PROMISSORY NOTES

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

PROMISSORY NOTES

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.

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.

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.

Debt Maturities

As of December 31, 2021, the aggregate scheduled maturities of the Company’s total debt outstanding were:

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