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, 2025 (the "2025 10-K"), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2026. 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 United States 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 select domestic markets, although licensing revenues are not material to our overall results of operations. Cannabis remains illegal under United States federal law. Our operations are conducted in compliance with applicable state and local laws and regulations in the jurisdictions in which we operate. 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 our acquisition of FSC (the "FSC Acquisition"), FSC had been our managed services client. The financial results of FSC are included in our consolidated financial statements for the periods subsequent to the FSC Acquisition Date. On February 24, 2026, we and the holders of our Series B Convertible Preferred Stock (the "Series B Holders") entered into a Restructuring and Exchange Agreement (the "Series B Restructuring Agreement") to restructure our existing obligation under the Series B Convertible Preferred Stock (the "Series B Obligation"). Pursuant to the Series B Restructuring Agreement, all outstanding shares of Series B Convertible Preferred Stock were cancelled, and the Series B Obligation was extinguished. In exchange, we issued to the Series B Holders (i) two new promissory notes in the aggregate principal amount of $8.0 million, one in the principal amount of $2.0 million, due March 1, 2028, accruing 30 Table of Contents interest at a rate of 8.0% per annum (“Note #1”) and the other in the principal amount of $6.0 million, due March 1, 2031, accruing interest at a rate of 10.0% per annum (subject to reduction to 8.0% if Note #1 is paid in full within six (6) months of February 24, 2026) (“Note #2” collectively with Note #1, the “New Notes”), and (ii) 26,900,000 shares of an amended and restated class of our Series B Convertible Preferred Stock (the “New Series B Preferred Stock”), having an aggregate liquidation preference of $6.725 million ($0.25 per share), and the rights, preferences and privileges set forth in the Second Amended and Restated Certificate of Designation filed with the Secretary of State of the State of Delaware on February 26, 2026. The New Notes are guaranteed by certain of our subsidiaries pursuant to a Subsidiary Guaranty, dated as of February 24, 2026. We recognized a gain on the extinguishment of $0.7 million. 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. 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. 31 Table of Contents 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 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. Customer Loyalty Program We have a customer loyalty program (the “Loyalty Program”) under which customers who participate in the Loyalty Program earn points based on qualifying purchases that can be redeemed for discounts on future purchases. 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. 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 32 Table of Contents 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 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. Results of Operations Three months ended March 31, 2026 and 2025 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); • 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. 33 Table of Contents Revenue for the three months ended March 31, 2026 and 2025 was comprised of the following (in thousands, except percentages): Three months ended Increase (decrease) March 31, from prior year 2026 2025 $ % Product sales - retail $ 21,727 $ 20,730 $ 997 4.8 % Product sales - wholesale 17,517 16,786 731 4.4 % Other revenue 237 390 (153) (39.2) % Total revenue $ 39,481 $ 37,906 $ 1,575 4.2 % Our product sales increased by $1.7 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in retail sales was primarily attributable to our dispensaries in Delaware and Maryland, partially offset by lower sales in certain of our other dispensaries in Illinois and, to a lesser extent, our Massachusetts dispensaries. The increase in our wholesale revenue was primarily attributable to higher wholesale revenue in Delaware and Illinois, partially offset by lower wholesale revenue in Maryland. The decrease in total other revenue in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily attributable to the cessation of revenue recognition from management fees, rental income and other components of other income from FSC prior to its acquisition by us in March 2025. 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. Our cost of revenue, gross profit and gross margin for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages): Three months ended Increase March 31, from prior year 2026 2025 $ % Cost of revenue $ 24,205 $ 22,817 $ 1,388 6.1 % Gross profit $ 15,276 $ 15,089 $ 187 1.2 % Gross margin 38.7 % 39.8 % The increase in our cost of revenue in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to higher employee- and facilities-related expenses. This increase primarily resulted from the inclusion of FSC expenses for the full quarter in 2026 and the expansion of our production footprint in Maryland. 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 months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages): Three months ended Increase (decrease) March 31, from prior year 2026 2025 $ % Personnel $ 7,254 $ 7,341 $ (87) (1.2) % Marketing and promotion 765 908 (143) (15.7) % General and administrative 6,887 6,250 637 10.2 % Acquisition-related and other 169 112 57 50.9 % Bad debt 76 1,388 (1,312) (94.5 %) $ 15,151 $ 15,999 $ (848) (5.3) % 34 Table of Contents Our personnel expenses were relatively unchanged in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The slight decrease in the three months ended March 31, 2026 compared to the same prior year period was primarily attributable to the elimination of employee expenses in connection with our pre-acquisition operations in Missouri, which we exited in the fourth quarter of 2025, coupled with lower employee cash incentive payments. Personnel costs decreased to approximately 18% of revenue in the three months ended March 31, 2026, from approximately 19% in the three months ended March 31, 2025. The decrease in our marketing and promotion expenses in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was 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 increase in our general and administrative expenses in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were primarily attributable to higher facility-related, employee travel and entertainment, and depreciation expenses. These increases were largely offset by decreases in certain other general and administrative expenses, such as stock-based compensation, amortization of acquired intangible assets, and insurance. 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 expenses in the three months ended March 31, 2026 primarily related to multiple pre-acquisitive and similar activities. Our acquisition-related and other expenses in the three months ended March 31, 2025 primarily related to the FSC Acquisition. We recorded $0.1 million of bad debt expense in the three months ended March 31, 2026 to reserve for certain trade receivable accounts. We recorded $1.4 million of bad debt expense in the three months ended March 31, 2025, comprised of $1.3 million of expense to fully reserve an amount due from a credit card service provider (the "Service Provider Receivable") and $0.1 million of expense to reserve for certain trade accounts receivable accounts. The reserve was reported as a component of Other assets in our condensed consolidated balance sheets at each of March 31, 2026 and December 31, 2025. 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 $0.2 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. This increase was primarily due to the inclusion in the three months of March 31, 2026 of interest on finance leases entered into in the third quarter of 2025. Gain on Extinguishment of Debt We recognized a gain on the extinguishment of debt of $0.7 million in connection with the Series B Restructuring Agreement described in the “Overview” section above. Income Tax Provision We recorded income tax provisions of $2.7 million and $2.8 million in the three months ended March 31, 2026 and 2025, 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 (the “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. On April 23, 2026, the U.S. Department of Justice (the “DOJ”) issued a final order that placed both FDA-approved drugs containing cannabis and cannabis subject to a qualifying state medical list in Schedule III of the Controlled Substances Act. 35 Table of Contents As a result, business conducted within these categories is no longer subject to IRC Section 280E, allowing for full deduction of ordinary and necessary business expenses. Due to the timing of when the final order was issued, we did not record the impact in our income tax provision for the three months ended March 31, 2026. We continue to monitor guidance from the DOJ and the U.S. Internal Revenue Service (the "IRS") to properly record and disclose any impact in our future financial statements. In February 2026, the IRS filed a lien against FSC in connection with an approximate $1 million tax liability for the years 2023 and 2024, which periods were prior to the FSC Acquisition Date. We recorded this liability as part of the allocation of the purchase consideration for FSC. In June 2025, the IRS filed a lien against us in connection with an approximate $6 million 2023 tax liability. We are disputing these assessments through Collection Due Process Hearings and pursuing resolutions, including potential reductions or collection alternatives. While the matters are pending, IRS enforcement is generally stayed. Although the liabilities are fully accrued in the accompanying condensed consolidated financial statements, unfavorable outcomes could materially impact our operations and financial position. Liquidity and Capital Resources We had cash, cash equivalents and restricted cash aggregating $7.9 million and $8.9 million at March 31, 2026 and December 31, 2025, 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 March 31, 2026 and December 31, 2025. 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 36 Table of Contents 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. Effective December 31, 2025, we and the CREM Borrowers entered into a First Amendment to the CREM Loan Agreement (the "Amendment") in connection with a federal tax lien filed against us relating to our 2023 income taxes (the "Tax Lien"), which we are disputing (the "Disputed Taxes"). Pursuant to the Amendment, beginning in January 2026, the CREM Borrowers are required to deposit $100,000 per month into a non-interest-bearing cash collateral reserve account to be held by the CREM Lender until the full amount of the Disputed Taxes is on deposit. The account is pledged as additional collateral under the CREM Loan Agreement and the amounts on deposit are available for payment of the Disputed Taxes. The Amendment also modified the CREM Borrowers' reporting obligations under the CREM Loan Agreement. All other material terms of the CREM Loan Agreement remain in effect. 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 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 $0.9 million and $1.3 million of cash in the three months ended March 31, 2026 and 2025, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to expenses arising from expanding our geographic presence. These higher costs primarily relate to cultivation/manufacturing, personnel and facility-related expenses. Cash Flows from Investing Activities Our investing activities used $0.8 million and $0.1 million of cash in the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026, we used $0.4 million for each of purchases of cannabis licenses and for capital expenditures. During the three months ended March 31, 2025, we used $0.3 million of cash for capital expenditures and $0.1 million in the aggregate for advances toward future business acquisitions and purchases of cannabis licenses. These amounts were partially offset by $0.2 million of cash acquired in connection with the FSC Acquisition and approximately $26,000 of proceeds from notes receivable. Cash Flows from Financing Activities Our financing activities used $1.1 million and $1.3 million of cash in the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026, we made $1.1 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $49,000 of distribution payments. During the three months ended March 31, 2025, we made $1.2 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $58,000 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 March 31, 2026, and our ability to raise additional cash through financing activities. Our contractual obligations at March 31, 2026 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 $79 million at March 31, 2026. 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. 37 Table of Contents Our management defines Adjusted EBITDA as income (loss) 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. 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 (loss) from operations to Adjusted EBITDA for the three months ended March 31, 2026 and 2025 (in thousands): Three months ended March 31, 2026 March 31, 2025 GAAP Income (loss) from operations $ 125 $ (910) Depreciation and amortization of property and equipment 2,153 1,807 Amortization of acquired intangible assets 810 949 Stock-based compensation 325 547 Acquisition-related and other 169 112 Adjusted EBITDA $ 3,582 $ 2,505 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. 38 Table of Contents 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. 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.