MARIMED INC. 10-Q

Item 1. Financial Statements MariMed Inc. Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts) (unaudited) March 31, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 15,234 $ 14,645 Accounts receivable, net of allowances of $ 764 at both March 31, 2024 and December 31, 2023 6,491 7,199 Inventory 29,044 25,306 Deferred rents receivable 612 630 Notes receivable, current portion 52 52 Investments, current portion — 88 Due from related parties 181 105 Other current assets 3,281 3,407 Total current assets 54,895 51,432 Property and equipment, net 90,765 89,103 Intangible assets, net 12,819 17,012 Goodwill 15,812 11,993 Investments, net of current portion 274 221 Notes receivable, net of current portion 814 814 Operating lease right-of-use assets 9,456 9,716 Finance lease right-of-use assets 3,539 3,295 Other assets 12,958 12,537 Total assets $ 201,332 $ 196,123 Liabilities, mezzanine equity and stockholders’ equity Current liabilities: Mortgages and notes payable, current portion $ 1,057 $ 723 Accounts payable 10,256 9,001 Accrued expenses and other 4,613 3,549 Income taxes payable 16,271 14,434 Operating lease liabilities, current portion 1,955 1,945 Finance lease liabilities, current portion 1,303 1,210 Total current liabilities 35,455 30,862 Mortgages and notes payable, net of current portion 67,448 65,652 Operating lease liabilities, net of current portion 8,218 8,455 Finance lease liabilities, net of current portion 2,290 2,140 4 Table of Contents MariMed Inc. Condensed Consolidated Balance Sheets (continued) (in thousands, except share and per share amounts) (unaudited) March 31, 2024 December 31, 2023 Other liabilities 100 100 Total liabilities 113,511 107,209 Commitments and contingencies Mezzanine equity Series B convertible preferred stock, $ 0.001 par value; 4,908,333 shares authorized, issued and outstanding at March 31, 2024 and December 31, 2023 14,725 14,725 Series C convertible preferred stock $ 0.001 par value; 12,432,432 shares authorized; 1,155,274 shares issued and outstanding at both March 31, 2024 and December 31, 2023 4,275 4,275 Total mezzanine equity 19,000 19,000 Stockholders’ equity Undesignated preferred stock, $ 0.001 par value; 32,659,235 shares authorized; zero shares issued and outstanding at March 31, 2024 and December 31, 2023 — — Common stock, $ 0.001 par value; 700,000,000 shares authorized; 375,465,266 and 375,126,352 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 375 375 Common stock subscribed but not issued — — Additional paid-in capital 171,389 171,144 Accumulated deficit ( 101,253 ) ( 99,955 ) Noncontrolling interests ( 1,690 ) ( 1,650 ) Total stockholders’ equity 68,821 69,914 Total liabilities, mezzanine equity and stockholders’ equity $ 201,332 $ 196,123 See accompanying notes to the unaudited condensed consolidated financial statements. 5 Table of Contents MariMed Inc. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) Three months ended March 31, 2024 2023 Revenue $ 37,933 $ 34,380 Cost of revenue 21,461 18,992 Gross profit 16,472 15,388 Operating expenses: Personnel 6,465 4,656 Marketing and promotion 1,762 1,146 General and administrative 6,140 4,305 Acquisition-related and other 84 190 Bad debt — ( 44 ) Total operating expenses 14,451 10,253 Income from operations 2,021 5,135 Interest and other (expense) income: Interest expense ( 1,629 ) ( 2,505 ) Interest income 26 99 Other expense, net ( 20 ) ( 900 ) Total interest and other expense, net ( 1,623 ) ( 3,306 ) Income before income taxes 398 1,829 Provision for income taxes 1,690 2,493 Net loss ( 1,292 ) ( 664 ) Less: Net income (loss) attributable to noncontrolling interests 6 ( 19 ) Net loss attributable to common stockholders $ ( 1,298 ) $ ( 645 ) Net loss per share attributable to common stockholders: Basic $ ( 0.00 ) $ ( 0.00 ) Diluted $ ( 0.00 ) $ ( 0.00 ) Weighted average common shares outstanding: Basic 375,211 342,794 Diluted 375,211 342,794 See accompanying notes to the unaudited condensed consolidated financial statements. 6 Table of Contents MariMed Inc. Condensed Consolidated Statements of Stockholders’ Equity (in thousands, except share amounts) (unaudited) Three months ended March 31, 2024 Common stock Common stock subscribed but not issued Additional paid-in capital Accumulated deficit Non- controlling interests Total stockholders’ equity Shares Par value Shares Amount Balances at January 1, 2024 375,126,352 $ 375 — 39 $ — $ 171,144 $ ( 99,955 ) $ ( 1,650 ) $ 69,914 Issuance of subscribed shares — — — — — — — — Release of shares under stock grants 335,300 — — — — — — — Common stock issued under licensing agreement 3,614 — — — 1 — — 1 Distributions to non-controlling interests — — — — — — ( 46 ) ( 46 ) Stock-based compensation — — — — 244 — — 244 Net loss — — — — — ( 1,298 ) 6 ( 1,292 ) Balances at March 31, 2024 375,465,266 $ 375 — $ — $ 171,389 $ ( 101,253 ) $ ( 1,690 ) $ 68,821 Three months ended March 31, 2023 Common stock Common stock subscribed but not issued Additional paid-in capital Accumulated deficit Non- controlling interests Total stockholders’ equity Shares Par value Shares Amount Balances at January 1, 2023 341,474,728 $ 341 70,000 $ 39 $ 142,365 $ ( 83,924 ) $ ( 1,511 ) $ 57,310 Common stock subscribed but not issued — — 5,025 2 — — — 2 Issuance of subscribed shares 70,000 — ( 70,000 ) ( 39 ) 39 — — — Warrants issued in connection with debt — — — — 5,454 — — 5,454 Shares issued as purchase consideration - Ermont Inc. 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 See accompanying notes to the unaudited condensed consolidated financial statements. 7 Table of Contents MariMed Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three months ended March 31, 2024 2023 Cash flows from operating activities: Net loss attributable to common stockholders $ ( 1,298 ) $ ( 645 ) Net income (loss) attributable to noncontrolling interests 6 ( 19 ) Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization of property and equipment 1,938 986 Amortization of intangible assets 374 557 Stock-based compensation 244 208 Amortization of original debt issuance discount — 55 Amortization of debt discount 87 328 Amortization of debt issuance costs 18 — Payment-in-kind interest 14 118 Present value adjustment of notes payable — 719 Bad debt income — ( 44 ) Obligations settled with common stock 1 1 Write-off of disposed assets 1 906 Gain on finance lease adjustment — ( 13 ) Loss on changes in fair value of investments 121 20 Changes in operating assets and liabilities: Accounts receivable, net 707 ( 132 ) Deferred rents receivable 18 18 Inventory ( 3,738 ) ( 3,246 ) Other current assets 391 639 Other assets 63 19 Accounts payable 1,334 ( 1,961 ) Accrued expenses and other 1,091 ( 207 ) Income taxes payable 1,838 ( 2,806 ) Net cash provided by (used in) operating activities 3,210 ( 4,499 ) Cash flows from investing activities: Purchases of property and equipment ( 3,368 ) ( 3,052 ) Business acquisitions, net of cash acquired — ( 2,995 ) Advances toward future business acquisitions ( 485 ) ( 300 ) Purchases of investments ( 86 ) — Purchases of cannabis licenses ( 265 ) ( 601 ) Proceeds from notes receivable 13 43 8 Table of Contents MariMed Inc. Condensed Consolidated Statements of Cash Flows (continued) (in thousands) (unaudited) Three months ended March 31, 2024 2023 Due from related party ( 75 ) ( 20 ) Net cash used in investing activities ( 4,266 ) ( 6,925 ) Cash flows from financing activities: Proceeds from term loan — 29,100 Proceeds from Construction to Permanent Commercial Real Estate Mortgage Loan 1,047 — Proceeds from mortgages 1,163 — Principal payments of mortgages ( 65 ) ( 203 ) Principal payments of promissory notes ( 135 ) ( 9 ) Repayment and retirement of promissory notes — ( 5,503 ) Principal payments of finance leases ( 320 ) ( 69 ) Distributions ( 45 ) ( 34 ) Net cash provided by financing activities 1,645 23,282 Net increase in cash and cash equivalents 589 11,858 Cash and equivalents, beginning of year 14,645 9,737 Cash and cash equivalents, end of period $ 15,234 $ 21,595 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,685 $ 1,100 Cash paid for income taxes $ 127 $ 5,296 Non-cash activities: Common stock issued as purchase consideration $ — $ 2,994 Present value of promissory note issued as purchase consideration $ — $ 4,569 Warrants to purchase common stock issued with debt $ — $ 5,454 Notes payable issued to purchase motor vehicles $ — $ 49 Entry into new operating leases $ — $ 5,366 Entry into new finance leases $ 513 $ 224 Issuance of common stock associated with subscriptions $ — $ 39 See accompanying notes to the unaudited condensed consolidated financial statements. 9 Table of Content s MariMed Inc. Notes to Condensed Consolidated Financial Statements (unaudited) (1) BASIS OF PRESENTATION Business MariMed Inc. (“MariMed” or the “Company”) is a multi-state operator in the United States cannabis industry. MariMed develops, operates, manages and optimizes state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medical and adult-use cannabis. MariMed also licenses its proprietary brands of cannabis along with other top brands in domestic markets. Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”). On March 9, 2023 (the "Ermont Acquisition Date"), the Company acquired the operating assets of Ermont, Inc. ("Ermont"), a medical-licensed vertical cannabis operator located in Quincy, Massachusetts (the "Ermont Acquisition"). The financial results of Ermont are included in the Company's condensed consolidated financial statements since the Ermont Acquisition Date. Interim results are not necessarily indicative of results for the full fiscal year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 7, 2024. Certain reclassifications, not affecting previously reported net income or cash flows, have been made to the previously issued financial statements to conform to the current period presentation. Significant Accounting Policies 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, 2024. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of MariMed and its wholly- and majority-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Noncontrolling interests represent third-party minority ownership interests in the Company’s majority-owned consolidated subsidiaries. Net income attributable to noncontrolling interests is reported in the condensed consolidated statements of operations, and the value of minority-owned interests is presented as a component of equity within the condensed consolidated balance sheets. Use of Estimates and Judgments The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these condensed consolidated financial statements include accounting for business combinations and asset purchases, inventory valuations, assumptions used to determine the fair value of stock-based compensation, and intangible assets and goodwill. Actual results could differ from those estimates. 10 Table of Content s Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity date of three months or less to be cash equivalents. The fair values of these investments approximate their carrying values. At both March 31, 2024 and December 31, 2023, the Company had $ 0.1 million of cash held in escrow. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments approximate their fair values and include cash equivalents, accounts receivable, deferred rents receivable, notes receivable, term loans, mortgages and notes payable, and accounts payable. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tier fair value hierarchy is based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows: • Level 1 . Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. • Level 2 . Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets). • Level 3 . Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. Recent Accounting Pronouncements The Company has reviewed all recently issued, but not yet effective, Accounting Standards Updates (“ASUs”) and does not believe that the future adoption of any such ASUs will have a material impact on its financial condition or results of operations. (2) BUSINESS COMBINATIONS AND ASSET PURCHASES Business Combinations Ermont On March 9, 2023, following approval by the Massachusetts Cannabis Control Commission (the "CCC"), the Company acquired the operating assets of Ermont, a medical-licensed vertical cannabis operator located in Quincy, Massachusetts. 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"). The Ermont Note has a six-year term and bears interest at 6.0 % per annum, with payments of interest-only for two years and thereafter, quarterly payments of principal and interest in arrears. The outstanding balance on the Ermont Note is subject to prepayment in the event the Company raises $ 75.0 million of equity capital. The Company recorded the Ermont Note at the present value as of the Ermont Acquisition Date of $ 4.6 million. The difference between the present value and face value of the Ermont Note is being amortized to interest expense through the term of such note. 11 Table of Content s The Company rebranded the dispensary as Panacea Wellness Dispensary and commenced medical sales immediately after the Ermont Acquisition Date. The Ermont Acquisition also includes a Host Community Agreement with the city of Quincy to conduct adult-use cannabis sales. The Company expects to commence adult-use sales upon approval by the CCC. The Company also plans to expand the existing medical dispensary to accommodate expected increased traffic associated with adult-use sales and to repurpose Ermont's existing cultivation facility for its pheno-hunting activities. The Company has moved its pheno-hunting out of the New Bedford facility to use the freed space to cultivate its Nature's Heritage flower. The Company's condensed consolidated statement of operations for the three months ended March 31, 2023 included approximately $ 230,000 of revenue and $ 42,000 of net loss attributable to Ermont. The Ermont Acquisition has been accounted for as a business combination. The Company did not assume any of Ermont's liabilities. The Company recorded adjustments to the amounts allocated to certain identifiable intangible assets and goodwill to reflect more precise forecasts of future revenue streams. These adjustments resulted in an increase to the tradename and trademarks intangible asset of $ 0.1 million, a decrease to the customer base intangible asset of $ 3.9 million and an increase to goodwill of $ 3.8 million. A summary of the final allocation of the Ermont Consideration to the acquired and identifiable intangible assets is as follows (in thousands): Fair value of consideration transferred: Cash consideration: Cash paid $ 3,000 Less cash acquired ( 13 ) Net cash consideration 2,987 Common stock 2,994 Promissory note 4,569 Total fair value of consideration $ 10,550 Fair value of assets acquired and (liabilities assumed): Property and equipment $ 800 Intangible assets: Tradename and trademarks 1,118 Customer base 768 License 131 Goodwill 7,733 Fair value of net assets acquired $ 10,550 The Company is amortizing the identifiable intangible assets arising from the Ermont Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 12.19 years (see Note 8). Goodwill results from assets not separately identifiable as part of the transaction and is not deductible for tax purposes. Valuation of Acquired Intangible Assets The valuation of acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company uses an income approach to value acquired tradename/trademarks, licenses/customer base, and non-compete intangible assets. The valuation for each of these intangible assets is based on estimated projections of expected cash flows to be generated by the assets discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of new markets, products and customers and its outcome through key assumptions driving asset values, including sales growth, royalty rates and other related costs. 12 Table of Content s Pending Transactions at March 31, 2024 Allgreens Dispensary, LLC ("Allgreens") On April 9, 2024, the Company completed the acquisition of Allgreens (the "Allgreens Acquisition Date"), as the conditions required for closing had been met (see Note 17). 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 was dependent upon certain conditions, including resolution of any remaining legal challenges affecting nearly 200 social equity dispensary licenses, and regulatory approval of the acquisition. With the closing conditions met and the acquisition completed, the Company will now have five adult-use dispensaries operating in Illinois. For the interim period until the acquisition was completed, the Company 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 approximately $ 250,000 for the three months ended March 31, 2024 as a component of Investments, net of current portion. Pursuant to the Allgreens Agreement, as of March 31, 2024, the Company had made payments aggregating $ 1,375,000 to the Allgreens members, with an additional cash payment of $ 875,000 made at closing. The Company issued a promissory notes for the final payment of $ 1.0 million on the Allgreens Acquisition Date (the "Allgreens Notes"). The Allgreens Notes will mature one year from the date the dispensary is permitted to commence operations. Our Community Wellness & Compassionate Care Center, Inc. ("MedLeaf") On April 5, 2024, the Company completed the acquisition of MedLeaf (the "MedLeaf Acquisition Date") (see Note 17). On February 1, 2024 (the "P&S Date"), the Company entered into an agreement to acquire 100 % of the membership interests of MedLeaf (the "MedLeaf Agreement"), which held a retail dispensary license in Maryland. The MedLeaf dispensary has been closed since July 1, 2023. The Company plans to reopen the dispensary and begin adult-use retail sales within the next few months. The acquisition of MedLeaf provides the Company with a second dispensary in the state of Maryland. Pursuant to the MedLeaf Agreement, total purchase consideration was $ 5.25 million, comprised of $ 2.0 million of cash with adjustments to reflect amounts owed the Company by the sellers of MedLeaf (the "MedLeaf Sellers"), a $ 2.0 million promissory note, and $ 1.25 million of shares of the Company's common stock, with such number of shares calculated using the volume weighted average price based on the ten trading day period ending on the P&S Date. The Company made cash payments aggregating $ 0.5 million through the P&S Date, which funds were deposited into escrow. On the MedLeaf Acquisition Date, the outstanding cash balance was paid and the promissory note and 3.9 million shares of the Company's common stock were issued. The promissory note bears interest at a rate of 8.0 % per annum and has a term of 540 days. 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 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 (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. 13 Table of Content s The shares used to compute loss per share were as follows (in thousands): Three months ended March 31, 2024 March 31, 2023 Weighted average shares outstanding - basic 375,211 342,794 Potential dilutive common shares — — Weighted average shares outstanding - diluted 375,211 342,794 (4) DEFERRED RENTS RECEIVABLE The Company is the lessor under operating leases which contain escalating rents over time, rent holidays, options to renew, and requirements to pay property taxes, insurance and/or maintenance costs. The Company is not the lessor under any finance leases. The Company recognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term. Differences between amounts received and amounts recognized are recorded in Deferred rents receivable in the condensed consolidated balance sheets. The Company currently leases a cannabis cultivation, processing and dispensary facility that it owns in Delaware to a cannabis-licensed client under a triple net lease that expires in 2035. The Company had previously leased a portion of an owned property in Massachusetts under a lease that expired in February 2023, after which the tenant continued to rent the space on a month-to-month basis through November 2023. The Company does not intend to lease this space again, as it plans to use this space to expand its cultivation footprint. The Company currently subleases two properties - a cannabis production facility with offices under a sublease that expires in January 2026 and contains an option to negotiate an extension of the sublease term, and a dispensary under a sublease that expires in April 2027. The Company also subleases a portion of a third property that it developed into a cultivation facility under a sublease that expires in March 2030, with an option to extend the term for three additional five-year periods. These properties are all subleased to a cannabis-licensed client in Delaware. The Company received rental payments aggregating $ 0.3 million and $ 0.4 million in the three months ended March 31, 2024 and 2023, respectively. Revenue from these payments was recognized on a straight-line basis and aggregated $ 0.3 million and $ 0.4 million in the three months ended March 31, 2024 and 2023, respectively. Future minimum rental receipts for non-cancellable leases and subleases as of March 31, 2024 were as follows (in thousands): Year ending December 31, Remainder of 2024 $ 900 2025 1,200 2026 1,059 2027 969 2028 931 Thereafter 2,713 $ 7,772 (5) NOTE RECEIVABLE AND OMNIBUS Note Receivable At March 31, 2024 and December 31, 2023, the Company had a note receivable from Healer LLC, an entity that provides cannabis education, dosage programs and products developed by Dr. Dustin Sulak ("Healer"), of approximately $ 866,000 . The note bears interest of 6 % per annum and requires quarterly payments of interest through the April 2026 maturity date. 14 Table of Content s The Company has the right to offset any licensing fees payable by the Company to Healer in the event Healer fails to make any payment when due. 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 Omnibus is included as a component of Other assets in the condensed consolidated balance sheets at March 31, 2024 and December 31, 2023. (6) INVENTORY Inventory at March 31, 2024 and December 31, 2023 consisted of the following (in thousands): March 31, 2024 December 31, 2023 Plants $ 2,502 $ 3,296 Ingredients and other raw materials 4,742 4,932 Work-in-process 11,766 9,663 Finished goods 10,034 7,415 $ 29,044 $ 25,306 (7) PROPERTY AND EQUIPMENT, NET The Company’s property and equipment, net, at March 31, 2024 and December 31, 2023 was comprised of the following (in thousands): March 31, 2024 December 31, 2023 Land $ 4,819 $ 4,819 Buildings and building improvements 54,958 54,737 Tenant improvements 26,122 25,451 Furniture and fixtures 2,191 2,191 Machinery and equipment 17,685 16,394 Construction in progress 1,574 427 107,349 104,019 Less: accumulated depreciation ( 16,584 ) ( 14,916 ) Property and equipment, net $ 90,765 $ 89,103 The Company recorded depreciation expense related to property and equipment of $ 1.9 million and $ 1.0 million in the three months ended March 31, 2024 and 2023, 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 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 three months ended March 31, 2023. 15 Table of Content s (8) INTANGIBLE ASSETS AND GOODWILL The Company’s acquired intangible assets at March 31, 2024 and December 31, 2022 consisted of the following (in thousands): March 31, 2024 Weighted average amortization period (years) Cost Accumulated amortization Net carrying value Tradename and trademarks 7.38 $ 3,159 $ 1,677 $ 1,482 Licenses and customer base 7.00 14,159 2,824 11,335 Non-compete agreements 2.00 42 40 2 7.05 $ 17,360 $ 4,541 $ 12,819 December 31, 2023 Weighted average amortization period (years) Cost Accumulated amortization Net carrying value Tradename and trademarks 7.11 $ 3,104 $ 1,335 $ 1,769 Licenses and customer base 9.15 18,033 2,797 15,236 Non-compete agreements 2.00 42 35 7 8.84 $ 21,179 $ 4,167 $ 17,012 Estimated future amortization expense for the Company’s intangible assets at March 31, 2024 was as follows: Year ending December 31, Remainder of 2024 $ 2,019 2025 2,237 2026 1,730 2027 1,637 2028 1,637 Thereafter 3,559 Total $ 12,819 The changes in the carrying value of the Company’s goodwill in the three months ended March 31, 2024 and 2023 were as follows (in thousands): 2024 2023 Balance at January 1, $ 11,993 $ 8,079 Ermont Acquisition 3,819 3,925 Balance at March 31, $ 15,812 $ 12,004 In connection with the finalization of the purchase price allocation for the Ermont Acquisition, the Company recorded reclassifications between its Tradename and trademarks intangible asset, Licenses and customer base intangible asset, and Goodwill (see Note 2). (9) DEBT Term Loan (the "CA Term Loan") 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 “CA Borrowers”), lenders from time-to-time party thereto (the “CA Lenders”), and Chicago Atlantic Admin, LLC (“Chicago Atlantic”), as administrative agent for the Lenders (the "CA Credit Agreement"). Proceeds from the CA Credit Agreement were designated to complete the 16 Table of Content s 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 notes payable issued in 2022 in connection with the acquisition of Kind Therapeutics USA, which repayment occurred on January 24, 2023. The remaining balance, if any, was expected to be used to fund acquisitions. The CA Credit Agreement allowed for $ 35.0 million in principal borrowings at the CA Borrowers’ option in the aggregate and further provides the CA 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 CA Lenders elected to fund such incremental term loan. $ 30.0 million of loan principal was funded at the initial closing (the "CA Term Loan"), which amount was reduced by an original issuance discount of $ 0.9 million (the "CA 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 loan required scheduled amortization payments of 1.0 % of the principal amount outstanding under the CA Credit Agreement per month commencing in May 2023, and the remaining principal balance was due in full on January 24, 2026, subject to extension to January 24, 2028 under certain circumstances. The CA Credit Agreement provided the CA 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 CA Credit Agreement were secured by substantially all of the assets of the CA Borrowers, excluding specified parcels of real estate and other customary exclusions. The CA Credit Agreement provided for a floating annual interest rate equal to the prime rate then in effect plus 5.75 %, which rate could be increased by 3.00 % upon an event of default or 7.50 % upon a material event of default as provided in the CA Credit Agreement. At any time, the Company could voluntarily prepay amounts due under the facility in $ 5.0 million increments, subject to a three -percent prepayment premium and, during the first 20 -months of the term, a “make-whole” payment. The CA Credit Agreement included customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency. The CA Credit Agreement also included customary negative covenants limiting the CA Borrowers’ ability to incur additional indebtedness and grant liens that were otherwise not permitted, among others. Additionally, the Credit Agreement required the CA Borrowers to meet certain financial tests. The Company was in compliance with the CA Credit Agreement covenants throughout the term of the CA Credit Agreement. The CA 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 CA 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 CA Term Loan by $ 5.5 million (the "CA Warrant Discount"). The CA Warrant Discount was being amortized to interest expense over the term of the Credit Agreement. The Company incurred $ 1.8 million of third party costs (i.e., legal fees, referral fees, etc.) in connection with the CA Term Loan, which were recorded as a discount to the CA Term Loan (the "CA Third-Party Costs Discount"), which was being amortized to interest expense over the term of the CA Credit Agreement. The Company recorded $ 0.3 million of aggregate interest amortization for the three months ended March 31, 2023 related to the CA Original Issuance Discount, CA Warrant Discount and CA Third-Party Costs Discount. On November 16, 2023, the Company repaid and retired the CA Term Loan (the "CA Term Loan Payoff") using proceeds from a new $ 58.7 million loan entered into on the same day (described below). The CA Term Loan Payoff amount totaled $ 32.7 million, comprised of $ 28.5 million for the outstanding principal, $ 3.7 million for the make-whole payment, $ 0.2 million for accrued unpaid interest and $ 0.3 million for transaction-related fees. The Company recognized a loss of $ 10.2 million in connection with the Term Loan Payoff, which it recorded in the fourth quarter of 2023. 17 Table of Content s 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 and notes payable balances at March 31, 2024 and December 31, 2023 were comprised of the following (in thousands): March 31, 2024 December 31, 2023 Construction to Permanent Commercial Real Estate Mortgage Loan ("CREM Loan") $ 53,152 $ 52,083 Bank of New England - Wilmington, DE property 1,186 1,219 DuQuoin State Bank - Anna, IL and Harrisburg, IL properties 712 719 DuQuoin State Bank - Metropolis, IL property 2,460 2,472 Du Quoin State Bank - Mt. Vernon, IL property (grow and production) 2,911 2,923 DuQuoin State Bank - Mt. Vernon, IL property (retail) 1,160 — Promissory note issued as purchase consideration - Ermont Acquisition 2,678 2,591 Promissory note issued as purchase consideration - Greenhouse Naturals Acquisition 4,098 4,190 Promissory notes issued to purchase motor vehicles 148 178 Total mortgages and notes payable 68,505 66,375 Less: Mortgages and notes payable, current ( 1,057 ) ( 723 ) Mortgages and notes payable, less current portion $ 67,448 $ 65,652 Mortgages CREM Loan On November 16, 2023, Mari Holdings MD LLC, Hartwell Realty Holdings LLC, Kind Therapeutics USA, LLC, ARL Healthcare Inc., and MariMed Advisors, Inc., each a wholly-owned direct or indirect subsidiary of the Company (collectively, the "CREM Borrowers") entered into a Loan Agreement (the "CREM Loan Agreement"), by and among the CREM Borrowers, and Needham Bank, a Massachusetts co-operative bank (the "CREM Lender") pursuant to which the CREM Lender loaned to the CREM Borrowers an aggregate principal amount of $ 58.7 million (the "CREM Loan Transaction"). The Company has fully guaranteed the obligations of the CREM Borrowers under the CREM Loan Transaction and pledged to the CREM Lender its equity ownership in each CREM Borrower. The CREM Lender has a first priority security interest in all of the CREM Borrowers' operating assets in Maryland and Massachusetts and first priority mortgages on the CREM Borrowers' properties owned in Maryland and Massachusetts. The CREM Loan Transaction matures in ten years and has an interest rate for the initial five years of 8.43 % per annum. The interest rate will reset after five years to the FHLB Rate (the Classic Advance Rate for Fixed Rate advances for a period of five years for an amount greater than or equal to the loan amount, as such rate is defined and published by the Federal Home Loan Bank of Boston), plus 3.50 %. The Company will make interest-only payments for the first twelve months of the term of the loan, with payments thereafter based upon a twenty-year amortization schedule. The CREM Lender initially released $ 52.8 million to the CREM Borrowers (the "Initial CREM Distribution"). The remaining proceeds of $ 5.9 million will be held in escrow to complete the expansion of the Company's Hagerstown, Maryland cultivation facility (the "Hagerstown Facility"). Any unused proceeds will be released to the Company after completion of the Hagerstown Facility expansion. The Company used $ 46.8 million of the Initial CREM Distribution to fully repay certain of its outstanding debt. These payments were comprised of $ 32.7 million to pay off the Term Loan, $ 11.9 million to pay off the mortgage with Bank of New England for the New Bedford, MA and Middleborough, MA properties, and $ 2.2 million to reduce the outstanding balance of the note issued by the Company in connection with the Ermont Acquisition. The Company incurred bank closing costs and third party costs (i.e., legal fees, etc.) aggregating $ 1.5 million in connection with the CREM Loan Transaction, which have been recorded as a discount to the Loan Transaction (the "CREM Closing Costs Discount"), and which are being amortized to interest expense over the term of the CREM Loan Transaction. The Company recorded approximately $ 18,000 of interest amortization in the three months ended March 31, 2024 related to the CREM Closing Costs Discount. 18 Table of Content s The CREM Loan Agreement includes customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency. The CREM Loan Agreement also includes customary negative covenants limiting the CREM Borrowers' (but not the Company's) ability to incur additional indebtedness and grant liens that are otherwise not permitted, among others. The CREM Loan Agreement also requires the CREM Borrowers to meet certain periodic financial tests. During the three months ended March 31, 2024, the Company received $ 1.0 million of the amount previously held back by the CREM Lender and made interest-only payments to the CREM Lender aggregating $ 1.2 million. The current portion of the outstanding principal balance of the CREM Loan was $ 0.4 million at March 31, 2024. Bank of New England (New Bedford, MA and Middleborough, MA) The Company maintained an amended and restated mortgage secured by the Company's properties in New Bedford, MA and Middleborough MA in the original amount of $ 13.0 million and bearing interest of 6.5 % per annum that would mature in August 2025 (the “Refinanced Mortgage”). On November 16, 2023, the Company used $ 11.9 million of proceeds from the CREM Loan Transaction to pay the outstanding principal of the Refinanced Mortgage, and such mortgage was retired. The Company recorded a loss of $ 0.2 million on the early repayment of the Refinanced Mortgage, which it recorded in the fourth quarter of 2023. Concurrent with the repayment of the Refinanced Mortgage, the Company refinanced the properties through the CREM Loan and accordingly, effective November 16, 2023, the mortgage on these properties is held by Needham Bank, which mortgage matures in 2033 and which outstanding amount is included as a component of the CREM Loan outstanding balance. Bank of New England (Wilmington, DE) The Company maintains a mortgage with Bank of New England for the 2206 purchase of a building in Wilmington, DE, which was developed into a cannabis seed to ale facility that is currently leased to the Company's cannabis-licensed client in that state. The mortgage matures in 2031, with monthly principal and interest payments at a rate of 5.25 % per annum, with the rate adjusting every five years to the then-prime rate plus 1.5 % and 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 this mortgage at March 31, 2024 and December 31, 2023 were approximately $ 135,000 and $ 133,000 , respectively. DuQuoin State Bank (Anna, IL and Harrisburg IL) In May 2016, the Company entered into a mortgage agreement with DuQuoin State Bank ("DSB") for the purchase of properties in Anna, IL and Harrisburg, IL, which the Company developed into two free-standing retail dispensaries. On May 5th of each year, this mortgage is due to be repaid unless it is renewed for another year at a rate determined by DSB’s executive committee. The mortgage was renewed in May 2023 at a rate of 9.75 % per annum. The current portions of the outstanding principal balance under this mortgage at March 31, 2024 and December 31, 2023 were approximately $ 28,000 and $ 27,000 , respectively. DuQuoin State Bank (Metropolis, IL) In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, Illinois. In connection with this purchase, the Company entered into a mortgage agreement with DSB in the amount of $ 2.7 million that matures in July 2041, and which currently bears interest at a rate of 11.25 % per annum, which rate 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 this mortgage at March 31, 2024 and December 31, 2023 were approximately $ 49,000 and $ 46,000 , respectively. DuQuoin State Bank (Mt. Vernon, IL) In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $ 3.0 million loan agreement and mortgage with DSB secured by property owned in Mt. Vernon, Illinois, which the Company is developing into a grow and production facility. The mortgage has a 20 -year term and currently bears interest at the rate of 11.25 % per 19 Table of Content s annum, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75 %). The proceeds of this loan are being utilized for the build-out of the property and other working capital needs. The current portions of the outstanding principal balance of this mortgage were approximately $ 50,000 and $ 48,000 at March 31, 2024 and December 31, 2022, respectively. DuQuoin State Bank (Mt. Vernon, IL) 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. 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 this mortgage, which totaled approximately $ 778,000 . In January 2024, the Company refinanced this property and entered into a $ 1.2 million mortgage with DSB. The mortgage with DSB has a 17-year term and bears interest of 9.50 % per annum. The current portion of the outstanding principal balance of this mortgage was approximately $ 29,000 at March 31, 2024. Promissory Notes Promissory Notes Issued as Purchase Consideration Ermont Acquisition In connection with the Ermont Acquisition, the Company issued the Ermont Note (see Note 2), totaling $ 7.0 million. The Ermont Note matures in March 2029, and bears interest at 6.0 % per annum, with payments of interest-only for two years , and quarterly payments of principal and interest in arrears thereafter. The outstanding balance on the Ermont Note is subject to prepayment in full in the event the Company raises $ 75.0 million or more of equity capital. The Company recorded the Ermont Note at a present value of $ 4.6 million. This amount is net of the $ 2.4 million recorded as a debt discount, which is being accreted through the term of the Ermont Note to interest expense. As discussed above, on November 26, 2023, the Company used $ 2.2 million of the proceeds from the CREM Loan Transaction to reduce the outstanding balance of the Ermont Note. The difference between the face value of the Ermont Note and the present value recorded at the time of the Ermont Acquisition is being amortized to interest expense over the term of the Ermont Note. The fair value of the Ermont Note was $ 2.7 million and $ 2.6 million at March 31, 2024 and December 31, 2023, respectively. The balances at both dates were 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 "Beverly Dispensary"). The Company recorded $ 0.7 million as a debt discount, which is being accreted to interest expense through the term of the Greenhouse Naturals Note, which matures in July 2026. 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 fair value of the Greenhouse Naturals Note was $ 4.1 million and $ 4.2 million at March 31, 2024 and December 31, 2023, respectively. The Company estimated that the current portion of the Greenhouse Naturals Note was $ 0.4 million and $ 0.3 million at March 31, 2024 and December 31, 2023, respectively. Kind Acquisition In connection with the 2022 acquisition of Kind Therapeutics USA ("Kind"), 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”). In connection with the CA Credit Agreement (described above), 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. 20 Table of Content s Promissory Notes Issued to Purchase Commercial Vehicles The Company had four outstanding promissory notes to purchase commercial motor vehicles at March 31, 2024 and five such notes outstanding at December 1, 2023. At March 31, 2024, the outstanding notes had an aggregate outstanding balance of approximately $ 148,000 , of which approximately $ 28,000 was current. At December 31, 2023, the outstanding notes had an aggregate outstanding balance of approximately $ 178,000 , of which approximately $ 33,000 was current. The weighted average interest rates of the outstanding balances were 11.28 % and 11.07 % at March 31, 2024 and December 31, 2023, respectively. The weighted average remaining terms of these notes were 4.55 years and 4.61 years at March 31, 2024 and December 31, 2023, respectively. Future Payments The future principal amounts due under the Company outstanding mortgages and notes payable at March 31, 2024 were as follows (in thousands): Year ending December 31, Remainder of 2024 $ 593 2025 2,164 2026 2,678 2027 2,980 2028 3,163 Thereafter 65,062 76,640 Less: discount ( 8,135 ) $ 68,505 (10) MEZZANINE EQUITY Series B Convertible Preferred Stock The Company had 4,908,333 shares of Series B Convertible Preferred Stock (the "Series B Stock") outstanding at both March 31, 2024 and December 31, 2023, which shares are held by three institutional shareholders. 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 into shares of the Company's common stock. At any time on or prior to the six-year anniversary of the 2020 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 21 Table of Content s 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 (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; or • 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; or • pay cash to the Series B Holders equal to $ 3.00 per share ($ 14,725,000 ); or • 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. Series C Convertible Preferred Stock The Company's Series C Convertible Preferred Stock (the "Series C Stock") is held by Hadron Healthcare Master Fund (“Hadron”). In 2021, the Company issued to Hadron 6,216,216 shares of Series C Stock and warrants to purchase up to an aggregate of 15,540,540 shares of its common stock in connection with a financing facility between the Company and Hadron. Each share of Series C Stock is convertible, at Hadron’s option, into five shares of the Company's common stock, and each warrant is exercisable at an exercise price of $ 1.087 per share. The warrants are subject to early termination if certain milestones are achieved and the market value of the Company’s common stock reaches certain predetermined levels. The Series C Stock is zero coupon, non-voting, and has a liquidation preference equal to its original issuance price plus declared but unpaid dividends. Holders of Series C Stock are entitled to receive dividends on an as-converted basis. During the year ended December 31, 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 5,060,942 shares of Series C stock into 25,304,710 shares of the Company's common stock (the "Conversions), comprised of 784,334 shares of Series C Stock converted into 3,921,670 shares of the Company's common stock in the third quarter of 2023 and 4,276,608 shares of Series C Stock converted into 21,383,040 shares of the Company's common stock in the second quarter of 2023. 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 both March 31, 2024 and December 31, 2023, 1,155,274 shares of Series C Stock remained outstanding. 22 Table of Content s (11) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Amended and Restated 2018 Stock Award and Incentive Plan The Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “Plan”) provides for the award of options to purchase the Company’s common stock (“stock options”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”), restricted stock, deferred stock, dividend equivalents, performance shares or other stock-based performance awards and other stock- or cash-based awards. Awards can be granted under the 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, 2024 is below: Shares Weighted average exercise price Outstanding at January 1, 2024 35,599,421 $ 0.78 Granted — $ — Exercised — $ — Forfeited ( 3,750 ) $ 0.44 Expired ( 63,750 ) $ 0.79 Outstanding at March 31, 2024 35,531,921 $ 0.78 Stock options granted under the 2018 Plan generally expire five years from the date of grant. At March 31, 2024, the stock options outstanding had a weighted average remaining life of approximately two years . The Company did not grant any stock options in the three months March 31, 2024. Restricted Stock Units Holders of unvested restricted stock units ("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, 2024 was as follows: RSUs Weighted average grant date fair value Unvested at January 1, 2024 5,825,538 $ 0.42 Granted 275,051 $ 0.35 Vested ( 335,300 ) $ 0.46 Forfeited ( 110,900 ) $ 0.40 Outstanding at March 31, 2024 5,654,389 $ 0.42 Warrants At March 31, 2024, warrants to purchase up to 42,089,476 shares of the Company's common stock were outstanding, with a weighted average exercise price of $ 0.68 . 23 Table of Content s Other Common Stock Issuances In addition to the activity related to stock options and RSUs, described above, during the three months ended March 31, 2024, the Company also issued 3,614 shares of restricted common stock with an aggregate fair value of approximately $ 1,100 , under a royalty agreement. Stock-Based Compensation The Company recorded stock-based compensation of $ 0.2 million in each of the three months ended March 31, 2024 and 2023. (12) REVENUE The Company’s main sources of revenue are comprised of the following: • Product sales (retail and wholesale) – direct sales of cannabis and cannabis-infused products by the Company’s retail dispensaries and wholesale operations. This revenue is recognized when products are delivered or at retail points-of-sale. • Real estate rental income – rental income generated from leasing of the Company’s state-of-the-art, regulatory-compliant cannabis facilities to its cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms. Prior to the third quarter of 2022, the Company charged additional rental fees based on a percentage of tenant revenues that exceeded specific amounts; these incremental rental fees were eliminated in connection with new contract terms with the Company's client. • Supply procurement – resale of cultivation and production resources, supplies and equipment that the Company has acquired from top national vendors at discounted prices to its client and third parties within the cannabis industry. The Company recognizes this revenue after the delivery and acceptance of goods by a purchaser. • Management fees – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations. Prior to the third quarter of 2022, these fees were based on a percentage of such client's revenue and were recognized after services were performed; these fees were eliminated in connection with new contract terms with the Company's client. • Licensing fees – revenue from the licensing of the Company's branded products, including Betty's Eddies , Bubby's Baked , Vibations and Kalm Fusion , to wholesalers and to regulated dispensaries throughout the United States and Puerto Rico. The Company recognizes this revenue when the products are delivered. The Financial Accounting Standards Board Accounting Standards Codification 606, Revenue from Contract with Customers, as amended by subsequently issued Accounting Standards Updates, requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The recognition of revenue is determined by performing the following consecutive steps: • Identify the contract(s) with a customer; • Identify the performance obligations in the contract(s); • Determine the transaction price; • Allocate the transaction price to the performance obligations in the contract(s); and • Recognize revenue as the performance obligation is satisfied. Additionally, when another party is involved in providing goods or services to the Company’s clients, a determination is made as to who - the Company or the other party - is acting in the capacity as the principal in the sale transaction, and who is the agent arranging for goods or services to be provided by the other party. The Company is typically considered the principal if it controls the specified good or service before such good or service is transferred to its client. The Company may also be deemed to be the principal even if it engages another party (an agent) to satisfy some of the performance obligations on its behalf, provided the Company (i) takes on certain responsibilities, 24 Table of Content s obligations, and risks, (ii) possesses certain abilities and discretion, or (iii) other relevant indicators of the sale. If deemed an agent, the Company would not recognize revenue for the performance obligations it does not satisfy. Revenue for the three months ended March 31, 2024 and 2023 was comprised of the following (in thousands): Three months ended March 31, 2024 March 31, 2023 Product revenue: Product revenue - retail $ 22,346 $ 23,183 Product revenue - wholesale 14,505 10,376 Total product revenue 36,851 33,559 Other revenue: Real estate rentals 374 420 Supply procurement 228 308 Management fees 437 19 Licensing fees 43 74 Total other revenue 1,082 821 Total revenue $ 37,933 $ 34,380 (13) 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, 2024 or 2023. The Company did not have any customers that accounted for 10% or more of the Company’s accounts receivable balance at either March 31, 2024 or December 31, 2023. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. The Company maintains an allowance for doubtful accounts and historical losses have been within management’s expectations. (14) LEASES Arrangements that are determined to be leases with a term greater than one year are accounted for by the recognition of right-of-use assets that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities that represent the Company’s obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately. Right-of-use assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term, utilizing the Company’s incremental borrowing rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company was the lessee under eight operating leases and twenty-six finance leases at March 31, 2024. These leases contain rent holidays and customary escalations of lease payments for the type of facilities being leased. The Company's operating leases include its corporate headquarters, dispensaries and cannabis production and processing facilities. The Company subleases three of these leased facilities to a cannabis-licensed client. The Company recognizes rent expense on a straight-line basis over the expected lease term, including cancelable option periods which the Company fully expects to exercise. Certain leases require the payment of property taxes, insurance and/or maintenance costs in addition to the rent payments. The Company leases machinery and office equipment under finance leases that expire from January 2026 through April 2030, with such terms being a major part of the economic useful life of the leased property. 25 Table of Content s The components of lease expense for the three months ended March 31, 2024 and 2023 were as follows (in thousands): Three months ended March 31, 2024 March 31, 2023 Operating lease expense $ 517 $ 299 Finance lease expenses: Amortization of right of use assets $ 196 $ 54 Interest on lease liabilities $ 82 $ 15 Total finance lease expense $ 278 $ 69 The weighted average remaining lease terms and weighted average discount rates for the Company's operating leases and finance leases at March 31, 2024 and December 31, 2023 were as follows: March 31, 2024 December 31, 2023 Weighted average remaining lease term (years): Operating leases 9.69 9.83 Finance leases 3.56 3.29 Weighted average discount rate: Operating leases 11.0 % 11.0 % Finance leases 9.8 % 11.0 % Future minimum lease payments as of March 31, 2024 under all non-cancelable leases having an initial or remaining term of more than one year were (in thousands): Operating leases Finance leases Remainder of 2024 $ 1,462 $ 977 2025 1,988 1,304 2026 1,915 1,022 2027 1,813 453 2028 1,757 199 Thereafter 2,230 431 Total lease payments 11,165 4,386 Less: imputed interest ( 992 ) ( 793 ) $ 10,173 $ 3,593 (15) RELATED PARTY TRANSACTIONS The Company’s corporate offices are leased from an entity in which the Company’s President and Chief Executive Officer (the "CEO") has an investment interest. This lease expires in October 2028 and contains a five-year extension option. Expenses incurred under this lease were approximately $ 41,000 and $ 39,000 for the three months ended March 31, 2024 and 2023, 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 $ 1.1 million and $ 1.0 million in the three months ended March 31, 2024 and 2023, 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. Under this agreement, the royalty percentage on all sales of Betty’s Eddies products is 3.0 % if sold directly by the Company and between 1.35 % and 2.5 % if licensed by the Company for sale by third parties. 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 26 Table of Content s royalties due to this entity were approximately $ 118,000 and $ 77,000 for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, one of the Company’s majority-owned subsidiaries paid distributions of approximately $ 1,200 and $ 1,300 , respectively, to the CEO, who owns a minority equity interest in such subsidiary. Prior to December 31, 2023, FSCC, the cannabis-licensed client in Delaware that the Company manages, paid 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 the three months ended March 31, 2023. Payment of these fees terminated effective as of December 31, 2023. At March 31, 2024, the Company’s mortgages with Bank of New England and DuQuoin State Bank were personally guaranteed by the CEO. Additionally, the CEO provided a limited guaranty to the Lenders under the Company's Credit Agreement with Chicago Atlantic through its repayment in November 2023. The CEO had also guaranteed the South Porte Bank Mortgage prior to its repayment in May 2023. (16) COMMITMENTS AND CONTINGENCIES Bankruptcy Claim During 2019, the Company’s subsidiary, MariMed Hemp, Inc. ("MMH") sold and delivered hemp seed inventory to GenCanna Global Inc., a Kentucky-based cultivator, producer, and distributor of hemp (“GenCanna”). At the time of sale, the Company owned a 33.5 % ownership interest in GenCanna. The Company recorded a related party receivable of approximately $ 29 million from the sale, which was fully reserved at December 31, 2019. On January 24, 2020, an involuntary bankruptcy proceeding under Chapter 11 was filed against GenCanna and its wholly-owned subsidiary, OGGUSA Inc. (f/k/a GenCanna Global US, Inc.) ("OGGUSA" and together with GenCanna, the "OGGUSA Debtors") in the U.S. Bankruptcy Court in the Eastern District of Kentucky (the "Bankruptcy Court"). 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 Investment Group LP ("MGG"), a creditor of the OGGUSA Debtors. After the consummation of the sale of all or substantially all of their assets and business, the 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. The Liquidating Plan was confirmed by the Bankruptcy Court on November 12, 2020. Since the approval of the Liquidating Plan, the OGGUSA Debtors have been in the process of liquidating the remaining assets, negotiating and prosecuting objections to other creditors’ claims, and pursuing the collection of accounts receivable and Chapter 5 bankruptcy avoidance claims. In April 2022, the Plan Administrator filed a Complaint against MMH (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 MMH 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 MMH’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, MMH 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 MMH and the Company. 27 Table of Content s As of the date of this filing, there is insufficient information to determine how much MMH 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 stockholder who also beneficially owned more than 5 % of the Company's 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 is engaged in discussions to reach agreement with the entity that paid for the electrical work and all other interested parties to address this liability and related payment terms. (17) SUBSEQUENT EVENTS Acquisitions MedLeaf On April 5, 2024, the Company completed the acquisition of the operating assets of MedLeaf in Prince George's County, Maryland. Consideration for this acquisition was comprised of $ 2.0 million of cash with adjustments to reflect amounts owed the Company, a $ 2.0 million promissory note, and 3.9 million shares of the Company's common stock. Immediately prior to closing, the Company paid the state's adult-use conversion fee and subsequently received an adult-use license to sell retail cannabis products from the Maryland Cannabis Administration. The acquired dispensary has been closed since July 1, 2023. The Company expects to reopen the dispensary and begin adult-use retail sales by the end of the second quarter of 2024 upon regulatory approvals. See Note 2. Allgreens On April 9, 2024, the Company completed the acquisition of Allgreens, a dispensary in Casey, Illinois. Consideration for this acquisition was comprised of $ 2.25 million of cash and a $ 1.0 million promissory note. The approval of the license transfer by the Illinois Department of Financial & Professional Regulation, and subsequent to the closing of the acquisition, allows the Company to fully consolidate the financial results of the Company's Thrive-branded dispensary in Casey, Illinois, which had previously been operated by the Company under a managed services agreement. See Note 2. Equity Transactions Subsequent to March 31, 2024, the following equity transaction occurred: • On April 5, 2024, the Company issued 3,917,267 shares as part of the purchase consideration for the acquisition of MedLeaf (described above), with a grant date fair value of approximately $ 1 million. • The Company issued 261,311 common shares in the aggregate underlying RSUs that vested on various dates. 28 Table of Content s