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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 207 added, 176 removed, 578 unchanged (40% of the section changed)

5 unchanged sentences

Cash and cash equivalents $ 10,192 $ 14,645

Accounts receivable, net of allowances of $ 764 at both March 31, 2024 and December 31, 2023

Accounts receivable, net of allowances of $ 764 at both June 30, 2024 and December 31, 2023

Inventory 31,139 25,306

34 unchanged sentences

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

4,908,333 shares authorized, issued and outstanding at June 30, 2024 and December 31, 2023

14,725 14,725

1 unchanged sentence

12,432,432 shares authorized;

1,155,274 shares issued and outstanding at both March 31, 2024 and December 31, 2023

1,155,274 shares issued and outstanding at both June 30, 2024 and December 31, 2023

Total mezzanine equity 19,000 19,000

2 unchanged sentences

32,659,235 shares authorized;

zero shares issued and outstanding at March 31, 2024 and December 31, 2023

zero shares issued and outstanding at June 30, 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

Common stock subscribed but not issued — —

380,338,790 and 375,126,352 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 172,842 171,144

6 unchanged sentences

(in thousands, except per share amounts)

Three months ended

Three months ended Six months ended

June 30, June 30,

2024 2023 2024 2023

Revenue $ 40,438 $ 36,519 $ 78,371 $ 70,899

14 unchanged sentences

Total interest and other expense, net ( 1,729 ) ( 2,535 ) ( 3,352 ) ( 5,841 )

Income before income taxes 398 1,829

(Loss) income before income taxes ( 773 ) 1,012 ( 375 ) 2,841

Provision for income taxes 866 1,947 2,556 4,440

Net loss ( 1,639 ) ( 935 ) ( 2,931 ) ( 1,599 )

Net income (loss) attributable to noncontrolling interests 6 ( 19 )

Net income attributable to noncontrolling interests 12 23 18 4

Net loss attributable to common stockholders $ ( 1,651 ) $ ( 958 ) $ ( 2,949 ) $ ( 1,603 )

8 unchanged sentences

(in thousands, except share amounts)

Three months ended March 31, 2024

Six months ended June 30, 2024

Common stock Common stock

6 unchanged sentences

Balances at January 1, 2024 375,126,352 $ 375 — $ — $ 171,144 $ ( 99,955 ) $ ( 1,650 ) $ 69,914

Issuance of subscribed shares — — — — — — — —

Release of shares under stock grants 335,300 — — — — — — —

2 unchanged sentences

Stock-based compensation — — — — 244 — — 244

Net loss — — — — — ( 1,298 ) 6 ( 1,292 )

Net loss (income) — — — — — ( 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

Release of shares under stock grants 950,707 1 — — ( 1 ) — — —

Standalone warrants issued as payment for services — — — — 218 — — 218

Shares issued as purchase consideration - business acquisition 3,917,267 4 — — 987 — — 991

Common stock issued under licensing agreement 5,550 — — — 1 — — 1

Distributions to non-controlling interests — — — — — — ( 37 ) ( 37 )

Stock-based compensation — — — — 248 — — 248

Net loss (income) — — — — — ( 1,651 ) 12 ( 1,639 )

Balances at June 30, 2024 380,338,790 380 — — 172,842 ( 102,904 ) ( 1,715 ) 68,603

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(in thousands, except share amounts)

Six months ended June 30, 2023

Common stock Common stock

16 unchanged sentences

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

Issuance of subscribed shares 5,025 — ( 5,025 ) ( 2 ) 2 — — —

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

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

Conversion of preferred stock to common stock 21,383,040 21 — — 15,802 — — 15,823

Purchase of minority interests in certain of the Company's subsidiaries 450,000 1 — — 4 — ( 5 ) —

Common stock issued to settle obligations 400,000 — — — 160 — — 160

Common stock issued under licensing agreement 1,290 — — — — — — —

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

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

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

Net loss (income) — — — — — ( 958 ) 23 ( 935 )

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

See accompanying notes to the unaudited condensed consolidated financial statements.

1 unchanged sentence

(in thousands)

Three months ended

Six months ended

Cash flows from operating activities:

Net loss attributable to common stockholders $ ( 2,949 ) $ ( 1,603 )

Net income (loss) attributable to noncontrolling interests 6 ( 19 )

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

Net income attributable to noncontrolling interests 18 4

Adjustments to reconcile net loss to cash provided by operating activities:

Depreciation and amortization of property and equipment 3,946 2,247

1 unchanged sentence

Stock-based compensation 492 505

Amortization of warrants issued to as payment for services received 218 —

Amortization of original debt issuance discount — 131

2 unchanged sentences

Payment-in-kind interest 69 299

Present value adjustment of notes payable — 719

Bad debt income ( 15 ) ( 5 )

17 unchanged sentences

Advances toward future business acquisitions ( 485 ) ( 250 )

Purchases of investments ( 86 ) —

Purchases of cannabis licenses ( 623 ) ( 601 )

Issuance of notes receivable — ( 879 )

Proceeds from notes receivable 13 87

1 unchanged sentence

(in thousands)

Three months ended

Six months ended

Due from related party ( 128 ) ( 6 )

4 unchanged sentences

Proceeds from mortgages 1,163 —

Principal payments of term loan — ( 600 )

Principal payments of mortgages ( 138 ) ( 404 )

Repayment and retirement of mortgages — ( 778 )

Principal payments of promissory notes ( 253 ) ( 25 )

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

Proceeds from exercise of stock options — 35

Principal payments of finance leases ( 676 ) ( 200 )

9 unchanged sentences

Common stock issued as purchase consideration $ 991 $ 2,994

Present value of promissory note issued as purchase consideration $ — $ 4,569

Present value of promissory notes issued as purchase consideration $ 3,000 $ 4,569

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

3 unchanged sentences

Issuance of common stock associated with subscriptions $ — $ 41

Conversion of preferred stock to common stock $ — $ 15,823

Adjustment to purchase price allocation to reclassify certain acquired intangible assets to goodwill $ 3,819 $ —

See accompanying notes to the unaudited condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

5 unchanged sentences

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

The Company completed two acquisitions during the three months ended June 30, 2024 that it accounted for as asset purchases.

On April 9, 2024 (the "Allgreens Acquisition Date"), the Company acquired 100 % of the membership interests of Allgreens Dispensary, LLC ("Allgreens"), which held a conditional adult-use cannabis dispensary license in Illinois.

On April 5, 2024 (the "MedLeaf Acquisition Date"), the Company acquired 100 % of the membership interests of Our Community Wellness & Compassionate Care Center, Inc.

("MedLeaf"), which held a retail dispensary license in Maryland.

The MedLeaf dispensary has been closed since July 1, 2023.

On March 9, 2023 (the "Ermont Acquisition Date"), the Company acquired the operating assets of Ermont, Inc.

7 unchanged sentences

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

There were no material changes to the Company's significant accounting policies during the three-month period ended March 31, 2024.

There were no material changes to the Company's significant accounting policies during the six-month period ended June 30, 2024.

Principles of Consolidation

7 unchanged sentences

Actual results could differ from those estimates.

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Cash and Cash Equivalents

1 unchanged sentence

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.

The Company had $ 0.2 million and $ 0.1 million of cash held in escrow at June 30, 2024 and December 31, 2023, respectively.

Fair Value of Financial Instruments

10 unchanged sentences

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

(2) BUSINESS ACQUISITIONS

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.

5 unchanged sentences

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.

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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.

Adult-use sales commenced on July 23, 2024.

The Company expanded the existing medical dispensary to accommodate expected increased traffic associated with adult-use sales and repurposed Ermont's existing cultivation facility.

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

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

22 unchanged sentences

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 Company uses an income approach to value acquired tradenames and trademarks, licenses and customer bases, 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.

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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 $ 3.25 million, comprised of $ 2.25 million of cash and a promissory note for $ 1.0 million, which note was issued to the Allgreens members on the Allgreens Acquisition Date.

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.

With the closing conditions met and the acquisition completed, the Company now owns and operates five adult-use dispensaries 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.

In connection with this agreement, the Company recorded expenses related to Allgreens aggregating approximately $ 250,000 for the period from January 1, 2024 through the Allgreens Acquisition Date as a component of Investments, net of current portion (the "Allgreens Expenses").

Pursuant to the Allgreens Agreement, the Company had made payments aggregating $ 1,375,000 to the Allgreens members prior to the Allgreens Acquisition Date.

On the Allgreens Acquisition Date, the Company made the final cash payment of $ 875,000 and issued a $ 1.0 million promissory note (the "Allgreens Note").

The Allgreens Note bears interest at a rate of 7.5 % per annum and matures one year from the date the dispensary is permitted to commence operations.

The Company has allocated the purchase price, including the Allgreens Expenses, to its licenses intangible asset, with an estimated useful life of 10 years (see Note 8).

Our Community Wellness & Compassionate Care Center, Inc.

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 Company plans to reopen the dispensary and begin adult-use retail sales upon receiving regulatory approval.

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.

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 to the Company by the sellers of MedLeaf (the "MedLeaf Sellers"), a $ 2.0 million promissory note, and shares of the Company's common stock, valued at $ 1.25 million, 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.

The promissory note bears interest at a rate of 8.0 % per annum and matures on October 5, 2025.

The Company has allocated the purchase price to its licenses intangible asset, with an estimated useful life of 10 years (see Note 8).

Pending Transaction at June 30, 2024

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.

In September 2022, the Company entered into an agreement to acquire 100 % of the membership interests in Robust Missouri Processing and Manufacturing 1, LLC, a Missouri wholesale and cultivator ("Robust"), for $ 700,000 in cash (the "Robust Agreement").

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

The state of Missouri has approved the location for the new facility but has not yet approved the application to transfer the license from Robust to the Company (the "License Transfer").

Once the new facility is licensed to conduct business, the Company will do so under a managed service agreement until the final approval

of the License Transfer.

Pursuant to the Robust Agreement, the Company has made an initial advance payment of $ 350,000 , with the balance due at closing, which will occur upon the state of Missouri's approval of the License Transfer.

(3) EARNINGS (LOSS) PER SHARE

1 unchanged sentence

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.

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

Three months ended

2024 March 31,

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Weighted average shares outstanding - basic 379,514 361,261 377,362 352,079

12 unchanged sentences

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):

The Company received rental payments aggregating $ 0.3 million and $ 0.4 million in the three months ended June 30, 2024 and 2023, respectively, and $ 0.6 million and $ 0.8 million in the six months ended June 30, 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 June 30, 2024 and 2023, respectively, and $ 0.6 million and $ 0.8 million in the six months ended June 30, 2024 and 2023, respectively.

Future minimum rental receipts for non-cancellable leases and subleases as of June 30, 2024 were as follows (in thousands):

Year ending December 31,

3 unchanged sentences

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.

At both June 30, 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.

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The note bears interest at 6 % per annum and requires quarterly payments of interest through the April 2026 maturity date.

The Company has the right to offset any licensing fees payable by the Company to Healer in the event Healer fails to make any payment when due.

8 unchanged sentences

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.

The Omnibus was included as a component of Other assets in the condensed consolidated balance sheets at June 30, 2024 and December 31, 2023.

(6) INVENTORY

Inventory at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

Inventory at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

2024 December 31,

5 unchanged sentences

(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):

The Company’s property and equipment, net, at June 30, 2024 and December 31, 2023 was comprised of the following (in thousands):

2024 December 31,

8 unchanged sentences

Property and equipment, net $ 93,977 $ 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,

The Company recorded depreciation expense related to property and equipment of $ 2.0 million and $ 1.2 million in the three months ended June 30, 2024 and 2023, respectively, and $ 3.9 million and $ 2.2 million in the six months ended June 30, 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.

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

(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

The Company’s acquired intangible assets at June 30, 2024 and December 31, 2023 consisted of the following (in thousands):

June 30, 2024 Weighted

period (years) Cost Accumulated

amortization Net

Tradename and trademarks 7.38 $ 3,159 $ 1,677 $ 1,482

Tradenames and trademarks 7.38 $ 3,159 $ 1,940 $ 1,219

Licenses and customer base 7.96 22,553 3,368 19,185

4 unchanged sentences

amortization Net

Tradename and trademarks 7.11 $ 3,104 $ 1,335 $ 1,769

Tradenames and trademarks 7.11 $ 3,104 $ 1,335 $ 1,769

Licenses and customer base 9.15 18,033 2,797 15,236

1 unchanged sentence

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:

Estimated future amortization expense for the Company’s intangible assets at June 30, 2024 was as follows:

Year ending December 31,

2 unchanged sentences

Total $ 20,404

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):

The changes in the carrying value of the Company’s goodwill in the six months ended June 30, 2024 and 2023 were as follows (in thousands):

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).

Balance at June 30, $ 15,812 $ 12,004

In connection with the finalization of the purchase price allocation for the Ermont Acquisition in the first quarter of 2024, the Company recorded reclassifications between its Tradename and trademarks intangible asset, Licenses and customer base intangible asset, and Goodwill (see Note 2).

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

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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.

Proceeds from the CA Credit Agreement were designated to complete the build-out of a new cultivation and processing facility in Illinois, complete the build-out of a new processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and repay in full the 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.

6 unchanged sentences

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.

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.

8 unchanged sentences

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).

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 date (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.

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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):

The Company’s mortgage and notes payable balances at June 30, 2024 and December 31, 2023 were comprised of the following (in thousands):

2024 December 31,

9 unchanged sentences

Promissory note issued as purchase consideration - Greenhouse Naturals Acquisition 4,002 4,190

Promissory notes issued as purchase consideration - MedLeaf Acquisition 2,027 —

Promissory note issued as purchase consideration - Allgreens Acquisition 1,014 —

Promissory notes issued to purchase motor vehicles 140 178

Total mortgages and notes payable 73,375 66,375

Mortgages and notes payable, current ( 1,057 ) ( 723 )

Mortgages and notes payable, less current portion $ 67,448 $ 65,652

Mortgages and notes payable, current portion ( 3,871 ) ( 723 )

Mortgages and notes payable, net of current portion $ 69,504 $ 65,652

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 Company 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 CREM Loan Transaction is for a term of 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").

The CREM Lender initially released $ 52.8 million to the CREM Borrowers (the "Initial CREM Distribution"), with the remaining proceeds of $ 5.9 million placed into 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.

The Company used $ 46.8 million of the Initial CREM Distribution to fully repay certain of its outstanding debt obligations.

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.

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The Company recorded approximately $ 19,000 and $ 37,000 of interest amortization in the three and six months ended June 30, 2024, respectively, related to the CREM Closing Costs Discount.

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.

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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.

During the six months ended June 30, 2024, the Company received $ 2.9 million of the amount previously held back by the CREM Lender and made interest-only payments to the CREM Lender aggregating $ 2.3 million.

The current portion of the outstanding principal balance of the CREM Loan was $ 0.7 million at June 30, 2024.

Bank of New England (New Bedford, MA and Middleborough, MA)

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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 Company maintains a mortgage with Bank of New England for the 2016 purchase of a building in Wilmington, DE, which was developed into a cannabis seed to sale 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 % 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 this mortgage at March 31, 2024 and December 31, 2023 were approximately $ 135,000 and $ 133,000 , respectively.

The current portions of the outstanding principal balance under this mortgage at June 30, 2024 and December 31, 2023 were approximately $ 137,000 and $ 133,000 , respectively.

DuQuoin State Bank (Anna, IL and Harrisburg IL)

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The mortgage was renewed in May 2024 at a rate of 9.5 % 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.

The current portions of the outstanding principal balance under this mortgage at June 30, 2024 and December 31, 2023 were approximately $ 23,000 and $ 27,000 , respectively.

DuQuoin State Bank (Metropolis, IL)

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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 this mortgage at March 31, 2024 and December 31, 2023 were approximately $ 49,000 and $ 46,000 , respectively.

The current portions of the outstanding principal balance of this mortgage at June 30, 2024 and December 31, 2023 were approximately $ 50,000 and $ 46,000 , respectively.

DuQuoin State Bank (Mt.

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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

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annum, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S.

The mortgage has a 20 -year term and currently bears interest at the rate of 11.25 % per annum, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S.

Prime Rate (with an interest rate floor of 7.75 %).

The proceeds of this loan are being utilized for the build-out of the property and other working capital needs.

The current portions of the outstanding principal balance of this mortgage were approximately $ 50,000 and $ 48,000 at March 31, 2024 and December 31, 2022, respectively.

The current portions of the outstanding principal balance of this mortgage were approximately $ 51,000 and $ 48,000 at June 30, 2024 and December 31, 2023, respectively.

DuQuoin State Bank (Mt.

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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.

The current portion of the outstanding principal balance of this mortgage was approximately $ 30,000 at June 30, 2024.

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 $ 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.

The fair value of the Ermont Note was $ 2.8 million and $ 2.6 million at June 30, 2024 and December 31, 2023, respectively.

The current portion of the outstanding principal balance of this mortgage was approximately $ 151,000 at June 30, 2024.

This mortgage did no t have a current portion recorded at December 31, 2023, as the first principal payment is not due until two years after the Ermont Acquisition Date.

Greenhouse Naturals Acquisition

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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.

The fair value of the Greenhouse Naturals Note was $ 4.0 million and $ 4.2 million at June 30, 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 June 30, 2024 and December 31, 2023, respectively.

MedLeaf Acquisition

In connection with the MedLeaf Acquisition, the Company issued a $ 2.0 million promissory note to the MedLeaf Sellers (the "MedLeaf Note") (See Note 2).

The MedLeaf Note bears interest at a rate of 8.0 % per annum and matures on October 5, 2025.

The MedLeaf Note calls for six equal principal payments, paid quarterly;

which payments began on July 5, 2024.

At June 30, 2024, the current portion of the MedLeaf Note was $ 1.3 million.

Allgreens Acquisition

In connection with the Allgreens Acquisition, the Company issued promissory notes aggregating $ 1.0 million to the Allgreens members.

The Allgreens Notes bear interest at a rate of 7.5 % per annum and will mature one year from the date that the dispensary is permitted to commence operations.

The $ 1.0 million outstanding balance of the Allgreens Notes was recorded as current at June 30, 2024.

Kind Acquisition

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There was no penalty in connection with the early repayment of the Kind Notes.

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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.

The Company had four outstanding promissory notes to purchase commercial motor vehicles at June 30, 2024 and five such notes outstanding at December 31, 2023.

At June 30, 2024, the outstanding notes had an aggregate outstanding

balance of approximately $ 141,000 , of which approximately $ 29,000 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.

The weighted average interest rates of the outstanding balances were 11.33 % and 11.07 % at June 30, 2024 and December 31, 2023, respectively.

The weighted average remaining terms of these notes were 4.32 years and 4.61 years at June 30, 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):

The future principal amounts due under the Company outstanding mortgages and notes payable at June 30, 2024 were as follows (in thousands):

Year ending December 31,

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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 Company had 4,908,333 shares of Series B Convertible Preferred Stock (the "Series B Stock") outstanding at both June 30, 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.

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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.

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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.

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 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:

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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.

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At both June 30, 2024 and December 31, 2023, 1,155,274 shares of Series C Stock remained outstanding.

(11) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

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Stock Options

A summary of the Company's stock option activity during the three months ended March 31, 2024 is below:

A summary of the Company's stock option activity during the six months ended June 30, 2024 is below:

Shares Weighted average exercise price

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Expired ( 81,250 ) $ 0.81

Outstanding at March 31, 2024 35,531,921 $ 0.78

Outstanding at June 30, 2024 35,574,421 $ 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.

At June 30, 2024, the stock options outstanding had a weighted average remaining life of approximately two years .

The grant date fair value of the stock options granted in the six months ended June 30, 2024 was estimated using the Black-Scholes valuation model with the following assumptions:

Estimated life (in years) 1.18

Weighted average volatility 64.81 %

Weighted average risk-free interest rate 5.12 %

Dividend yield —

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 grant date fair values of RSUs are 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:

The activity related to the Company's RSUs for the six months ended June 30, 2024 was as follows:

RSUs Weighted average grant date fair value

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Forfeited ( 250,487 ) $ 0.38

Outstanding at March 31, 2024 5,654,389 $ 0.42

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 .

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Outstanding at June 30, 2024 5,033,100 $ 0.39

On May 2, 2024, the Company issued warrants to purchase 1,000,000 shares of the Company's common stock to an entity in consideration for introductory and other services rendered in connection with certain funding and acquisition transactions.

The warrants have an exercise price of $ 0.32 per share, vested immediately, and expire on May 1, 2029.

The Company calculated that the grant date fair value of the warrants was approximately $ 218,000 in the aggregate using the Black-Scholes valuation model.

This expense is included as a component of Acquisition-related and other in the Company's condensed consolidated statements of operations for both the three and six months ended June 30, 2024.

At June 30, 2024, warrants to purchase up to 43,089,476 shares of the Company's common stock were outstanding, with a

weighted average exercise price of $ 0.67 .

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.

In addition to the activity related to stock options and RSUs, described above, during the six months ended June 30, 2024, the Company also issued 3,917,267 shares of restricted common stock as purchase consideration (see Note 2) with a grant date fair value of approximately $ 1 million, and 5,550 shares of restricted common stock with an aggregate fair value of approximately $ 1,200 , 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.

The Company recorded stock-based compensation of $ 0.2 million and $ 0.3 million in the three months ended June 30, 2024 and 2023, respectively, and $ 0.5 million in each of the six months ended June 30, 2024 and 2023.

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

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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.

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obligations, and risks, (ii) possesses certain abilities and discretion, or (iii) other relevant indicators of the sale.

The Company may also be deemed to be the principal even if it engages another party (an agent) to satisfy some of the performance obligations on its behalf, provided the Company (i) takes on certain responsibilities, obligations, and risks, (ii) possesses certain abilities and discretion, or (iii) other relevant indicators of the sale.

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

Revenue for the three months ended March 31, 2024 and 2023 was comprised of the following (in thousands):

Three months ended

2024 March 31,

Revenue for the three and six months ended June 30, 2024 and 2023 was comprised of the following (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Product revenue:

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(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 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, 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 June 30, 2024 or December 31, 2023.

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 was the lessee under eight operating leases and twenty-six finance leases at March 31, 2024.

At June 30, 2024, the Company was the lessee under eight operating leases and twenty-nine finance leases.

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

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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.

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The components of lease expense for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

Three months ended

2024 March 31,

The components of lease expense for the three and six months ended June 30, 2024 and 2023 were as follows (in thousands):

Three months ended Six months ended

2024 June 30,

2023 June 30,

2024 June 30,

Operating lease expense $ 520 $ 515 $ 1,037 $ 814

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Total finance lease expense $ 273 $ 230 $ 551 $ 299

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:

The weighted average remaining lease terms and weighted average discount rates for the Company's operating leases and finance leases at June 30, 2024 and December 31, 2023 were as follows:

2024 December 31,

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Finance leases 9.5 % 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):

Future minimum lease payments as of June 30, 2024 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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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.

Expenses incurred under this lease were approximately $ 63,000 and $ 64,000 for the three months ended June 30, 2024 and 2023, respectively, and approximately $ 104,000 and $ 129,000 for the six months ended June 30, 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.

Purchases from this entity totaled $ 1.2 million and $ 1.4 million in the three months ended June 30, 2024 and 2023, respectively, and $ 2.2 million and $ 2.7 million in the six months ended June 30, 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.

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

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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.

The aggregate royalties earned by the entity under this agreement were approximately $ 131,000 and $ 346,000 for the three months ended June 30, 2024 and 2023, respectively, and approximately $ 249,000 and $ 465,000 for the six months ended June 30, 2024 and 2023, respectively.

During the three months ended June 30, 2024 and 2023, one of the Company’s majority-owned subsidiaries paid distributions of approximately $ 1,900 and $ 2,100 , respectively, to the CEO, who owns a minority equity interest in such subsidiary.

During the six months ended June 30, 2024 and 2023, this majority-owned subsidiary made distribution payments of approximately $ 3,100 and $ 12,600 , respectively, to the CEO.

On June 10, 2024 (the "Membership Unit Purchase Date"), the CEO and COO purchased 5 % and 15 %, respectively, of the membership units of Mari Holdings Metropolis, LLC, one of the Company's majority-owned subsidiaries.

These membership units were purchased from the previous minority interest-holder, and accordingly, the percentage of this majority-owned subsidiary held by noncontrolling interests remains unchanged.

During both the three- and six-month periods ended June 30, 2024, this majority-owned subsidiary accrued distribution payments of $ 3,250 and $ 9,750 to the CEO and COO, respectively.

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.

The aggregate fees paid by FSCC were $ 48,000 and $ 96,000 , respectively, for the three and six months ended June 30, 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.

At June 30, 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.

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("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.

At the time of sale, the Company held 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.

(f/k/a GenCanna Global US, Inc.) (the "OGGUSA Debtors") in the U.S.

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

In February 2020, the proceeding was converted into a voluntary Chapter 11 proceeding.

In May 2020, the Bankruptcy Court 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.

Following such sale, a liquidating plan of reorganization was confirmed by the Bankruptcy Court on November 12, 2020 (the "Liquidating Plan").

The liquidation is currently ongoing.

In April 2022, a Complaint was filed by the Liquidating Plan administrator 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 proceedings (the "Preferential Claim").

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.

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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.

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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.

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 are ongoing.

(17) SUBSEQUENT EVENTS

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.

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.

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.

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Subsequent to June 30, 2024, the Company issued 270,732 shares of common stock in the aggregate underlying RSUs that vested on various dates prior to the filing of this report.

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