MARIMED INC. 10-Q

Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations The following discussion of the financial condition and results of operations of MariMed Inc. should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 10-K"), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 6, 2025. Forward Looking Statements When used in this Quarterly Report on Form 10-Q and in future filings by the Company with the SEC, words or phrases, such as “anticipate,” “believe,” “could,” “would,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or similar expressions, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. These factors include, but are not limited to, changes that may occur to general economic and business conditions; changes in current pricing levels that the Company can charge for its services and products or which it pays to its suppliers and business partners; changes in political, social and economic conditions in the jurisdictions in which the Company operates; changes to regulations that pertain to its operations; changes in technology that render the Company’s technology relatively inferior, obsolete or more expensive compared to others; changes in the business prospects of the Company’s business partners and customers; increased competition, including from the Company’s business partners; and enforcement of U.S. federal cannabis-related laws. The following discussion should be read in conjunction with the financial statements and related notes which are included in this Quarterly Report on Form 10-Q. The Company does not undertake to update its forward-looking statements or risk factors to reflect future events or circumstances, unless required by law. Overview We are a multi-state cannabis operator in the United States, headquartered in Norwood, Massachusetts, dedicated to improving lives every day through our high-quality products, our actions, and our values. We develop, own and manage seed to sale state-licensed, state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of medicinal and adult-use cannabis. We have created and continue to develop our own brands of premium cannabis flower, concentrates, edibles and other precision-dosed products utilizing our proprietary strains and formulations. We also license our proprietary brands, along with other top cannabis products, in domestic markets. We completed the acquisition of First State Compassion Center ("FSC"), the leading cannabis operator in Delaware, effective March 1, 2025 (the "FSC Acquisition Date"). Prior to its acquisition by us (the "FSC Acquisition"), FSC had been our managed services client. The financial results of FSC are included in our condensed consolidated financial statements for the periods subsequent to the FSC Acquisition Date. We completed two acquisitions in the year ended December 31, 2024, which we accounted for as asset purchases. On April 9, 2024, we acquired 100% of the membership interests of Allgreens Dispensary, LLC ("Allgreens"), which held a conditional adult-use cannabis dispensary license in Illinois. On April 5, 2024, we acquired 100% of the membership interests of Our Community Wellness & Compassionate Care Center, Inc. ("MedLeaf"), which held a retail dispensary license in Maryland. The MedLeaf dispensary had ceased operations since July 1, 2023, but we reopened it on August 19, 2024, upon receiving regulatory approval to commence adult use retail sales. 32 Table of Contents We continue to focus on executing our strategic growth plan, with priority on activities that include the following: • Increasing our product brand revenue by: ◦ strengthening our cultivation and processing capabilities to ensure a reliable, high-quality supply of raw materials that will enhance product consistency, quality, and innovation; ◦ developing and launching innovative new products that align with consumer preferences and demand; ◦ offering new effects and formulations that differentiate our existing brands; ◦ broadening our distribution network in existing markets to maximize our reach and brand visibility; and ◦ expanding our distribution into new markets through new license applications, acquisitions of existing cannabis businesses, and/or identification of qualified licensing partners. • Increasing retail store revenue by: ◦ driving additional and higher average transactions in our existing stores through an outstanding customer experience that prioritizes our product selection and the ease of the shopping experience; and ◦ expanding our dispensary footprint in current markets where regulations allow and into new markets through new license applications and/or acquisitions of existing cannabis businesses. On July 30, 2025, we entered into a Management Services Agreement ("MSA") with Standard Farms, LLC ("Standard Farms"), a wholly-owned subsidiary of TILT Holdings Inc. ("TILT"). Under the terms of the MSA, which became effective on September 1, 2025, we assumed the day-to-day management of TILT's Standard Farms cultivation and processing facility in White Haven, Pennsylvania. These management services include oversight of Standard Farms' budgeting, financial planning, compliance with applicable laws and quality management. In addition, pursuant to a licensing arrangement with us, upon regulatory approval, Standard Farms intends to produce and distribute our brands in Pennsylvania. Critical Accounting Policies and Estimates Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment: accounts receivable; valuation of inventory; estimated useful lives and depreciation and amortization of property and equipment and intangible assets; accounting for acquisitions and business combinations; loss contingencies and reserves; stock-based compensation; and accounting for income taxes. Accounts Receivable We provide credit to our clients in the form of payment terms. We limit our credit risk by performing credit evaluations of our clients and maintaining a reserve, as applicable, for potential credit losses. Such evaluations are judgmental in nature and include a review of each client’s outstanding balances with consideration toward such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Accordingly, the actual amounts collected could differ from expected amounts and require that we record additional reserves. Inventory Our inventory is valued at the lower of cost or market, including consideration of factors such as shrinkage, the aging of and future demand for inventory, expected future selling price, what we expect to realize by selling the inventory and the 33 Table of Contents contractual arrangements with customers. Reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts, and net realizable value. These estimates are judgmental in nature and are made at a point in time, using available information, expected business plans and expected market conditions. As a result, the actual amount received on sale could differ from the estimated value of inventory. Periodic reviews are performed on the inventory balance. The impact of any changes in inventory reserves is reflected in cost of goods sold. Estimated Useful Lives and Depreciation and Amortization of Property, Equipment, and Intangible Assets Depreciation and amortization of property, equipment, and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets. Business Combinations and Asset Purchases Classification of a business acquisition as a business combination or an asset acquisition depends on whether the assets acquired constitute a business, which can be a complex judgment. Whether an acquisition is classified as a business combination or asset acquisition can have a significant impact on how we record the transaction. We allocate the purchase price of acquired assets and companies to identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net amount of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits from other assets acquired in the acquisition or business combination that are not individually identified and separately recognized. Significant judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, which are principally based upon estimates of the future performance and cash flows expected from the acquired asset or business and applied discount rates. While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. If different assumptions are used, it could materially impact the purchase price allocation and our financial position and results of operations. Any adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period are included in operating results in the period in which the adjustments are determined. Intangible assets typically are comprised of trademarks and trade names, licenses and customer relationships, and non-compete agreements. Loss Contingencies and Reserves We are subject to ongoing business risks arising in the ordinary course of business that affect the estimation process of the carrying value of assets, the recording of liabilities, and the possibility of various loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such amounts should be adjusted and record changes in estimates in the period they become known. We are subject to legal claims from time to time. We reserve for legal contingencies and legal fees when the amounts are probable and estimable. Stock-Based Compensation Our stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, which is generally the vesting period. We use the Black-Scholes valuation model for estimating the fair value of stock options as of the date of grant. Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions, including the volatility of our stock price, expected term of the stock option, risk-free interest rate and expected dividends. Changes in such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes, however, would not impact our cash flows. Income Taxes We use 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 34 Table of Contents reverse. Deferred tax assets are reduced by a valuation allowance to the extent our management concludes that it is more likely than not that the assets will not be realized. To assess the recoverability of any tax assets recorded on the balance sheet, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative income in the most recent years, changes in the business in which we operate and our forecast of future taxable income. In determining future taxable income, we make assumptions, including the amount of state and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our businesses. Customer Loyalty Program – Adjustments to Correct Error in Prior Periods We have a customer loyalty program (the “Loyalty Program”) under which customers earn points based on qualifying purchases that can be redeemed for discounts on future purchases. Applying Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), a portion of the transaction price is allocated to the loyalty points based on their relative standalone selling price, and revenue is deferred until the points are redeemed or expire. During the third quarter of 2025, we determined that we were not accounting for the Loyalty Program in accordance with ASC 606 and, accordingly, calculated the amounts that should have been recorded in prior periods. These amounts were deemed immaterial to our condensed consolidated financial statements. We have adjusted our financial statements to reflect the impact of adjustments to prior periods, which adjustments are reflected in the condensed consolidated financial statements included herein. We recorded decreases to revenue of approximately $83,000 and $237,000 in the three and nine months ended September 30, 2025, respectively, an increase to revenue of approximately $4,000 in the three months ended September 30, 2024 and a decrease to revenue of approximately $202,000 in the nine months ended September 30, 2024. We recorded additional marketing and promotion expense of approximately $16,000 and $46,000 in the three and nine months ended September 30, 2025, respectively, a nominal credit to marketing and promotion expense in the three months ended September 30, 2024 and additional marketing and promotion expense of approximately $38,000 in the nine months ended September 30, 2024. OTCQX Listing On June 10, 2025, the OTC Markets Group notified us of our non-compliance with the minimum bid price requirement, thereby triggering a discretionary cure period. To regain compliance, we must have maintained a bid price of at least $0.10 per share for a minimum of 10 consecutive trading days by September 8, 2025, which occurred effective September 5, 2025. Results of Operations Three and nine months ended September 30, 2025 and 2024 Revenue Our main sources of revenue are comprised of the following: • Product sales (retail and wholesale) . Our product sales are derived from direct sales of cannabis and cannabis-infused products primarily by our retail dispensaries and wholesale operations in multiple states. We recognize revenue when products are delivered to third parties or at our retail points-of-sale. • Other revenue . Our 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 our branded products to wholesalers and regulated dispensaries. We recognize revenue in amounts that represent the consideration that we expect to receive in exchange for goods or services provided to customers as follows: • Identify the contract(s) with a customer; • Identify the performance obligations in the contract(s); 35 Table of Contents • 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 our clients, a determination is made as to who - us or the other party - is acting in the capacity as the principal in the sale transaction, and who is the agent arranging for goods or services to be provided by the other party. We are typically considered the principal if we control the specified good or service before such good or service is transferred to our client, and typically considered the agent if we do not exert such control. We may also be deemed to be the principal even if we engage another party (an agent) to satisfy some of the performance obligations on our behalf, provided we (i) take on certain responsibilities, obligations and risks, (ii) possess certain abilities and discretion, or (iii) fulfill other relevant indicators of the sale. If deemed an agent, we do not recognize revenue for the performance obligations we do not satisfy. Revenue for the three and nine months ended September 30, 2025 and 2024 was comprised of the following (in thousands): Increase (decrease) from prior year 2025 2024 $ % Three months ended September 30, Product sales - retail $ 22,573 $ 23,388 $ (815) (3.5) % Product sales - wholesale 18,031 16,310 1,721 10.6 % Other revenue 160 897 (737) (82.2) % Total revenue $ 40,764 $ 40,595 $ 169 0.4 % Nine months ended September 30, Product sales - retail $ 65,637 $ 69,151 $ (3,514) (5.1) % Product sales - wholesale 51,948 46,683 5,265 11.3 % Total other revenue 591 2,926 (2,335) (79.8) % Total revenue $ 118,176 $ 118,760 $ (584) (0.5) % Our product sales increased by $0.9 million and $1.8 million, respectively, in the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024. Decreases in retail sales were more than offset by increases in wholesale sales in each of the three and nine month ended September 30, 2025, compared to the same prior year periods. The decreases in retail sales in both current periods were primarily attributable to lower sales in our Metropolis, Illinois dispensary and, to a lesser extent, certain of our dispensaries in Massachusetts, Maryland and our other Illinois dispensaries. These decreases were partially offset by higher sales in our other dispensaries in Delaware, Maryland, Ohio and Massachusetts, as well as the inclusion of retail revenue from FSC for the period since the FSC Acquisition Date. The increases in our wholesale revenue were primarily attributable to higher wholesale revenue in Delaware, Illinois and Massachusetts. These increases were partially offset by a decline in wholesale revenue in Maryland. The decreases in total other revenue in the three and nine months ended September 30, 2025 compared to the same prior year periods were primarily attributable to the cessation of revenue recognition from management fees, rental income and other components of other income, effective as of the FSC Acquisition Date. Cost of Revenue, Gross Profit and Gross Margin Our cost of revenue represents the direct costs associated with the generation of our revenue, including licensing, packaging, supply procurement, manufacturing, supplies, depreciation, amortization of acquired intangible assets, and other product-related costs. 36 Table of Contents Our cost of revenue, gross profit and gross margin for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages): Increase (decrease) from prior year 2025 2024 $ % Three months ended September 30, Cost of revenue $ 24,401 $ 23,813 $ 588 2.5 % Gross profit $ 16,363 $ 16,782 $ (419) (2.5) % Gross margin 40.1 % 41.3 % Nine months ended September 30, Cost of revenue $ 70,797 $ 68,803 $ 1,994 2.9 % Gross profit $ 47,379 $ 49,957 $ (2,578) (5.2) % Gross margin 40.1 % 42.1 % The increases in our cost of revenue in both the three and nine months ended September 30, 2025 compared to the same prior year periods were primarily due to higher employee-related, facilities and related expenses, partially offset by lower inventory-related expenses. The increases in employee-related, facilities and related expenses were primarily due to our increased headcount in connection with our recent acquisitions and expanded footprint. Operating Expenses Our operating expenses are comprised of personnel, marketing and promotion, general and administrative, acquisition-related and other, and bad debt expenses. Our operating expenses for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages): Increase (decrease) from prior year 2025 2024 $ % Three months ended September 30, Personnel $ 7,028 $ 7,255 $ (227) (3.1) % Marketing and promotion 1,121 1,827 (706) (38.6) % General and administrative 6,592 6,100 492 8.1 % Acquisition-related and other 145 371 (226) (60.9) % Bad debt (122) (116) (6) 5.2 % $ 14,764 $ 15,437 $ (673) (4.4) % Nine months ended September 30, Personnel $ 21,761 $ 20,678 $ 1,083 5.2 % Marketing and promotion 2,810 5,484 (2,674) (48.8) % General and administrative 19,185 19,044 141 0.7 % Acquisition-related and other 396 805 (409) (50.8) % Bad debt 1,522 (131) 1,653 (1,261.8 %) $ 45,674 $ 45,880 $ (206) (0.4) % The decrease in our personnel expenses in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily related to the strategic elimination and consolidation of certain positions, coupled with lower expense in connection with certain employee benefits. These decreases were partially offset by increased headcount in connection with our acquisitions and expanded presence. The increase in our personnel expenses in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily attributable to increased headcount in connection with our acquisitions and expanded presence, partially offset by lower expense in connection with certain employee benefits. Personnel costs decreased to approximately 17% of revenue in the three months ended September 30, 2025, from approximately 18% in the three months ended September 30, 2024. Personnel costs increased to approximately 18% of revenue in the nine months ended September 30, 2025, compared to approximately 17% in the same prior year period. 37 Table of Contents The decreases in our marketing and promotion expenses in each of the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 were primarily attributable to our planned reductions to these expenditures; however, we continue to focus on judicious marketing initiatives that expand the branding and distribution of our licensed products. The increases in our general and administrative expenses in each of the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 were primarily attributable to higher facilities, stock-based compensation and insurance expenses. These increases were largely offset by decreases in certain other general and administrative expenses, such as professional fees, travel and entertainment. Acquisition-related and other expenses include those expenses related to acquisitive activities and other significant transactions that we would otherwise not have incurred, and include professional and services fees, such as legal, audit, consulting, paying agent and other fees. Our acquisition-related and other expense in each of the three and nine months ended September 30, 2025 primarily related to the FSC Acquisition and other acquisitive activities. Our acquisition-related and other expense in the three and nine months ended September 30, 2024 primarily related to the acquisitions of MedLeaf and Allgreens, which were both consummated in April 2024, and non-cash expense for warrants to purchase our common stock issued to an entity in consideration for introductory and other services rendered in connection with certain funding and acquisitive transactions. We recorded $0.1 million of credits to bad debt expense and $1.5 million of bad debt expense in the three and nine months ended September 30, 2025, respectively. The nine-month amount included $1.5 million of expense to fully reserve amounts due from two credit card service providers (the "Service Provider Receivables"). Of the $1.5 million of Service Provider Receivables, $1.3 million and the related reserve were included as components of Other assets and $0.2 million and the related reserve were included as components of Accounts Receivable in the condensed consolidated balance sheet at September 30, 2025. At December 31, 2024, the Service Provider Receivables were included as components of Cash. We recorded $0.1 million of credits to bad debt expense in each of the three and nine months ended September 30, 2024. Interest Interest expense primarily relates to interest on mortgages and notes payable, as well as the CREM Loan (described below). Interest income primarily relates to our notes receivable. Our net interest expense increased by $0.1 million in the three months ended September 30, 2025 compared to the three months ended September 30, 2024, and increased by $0.3 million in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. These increases were primarily due to the interest on additional finance leases and the refinancing of one of our mortgages. Other Income (Expense), Net We recorded net other income of approximately $19,000 and $36,000 in the three and nine months ended September 30, 2025, respectively. We recorded net other expense of approximately $50,000 in the nine months ended September 30, 2024, primarily related to changes in the fair value of investments. We did not record other income or expense in the three months ended September 30, 2024. Income Tax Provision We recorded income tax provisions of $2.8 million and $6.3 million in the three and nine months ended September 30, 2025, respectively, and $0.7 million and $3.2 million in the three and nine months ended September 30, 2024, respectively. We are subject to income taxes in the jurisdictions in which we operate, and consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As we operate in the federally illegal cannabis industry, we are subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended (“IRC”) Section 280E, under which taxpayers are only allowed to deduct expenses directly related to cost of goods sold of cannabis products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and a higher effective tax rate than most industries. As a result, our effective tax rate can be highly variable and may not necessarily correlate to pre-tax income or loss. 38 Table of Contents In June 2025, the IRS filed a lien against us in connection with an approximate $6 million 2023 tax liability. We are disputing the assessment through a Collection Due Process (“CDP”) Hearing and pursuing a resolution, including potential reduction or collection alternatives. While the matter is pending, IRS enforcement is generally stayed. Although the liability is fully accrued in the accompanying condensed consolidated financial statements, an unfavorable outcome could materially impact our operations and financial position. Liquidity and Capital Resources We had cash and cash equivalents of $6.6 million and $7.3 million at September 30, 2025 and December 31, 2024, respectively. In addition to the discussions below of our cash flows from operating, investing, and financing activities, please also see our discussion of non-GAAP Adjusted EBITDA in the section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by GAAP which our management also uses to measure our liquidity. CREM Loan On November 16, 2023, Mari Holdings MD LLC, Hartwell Realty Holdings LLC, Kind Therapeutics USA, LLC, ARL Healthcare Inc., and MariMed Advisors, Inc., each a wholly-owned direct or indirect subsidiary of the Company (collectively, the "CREM Borrowers") entered into a Loan Agreement (the "CREM Loan Agreement"), by and among the CREM Borrowers, and Needham Bank, a Massachusetts co-operative bank (the "CREM Lender") pursuant to which the CREM Lender loaned to the CREM Borrowers an aggregate principal amount of $58.7 million (the "CREM Loan Transaction"). The Company has fully guaranteed the obligations of the CREM Borrowers under the CREM Loan Transaction and pledged to the CREM Lender its equity ownership in each CREM Borrower. The CREM Lender has a first priority security interest in all of the CREM Borrowers' operating assets in Maryland and Massachusetts and first priority mortgages on the CREM Borrowers' properties owned in Maryland and Massachusetts. The CREM Loan Transaction is for a term of ten years and has an interest rate for the initial five years of 8.43% per annum. The interest rate will reset after five years to the FHLB Rate (the Classic Advance Rate for Fixed Rate advances for a period of five years for an amount greater than or equal to the loan amount, as such rate is defined and published by the Federal Home Loan Bank of Boston), plus 3.50%. We 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"), with the remaining proceeds of $5.9 million placed into in escrow to complete the expansion of our Hagerstown, Maryland cultivation facility (the "Hagerstown Facility"). Any unused proceeds would be released to us after completion of the Hagerstown Facility expansion. We used $46.8 million of the Initial CREM Distribution to fully repay certain of our outstanding debt obligations. These payments were comprised of $32.7 million to repay the previous term loan with Chicago Atlantic Admin, LLC, $11.9 million to repay the mortgage with Bank of New England for our New Bedford, MA and Middleborough, MA properties (the "BNE Mortgage"), and $2.2 million to reduce the outstanding balance of the note we issued in connection with the 2023 acquisition of Ermont, Inc. in Quincy, Massachusetts. Concurrent with the repayment of the BNE Mortgage, we refinanced these properties through the CREM Loan and accordingly, effective November 16, 2023, the mortgage on these properties is held by the CREM Lender, which mortgage matures in 2033 and which outstanding amount is included as a component of the CREM Loan amount in our consolidated balance sheets at September 30, 2025 and December 31, 2024. 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. Cash Flows from Operating Activities Our primary sources of cash from operating activities are from sales to customers in our dispensaries and to our wholesale customers. We expect cash flows from operating activities to be affected by increases and decreases in sales volumes and timing of collections, and by purchases of inventory and shipment of our products. Our primary uses of cash for operating 39 Table of Contents activities are for personnel costs, purchases of packaging and other materials required for the production and sale of our products, and income taxes. Our operating activities provided $4.3 million and $7.2 million of cash in the nine months ended September 30, 2025 and 2024, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to higher personnel costs and operating expenses arising from expanding our geographic presence. These higher costs primarily relate to personnel, cultivation/manufacturing and facility expenses. Cash Flows from Investing Activities Our investing activities used $1.2 million and $15.9 million of cash in the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025, we used $1.1 million of cash for capital expenditures and an aggregate of $0.4 million for advances toward future business acquisitions and purchases and renewals of cannabis licenses. These amounts were partially offset by $0.2 million of cash acquired in connection with the FSC Acquisition, approximately $45,000 of cash proceeds from the disposal of assets and approximately $26,000 of proceeds from notes receivable. During the nine months ended September 30, 2024, we used $10.9 million of cash for capital expenditures, an aggregate of $4.3 million for purchase consideration in connection with the MedLeaf Acquisition and Allgreens Acquisition, and $0.7 million for purchases and renewals of cannabis licenses. Cash Flows from Financing Activities Our financing activities used $3.8 million of cash in the nine months ended September 30, 2025 and provided $3.9 million of cash in the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we made $5.6 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases and made approximately $115,000 of distribution payments. We received $2.0 million from the refinancing of the mortgage on one of our facilities in Illinois, of which we used $0.7 million of proceeds to retire the previous mortgage on this facility, which amount is included in the aggregate principal payments discussed above. During the nine months ended September 30, 2024, we received $5.1 million of additional proceeds from the CREM Loan (described above) and $1.2 million of proceeds from the refinancing of our retail facility in Mt. Vernon, Illinois. We made $2.2 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $120,000 of distribution payments. Based on our current expectations, we believe our current cash and future funding opportunities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at September 30, 2025, and our ability to raise additional cash through financing activities. Our contractual obligations at September 30, 2025 were primarily comprised of our outstanding CREM Loan, mortgages, promissory notes, and operating and finance leases. Our CREM Loan, mortgage and promissory note obligations totaled approximately $73 million at September 30, 2025. Non-GAAP Measurement In addition to the financial information reflected in this report, which is prepared in accordance with GAAP, we are providing a non-GAAP financial measurement of profitability – Adjusted EBITDA – as a supplement to the preceding discussion of our financial results. Our management 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. 40 Table of Contents Our management believes that Adjusted EBITDA is a useful measure to assess our performance and liquidity, as it provides meaningful operating results by excluding the effects of expenses that are not reflective of our operating business performance. In addition, our management uses Adjusted EBITDA to understand and compare operating results across accounting periods, and for financial and operational decision-making. 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. Our management believes that investors and analysts benefit from considering Adjusted EBITDA in assessing our financial results and our ongoing business, as it allows for meaningful comparisons and analysis of trends in the business. Adjusted EBITDA is used by many investors and analysts themselves, along with other metrics, to compare financial results across accounting periods and to those of peer companies. As there are no standardized methods of calculating non-GAAP measurements, our calculations may differ from those used by analysts, investors, and other companies, even those within the cannabis industry, and therefore they may not be directly comparable to similarly titled measures used by others. Reconciliation of Income from Operations to Adjusted EBITDA (a Non-GAAP Measurement) The table below reconciles income from operations to Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands): Three months ended Nine months ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 GAAP Income from operations $ 1,599 $ 1,345 $ 1,705 $ 4,077 Depreciation and amortization of property and equipment 2,115 1,803 6,036 5,749 Amortization of acquired intangible assets 674 882 2,592 2,065 Stock-based compensation 382 280 1,478 772 Severance 224 — 224 — Acquisition-related and other 145 371 396 805 Adjusted EBITDA $ 5,139 $ 4,681 $ 12,431 $ 13,468 Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue, expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. Inflation In the opinion of management, inflation has impacted us through increased costs of ingredients, nutrients and packaging. We recently negotiated with certain of our suppliers to reduce our costs for future purchases of ingredients, nutrients and packaging, all of which have increased significantly as a result of current economic conditions. Seasonality In the opinion of management, our financial condition and results of its operations are not materially impacted by seasonal sales. Recent Accounting Pronouncements We have reviewed all recently issued, but not yet effective, accounting pronouncements, and we do not believe the future adoption of any such pronouncements will have a material impact on our financial condition or results of operations. 41 Table of Contents Item 3. Quantitative and Qualitative Disclosure About Market Risk The Company is a “smaller reporting company” as defined by Regulation S-K and, as such, is not required to provide the information contained in this item pursuant to Regulation S-K.