UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended ~~September~~June 30, ~~2022~~2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File number 0-54433

MARIMED INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						27-4672745
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

10 Oceana Way

Norwood, MA 02062

(Address of Principal Executive Offices)

~~617-795-5140~~781-277-0007

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class

Ticker symbol(s)

Name of each exchange on which registered

Not Applicable

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer o

Accelerated filer

Non-accelerated filer o

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~November 3, 2022, 339,353,353~~July 28, 2023, 371,614,758 shares of the registrant’s common stock were outstanding.

Table of Contents

MariMed Inc.

Table of Contents


		Page
PART I – FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements		3
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	89
	Notes to Condensed Consolidated Financial Statements (unaudited)	1011
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3134
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	3943
Item 4.	Controls and Procedures	3943

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3944
Item 1A.	Risk Factors	3944
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4044
Item 3.	Defaults Upon Senior Securities	4044
Item 4.	Mine Safety Disclosures	4044
Item 5.	Other Information	4044
Item 6.	Exhibits	4145
Signature		4246

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to MariMed Inc. that is based on the beliefs of MariMed Inc.’s management, as well as assumptions made by and information currently available to the Company. In some cases, you can identify these statements by forward-looking words such as “anticipates,” “believes,” “could,” “should,” “estimates,” “expects,” “intends,” “may,” “plans,” “predicts,” “projects,” “will,” or other similar or comparable words. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. Such statements reflect the current views of the Company with respect to future events, including consummation of pending transactions, launch of new products, expanded distribution of existing products, ~~obtaining~~obtainment of new licenses, estimates and projections of revenue, EBITDA and Adjusted EBITDA and other information about ~~its~~the Company's business, business prospects and strategic growth plan, which are based on certain assumptions of its management, including those described in this Quarterly Report on Form 10-Q. These statements are not a guarantee of future performance and involve risk and uncertainties that are difficult to predict, including, among other factors, changes in demand for the Company’s services and products, changes in the law and its enforcement, timing and outcome of regulatory processes and changes in the economic environment.

Additional important factors that could cause actual results to differ materially from those in these forward-looking statements are also discussed in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Any forward-looking statement made by the Company in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

MariMed Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	11,113	$	29,683	Cash and cash equivalents	$	14,635	$	9,737
Accounts receivable, net		6,560		1,666
Accounts receivable, net of allowances of $4,403 and $4,603 at June 30, 2023 and December 31, 2022, respectively						Accounts receivable, net of allowances of $4,403 and $4,603 at June 30, 2023 and December 31, 2022, respectively	5,509		4,157
Deferred rents receivable	Deferred rents receivable	725		1,678		Deferred rents receivable	667		704
Notes receivable, current portion	Notes receivable, current portion	134		127		Notes receivable, current portion	2,642		2,637
Inventory	Inventory	18,309		9,768		Inventory	24,786		19,477
Investments, current		274		251
Investments, current portion						Investments, current portion	102		123
Due from related parties						Due from related parties	35		29
Other current assets	Other current assets	3,768		1,440		Other current assets	9,541		7,282
Total current assets	Total current assets	40,883		44,613		Total current assets	57,917		44,146
Property and equipment, net	Property and equipment, net	70,396		62,150		Property and equipment, net	78,634		71,641
Intangible assets, net	Intangible assets, net	9,469		162		Intangible assets, net	18,700		14,201
Goodwill	Goodwill	8,079		2,068		Goodwill	11,993		8,079
Notes receivable, net of current		9,160		8,987
Notes receivable, net of current portion						Notes receivable, net of current portion	8,457		7,467
Investments, net of current portion						Investments, net of current portion	89		—
Operating lease right-of-use assets	Operating lease right-of-use assets	4,954		5,081		Operating lease right-of-use assets	9,898		4,931
Finance lease right-of-use assets	Finance lease right-of-use assets	747		46		Finance lease right-of-use assets	2,263		713
Other assets	Other assets	1,010		98		Other assets	1,417		1,024
Total assets	Total assets	$	144,698	$	123,205	Total assets	$	189,368	$	152,202

Liabilities, mezzanine equity and stockholders’ equity	Liabilities, mezzanine equity and stockholders’ equity					Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Term loan						Term loan	$	3,600	$	—
Mortgages and notes payable, current portion	Mortgages and notes payable, current portion	$	2,825	$	1,410	Mortgages and notes payable, current portion	2,050		3,774
Accounts payable	Accounts payable	7,973		5,099		Accounts payable	7,764		6,626
Accrued expenses and other	Accrued expenses and other	3,265		3,149		Accrued expenses and other	3,616		3,091
Income taxes payable	Income taxes payable	11,663		16,467		Income taxes payable	9,615		11,489
Operating lease liabilities, current portion	Operating lease liabilities, current portion	1,284		1,071		Operating lease liabilities, current portion	1,828		1,273
Finance lease liabilities, current portion	Finance lease liabilities, current portion	241		27		Finance lease liabilities, current portion	752		237
Total current liabilities	Total current liabilities	27,251		27,223		Total current liabilities	29,225		26,490
Mortgages and notes payable, net of current		23,048		17,262
Operating lease liabilities, net of current		4,214		4,574
Finance lease liabilities, net of current		483		22
Other liabilities		100		100
Total liabilities		55,096		49,181

Commitments and contingencies

Term loan, net of current portion						Term loan, net of current portion	20,546		—
Mortgages and notes payable, net of current portion						Mortgages and notes payable, net of current portion	26,544		25,943
Operating lease liabilities, net of current portion						Operating lease liabilities, net of current portion	8,631		4,173

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MariMed Inc.

Condensed Consolidated Balance Sheets (continued)

(in thousands, except share and per share amounts)

(unaudited)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at September 30, 2022 and December 31, 2021		14,725		14,725
Series C convertible preferred stock $0.001 par value; 12,432,432 shares authorized; 6,216,216 shares issued and outstanding at September 30, 2022 and December 31, 2021		23,000		23,000
Finance lease liabilities, net of current portion						Finance lease liabilities, net of current portion	1,516		461
Other liabilities						Other liabilities	100		100
Total liabilities						Total liabilities	86,562		57,167

Commitments and contingencies						Commitments and contingencies

Mezzanine equity						Mezzanine equity
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at June 30, 2023 and December 31, 2022						Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at June 30, 2023 and December 31, 2022	14,725		14,725
Series C convertible preferred stock $0.001 par value; 12,432,432 shares authorized; 1,939,608 and 6,216,216 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Series C convertible preferred stock $0.001 par value; 12,432,432 shares authorized; 1,939,608 and 6,216,216 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	7,177		23,000
Total mezzanine equity	Total mezzanine equity	37,725		37,725		Total mezzanine equity	21,902		37,725

Stockholders’ equity	Stockholders’ equity					Stockholders’ equity
Undesignated preferred stock, $0.001 par value; 38,875,451 shares authorized; zero shares issued and outstanding at September 30, 2022 and December 31, 2021		—		—
Common stock, $0.001 par value; 700,000,000 shares authorized; 339,270,387 and 334,030,348 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		339		334
Undesignated preferred stock, $0.001 par value; 32,659,235 shares authorized; zero shares issued and outstanding at June 30, 2023 and December 31, 2022						Undesignated preferred stock, $0.001 par value; 32,659,235 shares authorized; zero shares issued and outstanding at June 30, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value; 700,000,000 shares authorized; 371,614,758 and 341,474,728 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively						Common stock, $0.001 par value; 700,000,000 shares authorized; 371,614,758 and 341,474,728 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	372		341
Common stock subscribed but not issued	Common stock subscribed but not issued	41		—		Common stock subscribed but not issued	—		39
Additional paid-in capital	Additional paid-in capital	141,652		134,920		Additional paid-in capital	167,652		142,365
Accumulated deficit	Accumulated deficit	(88,675)		(97,392)		Accumulated deficit	(85,527)		(83,924)
Noncontrolling interests	Noncontrolling interests	(1,480)		(1,563)		Noncontrolling interests	(1,593)		(1,511)
Total stockholders’ equity	Total stockholders’ equity	51,877		36,299		Total stockholders’ equity	80,904		57,310
Total liabilities, mezzanine equity and stockholders’ equity	Total liabilities, mezzanine equity and stockholders’ equity	$	144,698	$	123,205	Total liabilities, mezzanine equity and stockholders’ equity	$	189,368	$	152,202

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

MariMed Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)


		Three months ended				Nine months ended					Three months ended				Six months ended
		September 30,				September 30,					June 30,				June 30,
		2022		2021		2022		2021			2023		2022		2023		2022

Revenue	Revenue	$	33,912	$	33,208	$	98,180	$	90,420	Revenue	$	36,519	$	32,986	$	70,899	$	64,268
Cost of revenue	Cost of revenue	17,748		15,027		50,035		39,647		Cost of revenue	20,143		17,981		39,135		32,287
Gross profit	Gross profit	16,164		18,181		48,145		50,773		Gross profit	16,376		15,005		31,764		31,981

Operating expenses:	Operating expenses:									Operating expenses:
Personnel	Personnel	3,746		1,481		10,170		5,266		Personnel	5,619		3,382		10,275		6,424
Marketing and promotion	Marketing and promotion	1,402		563		2,854		1,058		Marketing and promotion	1,666		809		2,812		1,452
General and administrative	General and administrative	5,097		9,481		16,890		16,934		General and administrative	5,080		5,565		9,385		11,793
Acquisition-related and other	Acquisition-related and other	143		—		897		—		Acquisition-related and other	425		754		615		754
Bad debt	Bad debt	40		36		54		1,855		Bad debt	39		—		(5)		14
Total operating expenses	Total operating expenses	10,428		11,561		30,865		25,113		Total operating expenses	12,829		10,510		23,082		20,437

Income from operations	Income from operations	5,736		6,620		17,280		25,660		Income from operations	3,547		4,495		8,682		11,544

Interest and other (expense) income:	Interest and other (expense) income:									Interest and other (expense) income:
Interest expense	Interest expense	(518)		(300)		(1,271)		(2,077)		Interest expense	(2,640)		(440)		(5,145)		(753)
Interest income	Interest income	239		26		720		96		Interest income	115		318		214		481
Other (expense) income, net	Other (expense) income, net	(251)		(214)		24		(631)		Other (expense) income, net	(10)		(727)		(910)		275
Total interest and other expense		(530)		(488)		(527)		(2,612)
Total interest and other (expense) income, net										Total interest and other (expense) income, net	(2,535)		(849)		(5,841)		3

Income before income taxes	Income before income taxes	5,206		6,132		16,753		23,048		Income before income taxes	1,012		3,646		2,841		11,547
Provision for income taxes	Provision for income taxes	2,484		4,009		7,894		9,026		Provision for income taxes	1,947		1,750		4,440		5,410

Net income		2,722		2,123		8,859		14,022
Net (loss) income										Net (loss) income	(935)		1,896		(1,599)		6,137
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	16		103		142		289		Less: Net income attributable to noncontrolling interests	23		73		4		126
Net income attributable to common stockholders		$	2,706	$	2,020	$	8,717	$	13,733
Net (loss) income attributable to common stockholders										Net (loss) income attributable to common stockholders	$	(958)	$	1,823	$	(1,603)	$	6,011

Net income per share attributable to common stockholders:
Net (loss) earnings per share attributable to common stockholders:										Net (loss) earnings per share attributable to common stockholders:
Basic	Basic	$	0.01	$	0.01	$	0.03	$	0.04	Basic	$	(0.00)	$	0.01	$	(0.00)	$	0.02
Diluted	Diluted	$	0.01	$	0.01	$	0.02	$	0.04	Diluted	$	(0.00)	$	0.00	$	(0.00)	$	0.02

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	339,025		329,454		337,111		324,340		Basic	361,261		337,497		352,079		336,137
Diluted	Diluted	381,071		378,934		379,868		370,204		Diluted	361,261		379,626		352,079		379,225

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)

Nine months ended September 30, 2022
Common stock Common stock
subscribed but
not issued Additional
paid-in
capital Accumulated
deficit Non-
controlling
interests Total
stockholders’
equity
Shares Par value Shares Amount
Balances at January 1, 2022 334,030,348 $ 334 — $ — $ 134,920 $ (97,392) $ (1,563) $ 36,299
Exercise of stock options 55,000 10 10
Cashless exercise of stock options 200,000 —
Cashless exercise of warrants 234,961 —
Release of shares under stock grants 357,077 —
Common stock subscribed but not issued 74,581 41 41
Shares issued as purchase consideration - business acquisition 2,343,750 3 1,497 1,500
Purchase of minority interests in certain of the Company’s subsidiaries (2,165) 165 (2,000)
Obligations settled with common stock 906,393 1 636 637
Conversion of promissory notes to stock 1,142,858 1 399 400
Distributions to non-controlling interests (224) (224)
Stock-based compensation 6,355 6,355
Net income 8,717 142 8,859
Balances at September 30, 2022 339,270,387 $ 339 74,581 $ 41 $ 141,652 $ (88,675) $ (1,480) $ 51,877

Nine months ended September 30, 2021
Common stock Common stock
subscribed but
not issued Additional
paid-in
capital Accumulated
deficit Non-
controlling
interests Total
stockholders’
equity
Shares Par value Shares Amount
Balances at January 1, 2021 314,418,812 $ 314 11,413 $ 5 $ 112,975 $ (104,617) $ (577) $ 8,100
Issuance of subscribed shares 11,413 (11,413) (5) 5 —
Exercise of stock options 178,885 31 31
Exercise of warrants 980,062 1 92 93
Release of shares under stock grants 152,094 102,204 95 138 233
Issuance of standalone warrants 832 832
Issuance of warrants with stock 655 655
Conversion of debentures payable to equity 4,610,645 5 1,352 1,357
Conversion of promissory notes to equity 10,042,125 10 3,337 3,347
Common stock issued to settle obligations 71,691 54 54
Common stock issued to purchase property and equipment 750,000 1 704 705
Obligations settled with common stock 409,308 1 374 375
Common stock returned to the Company (79,815) (10) (10)
Equity issuance costs (387) (387)
Acquisition of interest in subsidiary 100,000 94 871 (975) (10)
Distributions to non-controlling interests (301) (301)
Stock-based compensation 6,208 6,208
Net income 13,733 289 14,022
Balances at September 30, 2021 331,545,220 $ 332 202,204 $ 189 $ 127,231 $ (90,884) $ (1,564) $ 35,304


	Three months ended June 30, 2023
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at March 31, 2023	348,126,911	$	348	5,025	$	2	$	151,052	$	(84,569)	$	(1,564)	$	65,269
Issuance of subscribed shares	5,025	—		(5,025)	(2)		2		—		—		—

Exercise of stock options	157,752	—		—	—		35		—		—		35


Release of shares under stock grants	349,999	1		—	—		(1)		—		—		—


Conversion of preferred stock to common stock	21,383,040	21		—	—		15,802		—		—		15,823
Purchase of minority interests in certain of the Company’s subsidiaries	450,000	1		—	—		4		—		(5)		—
Common stock issued to settle obligations	400,000	—		—	—		160		—		—		160
Common stock issued under licensing agreement	1,290	—		—	—		—		—		—		—
Common stock issued to purchase property and equipment	740,741	1		—	—		299		—		—		300

Distributions to non-controlling interests	—	—		—	—		—		—		(47)		(47)
Stock-based compensation	—	—		—	—		299		—		—		299
Net loss	—	—		—	—		—		(958)		23		(935)
Balances at June 30, 2023	371,614,758	$	372	—	$	—	$	167,652	$	(85,527)	$	(1,593)	$	80,904


	Six months ended June 30, 2023
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at January 1, 2023	341,474,728	$	341	70,000	$	39	$	142,365	$	(83,924)	$	(1,511)	$	57,310
Issuance of subscribed shares	75,025	—		(70,000)	(39)		41		—		—		2

Exercise of stock options	157,752	—		—	—		35		—		—		35


Release of shares under stock grants	349,999	1		—	—		(1)		—		—		—

Warrants issued in connection with debt	—	—		—	—		5,454		—		—		5,454
Shares issued as purchase consideration - business acquisition	6,580,390	7		—	—		2,987		—		—		2,994
Conversion of preferred stock to common stock	21,383,040	21		—	—		15,802		—		—		15,823
Purchase of minority interests in certain of the Company’s subsidiaries	450,000	1		—	—		4		—		(5)		—
Common stock issued to settle obligations	400,000	—		—	—		160		—		—		160
Common stock issued under licensing agreement	3,083	—		—	—		1		—		—		1
Common stock issued to purchase property and equipment	740,741	1		—	—		299		—		—		300

Distributions to non-controlling interests	—	—		—	—		—		—		(81)		(81)
Stock-based compensation	—	—		—	—		505		—		—		505
Net income	—	—		—	—		—		(1,603)		4		(1,599)
Balances at June 30, 2023	371,614,758	$	372	—	$	—	$	167,652	$	(85,527)	$	(1,593)	$	80,904

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MariMed Inc.

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(in thousands, except share amounts)

(unaudited)


	Three months ended June 30, 2022
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balance at March 31, 2022	335,558,206	$	336	2,717	$	2	$	138,064	$	(93,204)	$	(1,611)	$	43,587

Issuance of subscribed shares	—	—		(2,717)	(2)		2		—		—		—

Cashless exercise of stock options	200,000	—		—	—		—		—		—		—

Cashless exercise of warrants	234,961	—		—	—		—		—		—		—
Release of shares under stock grants	356,938	—		—	—		—		—		—		—
Shares as purchase consideration - business combination	2,343,750	3		—	—		1,497		—		—		1,500
Purchase of minority interests in certain of the Company's subsidiaries	—	—		—	—		(2,165)		—		165		(2,000)











Distributions to non-controlling interests	—	—		—	—		—		—		(83)		(83)
Stock-based compensation	—	—		—	—		2,553		—		—		2,553
Net income	—	—		—	—		—		1,823		73		1,896
Balances at June 30, 2022	338,693,855	$	339	—	$	—	$	139,951	$	(91,381)	$	(1,456)	$	47,453


	Six months ended June 30, 2022
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at January 1, 2022	334,030,348	$	334	—	$	—	$	134,920	$	(97,392)	$	(1,563)	$	36,299


Exercise of stock options	10,000	—		—	—		3		—		—		3
Cashless exercise of stock options	200,000			—	—		—		—		—		—

Cashless exercise of warrants	234,961	—		—	—		—		—		—		—
Release of shares under stock grants	356,938	—		—	—		—		—		—		—
Shares issued as purchase consideration - business combination	2,343,750	3		—	—		1,497		—		—		1,500
Purchase of minority interests in certain of the Company's subsidiaries	—	—					(2,165)		—		165		(2,000)



Conversion of promissory notes to equity	1,142,858	1		—	—		399		—		—		400
Common stock issued to settle obligations	375,000	1		—	—		273		—		—		274





Distributions to non-controlling interests	—	—		—	—		—		—		(184)		(184)
Stock-based compensation	—	—		—	—		5,024		—		—		5,024
Net income	—	—		—	—		—		6,011		126		6,137
Balances at June 30, 2022	338,693,855	$	339	—	$	—	$	139,951	$	(91,381)	$	(1,456)	$	47,453

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


		Nine months ended					Six months ended
		September 30,					June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income attributable to common stockholders		$	8,717	$	13,733
Net (loss) income attributable to common stockholders						Net (loss) income attributable to common stockholders	$	(1,603)	$	6,011
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	142		289		Net income attributable to noncontrolling interests	4		126
Adjustments to reconcile net income to cash provided by operating activities:
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:						Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment	2,469		1,499		Depreciation and amortization of property and equipment	2,247		1,552
Amortization of intangible assets	Amortization of intangible assets	854		518		Amortization of intangible assets	1,337		425
Stock-based compensation	Stock-based compensation	6,396		7,152		Stock-based compensation	505		5,024
Amortization of standalone warrant issuances		—		776
Amortization of warrants attached to debt		—		539
Amortization of beneficial conversion feature		—		177
Amortization of original issue discount		—		52
Bad debt expense		54		1,855

Amortization of original debt issuance discount						Amortization of original debt issuance discount	131		—
Amortization of debt discount						Amortization of debt discount	888		—
Payment-in-kind interest						Payment-in-kind interest	299		—
Present value adjustment of notes payable						Present value adjustment of notes payable	719		—
Bad debt (income) expense						Bad debt (income) expense	(5)		14
Obligations settled with common stock	Obligations settled with common stock	637		375		Obligations settled with common stock	461		274
Loss on obligations settled with equity		—		3
Gain on sale of investment		—		(309)

Write-off of disposed assets						Write-off of disposed assets	906		—
Gain on finance lease adjustment						Gain on finance lease adjustment	(13)		—

Loss on changes in fair value of investments	Loss on changes in fair value of investments	930		937		Loss on changes in fair value of investments	30		679
Other investment income	Other investment income	(954)		—		Other investment income	—		(954)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(4,856)		(3,886)		Accounts receivable, net	(1,449)		(3,554)
Deferred rents receivable	Deferred rents receivable	111		192		Deferred rents receivable	37		99
Inventory	Inventory	(4,215)		(4,163)		Inventory	(5,309)		(1,795)
Other current assets	Other current assets	(1,973)		(1,641)		Other current assets	(1,497)		(1,267)
Other assets	Other assets	(113)		(17)		Other assets	359		(142)
Accounts payable	Accounts payable	2,372		2,098		Accounts payable	1,138		2,024
Accrued expenses and other	Accrued expenses and other	(193)		8,069		Accrued expenses and other	(535)		180
Income taxes payable	Income taxes payable	(4,804)		—		Income taxes payable	(1,874)		(6,467)
Net cash provided by operating activities		5,574		28,248
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(3,224)		2,229

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(9,985)		(14,649)		Purchases of property and equipment	(8,786)		(7,854)
Business acquisitions, net of cash acquired	Business acquisitions, net of cash acquired	(12,746)		—		Business acquisitions, net of cash acquired	(2,987)		(12,746)
Advances toward future business acquisitions	Advances toward future business acquisitions	(800)		—		Advances toward future business acquisitions	(250)		(250)
Purchases of cannabis licenses	Purchases of cannabis licenses	(330)		(638)		Purchases of cannabis licenses	(601)		(330)
Proceeds from sale of investment		—		1,475

Issuance of notes receivable						Issuance of notes receivable	(879)		—
Proceeds from notes receivable	Proceeds from notes receivable	130		407		Proceeds from notes receivable	87		73

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MariMed Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

Nine months ended
September 30,
2022 2021
Net cash used in investing activities (23,731) (13,405)
Cash flows from financing activities:
Proceeds from issuance of preferred stock — 23,000
Equity issuance costs — (387)
Proceeds from issuance of promissory notes — 35
Principal payments of mortgages and promissory notes (1,033) (16,248)
Proceeds from mortgages 3,000 2,700
Proceeds from exercise of stock options 10 31
Proceeds from exercise of warrants — 93
Repayment of loans from related parties — (1,158)
Principal payments of finance leases (166) (26)
Redemption of minority interests (2,000) —
Distributions (224) (301)
Net cash (used in) provided by financing activities (413) 7,739
Net (decrease) increase in cash and cash equivalents (18,570) 22,582
Cash and equivalents, beginning of year 29,683 2,999
Cash and cash equivalents, end of period $ 11,113 $ 25,581
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,120 $ 1,705
Cash paid for income taxes $ 12,582 $ 419
Non-cash activities:
Stock issued as purchase consideration $ 1,500 $ —
Conversion of promissory notes $ 400 $ 3,346
Conversion of debentures payable $ — $ 1,356
Acquisition of interest in subsidiary $ — $ 975
Purchases of property and equipment with stock $ — $ 705
Operating lease right-of-use assets and liabilities $ 378 $ 466
Finance lease right-of-use assets and liabilities $ 781 $ —
Common stock issued to settle obligations $ — $ 51
Return of stock $ — $ 10
Issuance of common stock associated with subscriptions $ — $ 5
Cashless exercise of warrants $ 235 $ 180
Cashless exercise of stock options $ 200 $ 53


	Six months ended
	June 30,
	2023		2022
Due from related party	(6)		—

Net cash used in investing activities	(13,422)		(21,107)

Cash flows from financing activities:
Proceeds from term loan	29,100		—



Principal payments of term loan	(600)		—
Principal payments of mortgages and promissory notes	(429)		(611)
Repayment and retirement of mortgage	(778)		—
Repayment and retirement of promissory notes	(5,503)		—

Proceeds from exercise of stock options	35		3


Principal payments of finance leases	(200)		(102)
Redemption of minority interests	—		(2,000)
Distributions	(81)		(184)
Net cash provided by (used in) financing activities	21,544		(2,894)

Net increase (decrease) in cash and cash equivalents	4,898		(21,772)
Cash and equivalents, beginning of year	9,737		29,683
Cash and cash equivalents, end of period	$	14,635	$	7,911

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,741	$	647
Cash paid for income taxes	$	6,301	$	11,877

Non-cash activities:
Common stock issued as purchase consideration	$	2,994	$	1,500
Common stock issued to purchase minority interests in certain of the Company's subsidiaries	$	5	$	—
Conversion of promissory notes to equity	$	—	$	400

Present value of promissory note issued as purchase consideration	$	4,569	$	—
Warrants to purchase common stock issued with debt	$	5,454	$	—

Note payable issued to purchase motor vehicle	$	109	$	—

Entry into new operating leases	$	5,366	$	322
Entry into new finance leases	$	1,765	$	519


Issuance of common stock associated with subscriptions	$	41	$	—
Conversion of preferred stock to common stock	$	15,823	$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

910

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MariMed Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) BASIS OF PRESENTATION

Business

MariMed Inc. (“MariMed” or the “Company”) is a multi-state operator in the United States cannabis industry. MariMed develops, operates, manages and optimizes state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medical and adult use cannabis. MariMed also licenses its proprietary brands of cannabis, ~~and hemp-infused products,~~ along with other top brands, in domestic markets.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

On March 9, 2023 (the "Ermont Acquisition Date"), the Company acquired the operating assets of Ermont, Inc. ("Ermont"), a medical-licensed vertical cannabis operator located in Quincy, Massachusetts (the "Ermont Acquisition"). The financial results of Ermont are included in the Company's condensed consolidated financial statements since the Ermont Acquisition Date.

On April 27, 2022 (the “Kind Acquisition Date”), the Company acquired Kind Therapeutics USA (“Kind”), the Company's former client in Maryland that holds licenses for the cultivation, production and dispensing of medical cannabis (the "Kind Acquisition"). The financial results of Kind are included in the Company’s condensed consolidated financial statements for the periods subsequent to the Kind Acquisition Date.

The Company completed two acquisitions during the year ended December 31, 2022 that it recorded as asset purchases. On May 5, 2022 (the "Green Growth Acquisition Date"), the Company completed the acquisition of 100% of the equity of Green Growth Group Inc. ("Green Growth"), an entity that holds a craft cultivation and production cannabis license in Illinois (the "Green Growth Acquisition"). On December 30, 2022 (the "Greenhouse Naturals Acquisition Date"), the Company completed an asset purchase under which it acquired a cannabis license and assumed a property lease for a dispensary in Beverly, Massachusetts that had never been operational.

Interim results are not necessarily indicative of results for the full fiscal year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the “Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~16, 2022.~~

~~Certain reclassifications, not affecting previously reported net income or cash flows, have been made to the previously issued financial statements to conform to the current period presentation.~~3, 2023.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements ~~included~~ in the Annual Report. There were no material changes to the Company's significant accounting policies during the ~~three- or nine-month periods~~six-month period ended ~~September~~June 30, ~~2022.~~2023.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of MariMed and its wholly- and majority-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Noncontrolling interests represent third-party minority ownership interests in the Company’s majority-owned consolidated subsidiaries. Net income attributable to noncontrolling interests is reported in the condensed consolidated statements of operations, and the value of minority-owned interests is presented as a component of equity within the condensed consolidated balance sheets.

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Use of Estimates and Judgments

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenue and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements include accounting for business combinations and asset purchases, inventory valuations, assumptions used to determine the fair value of stock-based compensation, and intangible assets and goodwill. Actual results could differ from those estimates.

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Cash and 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.

~~The~~At each of June 30, 2023 and December 31, 2022, the Company had $0.1 million of cash held in ~~escrow at September 30, 2022. At December 31, 2021, the Company had cash of $5.1 million held in escrow, of which $5.0 million was an escrow deposit in connection with the acquisition of Kind.~~escrow.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments approximate their fair values and include cash equivalents, accounts receivable, deferred rents receivable, notes receivable, term loans, mortgages and notes payable, and accounts payable.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tier fair value hierarchy is based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

•Level 1. Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

•Level 2. Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).

•Level 3. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, Accounting Standards Updates (“ASUs”) and does not believe that the future adoption of any such ASUs will have a material impact on its financial condition or results of operations.

(2) ~~ACQUISITIONS~~BUSINESS COMBINATIONS AND ASSET PURCHASES

Business Combinations

Ermont

On February 21, 2023, the Company announced its intention to acquire the operating assets of Ermont, a medical licensed vertical cannabis operator, located in Quincy, Massachusetts, subject to approval by the Massachusetts Cannabis Control Commission (the "CCC"). In March 2023, the CCC approved the Company's acquisition of Ermont, and the Ermont Acquisition was completed on March 9, 2023. The Ermont Acquisition provided the Company with its third dispensary in Massachusetts, substantially completing its build-out to the maximum allowable by state regulations.

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As consideration for the Ermont Acquisition, which totaled $13.0 million, the Company paid $3.0 million of cash, issued 6,580,390 shares of the Company's common stock, and issued a $7.0 million promissory note (the "Ermont Note" and collectively, the "Ermont Consideration"). The Ermont Note has a six-year term and bears interest at 6.0% per annum, with payments of interest-only for two years and thereafter, quarterly payments of principal and interest in arrears. The outstanding balance on the Ermont Note is due and payable in full if and when the Company raises $75.0 million of equity capital.

The Company rebranded the dispensary as Panacea Wellness Dispensary and commenced medical sales immediately after the Ermont Acquisition Date. The Ermont Acquisition also includes a Host Community Agreement with the city of Quincy to conduct adult-use cannabis sales. The Company expects to commence adult-use sales upon approval by the CCC. The Company also plans to expand the existing medical dispensary to accommodate expected increased traffic associated with adult-use sales and to repurpose Ermont's existing cultivation facility for its pheno-hunting activities. The Company has moved its pheno-hunting out of the New Bedford facility to use the freed space to cultivate its Nature's Heritage flower.

The Company's condensed consolidated statement of operations for the three months ended June 30, 2023 includes $1.1 million of revenue and $1.1 million of net loss attributable to Ermont. The Company's condensed consolidated statement of operations for the six months ended June 30, 2023 includes $1.4 million of revenue and $1.2 million of net loss attributable to Ermont for the period since the Ermont Acquisition Date.

The Ermont Acquisition has been accounted for as a business combination. The Company did not assume any of Ermont's liabilities. A summary of the preliminary allocation of the Ermont Consideration to the acquired and identifiable intangible assets is as follows (in thousands):


Fair value of consideration transferred:
Cash consideration:
Cash paid	$	3,000
Less cash acquired	(13)
Net cash consideration	2,987
Common stock	2,994
Promissory note	4,569
Total fair value of consideration	$	10,550


Fair value of assets acquired and (liabilities assumed):

Property and equipment	$	800
Intangible assets:
Tradename and trademarks	1,063
Customer base	4,642
License	131

Goodwill	3,914

Fair value of net assets acquired	$	10,550

The Company is amortizing the identifiable intangible assets arising from the Ermont Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 10.71 years (see Note 9). Goodwill results from assets not separately identifiable as part of the transaction, and is not deductible for tax purposes.

Kind

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 $13.5 million payable in cash (subject to certain adjustments) and $6.5 million, payable by the issuance of four-year 6.0% promissory notes to the members of Kind, secured by a first priority lien on the Company’s property in Hagerstown, MDMaryland (collectively, the “Kind Consideration”). Kind was the Company's client in Maryland that held licenses for the cultivation, production and dispensing of medical cannabis. Upon execution of the membership interest purchase agreement, the Company ~~had~~ deposited $5.0 million into escrow as a contract down payment.

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In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the ~~acquisition~~Kind Acquisition was completed on ~~the Kind Acquisition Date (the “Kind Acquisition”).~~April 27, 2022. Following the Kind Acquisition, litigation between the Company and the members of Kind was dismissed (see Note 18).

The ~~Company believes that the Kind Acquisition allows it to expand its operations into the Maryland cannabis industry and marketplace.~~

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~~The~~ Kind Acquisition has been accounted for as a business combination and the financial results of Kind have been included in the Company’s condensed consolidated financial statement for the periods subsequent to the Kind Acquisition Date. The Company’s financial results for the three months ended September 30, 2022 include $2.6 million of revenue and a net loss of $0.2 million attributable to Kind. The Company's financial results for the nine months ended September 30, 2022 include $4.3 million of revenue and a net loss of $0.5 million attributable to Kind.combination. A summary of the ~~preliminary~~final allocation of the Kind Consideration to the acquired assets, identifiable intangible assets and certain assumed liabilities is as follows (in thousands):


Fair value of consideration transferred:
Cash consideration:
Cash paid at closing	$	10,128
Release of escrow	2,444
Severance paid from escrow	556
Less cash acquired	(2,310)
Net cash consideration	10,818
Note payable	5,634
Write-off accounts receivable	658
Write-off of deferred accounts receivable	842
Total fair value of consideration transferred	$	17,952


Fair value of assets acquired and (liabilities assumed):
Current assets, net of cash acquired	$	5,047
Property and equipment	622
Intangible assets:
Tradename and trademarks	2,041
Licenses and customer base	4,700
Non-compete agreements	42
Goodwill	6,011
Current liabilities	(511)
Fair value of net assets acquired	$	17,952

The Company is amortizing the identifiable intangible assets arising from the Kind Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 5.77 years (see Note 9). Goodwill results from assets not separately identifiable as part of the transaction, and is not deductible for tax purposes.

Concurrent with entering into the Kind membership purchase agreement, 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, Maryland and Annapolis, Maryland, and (ii) Mia Development LLC (“Mia”), the Company’s majority-owned subsidiary that owns production and retail cannabis facilities in Wilmington, Delaware. Upon the dismissal in September 2022 of the derivative claims in the DiPietro lawsuit (see Note 18), the Company paid the aggregate purchase consideration of $2.0 million, and the transaction was completed, increasing the Company’s then-current ownership of Mari-MD and Mia to 99.7% and 94.3%, respectively.

The following unaudited pro forma information presents the condensed combined results of MariMed and Kind for the year ended December 31, 2022 as if the Kind Acquisition had been completed on January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the Kind Acquisition. These pro forma adjustments include the reversal of MariMed revenue and related cost of sales derived from Kind prior to the Kind Acquisition Date, amortization expense for the acquired intangible assets, depreciation expense for property and equipment acquired by MariMed as part of the Kind Acquisition, and interest expense related to the Kind Notes. Pro forma adjustments also include the elimination of acquisition-related and other expenses directly attributable to the Kind Acquisition incurred during the year ended December 31, 2022.

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The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of MariMed and Kind. Accordingly, these unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined companies that would have been achieved had the Kind Acquisition occurred at January 1, 2022, nor are they intended to represent or be indicative of future results of operations. The pro forma financial results for the year ended December 31, 2022, giving effect to the Kind Acquisition as if it had occurred at January 1, 2021 are as follows (unaudited, in thousands):





Revenue	$	136,078
Net income	$	15,823

Valuation of Acquired Intangible Assets

The valuation of ~~the~~ acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company ~~used~~uses an income approach to value ~~the~~ acquired tradename/trademarks, licenses/customer base, and non-compete intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of new markets, products and customers and its outcome through key assumptions driving asset values, including sales growth, royalty rates and other related costs.

The Company is amortizing the identifiable intangible assets arising from the Kind Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 5.77 years (see Note 9). Goodwill results from assets that are not separately identifiable as part of the transaction and is not deductible for tax purposes.

Concurrent with entering into the Kind membership purchase agreement, 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. Upon the dismissal in September 2022 of the derivative claims in the DiPietro lawsuit (see Note 18), the Company paid the aggregate purchase consideration of $2.0 million, and the transaction was completed, increasing the Company’s ownership of Mari-MD and Mia to 99.7% and 94.3%, respectively.Asset Purchases

Green Growth ~~Group Inc.~~

In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the equity ownership of Green Growth Group Inc. (“Green Growth”), an entity that holds a craft cultivation and production cannabis license issued by the

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Illinois Department of Agriculture, in exchange for cash of $1.9 million and shares of the Company’s common stock valued at $1.5 million. Concurrently, the Company made a good faith deposit of ~~$100,000.~~$0.1 million.

In April 2022, the Illinois Department of Agriculture approved the Company’s acquisition of Green Growth, and the ~~purchase transaction (the “Green~~Green Growth ~~Acquisition”)~~Acquisition was completed on May 5, ~~2022 (the “Green Growth Acquisition Date”).~~2022. The Company paid the remaining $1.8 million in cash and issued 2,343,750 shares of common stock to the sellers on the Green Growth Acquisition Date. With this license, the Company can cultivate up to 14,000 square feet of canopy to grow cannabis ~~flowers~~flower and produce cannabis concentrates. The Company believes that the acquisition of this cannabis license will allow it to be vertically integrated in Illinois by growing cannabis and producing cannabis products that can be distributed and sold at the Company-owned Thrive dispensaries and sold into the robust Illinois wholesale cannabis marketplace.

The Company has allocated the purchase price to its licenses/customer base intangible asset, on a preliminary basis. The Company recorded approximately $85,000 and $142,000 of amortization expense in the three and nine months ended September 30, 2022, respectively, for the intangible asset acquired based onwith an estimated ~~ten-year~~useful life ~~for such asset.~~of ten years.

~~Meditaurus LLC~~

In 2019, the Company had acquired a 70.0% ownership interest in Meditaurus in exchange for stock and cash aggregating $2.8 million. In September 2021, the Company acquired the remaining 30.0% ownership interest of Meditaurus LLC, a developer of CBD products sold under the Florance brand name (“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 on the date such interest was acquired, and as there was no change in control of Meditaurus from this transaction, the resulting gain on bargain purchase was recognized in Additional paid-in capital in the condensed consolidated balance sheet. As part of this transaction, the initial purchase agreement was amended, eliminating all future license fees and payments to the prior owners of Meditaurus. The Company has discontinued sales of its Meditaurus products.

~~Pending Transactions~~

~~Beverly Asset Purchase~~Greenhouse Naturals

In November 2021, the Company entered into an asset purchase agreement with Greenhouse Naturals LLC (the "Greenhouse Naturals Sellers") to acquire the cannabis license and assume the property lease ~~and other assets and rights of, and to assume certain liabilities and operating obligations~~ associated with a cannabis dispensary ~~that had been operating~~ in Beverly, MA.

The ~~purchase price is comprised~~Greenhouse Naturals Acquisition was completed on December 30, 2022, on which date the Company paid $0.1 million of cash and issued 2,000,000 shares of the ~~Company’s~~Company's common stock, ~~and $5.1~~with a fair value of $0.7 million, ~~in cash, with~~to the Greenhouse Naturals Sellers. The Company issued a note to the Greenhouse Naturals Sellers for the remaining $5.0 million of the cash ~~amount to be paid~~purchase price payable post-closing on a monthly basis as a percentage of the ~~business’~~dispensary's monthly gross ~~sales.~~

sales (the "Greenhouse Naturals Note"). The ~~purchase was contingent upon~~Company has recorded the ~~approval~~Greenhouse Naturals Note at present value of $4.3 million. The difference between the face value of the ~~Massachusetts Cannabis Control Commission (the "State") for a license~~Greenhouse Naturals Note and the ~~city transfer~~net present value recorded will be amortized to interest expense over the term of ~~the host community agreement to MariMed.~~such note. The ~~State has approved the transfer but the Company has not yet received approval of the host community agreement transfer. Upon~~ final inspection by the ~~State,~~Commonwealth of Massachusetts was completed in April 2023, and the Company opened the dispensary ~~will be able to open.~~on April 25, 2023. The Company ~~expects this~~has allocated the purchase price to ~~occur in early 2023. Concurrent with the execution~~a licenses/customer base intangible asset, which has an estimated useful life of this agreement, the parties entered into a consulting agreement under which the Company provides certain oversight services related to the development, staffing, and operation of the business in exchange for a monthly fee.10 years.

~~The Harvest Foundation~~Pending Transactions

Allgreens Dispensary, LLC ("Allgreens")

In ~~2019,~~August 2022, the Company entered into ~~a purchase~~an agreement to ~~acquire~~purchase 100% of the ~~ownership~~membership interests ~~of The Harvest Foundation~~in Allgreens Dispensary, LLC ~~(“Harvest”~~(the "Allgreens Agreement"), ~~the holder of~~ a conditional adult-use cannabis ~~cultivation~~dispensary license in ~~the state of Nevada. The acquisition is conditioned upon state regulatory approval of the transaction and other closing conditions. The regulatory approval process~~Illinois for license transfers in Nevada has experienced significant delays as a result of multiple factors including the impact of Covid. Additionally, the progress of this acquisition has been delayed as a result of actions taken by the Nevada Cannabis Control Board (“CCB”) relating to regulatory operating violations by Harvest and its current ownership. Harvest is in process of negotiating a settlement with the CCB to resolve these violations which will allow it to proceed with the sale. In October 2022, the CCB issued an order approving the placement of a receiver to oversee Harvest and its licenses. This followed the motion of a creditor of Harvest for such appointment which was granted by the Eighth Judicial District Court, Clark County Nevada, subject to CCB approval. The Company has had exchanges with the receiver in connection with$2.25

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~~potentially moving forward with the acquisition. The Company is monitoring the status~~million of ~~Harvest matters which will require adjustments to the terms~~cash. Completion of the ~~purchase agreement if the Company determines to proceed with the acquisition.~~

~~The original purchase agreement provided for a purchase price comprised~~acquisition is dependent upon certain conditions, including resolution of the issuance of (i) 1,000,000 shares of the Company’s common stock in the aggregate to the two owners of Harvest, which were issued as a good faith deposit 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 toany remaining legal challenges affecting nearly 200 social equity dispensary licenses, and regulatory approval of the ~~transaction, which have not been issued, and (iii) warrants to purchase 400,000 shares of the Company’s common stock at an exercise price equal to~~acquisition. If the closing ~~price of~~conditions are met and the ~~Company’s common stock on the day prior to regulatory approval of the transaction,~~acquisition is completed, which ~~have not been issued. The issued shares were recorded at par value. Such shares are restricted and are to be returned to~~ the Company expects to occur in 2023, the ~~event the transaction does not close.~~Company would have five adult-use dispensaries operating in Illinois.

IfPursuant to the Allgreens Agreement, the Company ~~determines~~has made payments aggregating $0.5 million to ~~proceed~~the Allgreens members, with additional cash payments aggregating $1.75 million to be made as specific milestones are reached. The Company will issue promissory notes for the final payment of $1.0 million, which will be issued at closing (the "Allgreens Notes"). The Allgreens Notes will mature one year from the date the dispensary may begin operating.

Robust Missouri Process and Manufacturing, LLC ("Robust")

In September 2022, the Company entered into an agreement to acquire 100% of the membership interests in Robust Missouri Processing and Manufacturing 1, LLC (the "Robust Agreement"), a Missouri wholesale and cultivator, for $0.7 million of cash. Completion of the acquisition ~~on terms acceptable~~is dependent upon obtaining all requisite approvals from the Missouri Department of Health and Senior Services, which is expected to ~~it, upon CCB approval~~occur in 2023. Pursuant to

the Robust Agreement, the Company has made an initial advance payment of ~~the transfer, and the fulfillment of other closing conditions, if achieved, the ownership of Harvest will be transferred~~$350,000 to the ~~Company, and the operations~~Robust members, with an additional payment of ~~Harvest will begin~~$350,000 to be consolidated into the Company’s financial statements. There is no assurance that the Company will determine to proceed with the acquisition of Harvest, and if it does, that the closing conditions to the Company’s acquisition of Harvest, including regulatory approval, will be achieved or that the acquisition will be consummated.made at closing.

(3) EARNINGS (LOSS) PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period. ~~Diluted~~For periods in which the Company reports net ~~earnings~~income, diluted net income per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period, unless the effect is antidilutive.

The ~~calculations~~number of shares used to compute ~~net~~ earnings (loss) per share were as follows (in thousands):


		Three months ended		Nine months ended			Three months ended		Six months ended
		September 30, 2022	September 30, 2021	September 30, 2022	September 30, 2021		June 30, 2023	June 30, 2022	June 30, 2023	June 30, 2022
Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	339,025	329,454	337,111	324,340	Weighted average shares outstanding - basic	361,261	337,497	352,079	336,137
Potential dilutive common shares	Potential dilutive common shares	42,046	49,480	42,757	45,864	Potential dilutive common shares	—	42,129	—	43,088
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	381,071	378,934	379,868	370,204	Weighted average shares outstanding - diluted	361,261	379,626	352,079	379,225

(4) DEFERRED RENTS RECEIVABLE

The Company is the lessor under operating leases, which contain escalating rents over time, rent ~~holidays,~~holidays; options to ~~renew,~~renew; requirements to pay property ~~taxes,~~taxes; insurance and/or maintenance ~~costs,~~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 in Deferred rents receivable in the condensed consolidated balance sheets. Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.

The Company ~~leases~~is the lessor of the following owned properties:

•Delaware – a 45,000 square foot cannabis cultivation, processing, and dispensary facility, which is leased to its cannabis-licensed client under a triple net lease that expires in 2035.

•Maryland – a 180,000 square foot cultivation and processing facility that expires in 2037. This facility ~~had been~~was leased to Kind prior to the Kind Acquisition Date.

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•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 (the "Tenant") under a lease that ~~expires~~expired in February 2023. The Tenant currently continues to occupy this space on a month-to-month basis.

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The Company ~~subleases~~is the sublessor of the following properties:

•Delaware – a 4,000 square foot cannabis dispensary, which is subleased to its cannabis-licensed client 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 that is 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. The Company intends to develop the remaining space into a processing facility.

•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.

The Company received rental payments aggregating $0.4 million and ~~$2.4~~$0.8 million in the three ~~and nine~~ months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~$1.2~~$0.8 million and ~~$3.6~~$2.0 million in the ~~three and nine~~six months ended ~~September~~June 30, ~~2021,~~2023 and 2022, respectively. Revenue from these payments was recognized on a straight-line basis and aggregated $0.4 million and ~~$2.3~~$0.8 million in the three ~~and nine~~ months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~$1.1~~$0.8 million and ~~$3.4~~$1.9 million in the ~~three and nine~~six months ended ~~September~~June 30, ~~2021,~~2023 and 2022, respectively.

Future minimum rental receipts for non-cancellable leases and subleases as of ~~September~~June 30, ~~2022~~2023 were as follows (in thousands):


Year ending December 31,	Year ending December 31,			Year ending December 31,
Remainder of 2022		$	315
2023		1,170
Remainder of 2023				Remainder of 2023	$	678
2024	2024	1,196		2024	1,357
2025	2025	1,199		2025	1,357
2026	2026	1,051		2026	1,219
2027				2027	1,134
Thereafter	Thereafter	6,131		Thereafter	4,591
		$	11,062		$	10,336

(5) NOTES RECEIVABLE

Notes receivable, including accrued interest, at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following (in thousands):

September 30,
2022 December 31,
2021
First State Compassion Center (initial note) $ 348 $ 403
First State Compassion Center (secondary note) 8,080 7,845
Healer LLC 866 866
Total notes receivable 9,294 9,114
Notes receivable, current portion 134 127
Notes receivable, less current portion $ 9,160 $ 8,987


	June 30, 2023		December 31, 2022
First State Compassion Center (FSCC Initial Note)	$	288	$	328
First State Compassion Center (FSCC Secondary Notes)	8,316		8,160
First State Compassion Center (FSCC New Note)	750		750
First State Compassion Center (FSCC Second New Note)	879		—
Healer LLC (Revised Healer Note)	866		866
Total notes receivable	11,099		10,104
Less: Notes receivable, current portion	(2,642)		(2,637)
Notes receivable, less current portion	$	8,457	$	7,467

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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 for $0.7 million, bearing interest at a rate of 12.5% per annum and maturing in April 2026, as amended (the “FSCC Initial Note”). The monthly payments on the FSCC Initial Note ~~approximate~~were approximately $10,000. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the current portions of the FSCC Initial Note were approximately ~~$82,000~~$90,000 and ~~$75,000,~~$85,000, respectively, and were included in Notes receivable, current portion, in the condensed consolidated balance sheets.

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In December 2021, the Company converted financed trade accounts receivable balances from FSCC aggregating $7.8 million into notes receivable, which was net of the $1.3 million debt issuance discount recorded in connection with the conversion, whereby FSCC issued promissory notes aggregating $7.8 million to the Company (the “FSCC Secondary Notes”). The FSCC Secondary Notes ~~bear~~bore interest at a rate of 6.0% per annum and ~~mature~~matured in December 2025. FSCC iswas required to make periodic payments of principal and interest throughout the term of the FSCC Secondary Notes. At ~~September 30,~~December 31, 2022, the FSCC Secondary Notes balance included approximately ~~$54,000~~$49,000 of unpaid accrued interest. The balance at June 30, 2023 did not include accrued interest, as the Company granted FSCC an interest holiday for the six months then ended. The increase in the FSCC Secondary Notes in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was attributable to the ~~accreted interest,~~accretion of the original debt discount, which ~~increases~~increased the value of such notes. At each of June 30, 2023 and December 31, 2022, the current portions of the FSCC Secondary Notes aggregated $2.5 million.

In December 2022, the Company converted amounts due from FSCC aggregating $750,000 into a note receivable, whereby FSCC issued a promissory note to the Company for $750,000 (the "FSCC New Note"). The FSCC New Note bore interest at a rate of 6.0% per annum and matured in December 2026. FSCC was required to make quarterly interest payments, with the full amount of principal due on December 31, 2026; however, the Company granted FSCC an interest holiday for the six months ended June 30, 2023. At each of June 30, 2023 and December 31, 2022, the entire balance of the FSCC New Note was long-term.

In the second quarter of 2023, the Company converted $879,000 due from FSCC into a note receivable (the "FSCC Second New Note"), which was subsequently consolidated into an Omnibus Agreement with FSCC, which is described below.

In July 2023, the Company entered into an Omnibus Agreement with FSCC: (a) consolidating all amounts owing from FSCC to the Company and its affiliated entities, aggregating $11.0 million (the "FSCC Consolidated Note"), which includes the amounts due under the FSCC Initial Note, the FSCC Secondary Notes, the FSCC New Note and the FSCC Second New Note; (b) providing for the automatic conversion of the FSCC Consolidated Note, upon the approval of adult cannabis use in Delaware into 100% ownership of FSCC's licenses and business; and (c) extending to FSCC, in the Company's sole discretion, up to an additional $2.0 million of working capital loans. The FSCC Consolidated Note has a term of five years, with an automatic five-year extension if adult cannabis use is not approved in Delaware by the maturity date, bears interest, compounded semiannually and payable annually, at the appropriate rate of interest in effect under Sections 1274(d), 482 and 7872 of the Internal Revenue Code of 1986, as amended, as calculated under Rev. Ruling 86-17, 1986-1 C.B. 377, for the period for which the amount of interest is being determined.

Healer LLC

In March 2021, the Company was issued a promissory note in the principal amount of approximately $0.9 million from Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak (“Healer”). The principal balance of the note represents previous loans extended to Healer by the Company of $0.8 million, plus accrued interest through the revised promissory note issuance date of approximately $94,000 (the “Revised Healer Note”). The Revised Healer Note bears interest at a rate of 6.0% per annum and requires quarterly payments of interest through the April 2026 maturity date.

The Company has the right to offset any licensing fees payable by the Company to Healer 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 Healer Note, reducing the principal amount to approximately $866,000. Of the outstanding Revised Healer Note balance at ~~both September~~each of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, approximately $52,000 was current.

~~High Fidelity~~

~~In August 2021, a $250,000 loan to High Fidelity Inc., an entity with cannabis operations in the state~~

Table of ~~Vermont, which bore interest at a rate of 10.0% per annum, was repaid in full.~~

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(6) INVENTORY

Inventory at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 consisted of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Plants	Plants	$	2,585	$	1,015	Plants	$	2,499	$	2,653
Ingredients and other raw materials	Ingredients and other raw materials	2,582		262		Ingredients and other raw materials	4,490		3,255
Work-in-process	Work-in-process	8,071		4,661		Work-in-process	10,304		7,635
Finished goods	Finished goods	5,071		3,830		Finished goods	7,493		5,934
		$	18,309	$	9,768		$	24,786	$	19,477

(7) INVESTMENTS

The Company’s investments at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021 were all classified as current and~~2022 were comprised of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Investment – current:						Investment – current:

Flowr Corp. (formerly Terrace Inc.)		$	78	$	251
WM Technology Inc.	WM Technology Inc.	196		—		WM Technology Inc.	$	102	$	123
		$	274	$	251

Investment - non-current:						Investment - non-current:
Artis LLC (d/b/a Little Dog)						Artis LLC (d/b/a Little Dog)	$	89	$	—

The Company did not have any ~~noncurrent~~long-term investments at ~~September 30, 2022 or~~ December 31, ~~2021.~~2022.

16Artis LLC (d/b/a Little Dog)

~~Table~~

In April, 2023, the Company purchased a 49% interest in Artis LLC, d/b/a Little Dog ("Little Dog"), a cannabis delivery service (the "Little Dog Investment") for $98,000 of ~~Contents~~cash. The Company is recognizing changes in the fair value of the Little Dog Investment based on its proportional share of Little Dog's net loss. During the three months ended June 30, 2023, the Company recognized a loss of approximately $9,000 in the Little Dog Investment, which is included as a component of Other (expense) income, net, in the condensed consolidated statements of operations for each of the three and six months ended June 30, 2023.

WM Technology Inc.

In February 2022, the Company received 121,968 shares of common stock of WM Technology Inc. (Nasdaq: MAPS) (the "WMT Shares"), a technology and software infrastructure provider to the cannabis industry, which represented the Company’s pro rata share of additional consideration pursuant to a 2021 asset purchase agreement between the Company and Members RSVP LLC. The Company recognized losses of approximately $2,000 and $21,000 in the three and six months ended June 30, 2023, respectively, reflecting the changes in the fair value of the WMT Shares for the respective periods. The Company recognized a loss of $0.6 million in both of the three- and six-month periods ended June 30, 2022, representing the changes in the fair value of the WMT Shares for such periods. Both the losses in the three and six months ended June 30, 2022 from the change in the fair value of the WMT Shares and the gain arising from the receipt in February 2022 of the WMT Shares are reported as Other (expense) income, net, in the condensed consolidated statements of operations for the respective periods.

Flowr Corp. ~~(formerly Terrace Inc.)~~

In December ~~2020,~~2021, the Company received shares of Flowr Corp. common stock (the "Flowr Stock") arising from the sale of its ownership interest in Terrace Inc., ~~a Canadian cannabis entity in~~ which ~~the Company had an ownership interest of 8.95% (“Terrace”),~~ was ~~acquired by~~sold to Flowr Corp. (TSX.V: FLWR; OTC: FLWPF)~~, a Toronto-headquartered cannabis company with operations in Canada, Europe, and Australia (“Flowr”)~~. ~~In accordance with the purchase agreement for this transaction, each shareholder of Terrace received 0.4973 shares in Flowr for each Terrace share held (the “Flowr Investment”).~~

The Flowr ~~Investment is~~Stock was recorded at fair value, with changes in fair value recorded as a component of Other (expense) income, net, in the condensed consolidated statements of operations. The Company recorded losses of ~~$0.1~~$0.2 million and ~~$0.2~~$0.1 million in the three and ~~nine~~six months ended ~~September~~June 30, 2022, respectively, ~~and losses of $0.5 million and $0.9 million in of the three- and nine-month periods ended September 30, 2021, respectively. These amounts represent~~representing the changes in the fair value of the Flowr ~~Investment~~Stock in the ~~respective periods.~~

~~WM Technology Inc. (formerly MembersRSVP LLC)~~

In January 2021, the Company and MembersRSVP LLC, an entity that develops cannabis-specific software (“MRSVP”) in which the Company owned a 23.0% membership interest, entered into an agreement under which the Company returned membership interests comprising 11.0% ownership in MRSVP in exchange for a release of the Company from any further obligation to make any incremental investments or payments to MRSVP, 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. As a result, the Company no longer had the ability to exercise significant influence over MRSVP, and accordingly, as of January 1, 2021, the Company discontinued accounting for this investment under the equity method.

In September 2021, MRSVP sold substantially all of its assets pursuant to an asset purchase agreement. In connection with this transaction, the Company received cash proceeds of $1.5 million, which represented the Company’s pro rata share of the cash consideration received by MRSVP at the closing of the transaction. The cash proceeds reduced the Company’s MRSVP investment balance to zero and resulted in a gain of $0.3 million, which gain was reported as a component of Other (expense) income, net.

As an ongoing member of MRSVP, the Company was entitled to its pro rata share of any additional consideration received by MRSVP pursuant to the asset purchase agreement, which could include securities or other forms of non-cash or in-kind consideration and holdback amounts, if and when received and distributed by MRSVP. 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, which represented the Company’s pro rata share of the additional consideration received by MRSVP pursuant to the asset purchase agreement. The Company recognized losses of $0.2 million and $0.8 million in the three and nine months ended September 30, 2022, respectively, which are included as components of Other (expense) income, net, in the condensed consolidated statements of operations for those periods. This amount represents the change in the fair value of the MAPS shares in the respective periods.

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respective periods. In the fourth quarter of 2022, the Company wrote off the remaining fair value of the Flowr Stock as a result of Flowr Corp.'s bankruptcy filing and delisting from the exchange on which its stock was traded.

(8) PROPERTY AND EQUIPMENT, NET

The Company’s property and equipment, net, at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was comprised of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Land	Land	$	4,450	$	4,450	Land	$	4,450	$	4,450
Buildings and building improvements	Buildings and building improvements	39,497		35,231		Buildings and building improvements	44,328		43,542
Tenant improvements	Tenant improvements	17,005		9,745		Tenant improvements	18,503		17,016
Furniture and fixtures	Furniture and fixtures	1,986		1,888		Furniture and fixtures	2,058		2,009
Machinery and equipment	Machinery and equipment	9,689		7,221		Machinery and equipment	12,264		10,087
Construction in progress	Construction in progress	7,084		10,569		Construction in progress	9,090		4,761
		79,711		69,104			90,693		81,865
Less: accumulated depreciation	Less: accumulated depreciation	(9,315)		(6,954)		Less: accumulated depreciation	(12,059)		(10,224)
Property and equipment, net	Property and equipment, net	$	70,396	$	62,150	Property and equipment, net	$	78,634	$	71,641

The ~~amounts reported~~Company recorded depreciation expense related to property and equipment of $1.2 million and $0.9 million in the three months ended June 30, 2023 and 2022, respectively, and $2.2 million and $1.6 million in the six months ended June 30, 2023 and 2022, respectively.

In the first quarter of 2023, the Company disposed of equipment it had previously purchased in connection with its planned acquisition of The Harvest Foundation LLC ("Harvest") in Nevada as ~~construction~~a result of the Company's withdrawal from the agreement to purchase Harvest. The Company recorded a loss on these asset disposals aggregating $0.9 million, which is included as a component of Other (expense) income, net, in ~~progress primarily relate to~~ the ~~development~~condensed consolidated statement of ~~facilities in Annapolis, MD, Beverly, MA and Mt. Vernon, IL.~~operation for the six months ended June 30, 2023.

(9) INTANGIBLE ASSETS AND GOODWILL

The Company’s acquired intangible assets at ~~September~~June 30, 2023 and December 31, 2022 consisted of the following (in thousands):


		Weighted average amortization period (years)	Cost		Accumulated amortization		Net carrying value
June 30, 2023									June 30, 2023	Weighted average amortization period (years)	Cost		Accumulated amortization		Net carrying value

Tradename and trademarks	Tradename and trademarks	3.00	$	2,041	$	283	$	1,758	Tradename and trademarks	7.11	$	3,104	$	818	$	2,286
Licenses and customer base	Licenses and customer base	8.26	8,100		422		7,678		Licenses and customer base	9.15	18,033		1,637		16,396
Non-compete agreements	Non-compete agreements	2.00	42		9		33		Non-compete agreements	2.00	42		24		18
		7.18	$	10,183	$	714	$	9,469		8.84	$	21,179	$	2,479	$	18,700


December 31, 2022	Weighted average amortization period (years)	Cost		Accumulated amortization		Net carrying value

Tradename and trademarks	3.00	$	2,041	$	453	$	1,588
Licenses and customer base	8.94	13,260		675		12,585
Non-compete agreements	2.00	42		14		28
	8.13	$	15,343	$	1,142	$	14,201

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Estimated future amortization expense for the Company’s intangible assets at ~~September~~June 30, ~~2022~~2023 was as follows:


Year ending December 31,	Year ending December 31,			Year ending December 31,
Remainder of 2022		$	428
2023		1,712
Remainder of 2023				Remainder of 2023	$	1,447
2024	2024	1,698		2024	2,772
2025	2025	1,239		2025	2,289
2026	2026	1,011		2026	2,062
2027				2027	2,062
Thereafter	Thereafter	3,381		Thereafter	8,068
Total	Total	$	9,469	Total	$	18,700

The changes in the carrying value of the Company’s goodwill in the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands):


		2022		2021			2023		2022
Balance at January 1,	Balance at January 1,	$	2,068	$	2,068	Balance at January 1,	$	8,079	$	2,068
Ermont Acquisition						Ermont Acquisition	3,914		—
Kind Acquisition	Kind Acquisition	6,011		—		Kind Acquisition	—		6,011
Balance at September 30,		$	8,079	$	2,068
Balance at June 30,						Balance at June 30,	$	11,993	$	8,079

(10) TERM LOAN

Credit Agreement

On January 24, 2023, the Company entered into a Loan and Security Agreement, by and among the Company, subsidiaries of the Company from time-to-time party thereto (collectively with the Company, the “Borrowers”), lenders from time-to-time party thereto (the “Lenders”), and Chicago Atlantic Admin, LLC (“Chicago Atlantic”), as administrative agent for the Lenders (the "Credit Agreement").

Proceeds from the Credit Agreement were designated to complete the build-out of a new cultivation and processing facility in Illinois, complete the build-out of a new processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and repay in full the Kind Notes incurred in connection with the Kind Acquisition, which repayment occurred on January 24, 2023 (see Note 11). The remaining balance, if any, was expected to be used to fund acquisitions.

Principal, Security, Interest and Prepayments

The Credit Agreement provides for $35.0 million in principal borrowings at the Borrowers’ option in the aggregate and further provides the Borrowers with the right, subject to customary conditions, to request an additional incremental term loan in the aggregate principal amount of up to $30.0 million, provided that the Lenders elect to fund such incremental term loan. $30.0 million of loan principal was funded at the initial closing (the "Term Loan"), which amount was reduced by an original issuance discount of $0.9 million (the "Original Issuance Discount"). The Company had the option, during the six-month period following the initial closing, to draw down an additional $5.0 million, which it did not elect to do. The loans require scheduled amortization payments of 1.0% of the principal amount outstanding under the Credit Agreement per month commencing in May 2023, and the remaining principal balance is due in full on January 24, 2026, subject to extension to January 24, 2028 under certain circumstances.

The Credit Agreement provides the Borrowers with the right, subject to specified limitations, to incur (a) seller provided debt in connection with future acquisitions, (b) additional mortgage financing from third-party lenders secured by real estate currently owned and acquired after the closing date, and (c) additional debt in connection with equipment leasing transactions.

The obligations under the Credit Agreement are secured by substantially all of the assets of the Borrowers, excluding specified parcels of real estate and other customary exclusions.

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~~(10)~~The Credit Agreement provides for a floating annual interest rate equal to the prime rate then in effect plus 5.75%, which rate may be increased by 3.00% upon an event of default or 7.50% upon a material event of default as provided in the Credit Agreement.

At any time, the Company may voluntarily prepay amounts due under the facility in $5.0 million increments, subject to a three-percent prepayment premium and, during the first 20-months of the term, a “make-whole” payment.

Representations, Warranties, Events of Default and Certain Covenants

The Credit Agreement includes customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.

The Credit Agreement also includes customary negative covenants limiting the Borrowers’ ability to incur additional indebtedness and grant liens that are otherwise not permitted, among others. Additionally, the Credit Agreement requires the Borrowers to meet certain financial tests. At June 30, 2023, the Company was in compliance with the Credit Agreement covenants.

Warrant Issuance

The Credit Agreement provided for 30% warrant coverage against amounts funded under the facility, priced at a 20% premium to the trailing 20-day average price on the closing date of each such funding. At the initial closing, upon funding of the initial $30.0 million under the facility, the Company issued to the Lenders an aggregate of 19,148,936 warrants to purchase shares of the Company’s common stock at $0.47 per share, exercisable for a five-year period following issuance.

The Company recorded the warrants at present value of $5.5 million as a component of Additional paid-in capital on the condensed consolidated balance sheet as of January 24, 2023, and discounted the Term Loan by $5.5 million (the "Term Loan Discount"). The Term Loan Discount is being amortized to interest expense over the term of the Credit Agreement.

Interest Amortization

The Company recorded $0.5 million and $0.9 million of aggregate interest amortization for the three and six months ended June 30, 2023, respectively, related to the Original Issuance Discount and the Term Loan Discount.

Outstanding Balance

At June 30, 2023, the outstanding Term Loan balance reported on the Company's condensed consolidated balance sheet was $24.1 million, with the current portion totaling $3.6 million.

(11) MORTGAGES AND NOTES PAYABLE

The Company’s mortgages and notes payable are reported in the aggregate on the condensed consolidated balance sheets under the captions Mortgages and notes payable, current portion, and Mortgages and notes payable, net of ~~current.~~current portion.

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Mortgages

The Company’s mortgage balances ~~including accrued interest,~~ at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were comprised of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Bank of New England – New Bedford, MA and Middleboro, MA properties	Bank of New England – New Bedford, MA and Middleboro, MA properties	$	12,231	$	12,499	Bank of New England – New Bedford, MA and Middleboro, MA properties	$	11,943	$	12,141
Bank of New England – Wilmington, DE property	Bank of New England – Wilmington, DE property	1,374		1,463		Bank of New England – Wilmington, DE property	1,282		1,345
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties	DuQuoin State Bank – Anna, IL and Harrisburg, IL properties	759		778		DuQuoin State Bank – Anna, IL and Harrisburg, IL properties	732		750
DuQuoin State Bank – Metropolis, IL property	DuQuoin State Bank – Metropolis, IL property	2,541		2,658		DuQuoin State Bank – Metropolis, IL property	2,439		2,508
Du Quoin State Bank - Mt. Vernon, IL property	Du Quoin State Bank - Mt. Vernon, IL property	2,990		—		Du Quoin State Bank - Mt. Vernon, IL property	2,940		2,974
South Porte Bank – Mt. Vernon, IL property	South Porte Bank – Mt. Vernon, IL property	808		816		South Porte Bank – Mt. Vernon, IL property	—		801
Total mortgages payable	Total mortgages payable	20,703		18,214		Total mortgages payable	19,336		20,519
Less: Mortgages payable, current	Less: Mortgages payable, current	(1,485)		(1,400)		Less: Mortgages payable, current	(700)		(1,491)
Mortgages payable, less current portion	Mortgages payable, less current portion	$	19,218	$	16,814	Mortgages payable, less current portion	$	18,636	$	19,028

The Company maintains an amended and restated mortgage agreement with the Bank of New England with an interest rate of 6.5% per annum, which matures in August 2025 (the “Amended BNE Mortgage”). The Amended BNE Mortgage is secured by the Company’s properties in New Bedford, MAMassachusetts and Middleboro, ~~MA.~~Massachusetts. Proceeds from the Amended BNE Mortgage were used to pay down a previous mortgage of $4.8 million with the Bank of New England on the New Bedford property and $7.2 million of outstanding promissory notes as discussed below. The current portions of the outstanding principal balance under the Amended BNE Mortgage at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were approximately ~~$376,000~~$393,000 and ~~$358,000,~~$382,000, respectively.

The Company maintains a second mortgage with Bank of New England that is secured by the Company’s property in Wilmington, DEDelaware (the “BNE Delaware Mortgage”). The mortgage matures in 2031, with monthly principal and interest payments. The interest rate is 5.25% per annum, with the rate adjusting every five years to the then-prime rate plus 1.5%, with a floor of 5.25% per annum. The next interest rate adjustment will occur in September 2026. The current portions of the outstanding principal balance under the BNE Delaware Mortgage at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were approximately ~~$125,000~~$129,000 and ~~$120,000,~~$126,000, respectively.

The Company maintains a mortgage with DuQuoin State Bank (“DSB”) in connection with its purchase of properties in Anna, ILIllinois and Harrisburg, ILIllinois (the “DuQuoin Mortgage”). On May 55th of each year, the DuQuoin Mortgage becomes due unless it is renewed for another year at a rate determined by DSB’s executive committee. The DuQuoin Mortgage was renewed in May ~~2021~~2023 at a rate of ~~6.75%~~9.75% per annum. The current portions of the outstanding principal balance under the DuQuoin Mortgage at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were approximately ~~$35,000~~$26,000 and ~~$33,000,~~$36,000, respectively.

In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $3 million loan agreement and mortgage with Du Quoin State Bank secured by property owned in Mt. Vernon, Illinois, which the Company is developing into a grow and production facility (the "DuQuoin Mt. Vernon Mortgage"). The DuQuoin Mt. Vernon Mortgage has a 20-year term and initially bears interest at the rate of 7.75%, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75%). The proceeds of this loan are being utilized for the build-out of the property and other working capital needs. The current portion of the DuQuoin Mt. Vernon Mortgage was approximately $66,000 at September 30, 2022.

In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, ~~IL.~~Illinois. 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 balance of $1.6 million. In connection with this purchase, the Company entered into a second mortgage agreement with DSB for $2.7 million that matures in July 2041, and which initially bears interest at a rate of 6.25% per annum (the “DuQuoin Metropolis Mortgage”). The interest rate on the DuQuoin Metropolis Mortgage 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

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Company’s subsidiary that owns the property and holds the related mortgage obligation, reducing the Company’s ownership interest in Metro to 70.0%. The current portions of the outstanding principal balance of the DuQuoin Metropolis Mortgage at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were approximately ~~$75,000~~$81,000 and ~~$73,000,~~$77,000, respectively.

In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $3.0 million loan agreement and mortgage with DSB secured by property owned in Mt. Vernon, Illinois, which the Company is developing into a grow and production facility (the "DuQuoin Mt. Vernon Mortgage"). The DuQuoin Mt. Vernon Mortgage has a 20-year term and initially bears interest at the rate of 7.75% per annum, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75%). The proceeds of this loan are being utilized for the build-out of the property and other working capital needs. The current portions of the

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outstanding principal balance of the DuQuoin Mt. Vernon Mortgage were approximately $70,000 and $68,000 at June 30, 2023 and December 31, 2022, respectively.

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,~~Illinois, (the “South Porte Bank Mortgage”). Beginning in August 2021, pursuant to ~~the~~an amendment of the South Porte Bank Mortgage, the monthly payments of principal and interest aggregated approximately $6,000, with such payment amounts effective through June 2023, at which time all remaining principal, interest and fees ~~are~~were due. On May 26, 2023, the Company repaid the outstanding balance on the South Porte Bank Mortgage, which totaled approximately $778,000, and the Company owns this property outright.

Promissory Notes

Promissory ~~Note Retirements~~Notes Issued as Purchase Consideration

Ermont Acquisition

In ~~March 2021, utilizing a portion of~~connection with the ~~proceeds from the Hadron Transaction (defined below; see Note 12)~~,Ermont Acquisition, the Company ~~retired $15.2 million~~issued the Ermont Note (see Note 2), totaling $7.0 million. The Ermont Note matures in March 2029, and bears interest at 6.0% per annum, with payments of interest only for two years, and thereafter quarterly payments of principal and interest ~~on promissory notes issued~~ in previous fiscal years to accredited individual and institutional investors. Concurrently, the remaining debt discount of approximately $450,000 on one of the retired promissory notes (such discount having arisen from the issuance of warrants attached to such promissory note) was fully amortized.

~~Promissory Note Conversions~~

During the three months ended March 31, 2021, the holder of a note issued by the Company in September 2020, with an outstanding balance of $4.2 million, converted $1.0 million of principal and approximately $10,000 of accrued interest into 3,365,972 shares of the Company’s common stock.arrears. The ~~Company issued the holder an amended and restated promissory note simultaneous with the conversion transaction representing the $3.2 million remaining balance due.~~

~~During 2021, in a series of transactions, the noteholder converted $2.8 million of principal into 8,033,296 shares of the Company’s common stock. At December 31, 2021, the~~ outstanding balance on the ~~amended~~Ermont Note is due and ~~restated promissory note~~payable in full if and when the Company raises $75.0 million or more of equity capital. The Company recorded the Ermont Note at a present value of $4.6 million. The Company recorded $2.4 million as a debt discount, which is being accreted through the term of the Ermont Note. The difference between the face value of the Ermont Note and the present value recorded at the time of the Ermont Acquisition is being amortized to interest expense over the term of the Ermont Note. The fair value of the Ermont Note was ~~$400,000.~~$4.7 million at June 30, 2023, all of which was recorded as noncurrent, as the first principal payment is not due until two years after the Ermont Acquisition Date.

During the three months ended March 31, 2022, the noteholder converted the remaining principal balance of $400,000 into 1,142,858 shares of the Company’s common stock and the note was retired. The Company did not record any gains or losses arising from these conversions.Greenhouse Naturals Acquisition

~~Promissory Notes Issued~~In connection with the Greenhouse Naturals Acquisition, the Company issued the Greenhouse Naturals Note (see Note 2) totaling $5.0 million to the Greenhouse Naturals Sellers, payable on a monthly basis as ~~Purchase Consideration –~~ a percentage of the monthly gross sales of the Company's Beverly, Massachusetts dispensary. The Company recorded the Greenhouse Naturals Note at a present value of $4.3 million. The Company recorded $0.7 million as a debt discount, which is being accreted through the term of the Greenhouse Naturals Note. The difference between the face value of the Greenhouse Naturals Note and the present value recorded at the time of the Greenhouse Naturals Acquisition is being amortized to interest expense over the term of such note, which matures in July 2026. The fair values of the Greenhouse Naturals Note were $4.4 million and $4.3 million at June 30, 2023 and December 31, 2022, respectively. The Company estimated that the current portions of the Greenhouse Naturals Note were $1.3 million and $0.9 million at June 30, 2023 and December 31, 2022, respectively, which are included in Mortgages and notes payable, current portion, in the Company's condensed consolidated balance sheets.

Kind Acquisition

In connection with the Kind Acquisition (see Note 2), the Company issued four-year promissory notes aggregating $6.5 million ~~at the~~with an interest rate of 6.0% per annum to the members of Kind (the “Kind Notes”). ~~The Company paid $0.8 million of principal during the period since the Kind Acquisition Date.~~ At ~~September 30,~~December 31, 2022, the ~~current portions~~outstanding balance of the Kind Notes ~~aggregated $1.5 million.~~totaled $5.5 million, of which $1.6 million was current.

In connection with the Credit Agreement (see Note 10), on January 24, 2023, the Company repaid the Kind Notes in full, aggregating $5.4 million, including approximately $420,000 of accrued interest. There was no penalty in connection with the early repayment of the Kind Notes.

Promissory Note Conversion

During the three months ended March 31, 2022, a noteholder converted the outstanding principal balance of $400,000 into 1,142,858 shares of the Company’s common stock and such note was retired. The Company did not record any gains or losses arising from this conversion.

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Promissory Notes Issued to Purchase Commercial Vehicles

~~In August 2020, the~~The Company entered into atwo note ~~agreement~~agreements to purchase commercial vehicles in the six months ended June 30, 2023: in April 2023 with Ford Credit, and in January 2023 with Ally Financial. The Company had previously entered into note agreements to purchase commercial vehicles in August 2020 with First ~~Citizens’~~Citizens' Federal Credit Union ~~for~~and in June 2021 with Ally Financial. At June 30, 2023, the purchase of a commercial vehicle (the “First Citizens’ Note”). The First Citizens’ Note bears interest at the rate of 5.74% per annum and matures in July 2026. At September 30, 2022, the First Citizens' Notefour outstanding notes had an aggregate outstanding balance of approximately ~~$22,000. The current portions~~$149,000, of ~~the outstanding balance under the First Citizens’ Note at September 30, 2022 and~~which approximately $27,000 was current. At December 31, ~~2021~~2022, there were ~~approximately$6,500 and $5,000, respectively.~~

~~In September 2021, the Company entered into a note agreement~~two outstanding notes with Ally Financial for the purchase of a second commercial vehicle (the “Ally Financial Note”). The Ally Financial note bears interest at the rate of 10.0% per annum and matures in May 2027. At September 30, 2022, the Ally Financial Note had an aggregate outstanding balance of approximately ~~$29,000.~~$48,000, of which approximately $12,000 was current. The ~~current portions~~weighted average interest rates of the outstanding ~~balance under the Ally Financial Note~~balances were 10.59% and 8.19% at ~~both September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022, respectively. The weighted average remaining terms of these notes were ~~approximately $5,000.~~

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~~Promissory Note Issued by MariMed Hemp Inc.~~

In September 2020, the Company paid $0.5 million of principal on a $1.0 million promissory note issued in 2019 by MariMed Hemp Inc., one of the Company’s wholly-owned subsidiaries. In March 2021, utilizing a portion of the proceeds from the Hadron Transaction, the Company made an interest payment of $0.2 million4.68 years and ~~paid the remaining principal of $0.5 million on this promissory note.~~

~~At September~~4.07 years at June 30, ~~2022~~2023 and December 31, ~~2021, the Company was carrying accrued interest balances of approximately $309,000 and $125,000,~~2022, respectively.

Future Payments

The future principal amounts due under the Company outstanding mortgages and notes payable at ~~September~~June 30, ~~2022 are~~2023 were as follows (in thousands):

Year ending December 31,
Remainder of 2022 $ 536
2023 3,060
2024 2,390
2025 2,545
2026 1,263
Thereafter 16,700
26,494
Less: discount (621)
$ 25,873

~~(11) DEBENTURES PAYABLE~~

In a series of transactions from October 2018 through February 2020, the Company sold an aggregate of $21.0 million of convertible debentures (the “$21M Debentures”) to an unaffiliated institutional investor pursuant to an amended securities purchase agreement.

As of March 31, 2021, the holder of the $21M Debentures had converted the entire $21.0 million of principal and related accrued interest into the Company’s common stock in a series of conversions, at conversion prices equal to 80.0% of a calculated average of the daily volume-weighted price preceding the date of conversion. Of these conversions, $1.3 million of principal and approximately $56,000 of accrued interest were converted into 4,610,645 shares of common stock at a conversion price of $0.29 per share during the three months ended March 31, 2021. Additionally, a remaining (i) original issue discount of approximately $52,000, (ii) debt discount of approximately $39,000 (such discount having arisen from the issuance of warrants attached to the $21M Debentures), and (iii) beneficial conversion feature of approximately $177,000 (such conversion feature having arisen from an in-the-money embedded conversion option on the commitment date), were fully amortized upon the final conversion of the $21M Debentures. All conversions were effected within the terms of the debenture agreements, and accordingly, the Company did not record any gains or losses in connection with these conversions.


Year ending December 31,
Remainder of 2023	$	1,139
2024	2,491
2025	3,911
2026	3,849
2027	2,681
Thereafter	18,008
	32,079
Less: discount	(3,485)
	$	28,594

(12) MEZZANINE EQUITY

Series B Convertible Preferred Stock

In ~~2020,~~2021, the Company entered into an exchange agreement with two unaffiliated institutional shareholders (the “Exchange Agreement”) whereby the Company (i) issued $4.4 million of promissory notes to the two institutional shareholders, ~~(such notes~~which were retired in March 2021, ~~as part of the promissory note retirements described above (see Note 11)),~~ and (ii) 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 the Company's newly designated Series B convertible preferred stock (the “Series B Stock”).

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In connection with the Exchange Agreement, the Company filed (i) a certificate of designation with respect to the rights and preferences of the Series B 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 Stock (the “Series B Holders”) are entitled to cast ~~the~~a number of votes equal to the number of shares of the Company's common stock into which the shares of Series B Stock are convertible, together with the holders of the Company's 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~~an amendment or repeal of certain charter provisions, liquidation or winding up of the Company, creation of stock senior to the Series B Stock, and/or other acts defined in the certificate of designation.

The Series B 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 Stock in an amount calculated pursuant to the certificate of designation.

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In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the ~~holder of~~ Series B ~~Stock~~Holders 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 the Company's common stock by reason of their ownership thereof, an amount per share of Series B Stock equal to $3.00, plus any dividends declared but unpaid thereon, with any remaining assets distributed pro-rata among the Series B Holders and the holders of the ~~shares of Series B Stock and~~Company's 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 tointo shares of the Company's common stock.

At any time on or prior to the six-year anniversary of the issuance date of the Series B Stock, (i) the Series B Holders have the option to convert their shares of Series B Stock into shares of the Company's 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 Stock into shares of the Company's common stock at a conversion price of $3.00 if the daily volume weighted average price of the Company's 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,~~Stock, all outstanding shares of Series B Stock shall automatically convert into shares of the Company's 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 Stock into shares of the Company's 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 sixty-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 Stock into shares of the Company's 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 Stock into shares of the Company's common stock at a conversion price per share equal to the sixty-day VWAP and pay cash to the Series B Holders equal to the difference between $3.00 per share and the sixty-day VWAP.

The Company shall at all times when the Series B 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 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 Stock.

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 (the “Hadron Facility”) in exchange for newly-designated Series C convertible preferred stock of the Company (the “Series C Stock”) and warrants to purchase the Company’s common stock (the “Hadron Transaction”).

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At the closing of the Hadron 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 Stock and a four-year warrant to purchase two and one-half shares of the Company's common stock. The Company issued to Hadron 6,216,216 shares of Series C Stock and warrants to purchase up to an aggregate of 15,540,540 shares of its common stock. Each share of Series C Stock is convertible, at Hadron’s option, into five shares of the Company's common stock, and each warrant is exercisable at an exercise price of $1.087 per share. The warrants are subject to early termination if certain milestones are achieved and the market value of the Company’s common stock reaches certain predetermined levels. The fair value of the warrants on the issuance date was $9.5 million, which amount was recorded in Additional paid-in capital. The Company incurred ~~costs~~$0.4 million of ~~$0.4 million~~costs related to the issuance of these securities, which was recorded as a reduction to Additional paid-in capital in March 2021.

In connection with the closing of the Hadron Transaction, the Company filed a certificate of designation with respect to the rights and preferences of the Series C Stock. Such stock is zero coupon, non-voting, and has a liquidation preference equal to its original issuance price plus declared but unpaid dividends. Holders of Series C Stock are entitled to receive dividends on an as-converted basis.

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Of the $23.0 million of proceeds received by the Company ~~in March 2021,~~from the Hadron Transaction, $7.3 million was used to fund construction and upgrades ofto certain of the Company’s owned and managed facilities, and $15.7 million was used to pay down debt and related interest (see Note ~~10)~~11).

No further funding has occurred under the Hadron Facility and, on August 4, 2022, the Company and Hadron entered into a ~~Second Amendment~~second amendment to the Securities Purchase Agreement pursuant to which, inter alia,, (a) Hadron’s obligation to provide any further funding to the Company and the Company’s obligation to sell any further securities to Hadron was terminated, (b) Hadron’s right to appoint a designee to the Company’s board of directors was eliminated, and (c) certain covenants restricting the Company’s incurrence of new indebtedness were eliminated.

During the three months ended June 30, 2023, the Company converted, in two separate transactions at Hadron's request in accordance with the terms and conditions of the Series C Stock certificate of designation, a total of 4,276,608 shares of Series C Stock into 21,383,040 shares of the Company's common stock (the "Conversions"). The Conversions were effected at a conversion rate of five shares of the Company's common stock for each share of Series C common stock converted. The Company did not recognize a gain or loss on the Conversions as they were effected in accordance with the Series C Stock certificate of designation. At June 30, 2023, 1,939,608 shares of Series C Stock remained outstanding.

(13) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

~~Common Stock~~

During 2021 and 2022, the Company issued an aggregate of 12,542,126 shares of common stock in a series of conversions of a promissory note in the original principal amount of $8.8 million, of which 1,142,858 shares were issued in the first quarter of 2022, resulting in the promissory note being fully paid and retired (see Note 11).

During the three months ended September 30, 2022, the Company issued an aggregate of 531,393 shares of common stock to one of its vendors as payment for services rendered and one of its partners as a royalty payment. The shares had an aggregate fair market value of approximately $361,000.

~~During the three months ended September 30, 2022, the issued subscriptions for common stock aggregating 74,581 shares, with a grant date fair value of approximately $41,000.~~

~~In August 2022, the Company issued 139 shares of common stock to an employee with a grant date fair value of approximately $80.~~

During the three months ended June 30, 2022, the Company issued 2,717 shares of restricted common stock associated with previously issued subscriptions for common stock with a grant date fair value of approximately $2,000.

~~In June 2022, the Company issued 4,221 shares of restricted common stock with a grant date fair value of approximately $2,500.~~

In May 2022, the Company issued 350,000 shares of restricted common stock with a grant date fair value of approximately $217,000 to the Company’s new Chief Financial Officer in connection with her appointment.

~~In March 2022, the Company issued 375,000 shares of restricted common stock with a grant date fair value of approximately $274,000 in exchange for consulting services.~~

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Amended and Restated 2018 Stock Award and Incentive Plan

The Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the ~~“2018 Plan”~~“Plan”) provides for the award of options to purchase the Company’s common stock (“stock options”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”), restricted stock, deferred stock, dividend equivalents, performance shares or other stock-based performance awards and other stock- or cash-based awards. Awards can be granted under the ~~2018~~ Plan to the Company’s employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries.

~~Warrants~~

~~At September 30, 2022, warrants~~On June 8, 2023, the Company's Board of Directors approved an amendment to ~~purchase up~~the Plan (the "2018 Plan") to ~~23,951,571 shares of common stock were outstanding, with a weighted average exercise price of $0.85.~~

~~In April 2022, 750,000 warrants were exercised in a cashless transaction, under which~~modify the ~~Company withheld 515,039 shares underlying such warrants and issued 234,961 shares of common stock.~~one-year minimum vesting requirements.

Stock Options

A summary of the Company's stock option activity during the six months ended June 30, 2023 is below:


	Shares	Weighted average exercise price
Outstanding at January 1, 2023	36,504,673	$	0.82
Granted	1,100,000	$	0.43
Exercised	(157,752)	$	0.23
Forfeited	(5,000)	$	0.52
Expired	(531,000)	$	1.85
Outstanding at June 30, 2023	36,910,921	$	0.80

Stock options granted under the 2018 Plan generally expire five years from the date of grant. At ~~September~~June 30, ~~2022,~~2023, the stock options ~~to purchase up to 40,081,173 shares of common stock were~~ outstanding ~~with a weighted average exercise price of $0.91 and~~had a weighted average remaining life of approximately three years.

~~In August 2022, 45,000 stock options were exercised, and the Company received $7,100 in connection with these exercises.~~

~~In June 2022, 312,248 stock options were exercised in a cashless transaction, under which the Company withheld 112,248 shares underlying such stock options and issued 200,000 shares of common stock.~~

~~In February 2022, 10,000 stock options were exercised, and the Company received $3,000 in connection with these exercises.~~

The grant date fair values of stock options ~~to purchase common stock~~ granted in the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~2023 were estimated using the Black-Scholes valuation model with the following assumptions:

Three months ended September 30, 2022 Nine months ended September 30, 2022
Estimated life (in years) 5.0 5.0
Volatility 89.4 % 90.0 %
Risk-free interest rates 3.0 % 3.0 %
Dividend yield — —


Estimated life (in years)	3.00 to 3.26
Weighted average volatility	99.22	%
Weighted average risk-free interest rate	3.59	%
Dividend yield	—

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The Company did not grant any stock options in the three months ended June 30, 2023.

Restricted Stock Units

The Company began to grant RSUs under the 2018 Plan in the fourth quarter of 2022. Holders of unvested RSUs do not have voting or dividend rights. The grant date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service periods. The fair value of RSUs is determined based on the market value of the shares of the Company's common stock on the date of grant.

The activity related to the Company's RSUs for the six months ended June 30, 2023 was as follows:


	RSUs	Weighted average grant date fair value
Unvested at January 1, 2023	1,599,999	$	0.53
Granted	2,669,382	$	0.43
Vested	(349,999)	$	0.53
Forfeited	(40,000)	$	0.47
Outstanding at June 30, 2023	3,879,382	$	0.46

Warrants

In connection with the Credit Agreement, the Company issued to the Lenders an aggregate of 19,148,936 warrants to purchase shares of the Company's common stock at $0.47 per share, exercisable for a five-year period following issuance (see Note 10).

In addition to the 450,000 shares of restricted common stock issued to purchase the outstanding minority interest in Mari Holdings MD LLC ("Mari MD") noted below, the Company also issued 400,000 warrants to purchase the Company's common stock at an exercise price of $0.40 per share (the "Mari MD Warrants"). The Mari MD Warrants expire on April 13, 2026.

At June 30, 2023, warrants to purchase up to 42,224,476 shares of the Company's common stock were outstanding, with a weighted average exercise price of $0.68.

Other Common Stock Issuances

In addition to the activity related to stock options and RSUs, described previously, the Company also issued during the six months ended June 30, 2023:

•70,000 shares of restricted common stock reported as subscribed at December 31, 2022 as discussed below;

•5,025 shares of restricted common stock subscribed during the six months ended June 30, 2023;

•6,580,390 shares of restricted common stock with a fair value of $3.0 million issued as purchase consideration for the Ermont Acquisition (see Note 2);

•450,000 shares of restricted common stock to purchase a 0.33% minority interest in Mari Holdings MD LLC, one of the Company's majority-owned subsidiaries;

•21,383,040 shares of common stock issued to convert 4,276,608 shares of Series C Stock to common stock;

•an aggregate of 1,140,741 shares of restricted common stock with a total fair value of approximately $460,000 issued as payment for services to two service providers; and

•3,083 shares of restricted common stock with an aggregate fair value of approximately $2,000 issued under a royalty agreement.

Stock-Based Compensation

The Company recorded stock-based compensation of ~~$1.4~~$0.3 million and ~~$6.4~~$2.6 million in the three ~~and nine~~ months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~$5.6~~$0.5 million and ~~$7.2~~$5.0 million in the ~~three and nine~~six months ended ~~September~~June 30, ~~2021,~~2023 and 2022, respectively.

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Common Stock Issuance Obligations

At December 31, 2022, the Company was obligated to issue 70,000 shares of restricted common stock in the aggregate with a total grant date fair value of approximately $39,000, to two employees. Such shares were issued in the first quarter of 2023.

(14) REVENUE

The Company’s main sources of revenue are comprised of the following:

•Product sales (retail and wholesale) – direct sales of cannabis and cannabis-infused products ~~primarily~~ by the Company’s retail dispensaries and wholesale ~~operations in Massachusetts, Illinois and, as of the Kind Acquisition Date, Maryland.~~operations. This revenue is recognized when products are delivered or at retail points-of-sale.

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•Real estate ~~rentals~~rental income – rental income generated from leasing of the Company’s state-of-the-art, ~~regulatory compliant~~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. Prior to the third quarter of 2022, the Company charged additional rental fees based on a percentage of tenant revenues that exceeded ~~specified amounts.~~specific amounts; these incremental rental fees were eliminated in connection with new contract terms with the Company's client.

•Supply procurement – resale of cultivation and production resources, supplies and equipment that the Company has acquired from top national vendors at discounted prices to its client and third parties within the cannabis industry. The Company recognizes this revenue after the delivery and acceptance of goods by a purchaser.

•Management fees – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations. ~~These~~Prior to the third quarter of 2022, these fees ~~are~~were based on a percentage of such ~~clients’~~client's revenue and ~~are~~were recognized after services ~~have been performed.~~

•~~Supply procurement – resale of cultivation and production resources, supplies and equipment, acquired by~~were performed; these fees were eliminated in connection with new contract terms with the Company from top national vendors at discounted prices, to its clients and third parties within the cannabis industry. The Company recognizes this revenue after the delivery and acceptance of goods by the purchaser.Company's client.

•Licensing fees – revenue from the licensing of the ~~Company’s~~Company's branded products, including ~~Betty’s~~Betty's Eddies, Bubby's Baked, Vibations and Kalm Fusion, to wholesalers and to regulated dispensaries throughout the United States and Puerto Rico. ~~This~~The Company recognizes this revenue ~~is recognized~~ when the products are delivered.

The Financial Accounting Standards Board Accounting Standards Codification 606, Revenue from Contract with Customers, as amended by subsequently issued Accounting Standards Updates, 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 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.

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Revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was comprised of the following (in thousands):

Three months ended Nine months ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
Product revenue:
Product revenue - retail $ 23,593 $ 23,454 $ 68,121 $ 59,230
Product revenue - wholesale 9,009 6,633 23,029 20,536
Total product revenue 32,602 30,087 91,150 79,766
Other revenue:
Real estate rentals 434 1,726 2,867 5,397
Supply procurement 815 528 2,825 1,446
Management fees 9 685 843 2,562
Licensing fees 52 182 495 1,249
Total other revenue 1,310 3,121 7,030 10,654
Total revenue $ 33,912 $ 33,208 $ 98,180 $ 90,420


	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022

Product revenue:
Product revenue - retail	$	24,336	$	23,087	$	47,519	$	44,528
Product revenue - wholesale	11,031		7,958		21,407		14,020
Total product revenue	35,367		31,045		68,926		58,548
Other revenue:
Real estate rentals	519		846		939		2,433
Supply procurement	496		820		804		2,010
Management fees	35		81		54		834
Licensing fees	102		194		176		443
Total other revenue	1,152		1,941		1,973		5,720
Total revenue	$	36,519	$	32,986	$	70,899	$	64,268

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(15) MAJOR CUSTOMERS

The Company did not have any customers that contributed 10% or more of total revenue in any of the three- ~~and nine-month~~or six-month periods ended ~~September~~June 30, ~~2022 and 2021.~~2023 or 2022.

~~At September 30, 2022, one customer~~The Company did not have any customers that accounted for 10% or more of the Company’s accounts receivable balance ~~representing approximately 54% of the total accounts receivable. At~~at either June 30, 2023 or December 31, ~~2021, one customer accounted for 10% or more of the Company’s accounts receivable balance, representing approximately 28% of total accounts receivable in the aggregate.~~2022. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. The Company maintains an allowance for doubtful accounts and historical losses have been within management’s expectations.

(16) LEASES

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.

The Company is currently the lessee under ~~six~~eight operating leases and ~~six~~fifteen 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 Company leases the following facilities under operating leases:

•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 that is being subleased to its cannabis-licensed client. The lease expires in March 2030, with an option to extend the term for three additional years.

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•Delaware –- a 12,000 square foot premises, which the Company developed into a cannabis production facility with offices and which it 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.

•Nevada – 10,000 square feet of an industrial building that the Company has built out into a cannabis cultivation facility which it plans to rent and then sublease to the cannabis-licensed entity, 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.

•Massachusetts - a 2,700 square foot dispensary, which lease the Company assumed that expires in 2026, with options to extend the term for three additional five-year periods through 2041.

•Massachusetts - an approximately 33,800 square foot building which houses both a dispensary and a cultivation facility, whose lease expires in October 2038.

•Maryland –- a 2,700 square foot two-unit apartment under a lease that expires in July 2023.

•Ohio - approximately 4,700 square feet of retail space in a multi-use building under a ten-year lease that expires in February 2033, with options to extend the term for two additional five-year periods through February 2043.

The Company leases machinery and office equipment under finance leases that expire from ~~February 2024~~July 2023 through ~~November 2027,~~March 2028, with such terms being a major part of the economic useful life of the leased property.

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The components of lease expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands):


		Three months ended				Nine months ended					Three months ended				Six months ended
		September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022

Operating lease expense	Operating lease expense	$	296	$	277	$	872	$	821	Operating lease expense	$	515	$	298	$	814	$	575

Finance lease expenses:	Finance lease expenses:									Finance lease expenses:
Amortization of right of use assets	Amortization of right of use assets	$	48	$	8	$	108	$	25	Amortization of right of use assets	$	160	$	40	$	214	$	59
Interest on lease liabilities	Interest on lease liabilities	14		1		32		4		Interest on lease liabilities	70		10		85		17
Total finance lease expense	Total finance lease expense	$	62	$	9	$	140	$	29	Total finance lease expense	$	230	$	50	$	299	$	76

At ~~September~~June 30, ~~2022,~~2023, the weighted average remaining lease terms for operating leases and finance leases were ~~6.6~~10.3 years and ~~3.3~~3.5 years, respectively. The weighted average discount rate used to determine the right-of-use assets and lease liabilities was between 7.5% and ~~12.0%~~13.5% for all leases.

Future minimum lease payments as of ~~September~~June 30, ~~2022~~2023 under all non-cancelable leases having an initial or remaining term of more than one year were (in thousands):


		Operating leases		Finance leases			Operating leases		Finance leases

Remainder of 2022		$	304	$	61
2023		1,298		238
Remainder of 2023						Remainder of 2023	$	887	$	415
2024	2024	1,199		217		2024	1,887		814
2025	2025	1,179		216		2025	1,929		813
2026	2026	1,128		88		2026	1,856		559
2027						2027	1,754		199
Thereafter	Thereafter	3,214		40		Thereafter	3,953		11
Total lease payments	Total lease payments	8,322		860		Total lease payments	12,266		2,811
Less: imputed interest	Less: imputed interest	(2,824)		(136)		Less: imputed interest	(1,807)		(543)
		$	5,498	$	724		$	10,459	$	2,268

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~~had an initial lease period of eleven months, with a minimum rent of $31.00 per square foot, which ~~amount increases~~increased 3.0% annually. ~~In the event~~Should the Company isbe awarded one or more cannabis licenses by the state of Ohio prior to the end of the ~~six Ohio cannabis licenses for which~~initial lease period, it ~~had previously applied, the Company can~~could extend the term of one or more of the Ohio Leases to ten years (with two additional five-year options

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to extend) upon the payment of $50,000 for ~~each~~the extended Ohio Lease, ~~and develop~~which the ~~premises of such extended lease(s)~~Company is building out into a ~~cannabis~~medical use dispensary.

In February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio. The Company is awaiting the final verification process to be completed by the state. As of September 30, 2022, the lease terms of the Ohio Leases were all less than one year, and accordingly the Company has not recorded a right-of-use asset and corresponding lease liability on its balance sheet. In April 2022, the Company extended the term of one of the Ohio Leases to February 2023 (the "Extended Ohio Lease"), and the remaining five Ohio Leases were terminated. ~~The~~In February 2023, the Company ~~intends to enter~~entered into a ten-year lease on the Extended Ohio Lease property, ~~which will become effective upon~~and the ~~completion~~Company opened its dispensary in Tiffin, Ohio in June 2023. At December 31, 2022, the lease term of the ~~final verification process by~~Extended Ohio Lease was less than one year, and the ~~state, which is expected~~Company was not required to ~~occur in the first quarter of 2023.~~record a right-of-use asset and corresponding lease liability on its balance sheet.

(17) RELATED PARTY TRANSACTIONS

The Company’s corporate offices are leased from an entity in which the Company’s ~~former~~ Chief ~~Financial~~Executive Officer ~~now the Company’s~~and President (the ~~"President"~~"CEO") has an investment interest. This lease expires in October 2028 and contains a five-year extension option. Expenses incurred under this lease were approximately $64,000 and $39,000 for ~~both of~~ the ~~three-month periods~~three months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~respectively, and approximately ~~$117,000~~$129,000 and $78,000 for ~~both of~~ the ~~nine-month periods~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021.~~respectively.

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The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s Chief Operating Officer ~~(“COO”~~(the “COO”). Purchases from this entity totaled ~~$1.1~~$1.4 million in each of the three-month periods ended June 30, 2023 and 2022, and $2.7 million and ~~$3.4~~$2.3 million in the ~~three and nine~~six months ended ~~September~~June 30, ~~2022, respectively,~~2023 and ~~$1.5 million and $3.8 million in the three and nine months ended September 30, 2021,~~2022, 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 Chief Revenue Officer ~~(“CRO"~~(the “CRO") 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 orand between 1.35% and 2.5% if licensed by the Company for sale by third ~~parties, respectively, and (ii) 0.5% and 1.0% of wholesale sales of future~~parties. Future developed products ~~within the product line~~(i.e., ice cream) have a royalty rate of 0.5% if sold directly by the Company orand between 0.125% and 0.135% if licensed by the Company for sale by ~~third-parties, respectively.~~third parties. The aggregate royalties due to this entity were approximately ~~$53,000~~$346,000 and ~~$163,000~~$53,000 for the three ~~and nine~~ months ended ~~September~~June 30, 2023 and 2022, respectively, and approximately ~~$48,000~~$465,000 and ~~$210,000~~$109,000 for the ~~three and nine~~six months ended ~~September~~June 30, ~~2021,~~2023 and 2022, respectively.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, respectively,~~2023, one of the Company’s majority-owned subsidiaries paid distributions in the aggregate of ~~$4,200~~approximately $2,100 and ~~$27,300~~$3,400, respectively, to the Company’s Chief Executive Officer (“CEO”) and its President, who own minority equity interests in such subsidiary. During the three and nine months ended September 30, 2021, respectively, this majority-owned subsidiary paid aggregate distributions of approximately $13,000 and $34,000 to the Company’s CEO, ~~and President.~~

~~During the three and nine months ended September 30, 2022, one of the Company’s majority-owned subsidiaries paid distributions of $6,500 and $17,500, respectively, to a current employee~~ who owns a minority equity interest in such subsidiary. During ~~both~~ the three and ~~nine~~six months ended ~~September, the employee was paid $4,300 from such subsidiary.~~

~~During the three and nine months ended September~~June 30, 2022, ~~the Company purchased fixed assets~~this majority-owned subsidiary paid distributions aggregating approximately $12,600 and ~~consulting services aggregating $267,000 and $926,000, respectively, from two entities owned by two of~~$23,100 to the Company’s ~~general managers. During~~then-CEO and then-Chief Financial Officer (now the ~~three and nine months ended September 30, 2021, the Company purchased fixed assets and consulting services from these entities aggregating approximately $150,000 and $723,000, respectively.~~

~~During the three and nine months ended September 30, 2022, the Company purchased fixed assets~~CEO), each of ~~$125,000 and $486,000, respectively, from an entity~~whom owned ~~by an employee. During the three and nine months ended September 30, 2021, the Company purchased fix assets of approximately $78,000 and $438,000, respectively, from this employee.~~minority equity interests 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. The CEO ~~and~~had also guaranteed the ~~Company’s President.~~South Porte Bank Mortgage prior to its repayment in May 2023.

(18) COMMITMENTS AND CONTINGENCIES

Maryland Litigation

Following the consummation of the Kind Acquisition, in April 2022, ~~the Maryland~~ litigation between the Company and the members of Kind was dismissed in its entirety with prejudice, and the parties have released one another of any and all claims between them.

DiPietro Lawsuit

In December 2021, the parties to this action entered into a global confidential settlement and release agreement, along with the parties to the aforementioned Maryland litigation. At the same date, the Company’s wholly-owned subsidiary MariMed Advisors Inc. (“MMA”) and Jennifer DiPietro (“Ms. DiPietro”), one of the former members of Kind, entered into a membership interest purchase agreement pursuant to which the Company would purchase Ms. DiPietro’s interests in Mia Development LLC, the Company's majority-owned subsidiary that owns production and ~~Mari-MD.~~retail cannabis facilities in Wilmington, Delaware, and Mari Holdings MD LLC ("Mari-MD"), the Company's majority-owned subsidiary that owns production and retail cannabis facilities in Hagerstown, Maryland and Annapolis Maryland. Upon the court’s approval of

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the parties’ joint motion for approval, on June 8, 2022, the purchase of Ms. DiPietro’s interests was consummated. The parties released all direct and derivative claims against one another, and a stipulation dismissing all claims and counterclaims with prejudice was filed with the court.

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Bankruptcy Claim

During 2019, the Company’s ~~MMH~~ subsidiary, MariMed Hemp, Inc. ("MHI") 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~~$29 million from the sale, which was fully reserved onat December 31, 2019.

~~In February~~On January 24, 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-filedan involuntary bankruptcy proceeding under Chapter 11 was filed against GenCanna and its wholly-owned subsidiary, OGGUSA Inc. (f/k/a GenCanna Global US, Inc.) ("OGGUSA" and together with GenCanna, the "OGGUSA Debtors") in the U.S. Bankruptcy Court in the Eastern District of Kentucky (the ~~“Bankruptcy Court”~~"Bankruptcy Court"). In February 2020, the OGGUSA Debtors, agreed to convert the involuntary bankruptcy proceeding into a voluntary Chapter 11 proceeding. ~~In addition, GenCanna and GenCanna USA’s~~The OGGUSA Debtors' subsidiary, Hemp Kentucky LLC, ~~(collectively with GenCanna and GenCanna USA, the “GenCanna Debtors”),~~also 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~~OGGUSA Debtors, which included the Company, entered an order authorizing the sale of all or substantially all of the assets of the ~~GenCanna~~OGGUSA Debtors to ~~MGG.~~MGG Investment Group LP ("MGG"), a creditor of the OGGUSA Debtors. After the consummation of the sale of all or substantially all of their assets and business, the ~~GenCanna~~OGGUSA 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~~OGGUSA 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 $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 approvedwas confirmed by the Bankruptcy Court ~~as a general unsecured claim in the amount of $31.0 million.~~on November 12, 2020.

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.

On April ~~20,~~ 2022, the Plan Administrator ~~for the OGGUSA Debtors~~ filed ~~an adversary proceeding~~a Complaint against ~~the Company seeking to recover approximately $200,000 in~~MHI (the "Complaint") alleging certain ~~alleged~~ preferential transfers of assets, which were valued by the Plan Administrator at $250,000, relating to payments on a $600,000 loan made to ~~MariMed Hemp, Inc.~~MHI by the Company prior to the filing of the OGGUSA Debtors Chapter 11 ~~bankruptcy. After investigating~~proceeding (the "Preferential Claim"). The Complaint sought to recover an amount no less than $200,000 and to disallow MHI’s unsecured general claim in the ~~nature of these claims, the Company and its counsel do not believe that~~bankruptcy proceeding until such ~~claims have any factual or legal merit and intend~~time as such preferential transfer had been repaid to ~~vigorously defend such preference action. In addition, by reason of the nature of the claims, the Company believes that it has certain counterclaims and possible third-party claims against~~ the OGGUSA ~~Debtors in relation to the facts asserted in the preference action. The Company~~Debtors.

In July 2023, MHI entered into a Settlement and ~~its counsel are continuing to have discussions~~Release Agreement with the Plan Administrator pursuant to which it agreed to reduce its Bankruptcy Court approved unsecured general claim to $15.5 million, or by 50%, in ~~an attempt to resolve this action without further litigation or expense. On October 19, 2022, counsel~~consideration for ~~the Plan Administrator requested a resumption of discussions between the parties regarding~~ the settlement of the ~~claims in question. It is not known at this time whether such matter can be resolved or if the Company will be required to proceed with its defense~~Preferential Claim and ~~counterclaims. In the event that the Company~~a general release of MHI and the Plan Administrator are not able to reach a settlement agreement regarding the resolution of the claims, one or both of the parties will file an election notice with the bankruptcy court to allow the reference action to proceed.Company.

As of the date of this filing, ~~since the preference section is still in its initial states and no discovery has been conducted by either party,~~ there is ~~still~~ insufficient information as to ~~(a) the details of the factual or legal basis for the preference claim asserted by the Plan Administrator or (b) what portion, if any, of the Company’s allowed claim will be paid~~determine how much MHI may receive upon the completion of the liquidation of the remaining assets of the OGGUSA ~~Debtors.~~

~~Table~~Debtors on account of ~~Contents~~

its general unsecured claim, if anything.

(19) SUBSEQUENT EVENTS

~~Equity Transactions~~In July 2023, the Company entered into an Omnibus Agreement with FSCC (see Note 5).

Subsequent to September 30, 2022, (i) 896,031 warrants were exercised in a cashless transaction, under which the Company withheld 813,694 shares underlying such warrants and issued 82,337 shares of common stock and (ii) 629 shares of restricted common stock were issued as payment under a royalty agreement.

~~Payoff of Promissory Note~~

In November 2022, the Company and the holder of the promissory note issued by MariMed Hemp Inc. reached an agreement under which the Company will pay approximately $227,000 to the holder of such note. No additional amounts are due under this promissory note.

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Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations

The following discussion of the financial condition and results of operations of MariMed Inc. should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March ~~16, 2022.~~3, 2023.

Forward Looking Statements

When used in this Quarterly Report on Form 10-Q and in future filings by the Company with the SEC, words or phrases, such as “anticipate,” “believe,” “could,” “would,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or similar expressions, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. These factors include, but are not limited to, changes that may occur to general economic and business conditions; changes in current pricing levels that the Company can charge for its services and products or which it pays to its suppliers and business partners; changes in political, social and economic conditions in the jurisdictions in which the Company operates; changes to regulations that pertain to its operations; changes in technology that render the Company’s technology relatively inferior, obsolete or more expensive compared to others; changes in the business prospects of the Company’s business partners and customers; increased competition, including from the Company’s business partners; and enforcement of U.S. federal cannabis-related laws.

The following discussion should be read in conjunction with the financial statements and related notes which are included in this Quarterly Report on Form 10-Q.

The Company does not undertake to update its forward-looking statements or risk factors to reflect future events or circumstances, unless required by law.

Overview

We are a multi-state operator in the United States cannabis industry. We develop, operate, manage, and optimize state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of medicinal and adult use cannabis. We also license our proprietary brands of cannabis and hemp-infused products, along with other top brands, in several domestic markets.

~~Our common stock commenced trading on the Canadian Securities Exchange effective July 12, 2022, under the ticker symbol MRMD, and continues to trade on the OTCQX under the same symbol.~~

On April 27, 2022 (the “Kind Acquisition Date”), we acquired Kind Therapeutics USA (“Kind”), our former client in Maryland that holds licenses for the cultivation, production, and dispensing of medical cannabis (the “Kind Acquisition”). The financial results of Kind are included in our condensed consolidated financial statements for the periods subsequent to the Kind Acquisition Date.

On March 9, 2023 (the "Ermont Acquisition Date"), we acquired the operating assets of Ermont, Inc. ("Ermont"), a medical-licensed vertical cannabis operator located in Quincy, Massachusetts (the "Ermont Acquisition"). The financial results of Ermont are included in our condensed consolidated financial statements for the period subsequent to the Ermont Acquisition Date.

We completed two acquisitions during the year ended December 31, 2022 that we recorded as asset purchases. On May 5, 2022 (the "Green Growth Acquisition Date"), we completed the acquisition of 100% of the equity ownership of Green Growth Group Inc. (“("Green ~~Growth”~~Growth"), an entity that holds a craft cultivation and production cannabis license in the state of Illinois (the ~~“Green~~"Green Growth ~~Acquisition”~~Acquisition"). On December 30, 2022 (the "Greenhouse Naturals Acquisition Date"), we completed an asset purchase under which we acquired a cannabis license and assumed a property lease for a dispensary in Beverly, Massachusetts that had never been operational.

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During ~~the balance of 2022 and into~~ 2023, we are focused on continuing to execute our strategic growth plan, with priority on activities ~~that include the following:~~described below:

•Continuing to consolidate the cannabis ~~business~~businesses that we have developed and ~~manage.~~managed.

•Expanding revenues, assets, and our footprint in the states in which we ~~operate:~~

operate.

◦•Expanding into other legal states through mergers and acquisitions and by filing new applications in states where new licensing opportunities become available.

•Increasing revenues by producing and distributing our award-winning brands to qualified strategic partners or by acquiring production and distribution licenses.

•In Massachusetts, we ~~intend to open~~recently opened two additional dispensaries, and intend to significantly expand the capacity and capability of our manufacturing ~~facility.~~facility in New Bedford, Massachusetts.

◦In Delaware, we intend to develop an additional 40,000 square feet of cultivation and production capacity at our facility in Milford, which, upon completion, will be leased to our client in this state.

◦•In Maryland, we opened a dispensary in Annapolis onin October ~~18,~~ 2022, and we intend to expand our manufacturing facility by 40,000 square feet. We recently received Good Manufacturing Practices ("GMP") certification of our production kitchen, as well as approval to produce and sell high-dose edibles, which we have commenced. We also commenced adult-use wholesale and retail sales in Maryland. Under current Maryland cannabis laws, we have the potential to add three additional medical dispensaries, for a total of four.

◦•In Illinois, in May 2022, we ~~recently~~ closed on the acquisition of ~~an Illinois~~a craft cannabis license, which will enable us to be vertically integrated and add cultivation, manufacturing, and distribution to our four existing retail cannabis operations in Illinois. Under Illinois cannabis laws, we have the potential to add ~~six~~five additional dispensaries, for a total of ten.

•~~Expanding into other legal states through mergers~~In Ohio, in June 2023, we opened our first medical dispensary in the state, and ~~acquisitions and~~we intend to explore additional opportunities to grow our operations in Ohio to the maximum allowable by ~~filing new applications in states where new licensing opportunities are available.~~state regulations.

•~~Increasing revenues by producing and distributing our award-winning brands to qualified strategic partners or by acquiring production and distribution licenses.~~

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Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment: accounts receivable; valuation of inventory; estimated useful lives and depreciation and amortization of property and equipment and intangible assets; accounting for acquisitions and business combinations; loss contingencies and reserves; stock-based compensation; and accounting for income taxes.

Accounts Receivable

We provide credit to our clients in the form of payment terms. We limit our credit risk by performing credit evaluations of our clients and maintaining a reserve, as applicable, for potential credit losses. Such evaluations are judgmental in nature and include a review of ~~the~~each client’s outstanding balances with consideration toward such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Accordingly, the actual amounts collected could differ from expected amounts and require that we record additional reserves.

Inventory

Our inventory is valued at the lower of cost or market, including consideration of factors such as shrinkage, the aging of and future demand for inventory, expected future selling price, what we expect to realize by selling the inventory and the

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contractual arrangements with customers. Reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts, and net realizable value. These estimates are judgmental in nature and are made at a point in time, using available information, expected business plans and expected market conditions. As a result, the actual amount received on sale could differ from the estimated value of inventory. Periodic reviews are performed on the inventory balance. The impact of any changes in inventory reserves is reflected in cost of goods sold.

Estimated Useful Lives and Depreciation and Amortization of Property, Equipment, and Intangible Assets

Depreciation and amortization of property, equipment, and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.

~~Acquisitions~~Business Combinations and ~~Business Combinations~~Asset Purchases

Classification of an acquisition as a business combination or an asset acquisition depends on whether the assets acquired constitute a business, which can be a complex judgment. Whether an acquisition is classified as a business combination or asset acquisition can have a significant impact on how we record the transaction.

We allocate the purchase price of acquired assets and companies to identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net amount of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits from other assets acquired in the acquisition or business combination that are not individually identified and separately recognized. Significant judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, which are principally based upon estimates of the future performance and cash flows expected from the acquired asset or business and applied discount rates. While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. If different assumptions are used, it could materially impact the purchase price allocation and our financial position and results of operations. Any adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period are included in operating results in the period in which the adjustments are determined.

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Intangible assets typically are comprised of trademarks and ~~tradenames,~~trade names, licenses and customer relationships, and non-compete agreements.

Loss Contingencies and Reserves

We are subject to ongoing business risks arising in the ordinary course of business that affect the estimation process of the carrying value of assets, the recording of liabilities, and the possibility of various loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such amounts should be adjusted and record changes in estimates in the period they become known. We are subject to legal claims from time to time. We reserve for legal contingencies and legal fees when the amounts are probable and estimable.

Stock-Based Compensation

Our stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, which is generally the vesting period. We use the Black-Scholes valuation model for estimating the fair value of stock options as of the date of grant. Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions, including the volatility of our stock price, expected term of the stock option, risk-free interest rate and expected dividends. Changes in such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes, however, would not impact our cash flows.

Income Taxes

We use the asset and liability method to account for 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

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reverse. Deferred tax assets are reduced by a valuation allowance to the extent our management concludes that it is more likely than not that the assets will not be realized. To assess the recoverability of any tax assets recorded on the balance sheet, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative income in the most recent years, changes in the business in which we operate and our forecast of future taxable income. In determining future taxable income, we make assumptions, including the amount of state and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our businesses.

Results of Operations

Three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

Revenue

Our main sources of revenue are comprised of the following:

•Product sales (retail and wholesale) - direct sales of cannabis and cannabis-infused products primarily by our retail dispensaries and wholesale operations in Massachusetts, Illinois, and, as of the Kind Acquisition Date, Maryland. We recognize this revenue when products are delivered or at ~~retain~~retail points-of-sale.

•Real estate rentals - rental income generated from leasing of our state-of-the-art, regulatory compliant cannabis facilities to our cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms. Prior to the third quarter of 2022, we charged additional rental fees based on a percentage of tenant revenues that exceeded specified ~~amounts.~~amounts; these incremental rental fees were eliminated in connection with new contract terms with our client.

•Management fees - fees for providing our 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.

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•Supply procurement - resale of cultivation and production resources, supplies and equipment that we have acquired from top national vendors at discounted prices to our clients and third parties within the cannabis industry. We recognize this revenue after the delivery and acceptance of goods by the purchaser.

•Management fees - fees for providing our cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations. Prior to the third quarter of 2022, these fees were based on a percentage of such client's revenue and were recognized after services have been performed; these fees were eliminated in connection with new contract terms with our client.

•Licensing fees - revenue from the licensing of our branded products, including Betty's Eddies, Bubby's Baked, Vibations, and Kalm Fusion, to wholesalers and to regulated dispensaries throughout the United States and Puerto Rico. We recognize this revenue when the products are delivered.

Our revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 was comprised of the following (in thousands):


	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Product revenue:
Product revenue - retail	$	24,336	$	23,087	$	47,519	$	44,528
Product revenue - wholesale	11,031		7,958		21,407		14,020
Total product revenue	35,367		31,045		68,926		58,548
Other revenue:
Real estate rentals	519		846		939		2,433
Supply procurement	496		820		804		2,010
Management fees	35		81		54		834
Licensing fees	102		194		176		443
Total other revenue	1,152		1,941		1,973		5,720
Total revenue	$	36,519	$	32,986	$	70,899	$	64,268

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Our total revenue increased ~~$0.7~~$3.5 million in the three months ended ~~September~~June 30, ~~2022~~2023 compared to the three months ended ~~September~~June 30, ~~2021.~~2022, and $6.6 million in the six months ended June 30, 2023 compared to the six months ended June 30, 2022. Our total product revenue increased ~~$2.5~~$4.3 million, or ~~8.4%~~13.9%, in the three months ended June 30, 2023 and $10.4 million, or 17.7%, in the six months ended June 30, 2023, compared to the same prior year periods. These increases in both the quarter and year-to-date 2023 periods were primarily attributable to ~~higher~~both wholesale and retail revenue arising from the Kind ~~Acquisition. This increase was~~Acquisition, and higher retail revenue in our Massachusetts dispensaries, primarily attributable to our recent acquisitions there. These increases were partially offset by ~~lower retail sales in Massachusetts due to increased competition. The decrease~~decreases in our other revenue, ~~was~~ primarily attributable to rent, supply procurement and ~~management~~ fee reductions in connection with one of our clients and the Kind ~~Acquisition, partially offset by higher supply procurement revenue primarily attributable to revenue generated from our cannabis clients in Delaware and, prior to the Kind Acquisition, in Maryland.~~

Our total revenue increased $7.8 million, or 8.6%, in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Our total product revenue increased $11.4 million, or 14.3%, primarily attributable to higher retail dispensary cannabis sales in Illinois and the inclusion of Kind’s sales in our results since the Kind Acquisition Date. Similar to our quarter-over-quarter results described above, the decrease in our other revenue was primarily attributable to rent and management fee reductions in connection with one of our clients and the Kind Acquisition, partially offset by higher supply procurement revenue primarily attributable to revenue generated from our cannabis clients in Delaware and, prior to the Kind Acquisition, in Maryland.Acquisition.

Cost of Revenue, Gross Profit and Gross Margin

Our cost of revenue represents the direct costs associated with the generation of our revenue, including licensing, packaging, supply procurement, manufacturing, supplies, depreciation, amortization of acquired intangible assets, and other product-related costs.

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Our cost of revenue, gross profit and gross margin for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands, except percentages):


								Increase (decrease) from prior year											Increase (decrease) from prior year
		2022			2021			$		%			2023			2022			$		%
Three months ended September 30,
Three months ended June 30,												Three months ended June 30,
Cost of revenue	Cost of revenue	$	17,748		$	15,027		$	2,721	18.1	%	Cost of revenue	$	20,143		$	17,981		$	2,162	12.0	%
Gross profit	Gross profit	$	16,164		$	18,181		$	(2,017)	(11.1)	%	Gross profit	$	16,376		$	15,005		$	1,371	9.1	%
Gross margin	Gross margin	47.7		%	54.7		%					Gross margin	44.8		%	45.5		%

Nine months ended September 30,
Six months ended June 30,												Six months ended June 30,
Cost of revenue	Cost of revenue	$	50,035		$	39,647		$	10,388	26.2	%	Cost of revenue	$	39,135		$	32,287		$	6,848	21.2	%
Gross profit	Gross profit	$	48,145		$	50,773		$	(2,628)	(5.2)	%	Gross profit	$	31,764		$	31,981		$	(217)	(0.7)	%
Gross margin	Gross margin	49.0		%	56.2		%					Gross margin	44.8		%	49.8		%

Our cost of revenue increased in both the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~three and nine months ended September 30, 2021. Our higher cost of revenue in the current~~same prior year ~~periods was~~periods. These increases were primarily attributable to ~~higher~~increases in manufacturing, employee-related and facility ~~and supply procurement costs~~expenses aggregating ~~$2.8~~$3.7 million and ~~$10.2~~$9.4 million ~~respectively,~~ in the three and ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023, respectively. These higher costs were primarily due to ~~continuing supply chain issues and associated higher shipping costs, coupled with~~ our increased headcount and new facilities in connection with our recent acquisitions and in-process expansions. ~~These~~The increases ~~in cost and resulting decreases in gross profit resulted in lower gross margins~~ in both current year ~~periods.~~periods were partially offset primarily by lower supply procurement and certain inventory-related expenses.

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Operating Expenses

Our operating expenses are comprised of personnel, marketing and promotion, general and administrative, acquisition-related and other, and bad debt expenses. Our operating expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands, except percentages):


						Increase (decrease) from prior year									Increase (decrease) from prior year
		2022		2021		$		%			2023		2022		$		%

Three months ended September 30,
Three months ended June 30,										Three months ended June 30,
Personnel	Personnel	$	3,746	$	1,481	$	2,265	152.9	%	Personnel	$	5,619	$	3,382	$	2,237	66.1	%
Marketing and promotion	Marketing and promotion	1,402		563		839		149.0	%	Marketing and promotion	1,666		809		857		105.9	%
General and administrative	General and administrative	5,097		9,481		(4,384)		(46.2)	%	General and administrative	5,080		5,565		(485)		(8.7)	%
Acquisition-related and other	Acquisition-related and other	143		—		143		100.0	%	Acquisition-related and other	425		754		(329)		(43.6)	%
Bad debt	Bad debt	40		36		4		11.1	%	Bad debt	39		—		39		100.0	%
		$	10,428	$	11,561	$	(1,133)	(9.8)	%		$	12,829	$	10,510	$	2,319	22.1	%

Nine months ended September 30,
Six months ended June 30,										Six months ended June 30,
Personnel	Personnel	$	10,170	$	5,266	$	4,904	93.1	%	Personnel	$	10,275	$	6,424	$	3,851	59.9	%
Marketing and promotion	Marketing and promotion	2,854		1,058		1,796		169.8	%	Marketing and promotion	2,812		1,452		1,360		93.7	%
General and administrative	General and administrative	16,890		16,934		(44)		(0.3)	%	General and administrative	9,385		11,793		(2,408)		(20.4)	%
Acquisition-related and other	Acquisition-related and other	897		—		897		100.0	%	Acquisition-related and other	615		754		(139)		(18.4)	%
Bad debt	Bad debt	54		1,855		(1,801)		(97.1	%)	Bad debt	(5)		14		(19)		(135.7	%)
		$	30,865	$	25,113	$	5,752	22.9	%		$	23,082	$	20,437	$	2,645	12.9	%

The increase in our personnel expenses in both the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~three and nine months ended September 30, 2021~~same prior year periods was primarily due to the hiring of additional staff to support higher levels of projected revenue from existing operations, ~~as well as from~~ the Kind ~~Acquisition.~~Acquisition and, to a lesser extent, our other recent acquisitions. Personnel costs increased to approximately ~~11%~~15% of revenue in the three and six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~approximately 5% of revenue in the three months ended September 30, 2021, and~~ approximately 10% of revenue in the ~~nine~~three and six months ended ~~September~~June 30, ~~2022, compared to approximately 6% of revenue in the nine months ended September 30, 2021.~~2022.

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The increase in our marketing and promotion expenses in both the three month and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~three and nine months ended September 30, 2021~~same prior year periods was primarily attributable to our focused efforts to upgrade our marketing initiatives in order to expand branding and distribution of our licensed products. Marketing and promotion costs increased to approximately 4% of revenue in three months ended September 30, 2022, compared to approximately 2% of revenue in the three months ended September 30, 2021, and approximately 3% of revenue in the nine months ended September 30, 2022, compared to approximately 1% of revenue in the nine months ended September 30, 2021.

~~Our~~The decrease in our general and administrative expenses ~~decreased by approximately $4 million~~ in both the three and six months ended ~~September~~June 30, ~~2022~~2023 compared to the ~~same prior year period. This decrease~~three and six months ended June 30, 2022 was primarily attributable to lower ~~costs~~expenses in connection with our equity programs ~~in the current year period. Our general~~ and ~~administrative expenses were essentially unchanged in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.~~professional fees, partially offset by higher facility, depreciation and amortization of property and equipment, and travel expenses.

Acquisition-related and other expenses include those expenses related to acquisitions and other significant transactions that we would otherwise not have incurred, and include professional and services fees, such as legal, audit, consulting, paying agent and other fees. ~~We incurred $0.1 million~~Our acquisition-related and ~~$0.9 million of~~other expense in the three and six months ended June 30, 2023 primarily related to our acquisitions and professional fees related to obtaining the Credit Agreement (as described below). Our acquisition-related and other expenses in the three and ~~nine~~six months ended ~~September~~June 30, 2022 ~~respectively,~~ primarily related to the Kind Acquisition and the ~~recent~~ listing of our common stock on the Canadian Securities Exchange. ~~We did not record any acquisition-related and other expenses in the three and nine months ended September 30, 2021.~~

We recorded nominal bad debt expense in both the three and nine months ended September 30, 2022, as well as in the three months ended September 30, 2021. We recorded $1.9 million in the nine months ended September 30, 2021 due to the higher reserve balances that were required in 2021 for aged trade receivable balances.

~~The increase in operating expenses, as detailed above, is the primary reason for the decrease in our net income for the nine months ended September 30, 2022, as compared to the same period in 2021.~~

Interest and Other (Expense) Income, Net

Interest expense primarily relates to interest on mortgages and notes ~~payable.~~payable and, effective in 2023, the Credit Agreement (as described below). Interest income primarily relates to interest receivable in connection with our notes receivable. Other (expense) income, net, includes gains (losses) on changes in the fair value of our investments and other investment-related income (expense).

Our net interest expense ~~was virtually unchanged~~increased $2.4 million and $4.7 million in the three and six months ended ~~September~~June 30, ~~2022~~2023, respectively, compared to the same prior year ~~period. Our net~~periods, primarily due to interest ~~expense decreased $1.4 million in the nine months ended September 30, 2022 compared~~related to the ~~nine months ended September 30, 2021. Higher interest~~Credit Agreement (as

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described below), coupled with expense ~~was partially offset by higher interest income~~for a fair value adjustment to notes payable in connection with our early repayment of the notes payable for the Kind Acquisition.

We reported nominal net other expense in the three months ended ~~September~~June 30, ~~2022 compared to the same prior year period. The decrease in~~2023 and $0.9 million of net ~~interest~~other expense in the ~~nine~~six months ended ~~September~~June 30, ~~2022 compared~~2023. The expense for the six months ended June 30, 2023 was primarily due to the ~~nine months ended September 30, 2021 was attributable~~write-off of assets in the first quarter of 2023 in connection with our decision to ~~$0.6 million of higher interest income, coupled with $0.8 million of lower interest expense.~~

~~Our~~cancel our plans to expand into Nevada. We reported net other expense ~~was $0.3 million and $0.2~~of $0.7 million in the three months ended ~~September~~June 30, 2022, ~~and 2021, respectively, and was~~ primarily comprised of losses from the ~~changes~~change in the fair value of our investments. ~~The three months ended September 30, 2021 also included a nominal loss on the extinguishment of debt.~~ We recorded $0.3 million of net other income ~~of approximately $24,000~~ in the ~~nine~~six months ended ~~September~~June 30, 2022, ~~and net other expense of $0.6 million in the nine months ended September 30, 2021. The current year-to-date amount is~~ comprised of $1.0 million of non-cash income from ~~the sale of~~ an investment, ~~virtually~~partially offset by a ~~$0.9 million loss from the change in fair value of other investments. The prior year amount is comprised of a $0.9~~$0.7 million loss from the change in fair value of our ~~investments and a nominal loss on the extinguishment of debt. These losses were partially offset by a gain of $0.3 million on an asset sale.~~investments.

Income Tax Provision

We recorded income tax provisions of ~~$7.9~~$4.4 million and ~~$9.0~~$5.4 million in the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ respectively.

Liquidity and Capital Resources

We had cash and cash equivalents of ~~$11.1~~$14.6 million and ~~$29.7~~$9.7 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. In addition to the discussions below of our cash flows from operating, investing, and financing activities,

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~~included here,~~ please also see our discussion of non-GAAP Adjusted EBITDA in the section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by GAAP which our management also uses to measure our liquidity.

Credit Agreement

On January 24, 2023,we entered into a Loan and Security Agreement, by and among the Company, subsidiaries of the Company from time-to-time party thereto (collectively with the Company, the “Borrowers”), lenders from time-to-time party thereto (the “Lenders”), and Chicago Atlantic Admin, LLC (“Chicago Atlantic”), as administrative agent for the Lenders (the "Credit Agreement").

Proceeds from the Credit Agreement were designated to complete the build-out of a new cultivation and processing facility in Illinois, complete the build-out of a new processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and repay in full the Kind Therapeutics seller notes incurred in connection with the Kind Acquisition, which repayment occurred on January 24, 2023. The remaining balance, if any, was expected to be used to fund acquisitions.

Principal, Security, Interest and Prepayments

The Credit Agreement provides for $35.0 million in principal borrowings at our option in the aggregate and further provides the Borrowers with the right, subject to customary conditions, to request an additional incremental term loan in the aggregate principal amount of up to $30.0 million; provided that the Lenders elect to fund such incremental term loan. $30.0 million of loan principal was funded at the initial closing and we have the option, during the six-month period following the initial closing, to draw down an additional $5.0 million, which we did not elect to do. The loans require scheduled amortization payments of 1.0% of the principal amount outstanding under the Credit Agreement per month commencing in May 2023, and the remaining principal balance is due in full on January 24, 2026, subject to extension to January 24, 2028 under certain circumstances.

The Credit Agreement provides the Borrowers with the right, subject to specified limitations, to incur(a) seller provided debt in connection with future acquisitions, (b) additional mortgage financing from third-party lenders secured by real estate currently owned and acquired after the closing date, and (c) additional debt in connection with equipment leasing transactions.

The obligations under the Credit Agreement are secured by substantially all of the assets of the Borrowers, excluding specified parcels of real estate and other customary exclusions.

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The Credit Agreement provides for a floating annual interest rate equal to the prime rate then in effect plus 5.75%, which rate may be increased by 3.00% upon an event of default or 7.50% upon a material event of default as provided in the Credit Agreement.

At any time, we may voluntarily prepay amounts due under the facility in $5.0 million increments, subject to a three-percent prepayment premium and, during the first 20-months of the term, a “make-whole” payment.

Representations, Warranties, Events of Default and Certain Covenants

The Credit Agreement also includes customary negative covenants limiting our ability to incur additional indebtedness and grant liens that are otherwise not permitted, among others. Additionally, the Credit Agreement requires us to meet certain financial tests. At June 30, 2023, we were in compliance with the covenants of the Credit Agreement.

Warrant Issuance

The Credit Agreement provided for 30% warrant coverage against amounts funded under the facility, priced at a 20% premium to the trailing 20-day average price on the closing date of each such funding. At the initial closing, upon funding of the initial $30.0 million under the facility, we issued to the Lenders an aggregate of 19,148,936 warrants to purchase shares of our common stock at $0.47 per share, exercisable for a five-year period following issuance.

Cash Flows from Operating Activities

Our primary sources of cash from operating activities are from sales to customers in our dispensaries and ~~cash collections from~~to our wholesale customers. We expect cash flows from operating activities to be affected by increases and decreases in sales volumes and timing of collections, and by purchases of inventory and shipment of our products. Our primary uses of cash for operating activities are for personnel costs, purchases of packaging and other materials required for the production and sale of our products, and income taxes.

Our operating activities ~~provided $5.6~~used $3.2 million and ~~$28.2~~provided $2.2 million of cash in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to ~~$12.6 million of cash utilized to pay income taxes in the current year period, compared to $0.4 million in the same prior year period, coupled with~~ higher costs and operating expenses ~~arising as we continue to increase~~driven by our continued focus on increasing and ~~expand~~expanding our sales activities, facilities and footprint both in the states where we currently operate and into other states. These higher costs primarily relate to personnel, cultivation/manufacturing and facility expenses.

Cash Flows from Investing Activities

Our investing activities used ~~$23.7~~$13.4 million and ~~$13.4~~$21.1 million of cash in the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, respectively. During the six months ended June 30, 2023, we used cash of $8.8 million for capital expenditures, $3.0 million as part of the purchase consideration for the Ermont Acquisition, $0.6 million for cannabis licenses and $0.3 million for advances toward future business acquisitions. We also issued $0.9 million of notes receivable to a cannabis-licensed client. During the six months ended June 30, 2022, ~~and 2021, respectively. The increase in cash usage in the current year period was primarily attributable to~~we used $12.7 million of cash in the aggregate ~~cash~~for purchase consideration ~~paid for~~in connection with the Kind Acquisition and the Green Growth Acquisition, ~~in April 2022~~$7.9 million for capital expenditures, $0.3 million for cannabis licenses and ~~May 2022, respectively.~~$0.3 million for advances toward future business acquisitions. These payments were partially offset by $0.1 million of proceeds from notes receivable.

Cash Flows from Financing Activities

Our financing activities ~~used $0.4~~provided $21.5 million of cash in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~provided $7.7~~used $2.9 million of cash in the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. We received proceeds of $29.1 million from the Credit Agreement, of which we used $5.5 million to repay in full the notes previously issued to the sellers of Kind as part of the purchase consideration for the April 2022 Kind Acquisition. Excluding the aforementioned repayment of the notes in connection with the Kind Acquisition, we made $1.2 million of aggregate principal payments on our outstanding mortgages and promissory notes, including the repayment in full in May 2023 of our mortgage with South Porte Bank. We also made $0.6 million of payments toward the outstanding balance of the Credit Agreement, $0.2 million of principal payments of finance leases,

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and $0.1 million of distribution payments. During the six months ended June 30, 2022, we paid $2.0 million ~~of cash~~ to redeem the outstanding minority interests in one of our majority-owned subsidiaries in June 2022, made ~~$1.0~~$0.6 million of aggregate principal payments on our outstanding mortgages and notes payable, made $0.2 million of distribution payments and ~~$0.2~~made $0.1 million of finance lease principal payments.

On August 4, 2022, we entered into a Second Amendment to the Purchase Agreement with Hadron pursuant to which, inter alia, (a) Hadron’s obligation to provide any further funding to the Company and the Company’s obligation to issue any further securities to Hadron was terminated, (b) Hadron’s right to appointment a designee to the Company’s board of directors was eliminated, and (c) certain covenants restricting the Company’s incurrence of new indebtedness were eliminated.

Based on our current expectations, we believe our current cash and future funding opportunities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at ~~September~~June 30, ~~2022,~~2023, and our ability to raise additional cash through financing activities. Our contractual obligations at September 30, 2022 were primarily comprised of our outstanding mortgages and promissory notes, as well as our operating leases. Our mortgage and promissory note obligations totaled approximately $26 million at September 30, 2022, with payments aggregating approximately $500,000 in the remainder of 2022, $3 million in 2023, $2 million in 2024, $3 million in 2025, $1 million in 2026 and $17 million thereafter. Our operating lease obligations totaled approximately $8 million at September 30, 2022, with payments aggregating approximately $300,000 in the remainder of 2022, $1 million in each of the years 2023 through 2026, and $3 million thereafter. We anticipate devoting substantial capital resources to continue our efforts to execute our strategic growth plan as described above.

Non-GAAP Measurement

In addition to the financial information reflected in this report, which is prepared in accordance with GAAP, we are providing a non-GAAP financial measurement of profitability – Adjusted EBITDA – as a supplement to the preceding discussion of our financial results.

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Management defines Adjusted EBITDA as ~~net~~ income from operations, determined in accordance with GAAP, excluding the following:

•~~interest income and interest expense;~~

•~~income tax provision;~~

•depreciation and amortization of property and equipment;

•amortization of acquired intangible assets;

•impairments or write-downs of acquired intangible assets;

•stock-based compensation;

•~~acquisition-related and other;~~

•legal settlements;

•~~other income (expense), net;~~ and

•~~discontinued operations.~~acquisition-related and other.

Management believes that Adjusted EBITDA is a useful measure to assess our performance and liquidity, as it provides meaningful operating results by excluding the effects of expenses that are not reflective of our operating business performance. In addition, our management uses Adjusted EBITDA to understand and compare operating results across accounting periods, and for financial and operational decision-making. The presentation of Adjusted EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP.

Management believes that investors and analysts benefit from considering Adjusted EBITDA in assessing our financial results and our ongoing business, as it allows for meaningful comparisons and analysis of trends in the business. Adjusted EBITDA is used by many investors and analysts themselves, along with other metrics, to compare financial results across accounting periods and to those of peer companies.

As there are no standardized methods of calculating non-GAAP measurements, our calculations may differ from those used by analysts, investors, and other companies, even those within the cannabis industry, and therefore may not be directly comparable to similarly titled measures used by others.

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Reconciliation of ~~Net~~ Income from Operations to Adjusted EBITDA (a Non-GAAP Measurement)

The table below reconciles ~~Net~~ income from operations to Adjusted EBITDA for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Three months ended Nine months ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
GAAP Net income $ 2,722 $ 2,123 $ 8,859 $ 14,022
Interest expense, net 279 274 551 1,981
Income tax provision 2,484 4,009 7,894 9,026
Depreciation and amortization of property and equipment 917 536 2,469 1,499
Amortization of acquired intangible assets 429 172 854 518
EBITDA (earnings before interest, taxes, depreciation and amortization) 6,831 7,114 20,627 27,046
Stock-based compensation 1,372 5,552 6,396 7,152
Settlement of litigation — (266) — (266)
Acquisition-related and other 143 — 897 —
Other expense (income), net 251 214 (24) 631
Adjusted EBITDA $ 8,597 $ 12,614 $ 27,896 $ 34,563


	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022

GAAP Income from operations	$	3,547	$	4,495	$	8,682	$	11,544
Depreciation and amortization of property and equipment	1,261		850		2,247		1,552
Amortization of acquired intangible assets	780		285		1,337		425
Stock-based compensation	299		2,553		505		5,024

Acquisition-related and other	425		754		615		754
Adjusted EBITDA	$	6,312	$	8,937	$	13,386	$	19,299

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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Inflation

In the opinion of management, inflation has not had a material effect on our financial condition or results of operations.

Seasonality

In the opinion of management, our financial condition and results of its operations are not materially impacted by seasonal sales.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

The Company is a “smaller reporting company” as defined by Regulation S-K and, as such, is not required to provide the information contained in this item pursuant to Regulation S-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“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 of 1934, as amended (the “Exchange Act”)), as of ~~September~~June 30, ~~2022~~2023 (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.

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 hiring of a new CFO, 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~~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) under the Exchange Act that occurred during the fiscal quarter ended ~~September~~June 30, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There has been no material change to the status of the Company’s previously reported legal proceedings.

Item 1A. Risk Factors

As a smaller reporting company, the Company is not required to provide the information contained in this item pursuant to Regulation S-K. However, information regarding the Company’s risk factors appears in Part I, Item 1A. of its Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022 (the "Annual Report"). These risk factors describe some of the assumptions, risks, uncertainties, and other factors that could adversely affect the Company’s business or that could otherwise result in changes that differ materially from management’s expectations. There have been no material changes to the risk factors contained in the Annual Report.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~On August 2, 2022,~~During the three months ended June 30, 2023, the Company issued ~~422,535~~unregistered securities as described below:

•5,025 shares of restricted common ~~shares~~stock subscribed during the six months ended June 30, 2023, with a fair ~~market~~ value of ~~$300,000~~approximately $2,000;

•450,000 shares of restricted common stock to purchase a ~~vendor~~0.33% minority interest in Mari Holdings MD LLC, one of the Company's majority-owned subsidiaries;

•21,383,040 shares of common stock issued to convert 4,276,608 shares of Series C convertible preferred stock to common stock;

•an aggregate of 1,140,741 shares of restricted common stock with a total fair value of approximately $460,000 issued as payment for services to two service providers; and ~~on September 8, 2022, the Company issued 108,858~~

•1,290 shares of restricted common ~~shares~~stock with aan aggregate fair ~~market~~ value of ~~$61,069 to one of its partners as payment~~approximately $1,000 issued under a royalty agreement.

The issuance of the shares of common stock described above were deemed to be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance upon Sections 4(a)(2) and/or 4(a)(5) of the Securities Act. A legend restricting the sale, transfer, or other disposition of these securities other than in compliance with the Securities Act was placed on the securities issued in the foregoing transactions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None~~None.

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Item 6. Exhibits


Exhibit No.			Description

3.1			Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10-12G, File No. 000-54433, filed on June 9, 2011 with the SEC).
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 (incorporated by reference to Exhibit 3.1.1 to the Company’s Annual Report on Form 10-K filed on April 17, 2017 with the SEC).
3.1.2			Series B Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on February 27, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on February 28, 2020 with the SEC).
3.1.3			Certificate Eliminating the Series A Preferred Stock as filed with the Secretary of State of Delaware on February 27, 2020 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on February 28, 2020 with the SEC).
3.1.4			Series C Convertible Preferred Stock Certificate of Designation as filed with the Secretary of State of Delaware on March 1, 2021 (incorporated by reference to Exhibit 3.1.4 to the Company’s Current Report on Form 8-K, filed on March 2, 2021 with the SEC).
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 (incorporated by reference to Exhibit 3.1.5 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021 with the SEC).
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 (incorporated by reference to Exhibit 3.1.6 to the Company’s Quarterly Report on Form 10-Q, filed on November 15, 2021 with the SEC).
3.2			Amended By-Laws, ~~– Restated~~amended as ~~Amended~~of February 28, 2023 (incorporated by reference to Exhibit 3.2 ~~to the Company’s Form 10-12G, filed on June 9, 2011 with the SEC).~~
~~10.1~~			~~Second Amendment to Securities Purchase Agreement, dated August 4, 2022, by and between MariMed Inc. and Hadron Healthcare Master Fund (incorporated by reference to Exhibit 10.4~~ to the Company's Quarterly Report on Form 10-Q, filed on ~~August~~May 9, ~~2022~~2023 with the SEC).
~~10.2~~10.1 * ***			~~Form of Third Amendment to Employment Agreement, effective as of September 7, 2022, between~~ MariMed Inc. Second Amended and ~~Jon R. Levine (incorporated by reference to Exhibit 10.1, filed on September 7, 2022 with the SEC).~~Restated 2018 Stock Award and Incentive Plan, as amended and restated June 8, 2023.
~~31.1.~~10.2 *			Omnibus Agreement, dated July 1, 2023, by and between MariMed Inc., MariMed Advisors Inc., MIA Development LLC, and First State Compassion Center, Inc.
31.1 *			Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer *
~~31.2.~~31.2 *			Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer *
~~32.1.~~32.1 **			Section 1350 Certification of Chief Executive Officer **
~~32.2.~~32.2 **			Section 1350 Certification 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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~November 8, 2022~~August 4, 2023


MARIMED INC.

By:			/s/ Susan M. Villare
			Susan M. Villare
			Chief Financial Officer (Principal Financial Officer)

4246


	Nine months ended September 30, 2022
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at January 1, 2022	334,030,348	$	334	—	$	—	$	134,920	$	(97,392)	$	(1,563)	$	36,299
Exercise of stock options	55,000						10						10
Cashless exercise of stock options	200,000												—
Cashless exercise of warrants	234,961												—
Release of shares under stock grants	357,077												—
Common stock subscribed but not issued				74,581	41								41
Shares issued as purchase consideration - business acquisition	2,343,750	3					1,497						1,500
Purchase of minority interests in certain of the Company’s subsidiaries							(2,165)				165		(2,000)
Obligations settled with common stock	906,393	1					636						637
Conversion of promissory notes to stock	1,142,858	1					399						400
Distributions to non-controlling interests											(224)		(224)
Stock-based compensation							6,355						6,355
Net income									8,717		142		8,859
Balances at September 30, 2022	339,270,387	$	339	74,581	$	41	$	141,652	$	(88,675)	$	(1,480)	$	51,877


	Nine months ended September 30, 2021
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at January 1, 2021	314,418,812	$	314	11,413	$	5	$	112,975	$	(104,617)	$	(577)	$	8,100
Issuance of subscribed shares	11,413			(11,413)	(5)		5						—
Exercise of stock options	178,885						31						31
Exercise of warrants	980,062	1					92						93
Release of shares under stock grants	152,094			102,204	95		138						233
Issuance of standalone warrants							832						832
Issuance of warrants with stock							655						655
Conversion of debentures payable to equity	4,610,645	5					1,352						1,357
Conversion of promissory notes to equity	10,042,125	10					3,337						3,347
Common stock issued to settle obligations	71,691						54						54
Common stock issued to purchase property and equipment	750,000	1					704						705
Obligations settled with common stock	409,308	1					374						375
Common stock returned to the Company	(79,815)						(10)						(10)
Equity issuance costs							(387)						(387)
Acquisition of interest in subsidiary				100,000	94		871				(975)		(10)
Distributions to non-controlling interests											(301)		(301)
Stock-based compensation							6,208						6,208
Net income									13,733		289		14,022
Balances at September 30, 2021	331,545,220	$	332	202,204	$	189	$	127,231	$	(90,884)	$	(1,564)	$	35,304


	September 30, 2022		December 31, 2021
First State Compassion Center (initial note)	$	348	$	403
First State Compassion Center (secondary note)	8,080		7,845
Healer LLC	866		866
Total notes receivable	9,294		9,114
Notes receivable, current portion	134		127
Notes receivable, less current portion	$	9,160	$	8,987


	Three months ended September 30, 2022		Nine months ended September 30, 2022
Estimated life (in years)	5.0		5.0
Volatility	89.4	%	90.0	%
Risk-free interest rates	3.0	%	3.0	%
Dividend yield	—		—