What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-09 · 304 added, 216 removed, 609 unchanged (46% of the section changed)

5 unchanged sentences

Cash and cash equivalents $ 14,635 $ 9,737

Accounts receivable, net of allowances of $ 716 and $ 4,603 at March 31, 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

Deferred rents receivable 667 704

1 unchanged sentence

Inventory 24,786 19,477

Investments, current 104 123

Investments, current portion 102 123

Due from related parties 35 29

4 unchanged sentences

Goodwill 11,993 8,079

Notes receivable, net of current 7,523 7,467

Notes receivable, net of current portion 8,457 7,467

Investments, net of current portion 89 —

Operating lease right-of-use assets 9,898 4,931

12 unchanged sentences

Total current liabilities 29,225 26,490

Term loan, net of current 20,803 —

Mortgages and notes payable, net of current 26,610 25,943

Operating lease liabilities, net of current 8,837 4,173

Finance lease liabilities, net of current 538 461

Term loan, net of current portion 20,546 —

Mortgages and notes payable, net of current portion 26,544 25,943

Operating lease liabilities, net of current portion 8,631 4,173

Condensed Consolidated Balance Sheets (continued)

1 unchanged sentence

2023 December 31,

Finance lease liabilities, net of current portion 1,516 461

Other liabilities 100 100

3 unchanged sentences

Series B convertible preferred stock, $ 0.001 par value;

4,908,333 shares authorized, issued and outstanding at March 31, 2023 and December 31, 2022

4,908,333 shares authorized, issued and outstanding at June 30, 2023 and December 31, 2022

14,725 14,725

1 unchanged sentence

12,432,432 shares authorized;

6,216,216 shares issued and outstanding at March 31, 2023 and December 31, 2022

23,000 23,000

1,939,608 and 6,216,216 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Total mezzanine equity 21,902 37,725

2 unchanged sentences

32,659,235 shares authorized;

zero shares issued and outstanding at March 31, 2023 and December 31, 2022

zero shares issued and outstanding at June 30, 2023 and December 31, 2022

Common stock, $ 0.001 par value;

700,000,000 shares authorized;

348,126,911 and 341,474,728 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

371,614,758 and 341,474,728 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Common stock subscribed but not issued — 39

7 unchanged sentences

(in thousands, except per share amounts)

Three months ended

Three months ended Six months ended

June 30, June 30,

2023 2022 2023 2022

Revenue $ 36,519 $ 32,986 $ 70,899 $ 64,268

13 unchanged sentences

Other (expense) income, net ( 10 ) ( 727 ) ( 910 ) 275

Total interest and other (expense) income ( 3,306 ) 852

Total interest and other (expense) income, net ( 2,535 ) ( 849 ) ( 5,841 ) 3

Income before income taxes 1,012 3,646 2,841 11,547

1 unchanged sentence

Net (loss) income ( 935 ) 1,896 ( 1,599 ) 6,137

Net (loss) income attributable to noncontrolling interests ( 19 ) 53

Net income attributable to noncontrolling interests 23 73 4 126

Net (loss) income attributable to common stockholders $ ( 958 ) $ 1,823 $ ( 1,603 ) $ 6,011

8 unchanged sentences

(in thousands, except share amounts)

Three months ended March 31, 2023

Three months ended June 30, 2023

Common stock Common stock

5 unchanged sentences

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

capital Accumulated

interests Total

stockholders’

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

Common stock subscribed but not issued — — 5,025 2 — — — 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 loss 0 — — — — ( 645 ) ( 19 ) ( 664 )

Balances at March 31, 2023 348,126,911 $ 348 5,025 $ 2 $ 151,052 $ ( 84,569 ) $ ( 1,564 ) $ 65,269

Three months ended March 31, 2022

Net income — — — — — ( 1,603 ) 4 ( 1,599 )

Balances at June 30, 2023 371,614,758 $ 372 — $ — $ 167,652 $ ( 85,527 ) $ ( 1,593 ) $ 80,904

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(in thousands, except share amounts)

Three months ended June 30, 2022

Common stock Common stock

5 unchanged sentences

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

capital Accumulated

interests Total

stockholders’

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

Common stock subscribed but not issued — — 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 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

Obligations settled with common stock 375,000 1 — — 273 — — 274

Common stock issued to settle obligations 375,000 1 — — 273 — — 274

Distributions to non-controlling interests — — — — — — ( 184 ) ( 184 )

1 unchanged sentence

Net income — — — — — 6,011 126 6,137

Balances at March 31, 2022 335,558,206 $ 336 2,717 $ 2 $ 138,064 $ ( 93,204 ) $ ( 1,611 ) $ 43,587

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.

1 unchanged sentence

(in thousands)

Three months ended

Six months ended

Cash flows from operating activities:

Net (loss) income attributable to common stockholders $ ( 1,603 ) $ 6,011

Net (loss) income attributable to noncontrolling interests ( 19 ) 53

Net income attributable to noncontrolling interests 4 126

Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:

2 unchanged sentences

Stock-based compensation 505 5,024

Amortization of original issue discount 55 —

Amortization of original debt issuance discount 131 —

Amortization of debt discount 888 —

5 unchanged sentences

Gain on finance lease adjustment ( 13 ) —

Loss (gain) on changes in fair value of investments 20 ( 48 )

Loss on changes in fair value of investments 30 679

Other investment income — ( 954 )

12 unchanged sentences

Business acquisitions, net of cash acquired ( 2,987 ) ( 12,746 )

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

Three months ended

Advances toward future business acquisitions ( 250 ) ( 250 )

Purchases of cannabis licenses ( 601 ) ( 330 )

Issuance of notes receivable ( 879 ) —

Proceeds from notes receivable 87 73

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

Six months ended

Due from related party ( 6 ) —

1 unchanged sentence

Cash flows from financing activities:

Proceeds from issuance of term loan 29,100 —

Proceeds from term loan 29,100 —

Principal payments of term loan ( 600 ) —

Principal payments of mortgages and promissory notes ( 429 ) ( 611 )

Repayment of promissory notes ( 5,503 ) —

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 in cash and cash equivalents 11,858 3,784

Net increase (decrease) in cash and cash equivalents 4,898 ( 21,772 )

Cash and equivalents, beginning of year 9,737 29,683

5 unchanged sentences

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

5 unchanged sentences

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.

6 unchanged sentences

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 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 three months ended March 31, 2023.

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 for the period subsequent to the Ermont Acquisition Date.

The financial results of Ermont are included in the Company's condensed consolidated financial statements since the Ermont Acquisition Date.

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.

7 unchanged sentences

The Company’s significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements in the Annual Report.

There were no material changes to the Company's significant accounting policies during the three-month period ended March 31, 2023.

There were no material changes to the Company's significant accounting policies during the six-month period ended June 30, 2023.

Principles of Consolidation

10 unchanged sentences

The fair values of these investments approximate their carrying values.

At December 31, 2022, the Company had $ 0.1 million of cash held in escrow.

The Company did no t have any cash held in escrow at March 31, 2023.

At each of June 30, 2023 and December 31, 2022, the Company had $ 0.1 million of cash held in escrow.

Fair Value of Financial Instruments

12 unchanged sentences

Business Combinations

On February 21, 2023, the Company announced its intention to acquire the operating assets of Ermont, Inc.

("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 the Ermont Acquisition Date.

The Ermont Acquisition provided the Company

with its third dispensary in Massachusetts, substantially completing its build-out to the maximum allowable by state regulations.

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.

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").

2 unchanged sentences

The Company rebranded the dispensary as Panacea Wellness Dispensary and commenced medical sales immediately after the Ermont Acquisition Date.

The Ermont Acquisition includes a Host Community Agreement with the city of Quincy to conduct adult-use cannabis sales.

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 the expected increased traffic associated with adult-use sales.

Additionally, the Company plans to repurpose Ermont's existing cultivation facility to use for its pheno-hunting activities.

The Company expects this will allow it to move pheno-hunting out of its New Bedford facility and to use the freed space in New Bedford for much-needed additional capacity to cultivate its Nature's Heritage flower.

The Company's condensed consolidated statement of operations for the three months ended March 31, 2023 includes approximately $ 230,000 of revenue and approximately $ 42,000 of net loss attributable to Ermont for the period since the Ermont Acquisition Date.

The Ermont Acquisition has been accounted for as a business acquisition, and the financial results of Ermont have been included in the Company' condensed consolidated statements for the period since the Ermont Acquisition Date.

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 of allocation of the Ermont Consideration to the acquired and identifiable intangible assets is as follows (in thousands):

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:

10 unchanged sentences

Tradename and trademarks 1,063

Licenses and customer base 4,773

Customer base 4,642

Goodwill 3,914

5 unchanged sentences

Upon execution of the membership interest purchase agreement, the Company deposited $ 5.0 million into escrow as a contract down payment.

In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the Kind Acquisition was completed on the Kind Acquisition Date.

In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the Kind Acquisition was completed on April 27, 2022.

Following the Kind Acquisition, litigation between the Company and the members of Kind was dismissed (see Note 18).

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 statements since the Kind Acquisition Date.

The Kind Acquisition has been accounted for as a business combination.

A summary of the final allocation of the Kind Consideration to the acquired assets, identifiable intangible assets and certain assumed liabilities is as follows (in thousands):

23 unchanged sentences

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 ownership of Mari-MD and Mia to 99.7 % and 94.3 %, respectively.

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 expense directly attributable to the Kind Acquisition from the year ended December 31, 2022.

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.

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 company 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.

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):

10 unchanged sentences

Concurrently, the Company made a good faith deposit of $ 0.1 million.

In April 2022, the Illinois Department of Agriculture approved the Company’s acquisition of Green Growth, and the Green Growth Acquisition was completed on the Green Growth Acquisition Date.

In April 2022, the Illinois Department of Agriculture approved the Company’s acquisition of Green Growth, and the Green Growth Acquisition was completed on May 5, 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.

3 unchanged sentences

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 associated with a cannabis dispensary in Beverly, MA.

The purchase transaction (the "Greenhouse Naturals Acquisition") was completed on December 30, 2022 (the "Greenhouse Naturals Acquisition Date").

The Company paid $ 0.1 million of cash and issued 2,000,000 shares of the Company's common stock, with a fair value of $ 0.7 million on the Greenhouse Naturals Acquisition Date, to the Sellers.

The 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 common stock, with a fair value of $ 0.7 million, to the Greenhouse Naturals Sellers.

The Company issued a note to the Greenhouse Naturals Sellers for the remaining $ 5.0 million of the cash purchase price payable post-closing on a monthly basis as a percentage of the dispensary's monthly gross sales (the "Greenhouse Naturals Note").

The Company has recorded the Greenhouse Naturals Note at present value of $ 4.3 million.

The difference between the face value of the Greenhouse Naturals Note and the net present value recorded will be amortized to interest expense over the term of the note.

The final inspection by the State of Massachusetts was completed in April 2023, and the Company opened the dispensary on April 25, 2023.

The difference between the face value of the Greenhouse Naturals Note and the net present value recorded will be amortized to interest expense over the term of such note.

The final inspection by the Commonwealth of Massachusetts was completed in April 2023, and the Company opened the dispensary on April 25, 2023.

The Company has allocated the purchase price to a licenses/customer base intangible asset, which has an estimated useful life of 10 years.

1 unchanged sentence

Allgreens Dispensary, LLC ("Allgreens")

In August 2022, the Company entered into an agreement to purchase 100 % of the membership interests in Allgreens Dispensary, LLC (the "Allgreens Agreement"), a conditional adult-use cannabis dispensary license in Illinois for $ 2,250,000 of cash.

million of cash.

Completion of the acquisition is dependent upon certain conditions, including resolution of any remaining legal challenges affecting nearly 200 social equity dispensary licenses, and regulatory approval of the acquisition.

Once the acquisition is complete, which the Company expects to occur in 2023, the Company will have five adult-use dispensaries operating in Illinois.

Under the Allgreens Agreement, the Company has made payments aggregating $ 0.5 million to the Allgreens members, with additional cash payments aggregating $ 1,750,000 to be made as specific milestones are reached.

The Company will issue promissory notes for the final payment of $ 1.0 million, which is due at closing (the "Allgreens Notes").

If the closing conditions are met and the acquisition is completed, which the Company expects to occur in 2023, the Company would have five adult-use dispensaries operating in Illinois.

Pursuant to the Allgreens Agreement, the Company has made payments aggregating $ 0.5 million to 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.

2 unchanged sentences

Completion of the acquisition is dependent upon obtaining all requisite approvals from the Missouri Department of Health and Senior Services, which is expected to occur in 2023.

Under the Robust Agreement, the Company made an initial advance payment of $ 350,000 to the Robust members, with an additional payment of $ 350,000 to be made at closing.

(3) (LOSS) EARNINGS PER SHARE

the Robust Agreement, the Company has made an initial advance payment of $ 350,000 to the Robust members, with an additional payment of $ 350,000 to be 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.

For periods in which the Company reports net 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 number of shares used to compute net (loss) earnings per share were as follows (in thousands):

Three months ended

2023 March 31,

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

Three months ended Six months ended

2023 June 30,

2022 June 30,

2023 June 30,

Weighted average shares outstanding - basic 361,261 337,497 352,079 336,137

2 unchanged sentences

(4) DEFERRED RENTS RECEIVABLE

The Company is the lessor under operating leases, which contain escalating rents over time, rent holidays, options to renew, requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based on a percentage of monthly tenant revenues.

The Company is the lessor under operating leases, which contain escalating rents over time, rent holidays;

options to renew;

requirements to pay property taxes;

insurance and/or maintenance costs;

and contingent rental payments based on a percentage of monthly tenant revenues.

The Company is not the lessor under any finance leases.

8 unchanged sentences

The Tenant currently continues to occupy this space on a month-to-month basis.

The Company the sublessor of the following properties:

The Company 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.

4 unchanged sentences

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 $ 1.2 million in the three months ended March 31, 2023 and 2022, respectively.

Revenue from these payments was recognized on a straight-line basis and aggregated $ 0.4 million and $ 1.1 million in the three months ended March 31, 2023 and 2022, respectively.

Future minimum rental receipts for non-cancellable leases and subleases as of March 31, 2023 were as follows (in thousands):

The Company received rental payments aggregating $ 0.4 million and $ 0.8 million in the three months ended June 30, 2023 and 2022, respectively, and $ 0.8 million and $ 2.0 million in the six months ended June 30, 2023 and 2022, respectively.

Revenue from these payments was recognized on a straight-line basis and aggregated $ 0.4 million and $ 0.8 million in the three months ended June 30, 2023 and 2022, respectively, and $ 0.8 million and $ 1.9 million in the six months ended June 30, 2023 and 2022, respectively.

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

Year ending December 31,

2 unchanged sentences

(5) NOTES RECEIVABLE

Notes receivable, including accrued interest, at March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

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

2023 December 31,

2 unchanged sentences

First State Compassion Center (FSCC New Note) 750 750

Healer LLC 866 866

First State Compassion Center (FSCC Second New Note) 879 —

Healer LLC (Revised Healer Note) 866 866

Total notes receivable 11,099 10,104

3 unchanged sentences

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 $ 10,000 .

At March 31, 2023 and December 31, 2022, the current portions of the FSCC Initial Note were approximately $ 87,000 and $ 85,000 , respectively, and were included in Notes receivable, current, in the condensed consolidated balance sheets.

In December 2021, the Company converted financed trade accounts receivable balances from FSCC aggregating $ 7.8 million into notes receivable, whereby FSCC issued promissory notes aggregating $ 7.8 million to the Company (the “FSCC Secondary Notes”).

The FSCC Secondary Notes bear interest of 6.0 % per annum and mature in December 2025.

FSCC is required to make periodic payments of principal and interest throughout the term of the FSCC Secondary Notes.

At March 31, 2023 and December 31, 2022, the FSCC Secondary Notes balance included approximately $ 28,000 and $ 49,000 , respectively, of unpaid accrued interest.

The increase in the FSCC Secondary Notes in the three months ended March 31, 2023 was attributable to the accreted interest, which increases the value of such notes.

At each of March 31, 2023 and December 31, 2022, the current portions of the FSCC Secondary Notes aggregated $ 2.5 million.

In December 2022, the Company converted a short-term loan and other receivable balances 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 bears interest of 6.0 % per annum and matures in December 2026.

FSCC is required to make quarterly interest payments, with the full amount of principal due on December 31, 2026.

At each of March 31, 2023 and December 31, 2022, the entire balance of the FSCC New Note was long-term.

The monthly payments on the FSCC Initial Note were approximately $ 10,000 .

At June 30, 2023 and December 31, 2022, the current portions of the FSCC Initial Note were approximately $ 90,000 and $ 85,000 , respectively, and were included in Notes receivable, current portion, in the condensed consolidated balance sheets.

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 bore interest at a rate of 6.0 % per annum and matured in December 2025.

FSCC was required to make periodic payments of principal and interest throughout the term of the FSCC Secondary Notes.

At December 31, 2022, the FSCC Secondary Notes balance included approximately $ 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 six months ended June 30, 2023 was attributable to the accretion of the original debt discount, which 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.

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.

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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 each of March 31, 2023 and December 31, 2022, approximately $ 52,000 was current.

Of the outstanding Revised Healer Note balance at each of June 30, 2023 and December 31, 2022, approximately $ 52,000 was current.

(6) INVENTORY

Inventory at March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

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

2023 December 31,

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(7) INVESTMENTS

The Company’s investment at March 31, 2023 and December 31, 2022 was classified as current and was comprised of the following (in thousands):

The Company’s investments at June 30, 2023 and December 31, 2022 were comprised of the following (in thousands):

2023 December 31,

Investment – current:

WM Technology Inc.

The Company did not have any long-term investments at March 31, 2023 or December 31, 2022.

Investment - non-current:

Artis LLC (d/b/a Little Dog) $ 89 $ —

The Company did not have any long-term investments at December 31, 2022.

Artis LLC (d/b/a Little Dog)

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 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.

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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 a loss of approximately $ 19,000 in the three months ended March 31, 2023, which reflects the change in the fair value of the WMT Shares for the period.

The fair value of the WMT Shares was approximately $ 954,000 at March 31, 2022.

Both the loss in the three months ended March 31, 2022 from the change in the fair value of the WMT Shares and the gain arising from the receipt of the WMT Shares are reported as Other (expense) income, net, in the condensed consolidated statements of operations for the respective periods.

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.

In December 2021, the Company received shares of Flowr Corp.

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The Flowr 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 a gain of approximately $ 48,000 in the three months ended March 31, 2022, which represented the change in the fair value of the Flowr Stock for the period.

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

The Company recorded losses of $ 0.2 million and $ 0.1 million in the three and six months ended June 30, 2022, respectively, representing the changes in the fair value of the Flowr Stock in the

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 March 31, 2023 and December 31, 2022 was comprised of the following (in thousands):

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

2023 December 31,

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Property and equipment, net $ 78,634 $ 71,641

The Company recorded $ 1.0 million and $ 0.7 million of depreciation expense related to property and equipment in the three months ended March 31, 2023 and 2022, respectively.

The Company disposed of equipment it had previously purchased in connection with its planned acquisition of The Harvest Foundation LLC ("Harvest") in Nevada as 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 the condensed consolidated statement of operation for the three months ended March 31, 2023.

The 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 a result of the Company's withdrawal from the agreement to purchase Harvest.

(9) INTANGIBLE ASSETS AND GOODWILL

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

March 31, 2023 Weighted

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

June 30, 2023 Weighted

period (years) Cost Accumulated

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8.13 $ 15,343 $ 1,142 $ 14,201

Estimated future amortization expense for the Company’s intangible assets at March 31, 2023 was as follows:

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

Year ending December 31,

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Total $ 18,700

The changes in the carrying value of the Company’s goodwill in the three months ended March 31, 2023 and 2022 were as follows (in thousands):

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

Balance at January 1, $ 8,079 $ 2,068

Ermont Acquisition 3,914 —

Balance at March 31, $ 12,004 $ 2,068

Kind Acquisition — 6,011

Balance at June 30, $ 11,993 $ 8,079

(10) TERM LOAN

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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 are 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 (see Note 11).

The remaining balance, if any, is expected to be used to fund acquisitions.

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 Company has the option, during a six-month period following the initial closing, to draw down an additional $ 5.0 million.

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

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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Additionally, the Credit Agreement requires the Borrowers to meet certain financial tests.

At March 31, 2023, the Company was in compliance with the Credit Agreement covenants.

At June 30, 2023, the Company was in compliance with the Credit Agreement covenants.

Warrant Issuance

The Credit Agreement provides 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.

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.

Incremental warrants are issuable upon further draw-downs under the facility.

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.

The Company recorded $ 0.3 million of interest amortization for the three months ended March 31, 2023.

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 March 31, 2023, the outstanding Term Loan balance reported on the Company's condensed consolidated balance sheet was $ 24.1 million, with the current portion totaling $ 3.3 million.

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, and Mortgages and notes payable, net of current.

The Company’s mortgage balances at March 31, 2023 and December 31, 2022 were comprised of the following (in thousands):

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 portion.

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

2023 December 31,

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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 March 31, 2023 and December 31, 2022 were approximately $ 387,000 and $ 382,000 , respectively.

The current portions of the outstanding principal balance under the Amended BNE Mortgage at June 30, 2023 and December 31, 2022 were approximately $ 393,000 and $ 382,000 , respectively.

The Company maintains a second mortgage with Bank of New England that is secured by the Company’s property in Wilmington, Delaware (the “BNE Delaware Mortgage”).

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The next interest rate adjustment will occur in September 2026.

The current portions of the outstanding principal balance under the BNE Delaware Mortgage at March 31, 2023 and December 31, 2022 were approximately $ 128,000 and $ 126,000 , respectively.

The current portions of the outstanding principal balance under the BNE Delaware Mortgage at June 30, 2023 and December 31, 2022 were approximately $ 129,000 and $ 126,000 , respectively.

The Company maintains a mortgage with DuQuoin State Bank (“DSB”) in connection with its purchase of properties in Anna, Illinois and Harrisburg, Illinois (the “DuQuoin Mortgage”).

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The DuQuoin Mortgage was renewed in May 2023 at a rate of 9.75 % per annum.

The current portions of the outstanding principal balance under the DuQuoin Mortgage at each of March 31, 2023 and December 31, 2022 were approximately $ 37,000 and $ 36,000 , respectively.

The current portions of the outstanding principal balance under the DuQuoin Mortgage at June 30, 2023 and December 31, 2022 were approximately $ 26,000 and $ 36,000 , respectively.

In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, Illinois.

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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 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 March 31, 2023 and December 31, 2022 were approximately $ 79,000 and $ 77,000 , respectively.

The current portions of the outstanding principal balance of the DuQuoin Metropolis Mortgage at June 30, 2023 and December 31, 2022 were approximately $ 81,000 and $ 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.

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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 outstanding principal balance of the DuQuoin Mt.

Vernon Mortgage were approximately $ 68,000 at each of March 31, 2023 and December 31, 2022.

The current portions of the

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, Illinois, (the “South Porte Bank Mortgage”).

Beginning in August 2021, pursuant to 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 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

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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 $ 4.6 million at March 31, 2023, all of which was recorded as noncurrent, as the first principal payment is not due until two years after the Ermont Acquisition Date.

The fair value of the Ermont Note was $ 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.

Greenhouse Naturals Acquisition

In connection with the Greenhouse Naturals Acquisition, the Company issued the Greenhouse Naturals Note (see Note 2) totaling $ 5.0 million to the Greenhouse Sellers, payable on a monthly basis as a percentage of the monthly gross sales of the Company's Beverly, Massachusetts dispensary.

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 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 the note, which matures in July 2026.

The fair values of the Greenhouse Naturals Note were $ 4.4 million and $ 4.3 million at March 31, 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 March 31, 2023 and December 31, 2022, respectively, which are included in Mortgages and notes payable, current portion, in the Company's condensed consolidated balance sheets.

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 rate of 6.0 % per annum to the members of Kind (the “Kind Notes”).

In connection with the Kind Acquisition (see Note 2), the Company issued four-year promissory notes aggregating $ 6.5 million with an interest rate of 6.0 % per annum to the members of Kind (the “Kind Notes”).

At December 31, 2022, the outstanding balance of the Kind Notes totaled $ 5.5 million, of which $ 1.6 million was current.

On January 24, 2023, in connection with the Credit Agreement (see Note 10), the Company repaid the Kind Notes in full, aggregating $ 5.4 million, including approximately $ 420,000 of accrued interest.

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 the note was retired.

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.

Promissory Notes Issued to Purchase Commercial Vehicles

The Company purchased a commercial vehicle in January 2023 and entered into a note agreement with Ally Financial to finance the purchase.

The Company entered into two note 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' Federal Credit Union and in June 2021 with Ally Financial.

At March 31, 2023, the three outstanding notes had an aggregate outstanding balance of approximately $ 95,000 , of which approximately $ 17,000 was current.

At December 31, 2022, the two outstanding notes had an aggregate outstanding balance of approximately $ 48,000 , of which approximately $ 12,000 was current.

The weighted average interest rates of the outstanding balances were 11.64 % and 8.19 % at March 31, 2023 and December 31, 2022, respectively.

The weighted average remaining terms of these notes were 4.84 years and 4.07 years at March 31, 2023 and December 31, 2022, respectively.

At June 30, 2023, the four outstanding notes had an aggregate outstanding balance of approximately $ 149,000 , of which approximately $ 27,000 was current.

At December 31, 2022, there were two outstanding notes with an aggregate outstanding balance of approximately $ 48,000 , of which approximately $ 12,000 was current.

The weighted average interest rates of the outstanding balances were 10.59 % and 8.19 % at June 30, 2023 and December 31, 2022, respectively.

The weighted average remaining terms of these notes were 4.68 years and 4.07 years at June 30, 2023 and December 31, 2022, respectively.

Future Payments

The future principal amounts due under the Company outstanding mortgages and notes payable at March 31, 2023 were as follows (in thousands):

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

Year ending December 31,

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Series B Convertible Preferred Stock

In 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, which were retired in March 2021, 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 newly designated Series B convertible preferred stock (the “Series B Stock”).

In 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, which were retired in March 2021, 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”).

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 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 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 holders of Series B Stock (the “Series B Holders”) are entitled to cast 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 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 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.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Series B 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 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 to 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, all outstanding shares of Series B Stock shall automatically convert into shares of the Company's common stock as follows:

On the day following the six-year anniversary of the issuance of the Series B 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.

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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 of $ 0.4 million related to the issuance of these securities, which was recorded as a reduction to Additional paid-in capital in March 2021.

The Company incurred $ 0.4 million of 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.

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Holders of Series C Stock are entitled to receive dividends on an as-converted basis.

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

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

No further funding has occurred under the Hadron Facility and, on August 4, 2022, the Company and Hadron entered into a 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

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Awards can be granted under the Plan to the Company’s employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries.

On June 8, 2023, the Company's Board of Directors approved an amendment to the Plan (the "2018 Plan") to modify the one-year minimum vesting requirements.

Stock Options

A summary of the Company's stock option activity during the three months ended March 31, 2023 is below:

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

Shares Weighted average exercise price

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Granted 1,100,000 $ 0.43

Exercised ( 157,752 ) $ 0.23

Forfeited ( 5,000 ) $ 0.52

Outstanding at March 31, 2023 37,147,173 $ 0.80

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 March 31, 2023, the options outstanding had a weighted average remaining life of approximately three years .

The grant date fair values of stock options granted in the three months ended March 31, 2023 were estimated using the Black-Scholes valuation model with the following assumptions:

At June 30, 2023, the stock options outstanding had a weighted average remaining life of approximately three years .

The grant date fair values of stock options granted in the six months ended June 30, 2023 were estimated using the Black-Scholes valuation model with the following assumptions:

Estimated life (in years) 3.00 to 3.26

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Dividend yield —

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 and dividend rights.

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 three months ended March 31, 2023 was as follows:

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

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Granted 2,669,382 $ 0.43

Outstanding at March 31, 2023 2,707,999 $ 0.50

Vested ( 349,999 ) $ 0.53

Forfeited ( 40,000 ) $ 0.47

Outstanding at June 30, 2023 3,879,382 $ 0.46

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).

At March 31, 2023, warrants to purchase up to 41,824,476 shares of the Company's common stock were outstanding, with a weighted average exercise price of $ 1.46 .

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 described previously, the Company also issued during the three months ended March 31, 2023:

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;

• 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 $ 0.2 million and $ 2.5 million in the three months ended March 31, 2023 and 2022, respectively.

The Company recorded stock-based compensation of $ 0.3 million and $ 2.6 million in the three months ended June 30, 2023 and 2022, respectively, and $ 0.5 million and $ 5.0 million in the six months ended June 30, 2023 and 2022, respectively.

Common Stock Issuance Obligations

At March 31, 2023, the Company was obligated to issue 5,025 shares of restricted common stock with an aggregate grant date fair value of approximately $ 2,000 to an employee.

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, which were issued during the three months ended March 31, 2023.

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.

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

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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

The Company recognizes this revenue after the delivery and acceptance of goods by a purchaser.

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If deemed an agent, the Company would not recognize revenue for the performance obligations it does not satisfy.

Revenue for the three months ended March 31, 2023 and 2022 was comprised of the following (in thousands):

Three months ended

2023 March 31,

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

Three months ended Six months ended

2023 June 30,

2022 June 30,

2023 June 30,

Product revenue:

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(15) MAJOR CUSTOMERS

The Company did not have any customers that contributed 10% or more of total revenue in either of the three-month periods ended March 31, 2023 or 2022.

The Company did not have any customers that accounted for 10% or more of the Company’s accounts receivable balance, at either March 31, 2023 or December 31, 2022.

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

The Company did not have any customers that accounted for 10% or more of the Company’s accounts receivable balance at either June 30, 2023 or December 31, 2022.

The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable.

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Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company is currently the lessee under seven operating leases and eleven finance leases.

The Company is currently the lessee under eight operating leases and fifteen finance leases.

These leases contain rent holidays and customary escalations of lease payments for the type of facilities being leased.

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• 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 under a lease 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, which lease expires in October 2038.

• 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.

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

The components of lease expense for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

Three months ended

2023 March 31,

• 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 July 2023 through March 2028, with such terms being a major part of the economic useful life of the leased property.

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

Three months ended Six months ended

2023 June 30,

2022 June 30,

2023 June 30,

Operating lease expense $ 515 $ 298 $ 814 $ 575

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Total finance lease expense $ 230 $ 50 $ 299 $ 76

At March 31, 2023, the weighted average remaining lease terms for operating leases and finance leases were 10.2 years and 3.3 years, respectively.

At June 30, 2023, the weighted average remaining lease terms for operating leases and finance leases were 10.3 years and 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 13.5 % for all leases.

Future minimum lease payments as of March 31, 2023 under all non-cancelable leases having an initial or remaining term of more than one year were (in thousands):

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

leases Finance

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Each Ohio Lease had an initial lease period of eleven months , with a minimum rent of $ 31.00 per square foot, which increased 3.0 % annually.

Should the Company be awarded one or more cannabis licenses by the state of Ohio prior to the end of the initial lease period, it could extend the term of one or more of the Ohio Leases to ten years (with two additional five-year options to extend) upon the payment of $ 50,000 for the extended Ohio Lease, which the Company is building out into a medical use dispensary.

to extend) upon the payment of $ 50,000 for the extended Ohio Lease, which the Company is building out into a 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.

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 Company intends to enter into a ten-year lease on the Extended Ohio Lease property, which will become effective upon the completion of the final verification process by the state.

At March 31, 2023 and December 31, 2022, the lease term of the Extended Ohio Lease was less than one year, and the Company was not required to record a right-of-use asset and corresponding lease liability on its balance sheet.

Accordingly, the future lease payments of the Extended Ohio Lease are excluded from the table of future minimum lease payments shown above.

In February 2023, the Company entered into a ten-year lease on the Extended Ohio Lease property, and the Company opened its dispensary in Tiffin, Ohio in June 2023.

At December 31, 2022, the lease term of the Extended Ohio Lease was less than one year, and the Company was not required to record a right-of-use asset and corresponding lease liability on its balance sheet.

(17) RELATED PARTY TRANSACTIONS

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This lease expires in October 2028 and contains a five-year extension option.

Expenses incurred under this lease were approximately $ 39,000 for each of the three-month periods ended March 31, 2023 and 2022.

Expenses incurred under this lease were approximately $ 64,000 and $ 39,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $ 129,000 and $ 78,000 for the six months ended June 30, 2023 and 2022, respectively.

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 (the “COO”).

Purchases from this entity totaled $ 1.0 million and $ 0.9 million in the three months ended March 31, 2023 and 2022, respectively.

Purchases from this entity totaled $ 1.4 million in each of the three-month periods ended June 30, 2023 and 2022, and $ 2.7 million and $ 2.3 million in the six months ended June 30, 2023 and 2022, respectively.

The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the COO and its Chief Revenue Officer (the “CRO") under a royalty agreement.

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Future developed products (i.e., ice cream) have a royalty rate of 0.5 % if sold directly by the Company and between 0.125 % and 0.135 % if licensed by the Company for sale by third parties.

The aggregate royalties due to this entity were approximately $ 77,000 and $ 56,000 for the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2023, one of the Company’s majority-owned subsidiaries paid distributions in the aggregate of approximately $ 1,300 to the CEO, who owns a minority equity interest in such subsidiary.

During the three months ended March 31, 2022, this majority-owned subsidiary paid aggregate distributions of approximately $ 11,000 to the Company’s then-CEO and then-Chief Financial Officer (now the CEO), each of whom owned minority equity interests in such subsidiary.

During the three months ended March 31, 2023 and 2022, the Company purchased fixed assets and consulting services aggregating $ 267,000 and $ 82,000 , respectively, from two entities owned by two of the Company’s general managers.

The Company’s mortgages with Bank of New England, DuQuoin State Bank, and South Porte Bank are personally guaranteed by the CEO.

The aggregate royalties due to this entity were approximately $ 346,000 and $ 53,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $ 465,000 and $ 109,000 for the six months ended June 30, 2023 and 2022, respectively.

During the three and six months ended June 30, 2023, one of the Company’s majority-owned subsidiaries paid distributions in the aggregate of approximately $ 2,100 and $ 3,400 , respectively, to the CEO, who owns a minority equity interest in such subsidiary.

During the three and six months ended June 30, 2022, this majority-owned subsidiary paid distributions aggregating approximately $ 12,600 and $ 23,100 to the Company’s then-CEO and then-Chief Financial Officer (now the CEO), each of whom owned minority equity interests in such subsidiary.

The Company’s mortgages with Bank of New England, DuQuoin State Bank are personally guaranteed by the CEO.

The CEO had also guaranteed the South Porte Bank Mortgage prior to its repayment in May 2023.

(18) COMMITMENTS AND CONTINGENCIES

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DiPietro’s interests in Mia Development LLC, the Company's majority-owned subsidiary that owns production and 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 the parties’ joint motion for approval, on June 8, 2022, the purchase of Ms.

Upon the court’s approval of

the parties’ joint motion for approval, on June 8, 2022, the purchase of Ms.

DiPietro’s interests was consummated.

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Bankruptcy Claim

During 2019, the Company’s MMH subsidiary sold and delivered hemp seed inventory to GenCanna Global Inc., a Kentucky-based cultivator, producer, and distributor of hemp (“GenCanna”).

During 2019, the Company’s 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.

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Bankruptcy Court in the Eastern District of Kentucky (the "Bankruptcy Court").

In February 2020, the OGGUSA Debtors, under pressure from certain of its creditors including its senior lender MGG Investment Group LP ("MGG"), agreed to convert the involuntary bankruptcy proceeding into a voluntary Chapter 11

In February 2020, the OGGUSA Debtors, agreed to convert the involuntary bankruptcy proceeding into a voluntary Chapter 11 proceeding.

The OGGUSA Debtors' subsidiary, Hemp Kentucky LLC, 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 OGGUSA Debtors, which included the Company, entered an order authorizing the sale of all or substantially all of the assets of the OGGUSA Debtors to MGG.

After the consummation of the sale of all or substantially all of their assets and business, 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 OGGUSA Debtors, and make payments to creditors.

1 unchanged sentence

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 Oxford Restructuring Advisors LLC, the administrator of the Liquidating Plan for the OGGUSA Debtors (the "Plan Administrator"), 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.

In connection with the discussions of the Company with the OGGUSA Debtors relating to the Huron settlement, the Plan Administrator raised issues relating to a potential claim against MariMed Hemp, Inc.

("MHI") for certain preferential transfers of assets, which were valued at $ 250,000 by the Plan Administrator, of the OGGUSA Debtors alleged to have been made to MHI in payment of a $ 600,000 loan made by the Company prior to the Chapter 11 bankruptcy of the OGGUSA Debtors (the "Preferential Claim").

On April 20, 2022, the Plan Administrator filed its Complaint to Avoid and Recover Transfers Pursuant to 11 U.S.C.

§§547 and 550 and to Disallow Claims Pursuant to 11 U.S.C.

§502 (the "Complaint"), asserting the Preferential Claim seeking the recovery of an amount no less than $ 200,000 and to disallow the MHI claim until such time as such preferential transfer has been repaid to the OGGUSA Debtors.

On August 1, 2022, an answer to the Complaint was filed, asserting counterclaims and third-party claims against OGGUSA, the Plan Administrator, and Huron for declaratory judgment (the "Related Claims") in relation to terms of the Plan of Reorganization (the "Plan") and the allowance of the MHI claim under the Plan.

The Company has and continues to vigorously deny that any of the Preferential Claim exists in that such claims were waived and released in connection with the Company's settlement agreement and stipulations for its support of and voting for the Plan.

As such, the Company believes that such claims are meritless and have no basis in fact or law.

As of the date of this filing, there is insufficient information as to how much of the Company's allowed general unsecured claim, if any, will be paid upon the completion of the liquidation of the remaining assets of the OGGUSA Debtors.

In April 2022, the Plan Administrator filed a Complaint against MHI (the "Complaint") alleging certain preferential transfers of assets, which were valued by the Plan Administrator at $ 250,000 , relating to payments on a $ 600,000 loan made to MHI by the Company prior to the filing of the OGGUSA Debtors Chapter 11 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 bankruptcy proceeding until such time as such preferential transfer had been repaid to the OGGUSA Debtors.

In July 2023, MHI entered into a Settlement and 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 consideration for the settlement of the Preferential Claim and a general release of MHI and the Company.

As of the date of this filing, there is insufficient information to determine how much MHI may receive upon the completion of the liquidation of the remaining assets of the OGGUSA Debtors on account of its general unsecured claim, if anything.

(19) SUBSEQUENT EVENTS

Equity Transactions

Subsequent to March 31, 2023, the following equity transactions occurred:

• On April 5, 2023, the Company issued 1,290 restricted common shares under a royalty agreement.

• On April 5, 2023, the Company issued 5,025 restricted common shares in satisfaction of shares subscribed at March 31, 2023.

• On April 17, 2023, the Company issued 349,999 common shares underlying RSUs that vested on that date.

• On April 21, 2023, the Company issued 450,000 restricted common shares to purchase a 0.33 % minority interest in Mari Holdings MD LLC, one of the Company's majority-owned subsidiaries.

• On April 25, 2023, the Company received a conversion notice from Hadron in connection with its conversion of 2,651,404 Series C Preferred shares into 13,257,020 common shares.

The Company issued the shares and

arranged for the delivery of a new stock certificate covering the remaining outstanding 3,564,818 Series C Preferred shares.

The effective date of the conversion was April 25, 2023.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements