What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-04 · 233 added, 190 removed, 723 unchanged (37% of the section changed)

2 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

2023 December 31,

1 unchanged sentence

Cash and cash equivalents $ 13,259 $ 9,737

Accounts receivable, net of allowances of $ 4,403 and $ 4,603 at June 30, 2023 and December 31, 2022, respectively

Accounts receivable, net of allowances of $ 564 and $ 4,603 at September 30, 2023 and December 31, 2022, respectively

Inventory 24,206 19,477

Deferred rents receivable 649 704

Notes receivable, current portion 52 2,637

Inventory 24,786 19,477

Investments, current portion 161 123

26 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

2023 December 31,

5 unchanged sentences

Series B convertible preferred stock, $ 0.001 par value;

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

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

14,725 14,725

1 unchanged sentence

12,432,432 shares authorized;

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

1,155,274 and 6,216,216 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Total mezzanine equity 19,000 37,725

2 unchanged sentences

32,659,235 shares authorized;

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

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

Common stock, $ 0.001 par value;

700,000,000 shares authorized;

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

375,871,958 and 341,474,728 shares issued and outstanding at September 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 Six months ended

June 30, June 30,

Three months ended Nine months ended

September 30, September 30,

2023 2022 2023 2022

14 unchanged sentences

Other (expense) income, net ( 646 ) ( 251 ) ( 1,556 ) 24

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

Total interest and other expense, net ( 3,099 ) ( 530 ) ( 8,940 ) ( 527 )

Income before income taxes 193 5,206 3,034 16,753

1 unchanged sentence

Net (loss) income ( 4,269 ) 2,722 ( 5,868 ) 8,859

Net income attributable to noncontrolling interests 23 73 4 126

Net (loss) income attributable to noncontrolling interests ( 10 ) 16 ( 6 ) 142

Net (loss) income attributable to common stockholders $ ( 4,259 ) $ 2,706 $ ( 5,862 ) $ 8,717

8 unchanged sentences

(in thousands, except share amounts)

Three months ended June 30, 2023

Nine months ended September 30, 2023

Common stock Common stock

5 unchanged sentences

Shares Par value Shares Amount

Balances at January 1, 2023 341,474,728 $ 341 70,000 39 $ 39 $ 142,365 $ ( 83,924 ) $ ( 1,511 ) $ 57,310

Issuance of subscribed shares 70,000 — ( 70,000 ) ( 39 ) 39 — — —

Common stock subscribed but not issued — — 5,025 2 — — — —

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

Common stock issued under licensing agreement 1,793 — — — 1 — — 1

Distributions to non-controlling interests — — — — — — ( 34 ) ( 34 )

Stock-based compensation — — — — 206 — — 206

Net loss — — — — — ( 645 ) ( 19 ) ( 664 )

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

9 unchanged sentences

Stock-based compensation — — — — 299 — — 299

Net loss — — — — — ( 958 ) 23 ( 935 )

Net (loss) income — — — — — ( 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

Exercise of stock options 330,000 — — — 74 — — 74

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 3,921,670 4 — — 2,898 — — 2,902

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 5,530 — — — 2 — — 2

Common stock issued to purchase property and equipment 740,741 1 — — 299 — — 300

Distributions to non-controlling interests — — — — — — ( 47 ) ( 47 )

Stock-based compensation — — — — 296 — — 296

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

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

Net loss — — — — — ( 4,259 ) ( 10 ) ( 4,269 )

Balances at September 30, 2023 375,871,958 $ 376 — $ — $ 170,922 $ ( 89,786 ) $ ( 1,650 ) $ 79,862

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(in thousands, except share amounts)

Three months ended June 30, 2022

Nine months ended September 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

Balances at January 1, 2022 334,030,348 $ 334 — $ — $ 134,920 $ ( 97,392 ) $ ( 1,563 ) $ 36,299

Common stock subscribed but not issued — — 2,717 2 — — — 2

Exercise of stock options 10,000 — — — 3 — — 3

Conversion of promissory notes to equity 1,142,858 1 — — 399 — — 400

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

Distributions to non-controlling interests — — — — — — ( 101 ) ( 101 )

Stock-based compensation — — — — 2,469 — — 2,469

Net income — — — — — 4,188 53 4,241

Balances 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 — ( 2,717 ) ( 2 ) 2 — — —

8 unchanged sentences

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

Common stock subscribed but not issued — — 74,581 41 — — — 41

Exercise of stock options 45,000 — — — 7 — — 7

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

Cashless exercise of warrants 234,961 — — — — — — —

Release of shares under stock grants 356,938 — — — — — — —

Shares issued as purchase consideration - business combination 2,343,750 3 — — 1,497 — — 1,500

Purchase of minority interests in certain of the Company's subsidiaries — — ( 2,165 ) — 165 ( 2,000 )

Conversion of promissory notes to equity 1,142,858 1 — — 399 — — 400

Common stock issued to settle obligations 531,532 — — — 363 — — 363

2 unchanged sentences

Net income — — — — — 2,706 16 2,722

Balances at June 30, 2022 338,693,855 $ 339 — $ — $ 139,951 $ ( 91,381 ) $ ( 1,456 ) $ 47,453

Balances at September 30, 2022 339,270,387 $ 339 74,581 $ 41 $ 141,652 $ ( 88,675 ) $ ( 1,480 ) $ 51,877

See accompanying notes to the unaudited condensed consolidated financial statements.

1 unchanged sentence

(in thousands)

Six months ended

Nine months ended

September 30,

Cash flows from operating activities:

Net (loss) income attributable to common stockholders $ ( 5,862 ) $ 8,717

Net income attributable to noncontrolling interests 4 126

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

Net (loss) income attributable to noncontrolling interests ( 6 ) 142

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

Depreciation and amortization of property and equipment 3,838 2,469

9 unchanged sentences

Gain on finance lease adjustment ( 31 ) —

Loss on changes in fair value of investments 30 679

(Gain) loss on changes in fair value of investments ( 16 ) 930

Write-down of prepaid purchase consideration 200 —

Other investment income — ( 954 )

8 unchanged sentences

Income taxes payable 2,525 ( 4,804 )

Net cash (used in) provided by operating activities ( 3,224 ) 2,229

Net cash provided by operating activities 4,676 5,574

Cash flows from investing activities:

2 unchanged sentences

Advances toward future business acquisitions ( 250 ) ( 800 )

Purchases of investments ( 187 ) —

Purchases of cannabis licenses ( 626 ) ( 330 )

Issuance of notes receivable ( 879 ) —

Proceeds from notes receivable 87 73

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

Six months ended

Nine months ended

September 30,

Issuance of notes receivable ( 879 ) —

Proceeds from notes receivable 99 130

Due from related party ( 58 ) —

2 unchanged sentences

Proceeds from term loan 29,100 —

Payment of third-party debt issuance costs in connection with term loan ( 1,798 ) —

Principal payments of term loan ( 1,500 ) —

2 unchanged sentences

Repayment and retirement of promissory notes ( 5,503 ) —

Proceeds from mortgages — 3,000

Proceeds from exercise of stock options 109 10

15 unchanged sentences

Warrants to purchase common stock issued with debt $ 5,454 $ —

Note payable issued to purchase motor vehicle $ 109 $ —

Liability recorded for building improvements $ 1,997 $ —

Notes payable issued to purchase motor vehicles $ 158 $ —

Entry into new operating leases $ 5,366 $ 378

24 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 six-month period ended June 30, 2023.

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

Principles of Consolidation

10 unchanged sentences

The fair values of these investments approximate their carrying values.

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

At September 30, 2023 and December 31, 2022, the Company had $ 0.2 million and $ 0.1 million, respectively, of cash held in escrow.

Fair Value of Financial Instruments

14 unchanged sentences

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.

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").

6 unchanged sentences

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 Company's condensed consolidated statement of operations for the three months ended September 30, 2023 includes $ 1.2 million of revenue and $ 0.7 million of net loss attributable to Ermont.

The Company's condensed consolidated statement of operations for the nine months ended September 30, 2023 includes $ 2.6 million of revenue and $ 1.9 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.

19 unchanged sentences

In December 2021, the Company entered into a membership interest purchase agreement with the members of Kind to acquire 100 % of the equity ownership of Kind in exchange for $ 13.5 million payable in cash (subject to certain adjustments) and $ 6.5 million, payable by the issuance of four-year 6.0 % promissory notes to the members of Kind, secured by a first priority lien on the Company’s property in Hagerstown, Maryland (collectively, the “Kind Consideration”).

Kind was the Company's client in Maryland that held licenses for the cultivation, production and dispensing of medical cannabis.

Kind was the Company's client in Maryland that held licenses for the cultivation, production and

dispensing of medical cannabis.

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

32 unchanged sentences

The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of MariMed and Kind.

Accordingly, these unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined companies that would have been achieved had the Kind Acquisition occurred at January 1, 2022, nor are they intended to represent or be indicative of future results of operations.

The pro forma financial results for the year ended December 31, 2022, giving effect to the Kind Acquisition as if it had occurred at January 1, 2021 are as follows (unaudited, in thousands):

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 on 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 on January 1, 2021 are as follows (unaudited, in thousands):

Revenue $ 136,078

17 unchanged sentences

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 Company has recorded the Greenhouse Naturals Note at its 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 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.

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

Pending Transactions

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 $ 2.25

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.

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.

If the closing conditions are met and the acquisition is completed, the Company will have five adult-use dispensaries operating in Illinois.

While the Company believes this may still occur in 2023, it is quite possible that the closing date may not occur until 2024.

For the interim period until the acquisition is completed, the Company has entered into a management agreement with Allgreens, with the management fees calculated as a percentage of Allgreens' revenue.

In connection with this agreement, the Company recorded expenses related to Allgreens aggregating $ 0.1 million for both the three and nine months ended September 30, 2023 as a component of Investments, net of current portion (see Note 7).

Pursuant to the Allgreens Agreement, as of September 30, 2023 the Company had 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.

Additionally, the Company made a cash payment of $ 875,000 to the Allgreens members in October 2023.

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.

The Allgreens Notes will mature one year from the date the dispensary is permitted to commence operations.

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

In September 2022, the Company entered into an agreement to acquire 100 % of the membership interests in Robust Missouri Processing and Manufacturing 1, LLC (the "Robust Agreement"), a Missouri wholesale and cultivator, for $ 0.7 million of cash.

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

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.

Completion of the acquisition is dependent upon obtaining all requisite approvals from the Missouri Department of Health and Senior Services.

While the Company believes this may still occur in 2023, it is quite possible that the closing date may not occur until 2024.

Pursuant to 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.

Basic earnings (loss) per share is computed by dividing net income (loss) 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 earnings (loss) per share were as follows (in thousands):

Three months ended Six months ended

2023 June 30,

2022 June 30,

2023 June 30,

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Weighted average shares outstanding - basic 373,081 339,025 359,156 337,111

9 unchanged sentences

The Company recognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term.

Differences between amounts received and amounts recognized are recorded in Deferred rents receivable in the condensed consolidated balance sheets.

Differences between amounts received and amounts recognized are recorded in Deferred rents receivable in the

condensed consolidated balance sheets.

Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.

12 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 $ 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):

The Company received rental payments aggregating $ 0.5 million and $ 0.4 million in the three months ended September 30, 2023 and 2022, respectively, and $ 1.3 million and $ 2.4 million in the nine months ended September 30, 2023 and 2022, respectively.

Revenue from these payments was recognized on a straight-line basis and aggregated $ 0.4 million in each of the three months ended September 30, 2023 and 2022, respectively, and $ 1.2 million and $ 2.3 million in the nine months ended September 30, 2023 and 2022, respectively.

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

Year ending December 31,

2 unchanged sentences

(5) NOTES RECEIVABLE

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

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

September 30,

2023 December 31,

2 unchanged sentences

First State Compassion Center (FSCC New Note) — 750

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

Healer LLC (Revised Healer Note) 866 866

3 unchanged sentences

First State Compassion Center

The Company’s cannabis-licensed client in Delaware, First State Compassion Center (“FSCC”), issued a 10 -year promissory note to the Company in May 2016 for $ 0.7 million, bearing interest at a rate of 12.5 % per annum and maturing in April 2026, as amended (the “FSCC Initial Note”).

Omnibus Agreement

On July 1, 2023 (the "Omnibus Agreement Date"), the Company entered into an Omnibus Agreement with First State Compassion Center ("FSCC"), the Company's cannabis-licensed client in Delaware:

(a) consolidating all amounts owed by FSCC to the Company and its affiliated entities as described below, aggregating $ 11.0 million (the "Omnibus");

(b) providing for the automatic conversion of all amounts owed by FSCC to the Company, 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 Omnibus 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.

The state of Delaware recently approved the adult use of cannabis, with the implementation period expected to extend through approximately November 2024.

The Company recorded the Omnibus as a component of Other assets in the condensed consolidated balance sheet at September 30, 2023.

Notes Receivable From FSCC Prior to the Omnibus Agreement Date

The notes receivable from FSCC described below in the aggregate were converted into the Omnibus on the Omnibus Agreement Date:

• FSCC issued a 10 -year promissory note to the Company in May 2016 for $ 0.7 million, which bore interest at a rate of 12.5 % per annum and matured in April 2026, as amended (the “FSCC Initial Note”).

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

8 unchanged sentences

• 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.

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.

however, the Company had 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 the second quarter of 2023, the Company converted $ 879,000 due from FSCC into a note receivable (the "FSCC Second New Note").

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.

4 unchanged sentences

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 June 30, 2023 and December 31, 2022, approximately $ 52,000 was current.

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

(6) INVENTORY

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

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

September 30,

2023 December 31,

5 unchanged sentences

(7) INVESTMENTS

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

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

September 30,

2023 December 31,

1 unchanged sentence

WM Technology Inc.

Investment - non-current:

Investments - non-current:

Artis LLC (d/b/a Little Dog) $ 67 $ —

Investment in Allgreens 97 —

Total investments - non-current $ 164 $ —

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

In connection with the pending acquisition of Allgreens and the management agreement the Company entered into with Allgreens for the interim period prior to the completion of the acquisition (see Note 2), the Company recorded expenses related to Allgreens aggregating $ 0.1 million for both the three and nine months ended September 30, 2023 as a component of Investments, net of current portion.

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.

The Company recognizes changes in the fair value of the Little Dog Investment based on its proportional share of Little Dog's net income (loss).

During the three and nine months ended September 30, 2023, the Company recognized losses in the Little Dog Investment of approximately $ 22,000 and $ 31,000 , respectively, which are included as components of Other (expense) income, net, in the condensed consolidated statements of operations for the respective periods.

WM Technology Inc.

1 unchanged sentence

MAPS) (the "WMT Shares"), a technology and software infrastructure provider to the cannabis industry, which represented the Company’s pro rata share of additional consideration pursuant to a 2021 asset purchase agreement between the Company and Members RSVP LLC.

The Company recognized losses of approximately $ 2,000 and $ 21,000 in the three and six months ended June 30, 2023, respectively, reflecting the changes in the fair value of the WMT Shares for the respective periods.

The Company recognized a loss of $ 0.6 million in both of the three- and six-month periods ended June 30, 2022, representing the changes in the fair value of the WMT Shares for such periods.

Both the losses in the three and six months ended June 30, 2022 from the change in the fair value of the WMT Shares and the gain arising from the receipt in February 2022 of the WMT Shares are reported as Other (expense) income, net, in the condensed consolidated statements of operations for the respective periods.

The Company recognized gains of approximately $ 59,000 and $ 38,000 in the three and nine months ended September 30, 2023, respectively, reflecting the changes in the fair value of the WMT Shares for the respective periods.

The Company recognized losses of $ 0.2 million and $ 0.8 million in the three and nine months ended September 30, 2022, respectively, representing the changes in the fair value of the WMT Shares for such periods.

Both the losses arising from the changes 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.

1 unchanged sentence

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 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.

The Company recorded losses of $ 0.1 million and $ 0.2 million in the three and nine months ended September 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 June 30, 2023 and December 31, 2022 was comprised of the following (in thousands):

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

September 30,

2023 December 31,

8 unchanged sentences

Property and equipment, net $ 85,195 $ 71,641

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.

The Company recorded depreciation expense related to property and equipment of $ 1.6 million and $ 0.9 million in the three months ended September 30, 2023 and 2022, respectively, and $ 3.8 million and $ 2.5 million in the nine months ended September 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.

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 six months ended June 30, 2023.

The Company recorded a loss on the disposal of assets aggregating $ 0.9 million, which is included as a component of Other (expense) income, net, in the condensed consolidated statement of operations for the nine months ended September 30, 2023.

(9) INTANGIBLE ASSETS AND GOODWILL

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

June 30, 2023 Weighted

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

September 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 June 30, 2023 was as follows:

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

Year ending December 31,

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Total $ 17,856

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):

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

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

1 unchanged sentence

Kind Acquisition — 6,011

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

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

(10) TERM LOAN

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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 loan requires scheduled amortization payments of 1.0 % of the principal amount outstanding under the Credit Agreement per month commencing in May 2023, and the remaining principal balance is due in full on January 24, 2026, subject to extension to January 24, 2028 under certain circumstances.

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

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

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

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

Warrant Issuance

The Credit Agreement provided for 30 % warrant coverage against amounts funded under the facility, priced at a 20 % premium to the trailing 20 -day average price on the closing date of each such funding.

At the initial closing, upon funding of the initial $ 30.0 million under the facility, the Company issued to the Lenders an aggregate of 19,148,936 warrants to purchase shares of the Company’s common stock at $ 0.47 per share, exercisable for a five-year period following issuance.

The Company recorded the warrants at present value of $ 5.5 million as a component of Additional paid-in capital on the condensed consolidated balance sheet as of January 24, 2023, and discounted the Term Loan by $ 5.5 million (the "Term Loan Discount").

The Term Loan Discount is being amortized to interest expense over the term of the Credit Agreement.

At the initial closing, upon funding

of the initial $ 30.0 million under the facility, the Company issued to the Lenders an aggregate of 19,148,936 warrants to purchase shares of the Company’s common stock at $ 0.47 per share, exercisable for a five-year period following issuance.

The Warrant Discount is being amortized to interest expense over the term of the Credit Agreement.

Prepaid Debt Issuance Costs

The Company incurred $ 1.8 million of third party costs (i.e., legal fees, referral fees, etc.) in connection with the Term Loan, which have been recorded as a discount to the Term Loan (the "Third-Party Costs Discount"), which is being amortized to interest expense over the term of the Credit Agreement.

Interest Amortization

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

The Company recorded $ 0.7 million and $ 1.9 million of aggregate interest amortization for the three and nine months ended September 30, 2023, respectively, related to the Original Issuance Discount, Warrant Discount and Third-Party Costs Discount.

Outstanding Balance

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

At September 30, 2023, the outstanding Term Loan balance reported on the Company's condensed consolidated balance sheet was $ 22.5 million, with the current portion totaling $ 3.6 million.

(11) MORTGAGES AND NOTES PAYABLE

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

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

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

September 30,

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 June 30, 2023 and December 31, 2022 were approximately $ 393,000 and $ 382,000 , respectively.

The current portions of the outstanding principal balance under the Amended BNE Mortgage at September 30, 2023 and December 31, 2022 were approximately $ 400,000 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”).

The mortgage matures in 2031, with monthly principal and interest payments.

The interest rate is 5.25 % per annum, with the rate adjusting every five years to the then-prime rate plus 1.5 %, with a floor of 5.25 % per annum.

The interest rate is 5.25 % per annum, with the rate adjusting every five years to the then-prime rate plus

1.5 %, with a floor of 5.25 % per annum.

The next interest rate adjustment will occur in September 2026.

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

The current portions of the outstanding principal balance under the BNE Delaware Mortgage at September 30, 2023 and December 31, 2022 were approximately $ 131,000 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 June 30, 2023 and December 31, 2022 were approximately $ 26,000 and $ 36,000 , respectively.

The current portions of the outstanding principal balance under the DuQuoin Mortgage at September 30, 2023 and December 31, 2022 were approximately $ 27,000 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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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 June 30, 2023 and December 31, 2022 were approximately $ 81,000 and $ 77,000 , respectively.

The current portions of the outstanding principal balance of the DuQuoin Metropolis Mortgage at September 30, 2023 and December 31, 2022 were approximately $ 45,000 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 $ 70,000 and $ 68,000 at June 30, 2023 and December 31, 2022, respectively.

The current portions of the outstanding principal balance of the DuQuoin Mt.

Vernon Mortgage were approximately $ 46,000 and $ 68,000 at September 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.

1 unchanged sentence

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 were due.

On May 26, 2023, the Company repaid the outstanding balance on the South Porte Bank Mortgage, which totaled approximately $ 778,000 , and the Company owns this property outright.

On May 26, 2023, the Company repaid the outstanding balance on the South Porte Bank Mortgage, which totaled approximately $ 778,000 , and the Company currently 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 $ 4.7 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.

The fair value of the Ermont Note was $ 4.8 million at September 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 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.

1 unchanged sentence

The difference between the face value of the Greenhouse Naturals Note and the present value recorded at the time of the Greenhouse Naturals Acquisition is being amortized to interest expense over the term of such note, which matures in July 2026.

The fair values of the Greenhouse Naturals Note were $ 4.4 million and $ 4.3 million at June 30, 2023 and December 31, 2022, respectively.

The Company estimated that the current portions of the Greenhouse Naturals Note were $ 1.3 million and $ 0.9 million at June 30, 2023 and December 31, 2022, respectively, which are included in Mortgages and notes payable, current portion, in the Company's condensed consolidated balance sheets.

The fair value of the Greenhouse Naturals Note was $ 4.3 million at each of September 30, 2023 and December 31, 2022.

In the third quarter of 2023, the Company updated its forecast of revenue attributable to the Beverly Dispensary and, accordingly, adjusted the schedule of estimated future payments on the Greenhouse Naturals Note.

The Company estimated that the current portions of the Greenhouse Naturals Note were $ 0.3 million and $ 0.9 million at September 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

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Promissory Notes Issued to Purchase Commercial Vehicles

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 entered into three note agreements to purchase commercial vehicles in the nine months ended September 30, 2023:

in August 2023 with Ally Financial, 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 June 30, 2023, the four outstanding notes had an aggregate outstanding balance of approximately $ 149,000 , of which approximately $ 27,000 was current.

At September 30, 2023, the five outstanding notes had an aggregate outstanding balance of $ 0.2 million, of which approximately $ 33,000 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.

The weighted average interest rates of the outstanding balances were 11.04 % and 8.19 % at September 30, 2023 and December 31, 2022, respectively.

The weighted average remaining terms of these notes were 4.84 years and 4.07 years at September 30, 2023 and December 31, 2022, respectively.

Future Payments

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

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

Year ending December 31,

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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 into 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 Stock, all outstanding shares of Series B Stock shall automatically convert into shares of the Company's common stock as follows:

• If the sixty-day VWAP is less than or equal to $ 0.50 per share, the Company shall have the option to (i) convert all shares of Series B Stock into shares of the Company's common stock at a conversion price of $ 1.00 per share, and pay cash to the Series B Holders equal to the difference between the sixty-day VWAP and $ 3.00 per share, or (ii) pay cash to the Series B Holders equal to $ 3.00 per share.

• If the sixty-day VWAP is greater than $ 0.50 per share, the Company shall have the option to (i) convert all shares of Series B Stock into shares of the Company's common stock at a conversion price per share equal to the quotient of $ 3.00 per share divided by the sixty-day VWAP, or (ii) pay cash to the Series B Holders equal to $ 3.00 per share, or (iii) convert all shares of Series B Stock into shares of the Company's common stock at a conversion price per share equal to the sixty-day VWAP and pay cash to the Series B Holders equal to the difference between $ 3.00 per share and the sixty-day VWAP.

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 Stock (February 28, 2026), all outstanding shares of Series B Stock ( 4,908,333 shares) 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:

• convert all shares of Series B Stock into shares of the Company's common stock at a conversion ratio of 1 :1 ( 4,908,333 shares), subject to adjustment upon the occurrence of certain events, and pay cash to the Series B Holders equal to the difference between the sixty-day VWAP and $ 3.00 per share;

• pay cash to the Series B Holders equal to $ 3.00 per share ($ 14,725,000 ).

If the sixty-day VWAP is greater than $ 0.50 per share, the Company shall have the option to:

• convert all shares of Series B Stock into shares of the Company's common stock at a conversion price per share equal to $ 3.00 per share divided by the sixty-day VWAP;

• pay cash to the Series B Holders equal to $ 3.00 per share ($ 14,725,000 );

• convert a number of shares of Series B Stock, such number at the Company's sole discretion, into shares of the Company's common stock valued at the sixty-day VWAP (the "Conversion Value"), and pay cash to the Series B Holders equal to the difference between $ 14,725,000 and the Conversion Value (shares issued multiplied by the sixty-day VWAP).

The Company shall at all times when the Series B Stock is outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B Stock, such number of its duly authorized shares of common stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Stock.

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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").

(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 September 30, 2023, the Company converted, at Hadron's request in accordance with the terms and conditions of the Series C stock certificate of designation, a total of 784,334 shares of Series C Stock into 3,921,670 shares of the Company's common stock (the "Q3 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.

At September 30, 2023, 1,155,274 shares of Series C Stock remained outstanding.

(13) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

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Stock Options

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

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

Shares Weighted average exercise price

4 unchanged sentences

Expired ( 362,500 ) $ 1.98

Outstanding at June 30, 2023 36,910,921 $ 0.80

Outstanding at September 30, 2023 36,259,421 $ 0.79

Stock options granted under the 2018 Plan generally expire five years from the date of grant.

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:

At September 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 nine months ended September 30, 2023 were estimated using the Black-Scholes valuation model with the following assumptions:

Estimated life (in years) 3.00 to 3.26

2 unchanged sentences

Dividend yield —

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

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

Restricted Stock Units

3 unchanged sentences

The fair value of RSUs is determined based on the market value of the shares of the Company's common stock on the date of grant.

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

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

RSUs Weighted average grant date fair value

3 unchanged sentences

Forfeited ( 61,000 ) $ 0.43

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

Outstanding at September 30, 2023 5,544,038 $ 0.44

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).

1 unchanged sentence

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 .

At September 30, 2023, warrants to purchase up to 42,199,476 shares of the Company's common stock were outstanding, with a weighted average exercise price of $ 0.68 .

Other Common Stock Issuances

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

In addition to the activity related to stock options and RSUs, described previously, the Company also issued during the nine months ended September 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;

• 5,025 shares of restricted common stock subscribed;

• 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);

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Stock-Based Compensation

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.

The Company recorded stock-based compensation of $ 0.3 million and $ 1.4 million in the three months ended September 30, 2023 and 2022, respectively, and $ 0.8 million and $ 6.4 million in the nine months ended September 30, 2023 and 2022, respectively.

Common Stock Issuance Obligations

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

Such shares were issued in the first quarter of 2023.

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 shares of common stock were issued in the first quarter of 2023.

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

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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 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,

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

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 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 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 did not have any customers that contributed 10% or more of total revenue in any of the three- or nine-month periods ended September 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 September 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 eight operating leases and fifteen finance leases.

The Company is currently the lessee under seven operating leases and fourteen 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 - an approximately 33,800 square foot building which houses both a dispensary and a cultivation facility, whose lease expires in October 2038.

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

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

The Company leases machinery and office equipment under finance leases that expire from 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,

The Company had previously leased a 2,700 square foot two-unit apartment in Maryland under a lease that expired in July 2023.

The Company is currently renting this space on a month-to-month basis while it negotiates a new lease for the space.

The Company leases machinery and office equipment under finance leases that expire from February 2024 through July 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 nine months ended September 30, 2023 and 2022 were as follows (in thousands):

Three months ended Nine months ended

September 30,

2023 September 30,

2022 September 30,

2023 September 30,

Operating lease expense $ 507 $ 296 $ 1,321 $ 872

3 unchanged sentences

Total finance lease expense $ 267 $ 62 $ 566 $ 140

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.

At September 30, 2023, the weighted average remaining lease terms for operating leases and finance leases were 10.1 years and 3.7 years, respectively.

The weighted average discount rate used to determine the right-of-use assets and lease liabilities was between 11.0 % and 12.1 % for all leases.

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):

Future minimum lease payments as of September 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.

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.

In February 2022, the Company was notified that it was awarded a cannabis dispensary license from the state of Ohio.

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

Expenses incurred under this lease were approximately $ 64,000 and $ 39,000 for 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.

Expenses incurred under this lease were approximately $ 61,000 and $ 39,000 for the three months ended September 30, 2023 and 2022, respectively, and approximately $ 190,000 and $ 117,000 for the nine months ended September 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 $ 1.4 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.

Purchases from this entity totaled $ 1.4 million and $ 1.1 million in the three months ended September 30, 2023 and 2022, respectively, and $ 4.2 million and $ 3.4 million in the nine months ended September 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 $ 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 aggregate royalties due to this entity were approximately $ 149,000 and $ 53,000 for the three months ended September 30, 2023 and 2022, respectively, and approximately $ 614,000 and $ 163,000 for the nine months ended September 30, 2023 and 2022, respectively.

During the three and nine months ended September 30, 2023, one of the Company’s majority-owned subsidiaries paid distributions in the aggregate of approximately $ 3,000 and $ 6,400 , respectively, to the CEO, who owns a minority equity interest in such subsidiary.

During the three and nine months ended September 30, 2022, this majority-owned subsidiary paid distributions aggregating approximately $ 4,200 and $ 27,300 to the Company’s then-CEO and then-Chief Financial Officer (now the CEO), each of whom owned minority equity interests in such subsidiary.

FSCC, the cannabis-licensed client in Delaware that the Company manages, pays fees to BKR Management Inc., a company partially owned by the CEO, related to the initial formation, licensing and establishment of FSCC's cannabis operations.

The aggregate fees paid by FSCC were $ 48,000 for each of the three months ended September 30, 2023 and 2022, and $ 144,000 for each of the nine months ended September 30, 2023 and 2022.

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

Additionally, the CEO provided a limited guaranty to the Lenders under the Company's Credit Agreement with Chicago Atlantic.

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

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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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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.

New Bedford, MA and Middleborough, MA Buildouts

In the third quarter of 2023, the Company recorded an increase of $ 2.0 million in building and building improvements and a corresponding accrued liability in the same amount for electrical work performed at the Company's New Bedford and Middleborough properties between December 2017 and June 2023.

The electrical work was performed by an electrical contractor that is owned and/or controlled by the family of a non-officer/director Company stockholder who beneficially

owned more than 5 % of the Company's common stock when the electrical work began.

The electrical work was primarily paid for by an entity that is indirectly controlled by that individual and another non-officer/director Company shareholder who also beneficially owned more than 5 % of the common stock when the electrical work began.

The Company repaid the two shareholders $ 300,000 each as salary between 2021 and 2023 (at the rate of $ 100,000 each per year), which payments have since been terminated.

The Company intends to negotiate an agreement with the entity that paid for the electrical work and all other interested parties to reflect the liability and agreed-upon payment terms.

(19) SUBSEQUENT EVENTS

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

On October 31, 2023, Susan M.

Villare, the former Chief Financial Officer of the Company, tendered her resignation, effective immediately.

Subsequent thereto, the Board of Directors appointed Jon R.

Levine, the Company's President and Chief Executive Officer, as the Company's Interim Chief Financial Officer, and has initiated a search process to identify and engage a new Chief Financial Officer.

Subsequent to September 30, 2023, the following equity transaction occurred:

• On October 27, 2023, the Company issued 250,000 common shares underlying RSUs that vested on that date.

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