MARIMED INC. 10-K

Item 8. Financial Statements and Supplementary Data CONTENTS Report of Independent Registered Public Accounting Firm (PCAOB ID No. 2738 ) 34 Consolidated Balance Sheets 36 Consolidated Statements of Operations 38 Consolidated Statements of Stockholders’ Equity 39 Consolidated Statements of Cash Flows 40 Notes To Consolidated Financial Statements 41 33 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of MariMed Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of MariMed Inc. (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue As discussed in the Notes to the financial statements, the Company recognizes revenue upon the transfer of control of promised goods to the customer upon delivery in an amount that reflects the consideration the Company expects to receive in exchange for the products. 34 Auditing the recognition of revenue involves significant challenge due to the inherent risk of revenue recognition. Related to retail operations, M&K tested a sample of point-of-sale transactions as well as physical cash flows from the retail operations. Related to wholesale operations, M&K tested a sample of METRC reports and tested delivery of products to customers. To evaluate the appropriateness and accuracy of the assessment by management, we evaluated management’s assessment relationship to the relevant agreements and management’s disclosure in the financial statements. /s/ M&K CPAS, PLLC We have served as the Company’s auditor since 2018. The Woodlands, TX March 6, 2025 35 MariMed Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts) December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 7,282 $ 14,645 Accounts receivable, net 8,742 7,199 Inventory 33,488 25,306 Deferred rents receivable 556 630 Notes receivable, current portion 52 52 Investments, current portion — 88 Other current assets 3,389 3,512 Total current assets 53,509 51,432 Property and equipment, net 94,167 89,103 Intangible assets, net 18,639 17,012 Goodwill 15,812 11,993 Investments, net of current portion — 221 Notes receivable, net of current portion 840 814 Operating lease right-of-use assets 8,730 9,716 Finance lease right-of-use assets 4,073 3,295 Other assets 11,219 12,537 Total assets $ 206,989 $ 196,123 Liabilities, mezzanine equity and stockholders’ equity Current liabilities: Mortgages and notes payable, current portion $ 5,126 $ 723 Accounts payable 13,189 9,001 Accrued expenses and other 4,435 3,549 Income taxes payable 21,922 14,434 Operating lease liabilities, current portion 1,988 1,945 Finance lease liabilities, current portion 2,018 1,210 Total current liabilities 48,678 30,862 Mortgages and notes payable, net of current portion 69,860 65,652 Operating lease liabilities, net of current portion 7,549 8,455 Finance lease liabilities, net of current portion 1,926 2,140 Other liabilities 100 100 Total liabilities 128,113 107,209 36 December 31, 2024 2023 Commitments and contingencies Mezzanine equity: Series B convertible preferred stock, $ 0.001 par value; 4,908,333 shares authorized, issued and outstanding at December 31, 2024 and 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 December 31, 2024 and 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 December 31, 2024 and 2023 — — Common stock, $ 0.001 par value; 700,000,000 shares authorized; 381,476,581 and 375,126,352 shares issued and outstanding at December 31, 2024 and 2023, respectively 381 375 Additional paid-in capital 173,366 171,144 Accumulated deficit ( 112,119 ) ( 99,955 ) Noncontrolling interests ( 1,752 ) ( 1,650 ) Total stockholders’ equity 59,876 69,914 Total liabilities, mezzanine equity, and stockholders’ equity $ 206,989 $ 196,123 See accompanying notes to the consolidated financial statements. 37 MariMed Inc. Consolidated Statements of Operations (in thousands, except per share amounts) Year Ended December 31, 2024 2023 Revenue $ 157,964 $ 148,598 Cost of revenue 95,096 82,679 Gross profit 62,868 65,919 Operating expenses: Personnel 27,059 22,612 Marketing and promotion 6,664 5,977 General and administrative 25,618 22,132 Acquisition-related and other 951 695 Bad debt (recoveries) ( 336 ) 118 Total operating expenses 59,956 51,534 Income from operations 2,912 14,385 Interest and other (expense) income: Interest expense ( 6,944 ) ( 9,185 ) Interest income 114 270 Loss on extinguishment of debt — ( 10,431 ) Other expense, net ( 50 ) ( 1,635 ) Total interest and other expense, net ( 6,880 ) ( 20,981 ) Loss before income taxes ( 3,968 ) ( 6,596 ) Provision for income taxes 8,159 9,411 Net loss ( 12,127 ) ( 16,007 ) Less: Net income attributable to noncontrolling interests 37 24 Net loss attributable to common stockholders $ ( 12,164 ) $ ( 16,031 ) Net loss per share attributable to common stockholders: Basic $ ( 0.03 ) $ ( 0.04 ) Diluted $ ( 0.03 ) $ ( 0.04 ) Weighted average common shares outstanding: Basic 379,153 363,403 Diluted 379,153 363,403 See accompanying notes to consolidated financial statements. 38 MariMed Inc. Consolidated Statements of Stockholders’ Equity (in thousands, except share amounts) 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 75,025 — ( 75,025 ) ( 41 ) 41 — — — Release of shares under stock grants 599,999 1 — — ( 1 ) — — — Exercise of stock options 487,752 — — — 109 — — 109 Warrants issued in connection with debt — — — — 5,454 — — 5,454 Conversion of preferred stock to common stock 25,304,710 25 — — 18,700 — — 18,725 Common stock issued to settle obligations 400,000 — — — 160 — — 160 Common stock issued under a licensing and royalty agreement 13,007 — — — 5 — — 5 Common stock issued to purchase property and equipment 740,741 1 — — 299 — — 300 Common stock issued as purchase consideration - business acquisition 6,580,390 7 — — 2,987 — — 2,994 Purchase of minority interest in a subsidiary of the Company 450,000 1 — — 4 — ( 5 ) — Common stock returned to the Company in connection with a cancelled transaction (1) ( 1,000,000 ) ( 1 ) — — 1 — — — Distributions to noncontrolling interests — — — — — — ( 158 ) ( 158 ) Stock-based compensation — — — — 1,020 — — 1,020 Net (loss) income — — — — — ( 16,031 ) 24 ( 16,007 ) Balances at December 31, 2023 375,126,352 $ 375 — $ — $ 171,144 $ ( 99,955 ) $ ( 1,650 ) $ 69,914 Release of shares under stock grants 2,636,750 2 — — ( 2 ) — — — Shares of newly vested common stock surrendered to the Company to satisfy tax withholding obligations ( 249,087 ) — — — ( 41 ) — — ( 41 ) Standalone warrants issued as payment for services — — — — 218 — — 218 Common stock issued under a licensing and royalty agreement 45,299 — — — 10 — — 10 Common stock issued as purchase consideration - business acquisition 3,917,267 4 — — 987 — — 991 Distributions to noncontrolling interests — — — — — — ( 139 ) ( 139 ) Stock-based compensation — — — — 1,050 — — 1,050 Net (loss) income — — — — — ( 12,164 ) 37 ( 12,127 ) Balances at December 31, 2024 381,476,581 $ 381 — $ — $ 173,366 $ ( 112,119 ) $ ( 1,752 ) $ 59,876 (1) Represents shares initially issued in connection with an acquisitive transaction that was subsequently cancelled, at which time the shares were returned to the Company and recorded at par value. See accompanying notes to the consolidated financial statements. 39 MariMed Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2024 2023 Cash flows from operating activities: Net loss attributable to common stockholders $ ( 12,164 ) $ ( 16,031 ) Net income attributable to noncontrolling interests 37 24 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization of property and equipment 7,910 5,549 Amortization of intangible assets 2,948 3,025 Stock-based compensation 1,050 1,020 Amortization of warrants issued as payment for services received 218 — Amortization of original debt issuance discount — 232 Amortization of debt discount 358 2,851 Amortization of debt issuance costs 73 — Payment-in-kind interest 104 366 Bad debt (income) expense ( 336 ) 118 Obligations settled with common stock 10 465 Loss on disposal of assets 13 906 Gain on finance lease adjustment — ( 31 ) Writedown of prepaid purchase consideration — 200 Loss on extinguishment of debt — 10,431 Loss on changes in fair value of investments 145 76 Changes in operating assets and liabilities: Accounts receivable, net ( 1,207 ) ( 3,160 ) Inventory ( 8,182 ) ( 5,829 ) Deferred rents receivable 74 74 Other current assets 883 4,500 Other assets 1,421 ( 356 ) Accounts payable 4,188 2,375 Accrued expenses and other 1,754 ( 1,840 ) Income taxes payable 7,488 2,945 Net cash provided by operating activities 6,785 7,910 Cash flows from investing activities: Purchases of property and equipment ( 11,960 ) ( 20,130 ) Business acquisitions, net of cash acquired ( 4,250 ) ( 2,987 ) Advances toward future business acquisitions ( 100 ) ( 1,125 ) Purchases of investments — ( 261 ) Purchases and renewals of cannabis licenses ( 712 ) ( 626 ) Issuance of notes receivable — ( 879 ) Proceeds from notes receivable 50 99 Return on investment 44 — Proceeds from disposal of assets 22 — Due from third party ( 227 ) ( 76 ) Net cash used in investing activities ( 17,133 ) ( 25,985 ) Cash flows from financing activities: Proceeds from term loan — 29,100 Proceeds from Construction to Permanent Commercial Real Estate Mortgage Loan 5,077 53,618 Proceeds from mortgages 1,163 — Payment of third-party debt issuance costs in connection with debt — ( 3,339 ) Principal payments of term loan — ( 1,800 ) Repayment and retirement of term loan, including paid-in-kind interest — ( 28,541 ) Payment of penalties on early retirement of debt — ( 4,251 ) Principal payments of mortgages ( 382 ) ( 585 ) Repayment and retirement of mortgages — ( 12,595 ) Principal payments of promissory notes ( 1,177 ) ( 2,370 ) Repayment and retirement of promissory notes — ( 5,503 ) Proceeds from exercise of stock options — 109 Principal payments of finance leases ( 1,557 ) ( 702 ) Distributions ( 139 ) ( 158 ) Net cash provided by financing activities 2,985 22,983 Net (decrease) increase to cash and cash equivalents ( 7,363 ) 4,908 Cash and cash equivalents at beginning of year 14,645 9,737 Cash and cash equivalents at end of year $ 7,282 $ 14,645 Supplemental disclosure of cash flow information: Cash paid for interest $ 6,689 $ 5,654 Cash paid for income taxes $ 877 $ 6,419 Non-cash activities: Common stock issued to purchase property and equipment $ — $ 300 Present value of promissory notes issued as purchase consideration $ 3,000 $ 4,569 Entry into new operating leases $ — $ 5,604 Entry into new finance leases $ 2,881 $ 3,235 Writeoff of finance leases $ 1,112 $ — Common stock issued as purchase consideration $ 991 $ 2,994 Common stock issued to purchase minority interest in a subsidiary of the Company $ — $ 5 Warrants to issue common stock issued with debt $ — $ 5,454 Liability recorded for building improvements $ — $ 1,997 Notes payable issued to purchase property and equipment $ 396 $ 158 Common stock issued to settle obligations $ — $ 160 Common stock issued under licensing agreement $ 10 $ 5 Issuance of common stock associated with subscriptions $ — $ 41 Conversion of preferred stock to common stock $ — $ 18,725 Conversion of notes receivable to omnibus long-lived asset $ — $ 10,233 Return of common stock to the Company in connection with withholding taxes $ 41 $ — Adjustment to purchase price allocation to reclassify certain acquired intangible assets to goodwill $ 3,819 $ — See accompanying notes to the consolidated financial statements. 40 MariMed Inc. Notes to Consolidated Financial Statements (1) NATURE OF THE BUSINESS MariMed Inc. ("MariMed" or the "Company") is a multi-state cannabis operator in the United States, headquartered in Norwood, Massachusetts, dedicated to improving lives every day through its high-quality products, its actions, and its values. The Company develops, owns, and manages seed to sale state-licensed, state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medicinal and adult-use cannabis. MariMed has created and continues to develop its own brands of premium cannabis flower, concentrates, edibles, and other precision-dosed products utilizing its proprietary strains and formulations. The Company also licenses its proprietary brands, along with other top cannabis products, in domestic markets. (2) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). 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 Principles of Consolidation The accompanying consolidated financial statements include the accounts of MariMed Inc. and its wholly- and majority-owned subsidiaries. Consolidation is effected from the date when control is obtained. All intercompany transactions and balances have been eliminated. Subsidiary Percentage Owned MariMed Advisors Inc. 100.0 % Mia Development LLC 94.3 % Mari Holdings IL LLC 100.0 % Mari Holdings MD LLC 100.0 % Mari Holdings NJ LLC 100.0 % Mari Holdings Metropolis LLC 70.0 % Mari Holdings Mt. Vernon LLC 100.0 % Hartwell Realty Holdings LLC 100.0 % Kind Therapeutics USA LLC 100.0 % ARL Healthcare Inc. 100.0 % KPG of Anna LLC 100.0 % KPG of Harrisburg LLC 100.0 % MariMed OH LLC 100.0 % MariMed Hemp Inc. 100.0 % MediTaurus LLC 100.0 % MMMO LLC 100.0 % Green Growth Group Inc. 100.0 % Allgreens Dispensary LLC 100.0 % Our Community Wellness & Compasionate Care Center, Inc. 100.0 % 41 Noncontrolling Interests Noncontrolling interests represent third-party minority ownership of the Company’s majority-owned consolidated subsidiaries. Net income attributable to noncontrolling interests is reported in the consolidated statements of operations, and the value of minority-owned interests is presented as a component of equity within the 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 reporting amounts of revenue and expenses during the reporting periods. Significant estimates and judgments relied upon in preparing these 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. The Company regularly assesses these estimates and records changes in estimates in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates or assumptions. Business Acquisitions Business Combinations The Company recognizes identifiable assets acquired and liabilities assumed at fair value on the date of acquisition. Goodwill is measured as the excess of consideration transferred over the net fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits arising from other assets acquire in the business combination that are not individually identified and separately recognized. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Asset Purchases The Company accounts for an acquisitive transaction determined to be an asset purchase based on the cost accumulation and allocation method, under which the costs to purchase the asset or set of assets are allocated to the assets acquired. No goodwill is recorded in connection with an asset purchase. Cash Equivalents The Company considers all highly liquid investments with a maturity date of three months or less to be cash equivalents. The fair values of these investments approximate their carrying values. The Company had $ 0.3 million and $ 0.1 million of cash held in escrow at December 31, 2024 and 2023, respectively. The Company’s cash and cash equivalents are maintained with recognized financial institutions located in the United States. In the normal course of business, the Company may carry balances with certain financial institutions that exceed federally insured limits. The Company has not experienced losses on balances in excess of such limits and management believes the Company is not exposed to significant risks in that regard. 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, investments, term loans, mortgages and notes payable, and accounts payable. 42 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 price for similar assets or liabilities in active markets or quoted price 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. Accounts Receivable Accounts receivable consist of trade receivables and are carried at their estimated collectible amounts. The Company provides credit to its clients in the form of payment terms. The Company limits its credit risk by performing credit evaluations of its clients and maintaining a reserve, if deemed necessary, for potential credit losses. Such evaluations include the review of a client’s outstanding balances with consideration towards such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Based on such evaluations, the Company maintained reserves of $ 0.3 million and $ 0.8 million at December 31, 2024 and 2023, respectively. Inventory Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out basis. The Company allocates a certain percentage of overhead cost to its manufactured inventory; such allocation is based on square footage and other industry-standard criteria. The Company reviews physical inventory for obsolescence and/or excess and will record a reserve if necessary. As of the date of this report, no reserve was deemed necessary. Investments Investments are comprised of equity holdings of public companies. These investments are recorded at fair value on the Company’s consolidated balance sheet, with changes to fair value included in income. Investments are evaluated for permanent impairment and are written down if such impairments are deemed to have occurred. Revenue Recognition The Company’s main sources of revenue are comprised of the following: • Product sales (retail and wholesale) . The Company's product sales are derived from direct sales of cannabis and cannabis-infused products primarily by its retail dispensaries and wholesale operations in multiple states. The Company recognize this revenue when products are delivered to third parties or at the Company's retail points-of-sale. • Other revenue . The Company's other revenue is comprised of real estate rentals to cannabis-licensed clients; supply procurement fees from facilitating purchases of resources, supplies and equipment for cannabis-licensed clients and third parties; management fees for providing cannabis-licensed clients with comprehensive oversight of their operations; and licensing fees from the licensing of its branded products to wholesalers and regulated dispensaries. 43 The Company recognizes revenue in amounts that represent the consideration that it expects to receive in exchange for goods or services provided to customers performing the following 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 merely 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 goods or services before such goods or services are transferred to its client, and typically considered the agent if it does not exert such control. 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 are present. If deemed an agent, the Company does not recognize revenue for the performance obligations it does not satisfy. Research and Development Costs Research and development costs are expensed as incurred. Advertising Costs Advertising costs are expensed as incurred. Property and Equipment Property and equipment are stated at cost less accumulated depreciation, with depreciation recognized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term, if applicable. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income. Repairs and maintenance are charged to expense in the period incurred. The estimated useful lives of property and equipment are generally as follows: buildings and building improvements, thirty-nine to forty years ; tenant improvements, the lesser of the remaining duration of the related lease or the asset useful life; furniture and fixtures, seven to ten years ; machinery and equipment, seven to ten years . Land is not depreciated. Software development costs associated with internal use software are incurred in three stages of development: the preliminary project stage, the application development stage and the post-implementation stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Certain qualifying costs incurred during the application development stage are capitalized as property and equipment. Internal use software is amortized on a straight-line basis over its estimated useful life of five to seven years , beginning when the software is ready for its intended use. The Company’s property and equipment are individually reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from the undiscounted future cash flows of such asset over the anticipated holding period. An impairment loss is measured by the excess of the asset’s carrying amount over its estimated fair value. Impairment analysis is based on management’s current plans, asset holding periods, and currently available market information. If these criteria change, the Company’s evaluation of impairment losses may be different and could have a material impact to the consolidated financial statements. For the years ended December 31, 2024 and 2023, based on the results of management’s impairment analysis, there were no impairment losses. Intangible Assets and Goodwill The Company's intangible assets are comprised of trade names and trademarks, licenses and customer and non-compete agreements. Intangible assets are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable based upon the estimated undiscounted cash flows. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or 44 asset group to future net undiscounted cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset. The Company amortizes its intangible assets over their respective useful lives. For the years ended December 31, 2024 and 2023, there was no impairment of goodwill. 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 liabilities are recognized at the lease 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. Impairment of Long-Lived Assets The Company reviews the carrying amounts of its long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values. Stock-Based Compensation The Company's stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally corresponds with the vesting period. The Company uses the Black-Scholes valuation model for estimating the fair value of stock options and warrants on the date of grant. The fair value of stock option and warrant issuances is affected by the Company's stock price on the issuance date as well as valuation assumptions, including the volatility of the Company's common stock price, expected term of the instrument, risk-free interest rate and expected dividends. The expected life of an instrument is calculated using the simplified method, which allows for using the mid-point between the vesting date and expiration date for stock options and the contractual term for warrants. The volatility factors are based on the historical two-year movement of the Company’s common stock prior to an instrument’s issuance date. The risk-free interest rate is based on United States Treasury rates with maturity periods similar to the expected instruments life on the issuance date. The Company amortizes the fair value of options, warrants and restricted stock units on a straight-line basis over the requisite service period of each instrument. Income Taxes The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date. The Company recognizes in the financial statements the benefit of a tax position that is "more likely than not" to be sustained under examination based solely on the technical merits of the position, assuming a review by tax authorities having all relevant information. Tax positions that meet the recognition threshold are measured using a cumulative probability approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized 45 upon settlement. The Company's policy is to recognize interest and penalties related to the unrecognized tax benefits, if any, as a component of income tax expense. Certain subsidiaries of the Company, due to their cannabis activities, are subject to the provisions of Section 280E of the Internal Revenue Code, as amended, which prohibits businesses from deducting certain expenses associated with the trafficking of controlled substances within the meaning of Schedule I and II of the Controlled Substances Act. Such non-deductibility of certain ordinary business expenses results in permanent differences and can cause the Company’s effective tax rate to fluctuate significantly, and no necessarily correlated with pre-tax income. Related Party Transactions The Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements. Comprehensive Income There were no items of comprehensive income applicable to the Company during the periods covered in the financial statements. Commitments and Contingencies The Company regularly assesses the likelihood that a loss will be incurred from the occurrence or non-occurrence of one or more future events. Such assessment inherently involves an exercise of judgment. In assessing possible loss contingencies from legal proceedings or unasserted claims, the Company evaluates the perceived merits of such proceedings or claims, and of the relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable that a material loss will be incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. While not assured, management does not believe, based upon information available at this time, that any loss contingency will have material adverse effect on the Company’s financial position, results of operations or cash flows. Risk and Uncertainties The Company is subject to risks common to companies operating within the legal and medical cannabis industries, including, but not limited to, federal laws, government regulations and jurisdictional laws. Off Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements. Recent Accounting Pronouncements The Company has reviewed all recently issued, but not yet effective, accounting pronouncements, and does not believe the future adoption of any such pronouncements will have a material impact on its financial condition or the results of its operations. 46 (3) BUSINESS COMBINATION AND ASSET PURCHASES Business Combination Ermont 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"), following approval by the Massachusetts Cannabis Control Commission (the "CCC") The Ermont Acquisition provided the Company with its third dispensary in Massachusetts, substantially completing its build-out to the maximum allowable by state regulations. The financial results of Ermont are included in the Company's consolidated financial statements since the Ermont Acquisition Date. 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 with a fair value of $ 3.0 million, 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 of $ 4.6 million as of the Ermont Acquisition Date. 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. 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. Adult-use sales commenced on July 23, 2024. The Company expanded the existing medical dispensary to accommodate the expected increased traffic associated with adult-use sales and repurposed Ermont's existing cultivation facility. The Company's consolidated statement of operations for the year ended December 31, 2023 includes $ 3.8 million of revenue and $ 2.4 million of net loss attributable to Ermont for the period since the Ermont Acquisition Date. The Ermont Acquisition has been accounted for as a business combination. The Company did not assume any of Ermont's liabilities. 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 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 47 Fair value of assets acquired: 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 useful life of 12.19 years (see Note 10). Goodwill results from assets not separately identifiable as part of the transaction and is not deductible for tax purposes. The following unaudited pro forma information presents the condensed combined results of MariMed and Ermont for the year ended December 31, 2023 as if the Ermont Acquisition had been completed on January 1, 2023, with adjustments to give effect to pro forma events that are directly attributable to the Ermont Acquisition. These pro forma adjustments include amortization expense for the acquired intangible assets and interest expense related to the Ermont Note. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of MariMed and Ermont. Accordingly, these unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the Ermont Acquisition occurred on January 1, 2023, nor are they intended to represent or be indicative of future results of operations. These unaudited pro forma results for the year ended December 31, 2023 are as follows (in thousands): (unaudited) Revenue $ 148,948 Net loss $ ( 16,716 ) Valuation of Acquired Intangible Assets The valuation of the acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company used an income approach to value the acquired trade name/trademarks, licenses/customer base, and non-compete intangible assets. The valuation for each of these intangible assets was based on estimated projections of expected cash flows to be generated by the assets discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of new markets, products and customers and its outcome through key assumptions driving asset values, including sales growth, royalty rates and other related costs. Asset Purchases Allgreens Dispensary, LLC ("Allgreens") In August 2022, the Company entered into an agreement to purchase 100 % of the membership interests in Allgreens Dispensary, LLC (the "Allgreens Agreement"), a conditional adult-use cannabis dispensary license in Illinois, for $ 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 (the "Allgreens Notes"). 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 on April 9, 2024 (the "Allgreens Acquisition Date"), the Company now owns and operates five adult-use dispensaries in Illinois. For the interim period until the Allgreens Acquisition Date, the Company entered into a management agreement with Allgreens, with the management fees calculated as a percentage of Allgreens' revenue. Under this management agreement, the Company funded the build-out of the dispensary, including purchasing and retaining ownership of the related fixed assets it intended to use upon the transfer of ownership to the Company, hired and trained employees, and implemented the processes necessary to run the dispensary, all of which was completed prior to the state's approval of the license transfer to the Company. 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 48 Acquisition Date, and approximately $ 164,000 in the year ended December 31, 2023 (the "Allgreens Expenses"). The Allgreens Expenses for the year ended December 1, 2023 were included as a component of Investments, net of current portion, in the consolidated balance sheet at December 31, 2023. Pursuant to the Allgreens Agreement, as of December 31, 2023, 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 the Allgreens Notes. The Allgreens Notes bear interest at a rate of 7.5 % per annum and mature one year from the date the dispensary was permitted to commence operations. At December 31, 2024, the principal balance of $ 1.0 million due under the Allgreens Notes was past due and in default. 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 10). Our Community Wellness & Compassionate Care Center, Inc. ("MedLeaf") 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 had ceased its operations as of July 1, 2023. On April 5, 2024, the Company acquired 100 % of the membership interests in MedLeaf (the "MedLeaf Acquisition Date"). Upon receiving regulatory approval, the Company reopened the dispensary and commenced adult-use retail sales on August 19, 2024. The acquisition of MedLeaf provided 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 to the Company by the sellers of MedLeaf (the "MedLeaf Sellers"), a $ 2.0 million promissory note (the "MedLeaf 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 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 MedLeaf Note and 3.9 million shares of the Company's common stock were issued. The MedLeaf Note bears interest at a rate of 8.0 % per annum and matures on October 5, 2025. Pending Transaction at December 31, 2024 Robust Missouri Process and Manufacturing 1, 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, a Missouri wholesaler and processor, for $ 700,000 of cash (the "Robust Agreement"). Completion of the acquisition is dependent upon obtaining all requisite approvals from the Missouri Department of Health and Senior Services. In August 2024, the state of Missouri approved a facility license to conduct business, but has not yet approved the application to transfer the license from Robust to the Company (the "License Transfer"). The Company is currently conducting business under a managed service agreement until the final approval of the License Transfer. Pursuant to the Robust Agreement, the Company made an initial advance payment of $ 350,000 to the Robust members, with the balance of $ 350,000 due at closing, which will occur upon the state of Missouri's approval of the License Transfer. (4) (LOSS) EARNINGS PER SHARE Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of shares outstanding during the period. For periods in which the Company reports net income, diluted earnings 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. 49 The shares used to compute loss per share were as follows (in thousands): Year ended December 31, 2024 2023 Weighted average shares outstanding - basic 379,153 363,403 Potential dilutive common shares — — Weighted average shares outstanding - diluted 379,153 363,403 (5) ACCOUNTS RECEIVABLE, NET Accounts receivable, net, consisted of the following (in thousands): Year ended December 31, 2024 2023 Accounts receivable 8,997 7,963 Allowance for doubtful accounts ( 255 ) ( 764 ) Accounts receivable, net 8,742 7,199 The Company maintains an allowance against trade accounts receivable (the "AR Allowance"), and had previously also reserved against cash advanced by the Company to a cannabis-licensed client for working capital purposes (the "WC Reserve"), both of which were reported as components of the allowance for doubtful accounts in the Company's consolidated balance sheets. The Company's allowance for doubtful accounts activity was as follows (in thousands): Year ended December 31, Balance at beginning of year Charges (reversals) to expense Write-offs Balance at end of year 2024 $ 764 $ ( 336 ) $ ( 173 ) $ 255 2023 $ 4,603 $ 118 $ ( 3,957 ) $ 764 (6) INVENTORY Inventory at December 31, 2024 and 2023 consisted of the following (in thousands): December 31, 2024 2023 Plants $ 10,600 $ 3,296 Ingredients and other raw materials 7,785 4,932 Work-in-process 4,759 9,663 Finished goods 10,344 7,415 Total inventory $ 33,488 $ 25,306 (7) DEFERRED RENTS RECEIVABLE The Company is the lessor under operating leases which contain rent holidays, escalating rents over time, 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 operating leases 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 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 also 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 50 the space on a month-to-month basis through November 2023. The Company expanded its cultivation footprint into this space and accordingly, it is currently utilizing this space for its operations. 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 $ 1.2 million and $ 2.0 million in the years ended December 31, 2024 and 2023, respectively. The Company recognized rental revenue on a straight line basis totaling $ 1.1 million and $ 1.5 million for the years ended December 31, 2024 and 2023, respectively. Future minimum rental receipts for non-cancellable leases and subleases as of December 31, 2024 were as follows (in thousands): Year ending December 31, 2025 $ 1,211 2026 1,057 2027 952 2028 907 2029 907 Thereafter 1,930 Total $ 6,964 (8) NOTES RECEIVABLE AND OMNIBUS Note Receivable At December 31, 2024 and 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 $ 892,000 and $ 866,000 , respectively. Of these amounts, approximately $ 52,000 was current at each of December 31, 2024 and 2023. The balance at December 31, 2024 included approximately $ 26,000 of unpaid interest. The note bears interest at 6 % per annum and requires quarterly interest payments 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 that 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 (the "Omnibus Agreement"): (a) consolidating all amounts owed by FSCC to the Company and its affiliated entities as described below, aggregating $ 11.0 million; (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 Agreement 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, and bears interest, compounded semiannually and payable annually, at the appropriate rate of interest in effect under Sections 1274(d), 482 and 7872 of the Internal Revenue Code of 1986, as amended, as calculated under Rev. Ruling 86-17, 1986-1 C.B. 377, for the period for which the amount of interest is being determined. In May 2023, the state of Delaware approved the adult use of cannabis. As of December 31, 2024, Delaware had not approved the conversion of FSCC from a non-profit to a for-profit business, nor the conversion of the existing license to adult-use. The Omnibus Agreement is reported as a component of Other assets in the consolidated balance sheets at both December 31, 2024 and 2023. On February 28, 2025, the Company completed the acquisition of FSCC in accordance with the terms of the Omnibus Agreement. 51 (9) PROPERTY AND EQUIPMENT The Company's property and equipment, net, at December 31, 2024 and 2023 was comprised of the following (in thousands): December 31, 2024 2023 Land $ 6,151 $ 4,819 Buildings and building improvements 55,833 54,737 Tenant improvements 31,894 25,451 Furniture and fixtures 2,225 2,191 Machinery and equipment 19,629 16,394 Construction in progress 80 427 115,812 104,019 Less: accumulated depreciation ( 21,645 ) ( 14,916 ) Property and equipment, net $ 94,167 $ 89,103 During the years ended December 31, 2024 and 2023, additions to property and equipment totaled $ 12.0 million and $ 20.1 million, respectively. Of the additions to property and equipment in the year ended December 31, 2024, $ 0.3 million of such additions were paid for by the issuance of Company common stock. Depreciation expense for the years ended December 31, 2024 and 2023 was $ 7.9 million and $ 5.5 million, respectively. (10) INTANGIBLE ASSETS AND GOODWILL The Company's acquired intangible assets at December 31, 2024 and 2023 consisted of the following (in thousands): December 31, 2024 Weighted average amortization period (years) Cost Accumulated amortization Net carrying value Trade name and trademarks 7.38 $ 3,159 $ 2,466 $ 693 Licenses and customer base 7.96 22,553 4,607 17,946 Non-compete agreements 2.00 42 42 — 7.89 $ 25,754 $ 7,115 $ 18,639 December 31, 2023 Weighted average amortization period (years) Cost Accumulated amortization Net carrying value Trade name 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 52 Estimated future amortization expense for the Company’s intangible assets at December 31, 2024 was as follows (in thousands): Year ending December 31, 2025 $ 3,077 2026 2,570 2027 2,477 2028 2,477 2029 2,029 Thereafter 6,009 Total $ 18,639 The changes in the carrying value of the Company’s goodwill in the years ended December 31, 2024 and 2023 were as follows (in thousands): Year ended December 31, 2024 2023 Balance at January 1, $ 11,993 $ 8,079 Ermont Acquisition and subsequent adjustments to the purchase price allocation 3,819 3,914 Balance at December 31, $ 15,812 $ 11,993 Goodwill is tested on an annual basis for impairment. The Company performs its annual goodwill impairment test as of November 30 of each respective year. Based on these tests, the Company determined that there was no goodwill impairment in the years ended December 31, 2024 and 2023. (11) DEBT Term Loan (the "CA Term Loan") On January 24, 2023 (the "Term Loan Date"), 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 build-out of a new cultivation and processing facility in Illinois, complete the build-out of a new processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and repay in full the Kind Notes incurred in 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 the aggregate of principal borrowings at the CA Borrowers’ option and further provided 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. 53 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 minimum $ 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 or insolvency. The CA Credit Agreement also included customary negative covenants limiting the CA Borrowers’ ability to incur additional indebtedness and grant certain liens, among others. Additionally, the CA Credit Agreement required the CA Borrowers to meet certain financial tests. The Company was in compliance with the CA Credit Agreement covenants and financial tests 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 their present value of $ 5.5 million as of January 24, 2023 as a component of Additional paid-in capital on the consolidated balance sheet, and discounted the CA Term Loan amount by $ 5.5 million (the "CA Warrant Discount"). The Company amortized the CA Warrant Discount to interest expense over the period that the CA Credit Agreement was outstanding. 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 $ 2.1 million of aggregate interest amortization from the Term Loan Date to the CA Payoff Date (as described below) related to the CA Original Issuance Discount, CA Warrant Discount and CA Third Party Costs Discount. On November 16, 2023 (the "CA Payoff Date"), 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 (see "CREM Loan" 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 CA Term Loan Payoff, which it recorded in the fourth quarter of 2023. Mortgages and Notes Payable The Company's mortgages and notes payable are reported in the aggregate on the consolidated balance sheets under the captions Mortgages and notes payable, current portion, and Mortgages and notes payable, net of current portion. 54 The Company's mortgages and notes payable balances at December 31, 2024 and 2023 were comprised of the following (in thousands): December 31, 2024 2023 Construction to Permanent Commercial Real Estate Mortgage Loan ("CREM Loan"), net of debt discount of $ 1,460 and $ 1,534 at December 31, 2024 and 2023, respectively $ 57,136 $ 52,083 Bank of New England Wilmington, DE property 1,086 1,219 DuQuoin State Bank Anna, IL and Harrisburg, IL properties 689 719 DuQuoin State Bank Metropolis, IL property 2,427 2,472 DuQuoin State Bank Mt. Vernon, IL property (retail) 1,139 — DuQuoin State Bank Mt. Vernon, IL property (grow and production) 2,872 2,923 Promissory note issued as purchase consideration - Ermont Acquisition, net of debt discount of $ 1,801 and $ 2,159 at December 31, 2024 and 2023, respectively 2,949 2,591 Promissory note issued as purchase consideration - Greenhouse Naturals Acquisition, net of debt discount of $ 567 and $ 627 at December 31, 2024 and 2023, respectively 3,791 4,190 Promissory notes issued as purchase consideration - MedLeaf Acquisition 1,377 — Promissory note issued as purchase consideration - Allgreens Acquisition 1,000 — Promissory note issued to purchase land 352 — Promissory notes issued to purchase motor vehicles 168 178 Total mortgages and notes payable 74,986 66,375 Less: Mortgages and notes payable, current portion ( 5,126 ) ( 723 ) Mortgages and notes payable, net of current $ 69,860 $ 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 guaranteed the obligations of the CREM Borrowers under the CREM Loan Agreement and pledged to the CREM Lender its equity ownership in each CREM Borrower as security for the loan. 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 CREM Borrowers made 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 were held in escrow to complete the expansion of the Company's Hagerstown, Maryland cultivation facility (the "Hagerstown Facility"), with any unused proceeds to 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 obligations. These payments were comprised of $ 32.7 million for the CA Term Loan Payoff, $ 11.9 million to pay off the mortgage with Bank of New England for the New Bedford, MA and 55 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 were 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 interest amortization of approximately $ 73,000 in the year ended December 31, 2024 and nominal interest amortization in the year ended December 31, 2023 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. 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 year ended December 31, 2024, $ 5.1 million of the escrowed portion of the loan proceeds was released to the Company. The Company made interest-only payments to the CREM Lender through November 30, 2024 and commenced principal payments in December 2024. During the year ended December 31, 2024, the Company made interest-only payments aggregating $ 4.8 million and a principal payment of $ 0.1 million. The current portion of the outstanding principal balance of the CREM Loan was $ 1.2 million and $ 0.1 million at December 31, 2024 and 2023, respectively. Through November 16, 2023, the Company had a mortgage outstanding with Bank of New England secured by the Company’s properties in New Bedford, MA and Middleborough, MA in the original amount of $ 13.0 million, which bore interest of 6.5 % per annum and was scheduled to mature in August 2025 (the “Refinanced Mortgage”). The Company used $ 11.9 million of the 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 amount is included as a component of Loss on extinguishment of debt in the Company's consolidated statement of operations for the year ended December 31, 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 2016 purchase of a building in Wilmington, DE, which was developed into a cannabis seed to sale facility and 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, and 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 rate adjustment will occur in September 2026. At December 31, 2024 and 2023, the current portion of the outstanding principal balance under this mortgage was approximately $ 140,000 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 5 th 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 2024 at a rate of 9.50 % per annum. At both December 31, 2024 and 2023, the current portion of the outstanding principal balance under this mortgage was approximately $ 27,000 . DuQuoin State Bank (Metropolis, IL) In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, IL. 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 related mortgage obligation, reducing the Company’s ownership interest in Metro to 70.0 %. At December 31, 2024 and 56 2023, the current portion of the outstanding principal balance of this mortgage was approximately $ 56,000 and $ 46,000 , respectively. DuQuoin State Bank (Mt. Vernon, IL) grow and production) 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, IL, which the Company developed into a grow and production facility. The mortgage has a 20 -year term and currently bears interest at the rate of 11.25 % per annum, subject to adjustment on each annual anniversary date to the Wall Street Journal United States Prime Rate (with an interest rate floor of 7.75 %). The proceeds of the loan were utilized for the build-out of the property and other working capital purposes. The current portion of the outstanding principal balance of this mortgage was approximately $ 61,000 and $ 48,000 at December 31, 2024 and 2023, respectively. DuQuoin State Bank (Mt. Vernon, IL retail) In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, IL (the "South Porte Bank Mortgage"). Beginning in August 2021, pursuant to an amendment to the South Porte Bank Mortgage, the monthly payments of principal and interest aggregated approximately $ 6,000 , with such payment amounts effective through June 2023, at which time all remaining principal, interest and fees were due. On May 26, 2023, the Company repaid the outstanding balance on the South Porte Bank Mortgage, which totaled approximately $ 778,000 . 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 at the rate of 9.50 % per annum. The current portion of the outstanding principal balance of this mortgage was approximately $ 31,000 at December 31, 2024. Promissory Notes Promissory Notes Issued as Purchase Consideration Ermont In connection with the Ermont Acquisition, the Company issued the Ermont Note (see Note 3), in the principal amount of $ 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 $ 2.9 million and $ 2.6 million at December 31, 2024 and 2023, respectively. The current portion of the outstanding principal balance of the Ermont Note was $ 0.5 million at December 31, 2024. The Ermont Note did not have a current portion recorded at December 31, 2023. Greenhouse Naturals LLC In December 2022, the Company completed the acquisition from Greenhouse Naturals LLC of the assets associated with a cannabis dispensary in Beverly, Massachusetts (the "Beverly Dispensary"). In connection with this transaction, the Company issued a $ 5.0 million promissory note to the Sellers, payable on a monthly basis as percentage of the monthly gross sales of the Beverly Dispensary (the "Greenhouse Naturals Note"). 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 $ 3.8 million and $ 4.3 million at December 31, 2024 and 2023, respectively. The Company estimated that the current portion of the Greenhouse Naturals Note was $ 0.8 million and $ 0.3 million at December 31, 2024 and 2023, respectively, which amounts are included in Mortgages and notes payable, current portion, in the Company's consolidated balance sheets. 57 MedLeaf In connection with the MedLeaf Acquisition, the Company issued the MedLeaf Note, totaling $ 2.0 million (see Note 3). 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 December 31, 2024, the MedLeaf Note had an outstanding balance of $ 1.4 million, all of which was recorded as current. Allgreens In connection with the Allgreens Acquisition, the Company issued promissory notes aggregating $ 1.0 million (see Note 3). 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 Allgreens Notes had an aggregate outstanding balance of $ 1.0 million at December 31, 2024, all of which was recorded as current and was in default. Kind Therapeutics USA 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, on January 24, 2023, the Company repaid the Kind Notes in full, aggregating $ 5.4 million, including approximately $ 420,000 of accrued interest. There was no penalty in connection with the early repayment of the Kind Notes. Promissory Notes Issued to Purchase Property and Equipment At each of December 31, 2024 and 2023, the Company had five outstanding promissory notes in connection with the purchase of commercial motor vehicles. At December 31, 2024, the outstanding notes had an aggregate outstanding balance of approximately $ 168,000 , of which approximately $ 36,000 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 11.38 % and 11.07 % at December 31, 2024 and 2023, respectively. The weighted average remaining terms of these notes were 4.27 years and 4.61 years at December 31, 2024 and 2023, respectively. At December 31, 2024, the Company had an outstanding note in connection with the purchase, in the second quarter of 2024, of a parking lot adjacent to its Middleborough, MA dispensary totaling $ 352,000 . The note bears interest at 4.0 %, with monthly interest-only payments and a balloon payment for the entire principal amount due on February 1, 2029. Future Payments The future principal payments due under the Company's outstanding mortgages and notes payable at December 31, 2024 were as follows (in thousands): Year ending December 31, 2025 4,866 2026 2,969 2027 3,019 2028 3,152 2029 6,382 Thereafter 57,799 Total future principal payments 78,187 Less: discount ( 3,201 ) Total future principal payments, net of discount $ 74,986 58 (12) 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 each of December 31, 2024 and 2023, which shares are held by three institutional shareholders (the “Series B Holders”). The original issuance date of the Series B Stock was February 27, 2020. The Series B Holders are entitled to cast the number of votes equal to the number of shares of common stock into which the shares of Series B Stock are convertible, together with the holders of common stock as a single class, on most matters. However, the affirmative vote or consent of the Series B Holders voting separately as a class is required for certain acts taken by the Company, including the amendment or repeal of certain charter provisions, liquidation or winding up of the Company, creation of stock senior to the Series B Stock, and/or other acts as defined in the Series B Stock certificate of designation. The Series B Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the Company’s common stock. The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company unless the Series B Holders then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Stock in an amount calculated pursuant to the Series B Stock certificate of designation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Series B Holders then outstanding 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 common stock by reason of their ownership thereof, an amount per share equal to $ 3.00 , plus any dividends declared but unpaid thereon, with any remaining assets distributed on a prorated basis among the holders of the shares of Series B Stock and common stock, based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock. At any time on or prior to the six-year anniversary of the original issuance date of the Series B Stock, (i) the Series B Holders have the option to convert their shares of Series B Stock into 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, of the shares of Series B Stock into the Company's common stock at a conversion price of $ 3.00 if the daily volume weighted average price of 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 2020 issuance of the Series B Stock, all outstanding shares of Series B Stock shall automatically convert into 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 common stock at a conversion price per share equal to $ 3.00 per share divided by the sixty-day VWAP; • pay cash to the Series B Holders equal to $ 3.00 per share ($ 14,725,000 ); 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 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 shares of Series B Stock. 59 Series C Convertible Preferred Stock In March 2021, the Company entered into a securities purchase agreement with Hadron Healthcare Master Fund (“Hadron”) with respect to a financing facility of up to $ 46.0 million in exchange for newly-designated Series C Convertible Preferred Stock of the Company (the "Series C Stock") and warrants to purchase the Company’s common stock (the "Hadron Agreement"). At that time, Hadron purchased $ 23.0 million of Units at a price of $ 3.70 per Unit. Each Unit is comprised of one share of Series C Stock and a four-year warrant to purchase two and one-half shares of common stock. The Company issued to Hadron 6,216,216 shares of Series C Stock and warrants to purchase up to an aggregate of 15,540,540 shares of common stock. Each share of Series C Stock is convertible, at the holder’s option, into five shares of MariMed 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 attained and the market value of the Company’s common stock reaches certain predetermined levels. Provided that at least 50.0 % of the shares of Series C Stock remained outstanding, Hadron had the right to appoint one observer to the Company’s Board of Directors (the "Board") and to each of its Board committees, and appoint a member to the Board if and when a seat became available, at which time the observer roles would terminate. The transaction also imposed certain covenants on the Company with respect to the incurrence of new indebtedness, the issuance of additional shares of preferred stock, and the payment of distributions. On August 4, 2022, the Company and Hadron entered into a second amendment to the Hadron Agreement pursuant to which, inter alia, (i) Hadron's obligation to provide any further funding to the Company and the Company's obligation to sell any further securities to Hadron was terminated, and (ii) certain covenants restricting the Company's incurrence of new indebtedness were eliminated. During the year ended December 31, 2023, in three separate transactions, the Company converted, at Hadron's request in accordance with the terms and conditions of the Series C Stock, a total of 5,060,942 shares of Series C Stock into 25,304,710 shares of the Company's common stock (the "Conversions"). The Conversions were effected at a conversion rate of five shares of the Company's common stock for each share of Series C 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. Upon the Conversions, less than 50.0 % of the shares of Series C Stock remained outstanding, and as a result, Hadron's rights to appointment a designee to the Board and an observer to the Board and each of the Board's committees terminated. At December 31, 2024, 1,155,274 shares of Series C Stock remained outstanding. There were no such conversions in the year ended December 31, 2024. (13) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Amended and Restated 2018 Stock Award and Incentive Plan The Amended and Restated Stock Award and Incentive Plan (the "2018 Plan") provides for the award of options to purchase the Company's common stock ("stock options"), restricted stock units ("RSUs"), stock appreciation rights, restricted stock, deferred stock, dividend equivalents, performance shares or other stock-based performance awards, as well as other stock- or cash-based awards. At December 31, 2024, there were 25,481,098 total shares of common stock available for future issuance under the 2018 Plan. Stock Options A summary of the Company's stock option activity during the year ended December 31, 2024 was as follows: Shares Weighted average exercise price Outstanding at January 1, 2024 35,599,421 $ 0.78 Granted 60,000 $ 0.14 Exercised — $ — Forfeited ( 3,750 ) $ 0.44 Expired ( 1,383,750 ) $ 0.59 Outstanding at December 31, 2024 34,271,921 $ 0.79 60 Stock options granted under the 2018 Plan generally expire five years from the date of grant. At December 31, 2024, the options outstanding had a weighted average remaining life of approximately one and one-half years. The grant date fair values of stock options granted in the year ended December 31, 2024 were 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 and dividend rights. 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 Company's common stock on the date of grant. The activity related to RSUs for the year ended December 31, 2024 was as follows: RSUs Weighted average grant date fair value Unvested at January 1, 2024 5,825,538 $ 0.42 Granted 4,803,991 $ 0.18 Vested ( 2,636,750 ) $ 0.43 Forfeited ( 286,654 ) $ 0.38 Outstanding at December 31, 2024 7,706,125 $ 0.27 Warrants 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, were fully vested upon issuance, and expire on May 1, 2029. The grant date fair value of the warrants was approximately $ 218,000 using the Black-Scholes valuation model. This expense is included as a component of Acquisition-related and other in the Company's consolidated statements of operations for the year ended December 31, 2024. In connection with the CA Credit Agreement (see Note 11), on January 24, 2023, the Company issued to the Lenders an aggregate of 19,148,936 warrants to purchase shares of the Company's common stock at $ 0.47 per share, exercisable during the five-year period following issuance. In connection with the purchase by the Company of the outstanding minority interest in Mari Holdings MD LLC ("Mari MD") on April 13, 2023, the Company issued 400,000 warrants to purchase the Company's common stock at an exercise price of $ 0.40 per share (the "Mari MD Warrants"). The Mari MD Warrants expire on April 13, 2026. At December 31, 2024, warrants to purchase up to 38,089,476 shares of common stock were outstanding, with a weighted average exercise price of $ 0.73 . Other Common Stock Issuances In addition to the activity related to stock options and RSUs described above, the Company also issued during the year ended December 31, 2024: • 3,917,267 shares of restricted common stock with a fair value of $ 1.0 million in connection with the MedLeaf Acquisition (see Note 3); and • 45,299 shares of restricted common stock with an aggregate fair value of approximately $ 10,000 issued under a licensing and royalty agreement. 61 Stock-Based Compensation The Company recorded stock-based compensation expense of $ 1.1 million and $ 1.0 million for the years ended December 31, 2024 and 2023, respectively. (14) SEGMENT INFORMATION The Company operates as a single reporting segment engaged in the cultivation, processing and sale of branded cannabis products. The Chief Operating Decision Makers are the Company's Chief Executive Officer and its Chief Financial Officer, who together (the "CODM"), evaluate company performance based on Net income (loss), determined in accordance with U.S. GAAP, and Adjusted EBITDA, a non-GAAP measure. The Company defines Adjusted EBITDA as income from operations, determined in accordance with GAAP, excluding the following: • depreciation and amortization of property and equipment; • amortization of acquired intangible assets; • impairments or write-downs of acquired intangible assets; • inventory revaluation; • stock-based compensation; • severance; • legal settlements; and • acquisition-related and other. The CODM uses these measures to assess profitability and guide resource allocations, and believes that Adjusted EBITDA, when reviewed in conjunction with Net income (loss), is a useful measure to assess the Company's performance and liquidity, as it provides meaningful operating results by excluding the effects of expenses that are not reflective of the Company's operating business performance. In addition, the CODM uses Adjusted EBITDA to understand and compare operating results across accounting periods, and for financial and operational decision-making and resource allocation. The presentation of Adjusted EBITDA is not intended to be considered in isolation or as a substitute for the financial information prepared in accordance with GAAP. The CODM conducts monthly financial reviews, focusing on revenue trends, gross margin performance and operational efficiency across the Company's vertically integrated operations. Investment decisions, including capital expenditures for new cultivation facilities and retail expansion, are made based on expected return on investment and regulatory considerations in each state in which the Company operates. The table below provides the Company's Net loss, Income from operations, and a reconciliation of Income from operations to Adjusted EBITDA for the years ended December 31, 2024 and 2023 (in thousands): Year ended December 31, 2024 2023 Net loss $ ( 12,127 ) $ ( 16,007 ) GAAP Income from operations $ 2,912 $ 14,385 Depreciation and amortization of property and equipment 7,910 5,549 Amortization of acquired intangible assets 2,948 3,025 Inventory revaluation 3,667 — Stock-based compensation 1,050 1,020 Severance 211 — Acquisition-related and other 951 695 Adjusted EBITDA $ 19,649 $ 24,674 62 (15) REVENUE For the years ended December 31, 2024 and 2023, the Company’s revenue was derived from the following categories (in thousands): Year ended December 31, 2024 2023 Product sales - retail $ 91,530 $ 95,517 Product sales - wholesale 62,895 48,788 Other revenue 3,539 4,293 Total revenue $ 157,964 $ 148,598 (16) MAJOR CUSTOMERS The Company did not have any customers that contributed 10% or more of total revenue in the years ended December 31, 2024 or 2023. At each of December 31, 2024 and 2023, there were no customers that accounted for 10% or more of the Company's accounts receivable balance. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. (17) LEASES Lease Commitments At December 31, 2024, the Company was the lessee under eight operating leases and thirty-one finance leases. These leases contain rent holidays and customary escalations of lease payments for the types of facilities being leased. The Company's operating lease agreements 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 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 in January 2026 through July 2031, with such terms comprising a major part of the economic useful life of the leased property. The components of lease expense for the years ended December 31, 2024 and 2023 were as follows (in thousands): Year ended December 31, 2024 2023 Operating lease expense $ 2,069 $ 1,838 Finance lease expense: Amortization of right-of-use assets $ 1,145 $ 606 Interest on lease liabilities 292 244 Total finance lease expense $ 1,437 $ 850 63 The weighted average remaining lease terms and weighted average discount rates for the Company's operating leases and finance leases at December 31, 2024 and 2023 were as follows: Year ended December 31, 2024 2023 Weighted average remaining lease term (years): Operating leases 9.26 9.83 Finance leases 2.78 3.29 Weighted average discount rate: Operating leases 11.1 % 11.0 % Finance leases 9.6 % 11.0 % Future minimum lease payments as of December 31, 2024 under all non-cancelable leases having an initial or remaining term of more than one year were as follows (in thousands): Year ending December 31, Operating leases Finance leases 2025 $ 1,988 $ 2,018 2026 1,915 1,613 2027 1,813 563 2028 1,757 309 2029 1,595 134 Thereafter 635 10 Total lease payments 9,703 4,647 Less: imputed interest ( 166 ) ( 703 ) Present value of lease liabilities $ 9,537 $ 3,944 (18) 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 under this lease in the years ended December 31, 2024 and 2023 were approximately $ 233,000 and $ 272,000 , 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 $ 4.6 million and $ 6.5 million in the years ended December 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 the Company's Chief Revenue Officer (the "CRO") under a royalty agreement. Under this agreement, the royalty on all sales of Betty’s Eddies products is 3.0 % if sold directly by the Company and between 1.3 % 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 royalties earned by the entity for the years ended December 31, 2024 and 2023 approximated $ 634,000 and $ 722,000 , respectively. During the years ended December 31, 2024 and 2023, one of the Company’s majority-owned subsidiaries paid distributions of approximately $ 5,000 and $ 11,000 , respectively, to the CEO, who owns a minority equity interest in such subsidiary. At December 31, 2024, the Company had an outstanding accounts payable balance of approximately $ 251,000 in connection with fixed assets purchased from a third-party company in which the CEO has a controlling interest. 64 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 the noncontrolling interests in this this majority-owned subsidiary remains unchanged. During the year ended December 31, 2024, this majority-owned subsidiary made distribution payments of approximately $ 6,750 and $ 20,250 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 approximately $ 192,000 for the year ended December 31, 2023. Payment of these fees terminated effective as of December 31, 2023. At December 31, 2024, the Company’s mortgages with Bank of New England and DSB were personally guaranteed by the CEO. Additionally, the CEO provided a limited guaranty to the CA Lenders under the CA Credit Agreement through its repayment in November 2023. The CEO had also guaranteed the South Porte Bank Mortgage prior to its repayment in May 2023. (19) INCOME TAXES The Company recorded provisions for income taxes of $ 8.2 million and $ 9.4 million for the years ended December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, the Company’s cumulative federal net operating losses were $ 64.5 million and $ 71.2 million, respectively. The provision recorded in the year ended December 31, 2024 was due in part to the impact of Section 280E of the Internal Revenue Code ("Section 280E"), which prohibits the deduction of certain ordinary business expenses, the change in valuation allowance against deferred tax assets, and other nondeductible expenses. The provision recorded in the year ended December 31, 2022 was due in part to the impact of Section 280E of the Internal Revenue Code, which prohibits the deduction of true-ups from changes that occurred between when the provision for the year ended December 31, 2022 was determined and when the related tax returns were filed, and reserves recorded against uncertain tax positions taken on the tax return as filed. Reconciliations of the Company’s effective tax rates and the statutory tax rate for the years ended December 31, 2024 and 2023 were as follows: Year ended December 31, 2024 2023 U.S federal taxes at the statutory rate 21.0 % 21.0 % State taxes net of federal benefit ( 9.9 ) % ( 4.2 ) % Section 280E adjustment ( 240.4 ) % ( 49.3 ) % Other permanent non-deductible expenses ( 27.7 ) % ( 6.1 ) % Stock-based compensation ( 3.5 ) % ( 0.7 ) % Non-cash interest ( 1.5 ) % ( 9.4 ) % FIN 48 reserve ( 2.7 ) % ( 28.1 ) % Return to provision adjustments 3.1 % 45.9 % Other 3.5 % ( 1.2 ) % Valuation allowance 37.6 % ( 96.9 ) % Effective tax rate ( 220.5 ) % ( 129.0 ) % 65 The income tax effect of the Company’s loss carryforwards and temporary differences at December 31, 2024 and 2023 were as follows: Year ended December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 12,690 14,693 Allowance for doubtful accounts 68 207 Stock-based compensation 2,333 2,434 Loss on equity investments 8,025 8,094 Goodwill write-offs — 115 Change in fair value of investments 247 229 Lease payments 2,674 2,621 Accruals and reserves 169 484 Other 889 448 Deferred tax liabilities: Depreciation ( 6,047 ) ( 6,925 ) Goodwill write-offs ( 303 ) — Real estate revenue ( 2,613 ) ( 2,477 ) Net deferred tax asset 18,132 19,923 Valuation allowance ( 18,132 ) ( 19,923 ) Total $ — $ — Federal net operating losses carry forward indefinitely, subject to an annual limitation of 80% of taxable income, while state net operating losses expire at various dates beginning in 2031. These tax attributes are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under Internal Revenue Code Section 382. The Company recorded valuation allowances against its net deferred tax assets at December 31, 2024 and 2023 due to the uncertainty regarding the realization of such assets. The Company’s assessment of the realization of its deferred tax assets in future periods may differ due to changing circumstances. The Company's gross unrecognized tax benefits for the years ended December 31, 2024 and 2023 were as follows (in thousands): Year ended December 31, 2024 2023 Balance at January 1, $ 5,650 $ 4,014 Additions based on tax positions related to prior years 3 1,636 Reductions due to statute of limitations lapse ( 397 ) — Balance at December 31, $ 5,256 $ 5,650 All of the unrecognized tax benefits are included as a component of Income taxes payable, which is a current liability. The Company does not expect its unrecognized tax benefits to change significantly over the next twelve months. During the year ended December 31, 2024, the Company's unrecognized tax benefits decreased by approximately $ 394,000 as a result of the lapse of the statute of limitations for uncertain tax positions relating to net operating losses deducted by subsidiaries that are subject to the provisions of Section 280E. During the year ended December 31, 2023, the Company's unrecognized tax benefits increased by $ 1.6 million as a result of uncertain tax positions relating to net operating losses deducted by subsidiaries that are subject to the provision of Section 280E of the Internal Revenue Code. The Company is currently undergoing an IRS audit for the tax year ended December 31, 2022 for certain of its subsidiaries. The result of this audit could reasonably result in a change in our uncertain tax positions related to net operating losses deducted within the next 12 months. At this time, an estimate of the amount that could change for those uncertain tax positions cannot be made. The Company believes that its reserves for uncertain tax positions are appropriate, and that it has meritorious defenses for its tax filings and will vigorously defend them during any audit process, appellate process and through litigation in courts, as necessary. 66 The Company classified interest and penalties related to unrecognized tax benefits as income tax expense. The total amount of interest and penalties related to uncertain tax positions and recognized in the balance sheet at December 31, 2024 was $ 0.9 million. The Company files income tax returns in the United States federal tax jurisdiction and various state jurisdictions. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions for the tax years ended December 31, 2021 through December 31, 2024. At December 31, 2024 and 2023, the Company's consolidated balance sheets included a receivable for income taxes of $ 0.8 million and $ 0.7 million, respectively, representing requests for refunds from the Internal Revenue Service and state taxing authorities, and are reported as components of Other current assets as of the respective balance sheets. (20) COMMITMENTS AND CONTINGENCIES Bankruptcy Claim In 2019, MariMed Hemp, Inc. ("MMH"), a subsidiary of the Company, sold hemp seed inventory to GenCanna Global Inc., (“GenCanna”), recording a related party receivable of approximately $ 29 million, which was fully reserved at December 31, 2019. In early 2020, GenCanna entered a Chapter 11 bankruptcy, leading to a liquidating plan that remains ongoing. In 2022, the Plan Administrator filed a complaint against MMH for alleged preferential transfers, which was settled in 2023 by reducing MMH's general unsecured claim to $ 15.5 million. In the three months ended September 30, 2024, MMH received a liquidation distribution of $ 116,250 . As of the date of this filing, there is insufficient information to determine the amount of further liquidation distributions, if any, that MMH may receive on account of its general unsecured claim. New Bedford, MA and Middleborough, MA Buildouts In the third quarter of 2023, the Company recorded an increase of $ 2.0 million in building and building improvements and a corresponding accrued liability in the same amount for electrical work performed at the Company's New Bedford and Middleborough properties between December 2017 and June 2023. The electrical work was performed by an electrical contractor that is owned and/or controlled by the family of a non-officer/director Company stockholder who beneficially owned more than 5 % of the Company's common stock when the electrical work began. The electrical work was primarily paid for by an entity that is indirectly controlled by that individual and another non-officer/director Company shareholder who also beneficially owned more than 5 % of the common stock when the electrical work began. The Company repaid the two shareholders $ 300,000 each as salary between 2021 and 2023 (at the rate of $ 100,000 each per year), which payments have since been terminated. As of December 31, 2024, the $ 2.0 million accrued liability remains on the Company's consolidated balance sheet. 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. (21) SUBSEQUENT EVENTS Equity Transaction Subsequent to December 31, 2024, the Company issued 697,398 shares of common stock in the aggregate underlying RSUs that vested on various dates prior to the filing of this report. FSCC On February 28, 2025, the Company completed the acquisition of FSCC in accordance with the terms of the Omnibus Agreement. 67 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.