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Aug 04, 2023MariMed Sues Nevada Cultivator Over Failed $2.4M Deal
Dec 20, 2023Massachusetts-based multistate operator MariMed (OTCQX: MRMD) is suing a Nevada cultivation company, The Harvest Foundation LLC, claiming the owners lost their state-issued licenses to grow cannabis before a multimillion-dollar sale was finalized.
The suit, which was filed in Massachusetts federal court last week, alleges Harvest owners Larry Lemons and Donnie Burton severely mismanaged the company, leading to the suspension of its licenses by the Nevada Cannabis Compliance Board in 2021. Alleged violations include failure to report facility break-ins, employing underage workers, and negligence in reporting missing cannabis.
MariMed claims it was in the dark about these suspensions during the sale process. It had agreed to purchase Harvest for $2.4 million in stock, a deal that was slow to finalize due to a backlog at the NCCB and delays caused by the COVID-19 pandemic.
“MariMed learned that the NCCB had suspended all of Harvest’s cannabis licenses due to the negligent and willful actions of the defendants in violation of Nevada law,” the lawsuit reads.
As a result of the license suspensions, the NCCB is now selling Harvest’s assets. MariMed is seeking damages for unjust enrichment, promissory estoppel, and fraudulent misrepresentation. The company also demanded the return of the 1 million shares of MariMed stock issued to Lemons and Burton as part of the sale agreement.
Back in 2018, when MariMed was expanding its portfolio of dispensaries and growers nationwide, it brokered a deal with Lemons and Burton to acquire their operation and cannabis license. Each man received half a million shares, valued at $2.45 per share in June 2019. By August 2019, U.S. Securities and Exchange Commission filings showed that the total value of those shares had fallen to $1.2 million, Law360 reported.
MariMed’s common stock price is now hovering around $0.40 cents a share.
According to the suit, Burton and Lemons have refused to return the company shares and have instead attempted to sell them.
MariMed-Mass-lawsuit.pdf