominating director candidates for the annual
meeting of stockholders each year and considered director candidates recommended by stockholders. These responsibilities have largely
been assumed by the Nominating and Corporate Governance Committee.
In
considering candidates submitted by stockholders, the Nominating and Corporate Governance Committee will take into consideration the
needs of the Board and the qualifications of the candidate. The Nominating and Corporate Governance Committee may also take into consideration
the number of shares held by the recommending stockholder and the length of time that such shares have been held. To have a candidate
considered by the Nominating and Corporate Governance Committee for recommendation to the Board for nomination as a director candidate,
a stockholder must submit the recommendation in writing and must include the following information: (i) the name of the stockholder and
evidence of the person’s ownership of Company stock, (including the number of shares owned and the length of time of ownership);
(ii) the name of the candidate; (iii) the candidate’s resume or a listing of his or her qualifications to be a director of the
Company; and (iv) the person’s consent to be named as a director if selected and nominated by the Board.
The
information described above must be sent to the Company’s Secretary at 10 Oceana Way, Norwood, Massachusetts 02062, on a timely
basis in order to be considered by the Nominating and Corporate Governance Committee, within the time period prescribed by Rule 14a-8
under the Exchange Act.
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of
the common stock of a company that files reports pursuant to Section 12 of the Exchange Act, are required to report the ownership of
such common stock, options, and stock appreciation rights (other than certain cash-only rights) and any changes in that ownership with
the Commission. Specific due dates for these reports have been established, and the Company is required to report, in this Form
10-K, any failure to comply therewith during the fiscal year ended December 31, 2021 or prior fiscal years.
Other than as set forth
in the Delinquent Section 16(a) Reports section below, the Company believes that all of these filing requirements were satisfied
by its executive officers, directors and by the beneficial owners of more than 10% of the Company’s common stock. In making
this statement, the Company has relied solely on copies of any reporting forms it has received, and upon any written representations
received from reporting persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership) was required to be filed under applicable
rules of the Commission.
Delinquent
Section 16(a) Reports
Each
of Robert Fireman and Jon Levine was not timely in the filing of one Form 4 during the fiscal year ended December 31, 2021 to
report an option exercise in December 2021.
( 66 )
ITEM
11. EXECUTIVE COMPENSATION.
The
following table sets forth the compensation paid by the Company during the fiscal periods ended December 31, 2021 and 2020 to its chief
executive officer and other most highly compensated executive officers whose compensation exceeded $100,000 for the year ended December
31, 2021.
Summary
Compensation Table (1) (2)
Name and principal
position
Year
Salary
Bonus
Stock
Awards
Option
Awards (3)
All Other
Compensation
Total
Robert Fireman
2021
$
250,192
$
-
$
23,000
$
6,253,226
$
-
$
6,526,418
President and CEO
2020
$
31,486
$
-
$
-
$
-
$
-
$
31,486
Jon R. Levine
2021
$
237,981
$
-
$
23,000
$
6,253,226
$
-
$
6,514,207
Chief Financial Officer
2020
$
37,486
$
-
$
-
$
-
$
-
$
37,486
Timothy Shaw
2021
$
223,269
$
-
$
-
$
1,563,307
$
-
$
1,786,576
Chief Operating Officer
2020
$
158,139
$
1,751
$
-
$
5,967
$
-
$
165,857
(1)
The compensation reported
on the table does not include other personal benefits, the total value of which do not exceed $10,000.
(2)
Pursuant to the regulations
promulgated by the SEC, the table omits columns reserved for types of compensation not applicable to us.
(3)
Amounts represent the fair
value of option awards valued on grant date using the Black-Scholes pricing model and recognized over the vesting period for financial
reporting purposes.
Stock
Option Grants
The
following table sets forth information as of December 31, 2021 concerning unexercised options, unvested stock and equity incentive plan
awards for the officers named in the Summary Compensation Table.
Outstanding
Equity Awards at Year Ended December 31, 2021
Name
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Robert Fireman
2,500,000
2,500,000
-
$
0.90
10/01/26
Robert Fireman
2,500,000
2,500,000
-
$
0.88
07/09/26
Jon R. Levine
2,500,000
2,500,000
-
$
0.90
10/01/26
Jon R. Levine
2,500,000
2,500,000
-
$
0.88
07/09/26
Timothy Shaw
625,000
625,000
-
$
0.90
10/01/26
Timothy Shaw
625,000
625,000
-
$
0.88
07/09/26
Timothy Shaw
50,000
-
-
$
0.30
03/31/25
( 67 )
Compensation
of Directors
The
compensation package for each of the three non-employee members of the Board is comprised of an annual grant of stock options to purchase
up to 100,000 shares of the Company’s common stock with a five-year term at an exercise price equal to the fair value the Company’s
common stock on the grant date, and cash compensation of $6,250 per quarter.
The
following table sets forth information concerning the compensation paid to each of to the Company’s non-employee directors during
2021 for their services rendered as directors.
Name
Fees Earned
or Paid in
Cash
Stock
Awards
Option
Awards
(4)
Total
Eva Selhub, M.D. (1)
$ 25,000
$ 0
$ 60,890
$ 85,890
David Allen (2)
$ 25,000
$ 0
$ 60,890
$ 85,890
Edward Gildea (3)
$ 25,000
$ 0
$ 60,890
$ 85,890
(1)
Dr. Selhub held 200,000 stock options at December 31, 2020.
(2)
Mr. Allen held 200,000 stock options at December 31, 2020.
(3)
Mr. Gildea held 300,000 stock options at December 31, 2020.
(4)
Amounts represent the fair value of option awards valued on grant date using the Black-Scholes
pricing model and recognized over the vesting period for financial reporting purposes.
( 68 )
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The
following table sets forth as of March 16, 2022, certain information with respect to the beneficial ownership of common stock by (i)
each of to the Company’s directors and executive officers; (ii) each person known to us who owns beneficially more than 5% of the
common stock; and (iii) all directors and executive officers as a group.
Name and Address of Beneficial Owner (1)
Amount & Nature
of Beneficial
Owner
% of Class (2)
Robert Fireman
28,581,962 (3)
8.40%
Jon R. Levine
31,696,727 (4)
9.32%
Timothy Shaw
11,149,508 (5)
3.31%
Eva Selhub, M.D.
200,000 (6)
*
David Allen
200,000 (6)
*
Edward Gildea
529,391 (7)
*
All directors and executive officers as a group (six persons)
72,357,588 (8)
20.84%
*
Less
than one percent.
(1)
The
business address for each person named is c/o MariMed Inc., 10 Oceana Way, Norwood, MA 02062.
(2)
Calculated
pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934 whereby shares not outstanding which are subject to options,
warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number
and percentage owned by a person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person
listed. The Company believes that each individual or entity named has sole investment and voting power with respect
to the shares of common stock indicated as beneficially owned by them (subject to community property laws where applicable) and except
where otherwise noted. All percentages are determined based on 335,183,206 shares of
common stock outstanding as of March 16, 2022.
(3)
Includes
5,000,000 currently exercisable stock options.
(4)
Includes 5,000,000 currently exercisable stock options
and 6,684,640 shares of common stock held in a trust for the benefit of the Mr. Levine’s children. Mr. Levine’s spouse
is the trustee of the trust. Mr. Levine disclaims beneficial ownership of the 6,684,640 shares held in trust for the purposes of
section 13(d) or 13(g) of the Exchange Act.
(5)
Includes
1,300,000 currently exercisable stock options and 2,000,000 shares of common stock held in a trust for the benefit of Mr. Shaw’s
children. Mr. Shaw’s spouse is the trustee of the trust. Mr. Shaw disclaims beneficial ownership of the 2,000,000 shares held
in the trust for the purposes of section 13(d) or 13(g) of the Exchange Act.
(6)
Includes
200,000 currently exercisable stock options.
(7)
Includes
300,000 currently exercisable stock options
(8)
Includes
12,000,000 currently exercisable stock options
( 69 )
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
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.
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.
( 70 )
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fees
Billed for Audit and Non-Audit Services
The
following table represents the aggregate fees billed for professional audit services rendered by the independent registered public audit
firm of M&K CPAs PLLC for the audit of the annual financial statements for the years ended December 31, 2021 and 2020.
Year Ended December 31,
2021
2020
Audit fees (1)
$ 128,000
$ 97,279
Audit-related fees (2)
-
-
Tax fees (3)
-
-
All other fees (4)
2,500
1,500
Total accounting fees and services
$ 130,500
$ 98,779
(1)
Fees for professional services
for the audit of the Company’s annual financial statements, and for the review of the financial statements included in the
Company’s filings on Form 10-Q, and for services that are normally provided in connection with statutory and regulatory filings
or engagements.
(2)
Fees for assurance and
related services in connection with the performance of the audit or the review of the Company’s financial statements.
(3)
Fees for professional services
with respect to tax compliance, tax advice, and tax planning.
(4)
Fees for permissible work
that does not fall within any of the aforementioned categories of audit fees, audit-related fees, or tax fees.
Pre-Approval
Policy for Audit and Non-Audit Services
The
audit committee pre-approves all audit and non-audit services before an accountant is engaged. All of the services rendered to the Company
by its independent registered public auditors were pre-approved by the audit committee, and prior to the establishment of the audit committee,
by the full board.
( 71 )
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
The
Company has filed the following documents as part of this Form 10-K:
1.
Consolidated Financial Statements
See
Index to Consolidated Financial Statement on page 28.
2.
Financial Statement Schedules
No
financial statement schedules are included because the information is either provided in the consolidated financial statements or is
not required under the related instructions or is inapplicable, and therefore such schedules have been omitted.
3.
Exhibits
Exhibit
No.
Description
3.1
Certificate of Incorporation of the Company (a)
3.1.1
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 9, 2017 (b)
3.1.2
Series B Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on February 27, 2020 (h)
3.1.3
Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 (h)
3.1.4
Series C Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on March 1, 2021 (p)
3.1.5
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on April 25, 2017, effective as of May 1, 2017 (q)
3.1.6
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 24, 2021 (q)
3.2
By-Laws – Restated as Amended (a)
4.1
Amended and Restated Promissory Note, dated February 10, 2020, in the principal amount of $11,500,000, issued by MariMed Hemp Inc. and MariMed Inc. (f)
4.1.1
Promissory Note, dated February 27, 2020, in the principal amount of $3,742,500, issued by MariMed Inc. to Navy Capital Green Fund, LP (h)
4.1.2
Promissory Note, dated February 27, 2020, in the principal amount of $675,000, issued by MariMed Inc. to Navy Capital Green Co-Invest Fund, LLC (h)
4.1.3
12% Convertible Promissory Note, dated April 23, 2020, in the principal amount of $900,000, issued by MariMed Inc. to Best Buds Funding LLC (i)
4.2
Second Amended and Restated Promissory Note, dated June 24, 2020, in the principal amount of $8,811,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (j)
4.3
Common Stock Purchase Warrant, dated June 24, 2020, issued by MariMed Inc.to SYYM LLC (k)
4.4
Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $5,845,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
4.5
Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $3,000,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
( 72 )
4.6
Common Stock Purchase Warrant, dated September 30, 2020, issued by MariMed Inc.to Best Buds Funding, LLC. and/or its designees (m)
4.7
Amended and Restated Common Stock Purchase Warrant, dated March 18, 2021, issued by MariMed Inc. to Hadron Healthcare Master Fund (q)
4.8
Third Amended and Restated Promissory Note, dated April 1, 2021, in the principal amount of $3,211,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (r)
10.1
Amended and Restated 2018 Stock Award and Incentive Plan (d)
10.1.1
Amendment to the Amended and Restated 2018 Stock Award and Incentive Plan, effective as of September 23, 2021 (q)
10.2
Form of Stock Option Agreement, dated September 27, 2019, with each of David R. Allen, Eva Selhub, M.D., and Edward J. Gildea (e)
10.3
Amendment Agreement, dated as of February 10, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (g)
10.4
Exchange Agreement, dated as of February 27, 2020, among MariMed Inc., Navy Capital Green Management, LLC, a Delaware limited liability company, as discretionary investment manager of Navy Capital Green Fund, LP, and Navy Capital Green Co-Invest Fund, LLC. (h)
10.5
Amendment Agreement dated June 24, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (l)
10.6
Note Extension Agreement, effective as of September 30, 2020, among Best Buds Funding LLC, as lender, and each of MariMed Inc., Mari Holdings MD LLC, and MariMed Advisors Inc., as the borrower parties (n)
10.7
Securities Purchase Agreement, dated March 1, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)
10.8
First Amendment to Securities Purchase Agreement, dated March 18, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)
10.9
Amendment Agreement dated April 1, 2021, between SYYM LLC, as noteholder and collateral agent, and MariMed, Inc. and MariMed Hemp, Inc., as co-borrowers (r)
10.10
***
Employment Agreement between MariMed Inc. and Robert Fireman, dated July 9, 2021 (s)
10.11
***
Employment Agreement between MariMed Inc. and Jon R. Levine, dated July 9, 2021 (s)
10.12
***
Employment Agreement between MariMed Inc. and Timothy Shaw, dated July 9, 2021 (s)
10.13
***
Form of the First Amendment to the Employment Agreement, effective as of September 22, 2021, between MariMed Inc. and each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.14
***
Form of Stock Option Agreement, dated July 9, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.15
***
Form
of Stock Option Agreement, dated October 1, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.16
Settlement Agreement and General Release, dated August 19, 2021, between MariMed Inc. and Thomas Kidrin (q)
10.17
Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Inc. and Jennifer DiPietro, Susan Zimmerman and Sophia Leonard-Burns *
10.18
Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Advisors Inc. and Jennifer DiPietro *
21.1
List
of subsidiaries *
( 73 )
23.1
Consent
of M&K CPAS, PLLC, dated March 16, 2022 *
31.1.
Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer *
31.2.
Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer *
32.1.
Section 1350 Certifications of Chief Executive Officer **
32.2.
Section 1350 Certifications of Chief Financial Officer **
101.INS XBRL
Instance Document *
101.SCH XBRL
Taxonomy Extension Schema
*
101.CAL XBRL
Taxonomy Extension Calculation
Linkbase *
101.DEF XBRL
Taxonomy Extension Definition
Linkbase *
101.LAB XBRL
Taxonomy Extension Label
Linkbase *
101.PRE XBRL
Taxonomy Extension Presentation
Linkbase *
104
Cover Page Interactive
Data File (formatted as Inline XBRL and contained in Exhibit 101) *
*
Filed herewith.
**
Furnished herewith in accordance with Item 601 (32)(ii) of Regulation S-K.
***
This exhibit is a management contract or compensatory plan or arrangement.
(a)
Previously filed as an exhibit to
the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011 and incorporated herein by reference.
(b)
Previously filed as an exhibit to the
Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017 and incorporated herein by reference.
(c)
Intentionally omitted.
(d)
Previously filed as Appendix
A of the Company’s Definitive Proxy Statement on Schedule 14A, filed on August 26, 2019 and incorporated herein by reference.
(e)
Previously filed as an exhibit to
the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019 and incorporated herein
by reference.
(f)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(g)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(h)
Previously filed as an exhibit to the
Current Report on Form 8-K filed on February 27, 2020 and incorporated herein by reference.
(i)
Previously filed as an exhibit to
the Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed on May 28, 2020 and incorporated herein by reference.
(j)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(k)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(l)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(m)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(n)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(o)
Previously filed as an exhibit to
the Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 29, 2013 and incorporated herein by reference.
(p)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on March 2, 2021 and incorporated herein by reference.
(q)
Previously filed as an exhibit to
the Quarterly Report on Form 10-Q for the period ended September 30, 2021 filed on November 15, 2021 and incorporated herein by
reference.
(r)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on March 23, 2021 and incorporated herein by reference.
(s)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on July 9, 2021 and incorporated herein by reference.
ITEM
16. FORM 10-K SUMMARY
None.
( 74 )
SIGNATURES
In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated:
March 16, 2022
MARIMED INC.
(Registrant)
By:
/s/ Robert
Fireman
Name:
Robert Fireman
Title:
President and Chief Executive Office
In
accordance with the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature
Title
Date
/s/
Robert Fireman
President and Chief Executive
Officer
March 16, 2022
Robert Fireman
(Principal Executive Officer)
/s/
Jon R. Levine
Chief Financial Officer
March 16, 2022
Jon R. Levine
(Principal Financial Officer)
/s/
Eva Selhub
Director
March 16, 2022
Eva Selhub
/s/
Edward Gildea
Director
March 16, 2022
Edward Gildea
/s/
David Allen
Director
March 16, 2022
David Allen
( 75 )
INDEX
TO EXHIBITS
Exhibit
No.
Description
3.1
Certificate of Incorporation of the Company (a)
3.1.1
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 9, 2017 (b)
3.1.2
Series B Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on February 27, 2020 (h)
3.1.3
Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 (h)
3.1.4
Series C Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on March 1, 2021 (p)
3.1.5
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on April 25, 2017, effective as of May 1, 2017 (q)
3.1.6
Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 24, 2021 (q)
3.2
By-Laws – Restated as Amended (a)
4.1
Amended and Restated Promissory Note, dated February 10, 2020, in the principal amount of $11,500,000, issued by MariMed Hemp Inc. and MariMed Inc. (f)
4.1.1
Promissory Note, dated February 27, 2020, in the principal amount of $3,742,500, issued by MariMed Inc. to Navy Capital Green Fund, LP (h)
4.1.2
Promissory Note, dated February 27, 2020, in the principal amount of $675,000, issued by MariMed Inc. to Navy Capital Green Co-Invest Fund, LLC (h)
4.1.3
12% Convertible Promissory Note, dated April 23, 2020, in the principal amount of $900,000, issued by MariMed Inc. to Best Buds Funding LLC (i)
4.2
Second Amended and Restated Promissory Note, dated June 24, 2020, in the principal amount of $8,811,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (j)
4.3
Common Stock Purchase Warrant, dated June 24, 2020, issued by MariMed Inc.to SYYM LLC (k)
4.4
Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $5,845,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
4.5
Amended and Restated Senior Secured Commercial Promissory Note, dated October 19, 2020, in the principal amount of $3,000,000, issued by MariMed Advisors, Inc. to Best Buds Funding LLC (m)
( 76 )
4.6
Common Stock Purchase Warrant, dated September 30, 2020, issued by MariMed Inc.to Best Buds Funding, LLC. and/or its designees (m)
4.7
Amended and Restated Common Stock Purchase Warrant, dated March 18, 2021, issued by MariMed Inc. to Hadron Healthcare Master Fund (q)
4.8
Third Amended and Restated Promissory Note, dated April 1, 2021, in the principal amount of $3,211,653.84, issued by MariMed Hemp Inc. and MariMed Inc. to SYYM LLC (r)
10.1
Amended and Restated 2018 Stock Award and Incentive Plan (d)
10.1.1
Amendment to the Amended and Restated 2018 Stock Award and Incentive Plan, effective as of September 23, 2021 (q)
10.2
Form of Stock Option Agreement, dated September 27, 2019, with each of David R. Allen, Eva Selhub, M.D., and Edward J. Gildea (e)
10.3
Amendment Agreement, dated as of February 10, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (g)
10.4
Exchange Agreement, dated as of February 27, 2020, among MariMed Inc., Navy Capital Green Management, LLC, a Delaware limited liability company, as discretionary investment manager of Navy Capital Green Fund, LP, and Navy Capital Green Co-Invest Fund, LLC. (h)
10.5
Amendment Agreement dated June 24, 2020, between SYYM LLC, as noteholder and collateral agent, and MariMed Inc. and MariMed Hemp Inc., as co-borrowers (l)
10.6
Note Extension Agreement, effective as of September 30, 2020, among Best Buds Funding LLC, as lender, and each of MariMed Inc., Mari Holdings MD LLC, and MariMed Advisors Inc., as the borrower parties (n)
10.7
Securities Purchase Agreement, dated March 1, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)
10.8
First Amendment to Securities Purchase Agreement, dated March 18, 2021, between MariMed Inc. and Hadron Healthcare Master Fund (q)
10.9
Amendment Agreement dated April 1, 2021, between SYYM LLC, as noteholder and collateral agent, and MariMed, Inc. and MariMed Hemp, Inc., as co-borrowers (r)
10.10
***
Employment Agreement between MariMed Inc. and Robert Fireman, dated July 9, 2021 (s)
10.11
***
Employment Agreement between MariMed Inc. and Jon R. Levine, dated July 9, 2021 (s)
10.12
***
Employment Agreement between MariMed Inc. and Timothy Shaw, dated July 9, 2021 (s)
10.13
***
Form of the First Amendment to the Employment Agreement, effective as of September 22, 2021, between MariMed Inc. and each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.14
***
Form of Stock Option Agreement, dated July 9, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.15
***
Form
of Stock Option Agreement, dated October 1, 2021, with each of Robert Fireman, Jon R. Levine, and Timothy Shaw (q)
10.16
Settlement Agreement and General Release, dated August 19, 2021, between MariMed Inc. and Thomas Kidrin (q)
10.17
Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Inc. and Jennifer DiPietro, Susan Zimmerman and Sophia Leonard-Burns *
10.18
Membership Interest Purchase Agreement, dated December 31, 2021, between MariMed Advisors Inc. and Jennifer DiPietro *
21.1
List
of subsidiaries *
( 77 )
23.1
Consent
of M&K CPAS, PLLC, dated March 16, 2022 *
31.1.
Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer *
31.2.
Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer *
32.1.
Section 1350 Certifications of Chief Executive Officer **
32.2.
Section 1350 Certifications of Chief Financial Officer **
101.INS XBRL
Instance Document *
101.SCH XBRL
Taxonomy Extension Schema
*
101.CAL XBRL
Taxonomy Extension Calculation
Linkbase *
101.DEF XBRL
Taxonomy Extension Definition
Linkbase *
101.LAB XBRL
Taxonomy Extension Label
Linkbase *
101.PRE XBRL
Taxonomy Extension Presentation
Linkbase *
104
Cover Page Interactive
Data File (formatted as Inline XBRL and contained in Exhibit 101) *
*
Filed herewith.
**
Furnished herewith in accordance with Item 601 (32)(ii) of Regulation S-K.
***
This exhibit is a management contract or compensatory plan or arrangement.
(a)
Previously filed as an exhibit to
the Registration Statement on Form 10-12G (File No. 000-54433) filed on June 9, 2011 and incorporated herein by reference.
(b)
Previously filed as an exhibit to the
Annual Report on Form 10-K for the year ended December 31, 2016, filed on April 17, 2017 and incorporated herein by reference.
(c)
Intentionally omitted.
(d)
Previously filed as Appendix
A of the Company’s Definitive Proxy Statement on Schedule 14A, filed on August 26, 2019 and incorporated herein by reference.
(e)
Previously filed as an exhibit to
the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed on November 29, 2019 and incorporated herein
by reference.
(f)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(g)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on February 12, 2020 and incorporated herein by reference.
(h)
Previously filed as an exhibit to the
Current Report on Form 8-K filed on February 27, 2020 and incorporated herein by reference.
(i)
Previously filed as an exhibit to
the Quarterly Report on Form 10-Q for the period ended March 31, 2020, filed on May 28, 2020 and incorporated herein by reference.
(j)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(k)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(l)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on June 30, 2020 and incorporated herein by reference.
(m)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(n)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on October 26, 2020 and incorporated herein by reference.
(o)
Previously filed as an exhibit to
the Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 29, 2013 and incorporated herein by reference.
(p)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on March 2, 2021 and incorporated herein by reference.
(q)
Previously filed as an exhibit to
the Quarterly Report on Form 10-Q for the period ended September 30, 2021 filed on November 15, 2021 and incorporated herein by
reference.
(r)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on March 23, 2021 and incorporated herein by reference.
(s)
Previously filed as an exhibit to
the Current Report on Form 8-K filed on July 9, 2021 and incorporated herein by reference.
( 78 )