mrmd-20230331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended March 31, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File number 0-54433

MARIMED INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						27-4672745
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

10 Oceana Way

Norwood, MA 02062

(Address of Principal Executive Offices)

781-277-0007

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class

Ticker symbol(s)

Name of each exchange on which registered

Not Applicable

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer o

Accelerated filer

Non-accelerated filer o

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 4, 2023, 362,190,245 shares of the registrant’s common stock were outstanding.

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MariMed Inc.

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		Page
PART I – FINANCIAL INFORMATION

Cautionary Note Regarding Forward-Looking Statements		3
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)	4
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	41
Item 4.	Controls and Procedures	41

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	42
Signature		45

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to MariMed Inc. that is based on the beliefs of MariMed Inc.’s management, as well as assumptions made by and information currently available to the Company. In some cases, you can identify these statements by forward-looking words such as “anticipates,” “believes,” “could,” “should,” “estimates,” “expects,” “intends,” “may,” “plans,” “predicts,” “projects,” “will,” or other similar or comparable words. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. Such statements reflect the current views of the Company with respect to future events, including consummation of pending transactions, launch of new products, expanded distribution of existing products, obtaining new licenses, estimates and projections of revenue, EBITDA and Adjusted EBITDA and other information about its business, business prospects and strategic growth plan, which are based on certain assumptions of its management, including those described in this Quarterly Report on Form 10-Q. These statements are not a guarantee of future performance and involve risk and uncertainties that are difficult to predict, including, among other factors, changes in demand for the Company’s services and products, changes in the law and its enforcement, timing and outcome of regulatory processes and changes in the economic environment.

Additional important factors that could cause actual results to differ materially from those in these forward-looking statements are also discussed in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Any forward-looking statement made by the Company in this Quarterly Report on Form 10-Q speaks only as of the date on which this Quarterly Report on Form 10-Q was first filed. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

MariMed Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	21,595	$	9,737
Accounts receivable, net of allowances of $716 and $4,603 at March 31, 2023 and December 31, 2022, respectively	4,334		4,157
Deferred rents receivable	686		704
Notes receivable, current portion	2,639		2,637
Inventory	22,723		19,477
Investments, current	104		123
Due from related parties	49		29
Other current assets	7,244		7,282
Total current assets	59,374		44,146
Property and equipment, net	73,714		71,641
Intangible assets, net	19,480		14,201
Goodwill	12,004		8,079
Notes receivable, net of current	7,523		7,467

Operating lease right-of-use assets	10,122		4,931
Finance lease right-of-use assets	871		713
Other assets	1,303		1,024
Total assets	$	184,391	$	152,202

Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Term loan	$	3,300	$	—
Mortgages and notes payable, current portion	2,773		3,774
Accounts payable	4,665		6,626
Accrued expenses and other	2,968		3,091
Income taxes payable	8,683		11,489
Operating lease liabilities, current portion	1,798		1,273
Finance lease liabilities, current portion	322		237
Total current liabilities	24,509		26,490
Term loan, net of current	20,803		—
Mortgages and notes payable, net of current	26,610		25,943
Operating lease liabilities, net of current	8,837		4,173
Finance lease liabilities, net of current	538		461

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MariMed Inc.

Condensed Consolidated Balance Sheets (continued)

(in thousands, except share and per share amounts)

(unaudited)


	March 31, 2023		December 31, 2022
Other liabilities	100		100
Total liabilities	81,397		57,167

Commitments and contingencies

Mezzanine equity:
Series B convertible preferred stock, $0.001 par value; 4,908,333 shares authorized, issued and outstanding at March 31, 2023 and December 31, 2022	14,725		14,725
Series C convertible preferred stock $0.001 par value; 12,432,432 shares authorized; 6,216,216 shares issued and outstanding at March 31, 2023 and December 31, 2022	23,000		23,000
Total mezzanine equity	37,725		37,725

Stockholders’ equity
Undesignated preferred stock, $0.001 par value; 32,659,235 shares authorized; zero shares issued and outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value; 700,000,000 shares authorized; 348,126,911 and 341,474,728 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	348		341
Common stock subscribed but not issued	2		39
Additional paid-in capital	151,052		142,365
Accumulated deficit	(84,569)		(83,924)
Noncontrolling interests	(1,564)		(1,511)
Total stockholders’ equity	65,269		57,310
Total liabilities, mezzanine equity and stockholders’ equity	$	184,391	$	152,202

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)


	Three months ended
	March 31,
		2023		2022

Revenue		$	34,380	$	31,282
Cost of revenue		18,992		14,306
Gross profit		15,388		16,976

Operating expenses:
Personnel		4,656		3,042
Marketing and promotion		1,146		643
General and administrative		4,305		6,228
Acquisition-related and other		190		—
Bad debt		(44)		14
Total operating expenses		10,253		9,927

Income from operations		5,135		7,049

Interest and other (expense) income:
Interest expense		(2,505)		(313)
Interest income		99		163
Other (expense) income, net		(900)		1,002
Total interest and other (expense) income		(3,306)		852

Income before income taxes		1,829		7,901
Provision for income taxes		2,493		3,660

Net (loss) income		(664)		4,241
Less: Net (loss) income attributable to noncontrolling interests		(19)		53
Net (loss) income attributable to common stockholders		$	(645)	$	4,188

Net (loss) earnings per share attributable to common stockholders:
Basic		$	(0.00)	$	0.01
Diluted		$	(0.00)	$	0.01

Weighted average common shares outstanding:
Basic		342,794		334,763
Diluted		342,794		378,890

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(unaudited)


	Three months ended March 31, 2023
	Common stock			Common stock subscribed but not issued			Additional paid-in capital		Accumulated deficit		Non- controlling interests		Total stockholders’ equity
	Shares	Par value		Shares	Amount
Balances at January 1, 2023	341,474,728	$	341	70,000	$	39	$	142,365	$	(83,924)	$	(1,511)	$	57,310
Issuance of subscribed shares	70,000	—		(70,000)	(39)		39		—		—		—




Common stock subscribed but not issued	—	—		5,025	2		—		—		—		2
Warrants issued in connection with debt	—	—		—	—		5,454		—		—		5,454
Shares issued as purchase consideration - business acquisition	6,580,390	7		—	—		2,987		—		—		2,994

Common stock issued to settle obligations	1,793	—		—	—		1		—		—		1

Distributions to non-controlling interests	0	—		—	—		—		—		(34)		(34)
Stock-based compensation	0	—		—	—		206		—		—		206
Net loss	0	—		—	—		—		(645)		(19)		(664)
Balances at March 31, 2023	348,126,911	$	348	5,025	$	2	$	151,052	$	(84,569)	$	(1,564)	$	65,269


	Three months ended March 31, 2022
	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, 2022	334,030,348	$	334	—	$	—	$	134,920	$	(97,392)	$	(1,563)	$	36,299

Exercise of stock options	10,000	—		—	—		3		—		—		3


Common stock subscribed but not issued	—	—		2,717	2		—		—		—		2



Conversion of promissory notes to equity	1,142,858	1		—	—		399		—		—		400


Obligations settled with common stock	375,000	1		—	—		273		—		—		274



Distributions to non-controlling interests	—	—		—	—		—		—		(101)		(101)
Stock-based compensation	—	—		—	—		2,469		—		—		2,469
Net income	—	—		—	—		—		4,188		53		4,241
Balances at March 31, 2022	335,558,206	$	336	2,717	$	2	$	138,064	$	(93,204)	$	(1,611)	$	43,587

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three months ended
	March 31,
	2023		2022
Cash flows from operating activities:
Net (loss) income attributable to common stockholders	$	(645)	$	4,188
Net (loss) income attributable to noncontrolling interests	(19)		53
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:
Depreciation and amortization of property and equipment	986		702
Amortization of intangible assets	557		140
Stock-based compensation	208		2,471



Amortization of original issue discount	55		—
Amortization of debt discount	328		—
Payment-in-kind interest	118		—
Present value adjustment of notes payable	719		—
Bad debt (income) expense	(44)		14
Obligations settled with common stock	1		274

Write-off of disposed assets	906		—
Gain on finance lease adjustment	(13)		—

Loss (gain) on changes in fair value of investments	20		(48)
Other investment income	—		(954)
Changes in operating assets and liabilities:
Accounts receivable, net	(132)		(1,810)
Deferred rents receivable	18		92
Inventory	(3,246)		(2,470)
Other current assets	639		(739)
Other assets	19		—
Accounts payable	(1,961)		3,212
Accrued expenses and other	(207)		(227)
Income taxes payable	(2,806)		3,592
Net cash (used in) provided by operating activities	(4,499)		8,490

Cash flows from investing activities:
Purchases of property and equipment	(3,052)		(4,015)
Business acquisitions, net of cash acquired	(2,995)		—

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MariMed Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)


	Three months ended
	March 31,
	2023		2022
Advances toward future business acquisitions	(300)		(100)
Purchases of cannabis licenses	(601)		(305)

Proceeds from notes receivable	43		43
Due from related party	(20)		—

Net cash used in investing activities	(6,925)		(4,377)

Cash flows from financing activities:
Proceeds from issuance of term loan	29,100		—



Principal payments of mortgages and promissory notes	(212)		(176)
Repayment of promissory notes	(5,503)		—

Proceeds from exercise of stock options	—		3


Principal payments of finance leases	(69)		(55)

Distributions	(34)		(101)
Net cash provided by (used in) financing activities	23,282		(329)

Net increase in cash and cash equivalents	11,858		3,784
Cash and equivalents, beginning of year	9,737		29,683
Cash and cash equivalents, end of period	$	21,595	$	33,467

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,100	$	302
Cash paid for income taxes	$	5,296	$	68

Non-cash activities:
Common stock issued as purchase consideration	$	2,994	$	—
Conversion of promissory notes to equity	$	—	$	400

Present value of promissory note issued as purchase consideration	$	4,569	$	—
Warrants to purchase common stock issued with debt	$	5,454	$	—

Note payable issued to purchase motor vehicle	$	49	$	—

Entry into new operating leases	$	5,366	$	—
Entry into new finance leases	$	224	$	514


Issuance of common stock associated with subscriptions	$	39	$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

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MariMed Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) BASIS OF PRESENTATION

Business

MariMed Inc. (“MariMed” or the “Company”) is a multi-state operator in the United States cannabis industry. MariMed develops, operates, manages and optimizes state-of-the-art, regulatory-compliant facilities for the cultivation, production, and dispensing of medical and adult use cannabis. MariMed also licenses its proprietary brands of cannabis, along with other top brands, in domestic markets.

Basis of Presentation

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

On April 27, 2022 (the “Kind Acquisition Date”), the Company acquired Kind Therapeutics USA (“Kind”), the Company's former client in Maryland that holds licenses for the cultivation, production and dispensing of medical cannabis (the "Kind Acquisition"). The financial results of Kind are included in the Company’s condensed consolidated financial statements for the three months ended March 31, 2023.

On March 9, 2023, (the "Ermont Acquisition Date"), the Company acquired the operating assets of Ermont, Inc. ("Ermont"), a medical-licensed vertical cannabis operator located in Quincy, Massachusetts (the "Ermont Acquisition"). The financial results of Ermont are included in the Company's condensed consolidated financial statements for the period subsequent to the Ermont Acquisition Date.

The Company completed two acquisitions during the year ended December 31, 2022 that it recorded as asset purchases. On May 5, 2022 (the "Green Growth Acquisition Date"), the Company completed the acquisition of 100% of the equity of Green Growth Group Inc. ("Green Growth"), an entity that holds a craft cultivation and production cannabis license in Illinois (the "Green Growth Acquisition"). On December 30, 2022 (the "Greenhouse Naturals Acquisition Date"), the Company completed an asset purchase under which it acquired a cannabis license and assumed a property lease for a dispensary in Beverly, Massachusetts that had never been operational.

Interim results are not necessarily indicative of results for the full fiscal year or any future interim period. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 3, 2023.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2 to the Consolidated Financial Statements in the Annual Report. There were no material changes to the Company's significant accounting policies during the three-month period ended March 31, 2023.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of MariMed and its wholly- and majority-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Noncontrolling interests represent third-party minority ownership interests in the Company’s majority-owned consolidated subsidiaries. Net income attributable to noncontrolling interests is reported in the condensed consolidated statements of operations, and the value of minority-owned interests is presented as a component of equity within the condensed consolidated balance sheets.

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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 condensed consolidated financial statements include accounting for business combinations and asset purchases, inventory valuations, assumptions used to determine the fair value of stock-based compensation, and intangible assets and goodwill. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity date of three months or less to be cash equivalents. The fair values of these investments approximate their carrying values.

At December 31, 2022, the Company had $0.1 million of cash held in escrow. The Company did not have any cash held in escrow at March 31, 2023.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments approximate their fair values and include cash equivalents, accounts receivable, deferred rents receivable, notes receivable, term loans, mortgages and notes payable, and accounts payable.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The three-tier fair value hierarchy is based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

•Level 1. Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

•Level 2. Level 2 applies to assets or liabilities for which there are inputs that are directly or indirectly observable in the marketplace, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).

•Level 3. Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, Accounting Standards Updates (“ASUs”) and does not believe that the future adoption of any such ASUs will have a material impact on its financial condition or results of operations.

(2) BUSINESS COMBINATIONS AND ASSET PURCHASES

Business Combinations

Ermont

On February 21, 2023, the Company announced its intention to acquire the operating assets of Ermont, Inc. ("Ermont"), a medical licensed vertical cannabis operator, located in Quincy, Massachusetts, subject to approval by the Massachusetts Cannabis Control Commission (the "CCC"). In March 2023, the CCC approved the Company's acquisition of Ermont, and the Ermont Acquisition was completed on the Ermont Acquisition Date. The Ermont Acquisition provided the Company

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with its third dispensary in Massachusetts, substantially completing its build-out to the maximum allowable by state regulations.

As consideration for the Ermont Acquisition, which totaled $13.0 million, the Company paid $3.0 million of cash, issued 6,580,390 shares of the Company's common stock, and issued a $7.0 million promissory note (the "Ermont Note", and collectively, the "Ermont Consideration"). The Ermont Note has a six-year term and bears interest at 6.0% per annum, with payments of interest-only for two years and thereafter, quarterly payments of principal and interest in arrears. The outstanding balance on the Ermont Note is due and payable in full if and when the Company raises $75 million of equity capital.

The Company rebranded the dispensary as Panacea Wellness Dispensary and commenced medical sales immediately after the Ermont Acquisition Date. The Ermont Acquisition includes a Host Community Agreement with the city of Quincy to conduct adult-use cannabis sales. The Company expects to commence adult-use sales upon approval by the CCC. The Company also plans to expand the existing medical dispensary to accommodate the expected increased traffic associated with adult-use sales. Additionally, the Company plans to repurpose Ermont's existing cultivation facility to use for its pheno-hunting activities. The Company expects this will allow it to move pheno-hunting out of its New Bedford facility and to use the freed space in New Bedford for much-needed additional capacity to cultivate its Nature's Heritage flower.

The Company's condensed consolidated statement of operations for the three months ended March 31, 2023 includes approximately $230,000 of revenue and approximately $42,000 of net loss attributable to Ermont for the period since the Ermont Acquisition Date.

The Ermont Acquisition has been accounted for as a business acquisition, and the financial results of Ermont have been included in the Company' condensed consolidated statements for the period since the Ermont Acquisition Date. The Company did not assume any of Ermont's liabilities. A summary of the preliminary of 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	(5)
Net cash consideration	2,995
Common stock	2,994
Promissory note	4,569
Total fair value of consideration	$	10,558


Fair value of assets acquired and (liabilities assumed):

Property and equipment	$	800
Intangible assets:
Tradename and trademarks	1,060
Licenses and customer base	4,773

Goodwill	3,925

Fair value of net assets acquired	$	10,558

The Company is amortizing the identifiable intangible assets arising from the Ermont Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 10.91 years (see Note 9). Goodwill results from assets not separately identifiable as part of the transaction, and is not deductible for tax purposes.

Kind

In December 2021, the Company entered into a membership interest purchase agreement with the members of Kind to acquire 100% of the equity ownership of Kind in exchange for $13.5 million payable in cash (subject to certain adjustments) and $6.5 million payable by the issuance of four-year 6.0% promissory notes to the members of Kind, secured by a first priority lien on the Company’s property in Hagerstown, Maryland (collectively, the “Kind Consideration”). Kind was the Company's client in Maryland that held licenses for the cultivation, production and dispensing of medical cannabis.

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Upon execution of the membership interest purchase agreement, the Company deposited $5.0 million into escrow as a contract down payment.

In April 2022, the Maryland Medical Cannabis Commission approved the Company’s acquisition of Kind, and the Kind Acquisition was completed on the Kind Acquisition Date. Following the Kind Acquisition, litigation between the Company and the members of Kind was dismissed (see Note 18).

The Kind Acquisition has been accounted for as a business combination, and the financial results of Kind have been included in the Company’s condensed consolidated financial statements since the Kind Acquisition Date. A summary of the final allocation of the Kind Consideration to the acquired assets, identifiable intangible assets and certain assumed liabilities is as follows (in thousands):


Fair value of consideration transferred:
Cash consideration:
Cash paid at closing	$	10,128
Release of escrow	2,444
Severance paid from escrow	556
Less cash acquired	(2,310)
Net cash consideration	10,818
Note payable	5,634
Write-off accounts receivable	658
Write-off of deferred accounts receivable	842
Total fair value of consideration transferred	$	17,952


Fair value of assets acquired and (liabilities assumed):
Current assets, net of cash acquired	$	5,047
Property and equipment	622
Intangible assets:
Tradename and trademarks	2,041
Licenses and customer base	4,700
Non-compete agreements	42
Goodwill	6,011
Current liabilities	(511)
Fair value of net assets acquired	$	17,952

The Company is amortizing the identifiable intangible assets arising from the Kind Acquisition in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which have a weighted average life of 5.77 years (see Note 9). Goodwill results from assets not separately identifiable as part of the transaction, and is not deductible for tax purposes.

Concurrent with entering into the Kind membership purchase agreement, the Company entered into a membership interest purchase agreement with one of the members of Kind to acquire such member’s entire equity ownership interest in (i) Mari Holdings MD LLC (“Mari-MD”), the Company’s majority-owned subsidiary that owns production and retail cannabis facilities in Hagerstown, Maryland and Annapolis, Maryland, and (ii) Mia Development LLC (“Mia”), the Company’s majority-owned subsidiary that owns production and retail cannabis facilities in Wilmington, Delaware. Upon the dismissal in September 2022 of the derivative claims in the DiPietro lawsuit (see Note 18), the Company paid the aggregate purchase consideration of $2.0 million, and the transaction was completed, increasing the Company’s ownership of Mari-MD and Mia to 99.7% and 94.3%, respectively.

The following unaudited pro forma information presents the condensed combined results of MariMed and Kind for the year ended December 31, 2022 as if the Kind Acquisition had been completed on January 1, 2021, with adjustments to give effect to pro forma events that are directly attributable to the Kind Acquisition. These pro forma adjustments include the reversal of MariMed revenue and related cost of sales derived from Kind prior to the Kind Acquisition Date, amortization expense for the acquired intangible assets, depreciation expense for property and equipment acquired by MariMed as part of the Kind Acquisition, and interest expense related to the Kind Notes. Pro forma adjustments also include the elimination

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of acquisition-related and other expense directly attributable to the Kind Acquisition from the year ended December 31, 2022.

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 Kind. 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 Kind Acquisition occurred at January 1, 2022, nor are they intended to represent or be indicative of future results of operations. The pro forma financial results for the year ended December 31, 2022 giving effect to the Kind Acquisition as if it had occurred at January 1, 2021 are as follows (unaudited, in thousands):





Revenue	$	136,078
Net income	$	15,823

Valuation of Acquired Intangible Assets

The valuation of acquired intangible assets is inherently subjective and relies on significant unobservable inputs. The Company uses an income approach to value acquired tradename/trademarks, licenses/customer base, and non-compete intangible assets. The valuation for each of these intangible assets 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

Green Growth

In January 2022, the Company entered into a stock purchase agreement to acquire 100% of the equity ownership of Green Growth Group Inc. (“Green Growth”), an entity that holds a craft cultivation and production cannabis license issued by the Illinois Department of Agriculture, in exchange for cash of $1.9 million and shares of the Company’s common stock valued at $1.5 million. Concurrently, the Company made a good faith deposit of $0.1 million.

In April 2022, the Illinois Department of Agriculture approved the Company’s acquisition of Green Growth, and the Green Growth Acquisition was completed on the Green Growth Acquisition Date. The Company paid the remaining $1.8 million in cash and issued 2,343,750 shares of common stock to the sellers on the Green Growth Acquisition Date. With this license, the Company can cultivate up to 14,000 square feet of canopy to grow cannabis flower and produce cannabis concentrates.

The Company has allocated the purchase price to its licenses/customer base intangible asset, with an estimated useful life of ten years.

Greenhouse Naturals

In November 2021, the Company entered into an asset purchase agreement with Greenhouse Naturals LLC (the "Greenhouse Naturals Sellers") to acquire the cannabis license and assume the property lease associated with a cannabis dispensary in Beverly, MA.

The purchase transaction (the "Greenhouse Naturals Acquisition") was completed on December 30, 2022 (the "Greenhouse Naturals Acquisition Date"). The Company paid $0.1 million of cash and issued 2,000,000 shares of the Company's common stock, with a fair value of $0.7 million on the Greenhouse Naturals Acquisition Date, to the Sellers. The Company issued a note to the Greenhouse Naturals Sellers for the remaining $5.0 million of the cash purchase price payable post-closing on a monthly basis as a percentage of the dispensary's monthly gross sales (the "Greenhouse Naturals Note"). The Company has recorded the Greenhouse Naturals Note at present value of $4.3 million. The difference between the face value of the Greenhouse Naturals Note and the net present value recorded will be amortized to interest expense over the term of the note. The final inspection by the State of Massachusetts was completed in April 2023, and the Company opened the dispensary on April 25, 2023. The Company has allocated the purchase price to a licenses/customer base intangible asset, which has an estimated useful life of 10 years.

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Pending Transactions

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 $2,250,000 of cash. Completion of the acquisition is dependent upon certain conditions, including resolution of any remaining legal challenges affecting nearly 200 social equity dispensary licenses, and regulatory approval of the acquisition. Once the acquisition is complete, which the Company expects to occur in 2023, the Company will have five adult-use dispensaries operating in Illinois.

Under the Allgreens Agreement, the Company has made payments aggregating $0.5 million to the Allgreens members, with additional cash payments aggregating $1,750,000 to be made as specific milestones are reached. The Company will issue promissory notes for the final payment of $1.0 million, which is due at closing (the "Allgreens Notes"). The Allgreens Notes will mature one year from the date the dispensary may begin operating.

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 (the "Robust Agreement"), a Missouri wholesale and cultivator, for $0.7 million of cash. Completion of the acquisition is dependent upon obtaining all requisite approvals from the Missouri Department of Health and Senior Services, which is expected to occur in 2023. Under the Robust Agreement, the Company made an initial advance payment of $350,000 to the Robust members, with an additional payment of $350,000 to be made at closing.

(3) (LOSS) EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the period. For periods in which the Company reports net income, diluted net income per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period, unless the effect is antidilutive.

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


	Three months ended
		March 31, 2023	March 31, 2022
Weighted average shares outstanding - basic		342,794	334,763
Potential dilutive common shares		—	44,127
Weighted average shares outstanding - diluted		342,794	378,890

(4) DEFERRED RENTS RECEIVABLE

The Company is the lessor under operating leases, which contain escalating rents over time, rent holidays, options to renew, requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based on a percentage of monthly tenant revenues. The Company is not the lessor under any finance leases.

The Company recognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term. Differences between amounts received and amounts recognized are recorded in Deferred rents receivable in the condensed consolidated balance sheets. Contingent rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.

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The Company is the lessor of the following owned properties:

•Delaware – a 45,000 square foot cannabis cultivation, processing, and dispensary facility which is leased to its cannabis-licensed client under a triple net lease that expires in 2035.

•Maryland – a 180,000 square foot cultivation and processing facility that expires in 2037. This facility was leased to Kind prior to the Kind Acquisition Date.

•Massachusetts – a 138,000 square foot industrial property, of which approximately half of the available square footage is leased to a non-cannabis manufacturing company (the "Tenant") under a lease that expired in February 2023. The Tenant currently continues to occupy this space on a month-to-month basis.

The Company the sublessor of the following properties:

•Delaware – a 4,000 square foot cannabis dispensary, which is subleased to its cannabis-licensed client under a sublease expiring in April 2027.

•Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility that is subleased to its cannabis-licensed client. The sublease expires in March 2030, with an option to extend the term for three additional five-year periods. The Company intends to develop the remaining space into a processing facility.

•Delaware – a 12,000 square foot cannabis production facility with offices which is subleased to its cannabis-licensed client. The sublease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.

The Company received rental payments aggregating $0.4 million and $1.2 million in the three months ended March 31, 2023 and 2022, respectively. Revenue from these payments was recognized on a straight-line basis and aggregated $0.4 million and $1.1 million in the three months ended March 31, 2023 and 2022, respectively.

Future minimum rental receipts for non-cancellable leases and subleases as of March 31, 2023 were as follows (in thousands):


Year ending December 31,
Remainder of 2023	$	1,159
2024	1,357
2025	1,357
2026	1,221
2027	1,134
Thereafter	4,550
	$	10,778

(5) NOTES RECEIVABLE

Notes receivable, including accrued interest, at March 31, 2023 and December 31, 2022 consisted of the following (in thousands):


	March 31, 2023		December 31, 2022
First State Compassion Center (FSCC Initial Note)	$	308	$	328
First State Compassion Center (FSCC Secondary Notes)	8,238		8,160
First State Compassion Center (FSCC New Note)	750		750
Healer LLC	866		866
Total notes receivable	10,162		10,104
Less: Notes receivable, current portion	(2,639)		(2,637)
Notes receivable, less current portion	$	7,523	$	7,467

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First State Compassion Center

The Company’s cannabis-licensed client in Delaware, First State Compassion Center (“FSCC”), issued a 10-year promissory note to the Company in May 2016 for $0.7 million, bearing interest at a rate of 12.5% per annum and maturing in April 2026, as amended (the “FSCC Initial Note”). The monthly payments on the FSCC Initial Note approximate $10,000. At March 31, 2023 and December 31, 2022, the current portions of the FSCC Initial Note were approximately $87,000 and $85,000, respectively, and were included in Notes receivable, current, in the condensed consolidated balance sheets.

In December 2021, the Company converted financed trade accounts receivable balances from FSCC aggregating $7.8 million into notes receivable, whereby FSCC issued promissory notes aggregating $7.8 million to the Company (the “FSCC Secondary Notes”). The FSCC Secondary Notes bear interest of 6.0% per annum and mature in December 2025. FSCC is required to make periodic payments of principal and interest throughout the term of the FSCC Secondary Notes. At March 31, 2023 and December 31, 2022, the FSCC Secondary Notes balance included approximately $28,000 and $49,000, respectively, of unpaid accrued interest. The increase in the FSCC Secondary Notes in the three months ended March 31, 2023 was attributable to the accreted interest, which increases the value of such notes. At each of March 31, 2023 and December 31, 2022, the current portions of the FSCC Secondary Notes aggregated $2.5 million.

In December 2022, the Company converted a short-term loan and other receivable balances from FSCC aggregating $750,000 into a note receivable, whereby FSCC issued a promissory note to the Company for $750,000 (the "FSCC New Note"). The FSCC New Note bears interest of 6.0% per annum and matures in December 2026. FSCC is required to make quarterly interest payments, with the full amount of principal due on December 31, 2026. At each of March 31, 2023 and December 31, 2022, the entire balance of the FSCC New Note was long-term.

Healer LLC

In March 2021, the Company was issued a promissory note in the principal amount of approximately $0.9 million from Healer LLC, an entity that provides cannabis education, dosage programs, and products developed by Dr. Dustin Sulak (“Healer”). The principal balance of the note represents previous loans extended to Healer by the Company of $0.8 million, plus accrued interest through the revised promissory note issuance date of approximately $94,000 (the “Revised Healer Note”). The Revised Healer Note bears interest at a rate of 6.0% per annum and requires quarterly payments of interest through the April 2026 maturity date.

The Company has the right to offset any licensing fees payable by the Company to Healer in the event Healer fails to make any payment when due. In March 2021, the Company offset approximately $28,000 of licensing fees payable to Healer against the principal balance of the Revised Healer Note, reducing the principal amount to approximately $866,000. Of the outstanding Revised Healer Note balance at each of March 31, 2023 and December 31, 2022, approximately $52,000 was current.

(6) INVENTORY

Inventory at March 31, 2023 and December 31, 2022 consisted of the following (in thousands):


	March 31, 2023		December 31, 2022
Plants	$	2,511	$	2,653
Ingredients and other raw materials	4,310		3,255
Work-in-process	9,039		7,635
Finished goods	6,863		5,934
	$	22,723	$	19,477

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(7) INVESTMENTS

The Company’s investment at March 31, 2023 and December 31, 2022 was classified as current and was comprised of the following (in thousands):


	March 31, 2023		December 31, 2022


WM Technology Inc.	$	104	$	123

The Company did not have any long-term investments at March 31, 2023 or December 31, 2022.

WM Technology Inc.

In February 2022, the Company received 121,968 shares of common stock of WM Technology Inc. (Nasdaq: MAPS) (the "WMT Shares"), a technology and software infrastructure provider to the cannabis industry, which represented the Company’s pro rata share of additional consideration pursuant to a 2021 asset purchase agreement between the Company and Members RSVP LLC. The Company recognized a loss of approximately $19,000 in the three months ended March 31, 2023, which reflects the change in the fair value of the WMT Shares for the period. The fair value of the WMT Shares was approximately $954,000 at March 31, 2022. Both the loss in the three months ended March 31, 2022 from the change in the fair value of the WMT Shares and the gain arising from the receipt of the WMT Shares are reported as Other (expense) income, net, in the condensed consolidated statements of operations for the respective periods.

Flowr Corp.

In December 2021, the Company received shares of Flowr Corp. common stock (the "Flowr Stock") arising from the sale of its ownership interest in Terrace Inc., which was sold to Flowr Corp. (TSX.V: FLWR; OTC: FLWPF). The Flowr Stock was recorded at fair value, with changes in fair value recorded as a component of Other (expense) income net, in the condensed consolidated statements of operations. The Company recorded a gain of approximately $48,000 in the three months ended March 31, 2022, which represented the change in the fair value of the Flowr Stock for the period. In the fourth quarter of 2022, the Company wrote off the remaining fair value of the Flower Stock arising from Flowr Corp.'s bankruptcy filing and delisting from the exchange on which its stock was traded.

(8) PROPERTY AND EQUIPMENT, NET

The Company’s property and equipment, net, at March 31, 2023 and December 31, 2022 was comprised of the following (in thousands):


	March 31, 2023		December 31, 2022
Land	$	4,450	$	4,450
Buildings and building improvements	43,075		43,542
Tenant improvements	16,790		17,016
Furniture and fixtures	1,981		2,009
Machinery and equipment	10,223		10,087
Construction in progress	7,343		4,761
	83,862		81,865
Less: accumulated depreciation	(10,148)		(10,224)
Property and equipment, net	$	73,714	$	71,641

The Company recorded $1.0 million and $0.7 million of depreciation expense related to property and equipment in the three months ended March 31, 2023 and 2022, respectively.

The Company disposed of equipment it had previously purchased in connection with its planned acquisition of The Harvest Foundation LLC ("Harvest") in Nevada as a result of the Company's withdrawal from the agreement to purchase Harvest. The Company recorded a loss on these asset disposals aggregating $0.9 million, which is included as a component of Other (expense) income, net, in the condensed consolidated statement of operation for the three months ended March 31, 2023.

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(9) INTANGIBLE ASSETS AND GOODWILL

The Company’s acquired intangible assets at March 31, 2023 and December 31, 2022 consisted of the following (in thousands):


March 31, 2023	Weighted average amortization period (years)	Cost		Accumulated amortization		Net carrying value

Tradename and trademarks	7.11	$	3,104	$	624	$	2,480
Licenses and customer base	9.22	18,033		1,056		16,977
Non-compete agreements	2.00	42		19		23
	8.89	$	21,179	$	1,699	$	19,480


December 31, 2022	Weighted average amortization period (years)	Cost		Accumulated amortization		Net carrying value

Tradename and trademarks	3.00	$	2,041	$	453	$	1,588
Licenses and customer base	8.94	13,260		675		12,585
Non-compete agreements	2.00	42		14		28
	8.13	$	15,343	$	1,142	$	14,201

Estimated future amortization expense for the Company’s intangible assets at March 31, 2023 was as follows:


Year ending December 31,
Remainder of 2023	$	2,023
2024	2,683
2025	2,223
2026	1,996
2027	1,996
Thereafter	8,559
Total	$	19,480

The changes in the carrying value of the Company’s goodwill in the three months ended March 31, 2023 and 2022 were as follows (in thousands):


	2023		2022
Balance at January 1,	$	8,079	$	2,068
Ermont Acquisition	3,925		—

Balance at March 31,	$	12,004	$	2,068

(10) Term Loan

Credit Agreement

On January 24, 2023, the Company entered into a Loan and Security Agreement, by and among the Company, subsidiaries of the Company from time-to-time party thereto (collectively with the Company, the “Borrowers”), lenders from time-to-time party thereto (the “Lenders”), and Chicago Atlantic Admin, LLC (“Chicago Atlantic”), as administrative agent for the Lenders (the "Credit Agreement").

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Proceeds from the Credit Agreement are 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 Therapeutics seller notes incurred in connection with the Kind Acquisition, which repayment occurred on January 24, 2023 (see Note 11). The remaining balance, if any, is expected to be used to fund acquisitions.

Principal, Security, Interest and Prepayments

The Credit Agreement provides for $35.0 million in principal borrowings at the Borrowers’ option in the aggregate and further provides the 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 Lenders elect to fund such incremental term loan. $30.0 million of loan principal was funded at the initial closing (the "Term Loan"), which amount was reduced by an original issuance discount of $0.9 million. The Company has the option, during a six-month period following the initial closing, to draw down an additional $5.0 million. The loans require scheduled amortization payments of 1.0% of the principal amount outstanding under the Credit Agreement per month commencing in May 2023, and the remaining principal balance is due in full on January 24, 2026, subject to extension to January 24, 2028 under certain circumstances.

The Credit Agreement provides the Borrowers with the right, subject to specified limitations, to (a) incur seller provided debt in connection with future acquisitions, (b) incur additional mortgage financing from third-party lenders secured by real estate currently owned and acquired after the closing date, and (c) to incur additional debt in connection with equipment leasing transactions.

The obligations under the Credit Agreement are secured by substantially all of the assets of the Borrowers, excluding specified parcels of real estate and other customary exclusions.

The Credit Agreement provides for a floating annual interest rate equal to the prime rate then in effect plus 5.75%, which rate may be increased by 3.00% upon an event of default or 7.50% upon a material event of default as provided in the Credit Agreement.

At any time, the Company may voluntarily prepay amounts due under the facility in $5.0 million increments, subject to a three-percent prepayment premium and, during the first 20-months of the term, a “make-whole” payment.

Representations, Warranties, Events of Default and Certain Covenants

The Credit 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 Credit Agreement also includes customary negative covenants limiting the Borrowers’ ability to incur additional indebtedness and grant liens that are otherwise not permitted, among others. Additionally, the Credit Agreement requires the Borrowers to meet certain financial tests. At March 31, 2023, the Company was in compliance with the Credit Agreement covenants.

Warrant Issuance

The Credit Agreement provides 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 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. Incremental warrants are issuable upon further draw-downs under the facility.

The Company recorded the warrants at present value of $5.5 million as a component of Additional paid-in capital on the condensed consolidated balance sheet as of January 24, 2023, and discounted the Term Loan by $5.5 million (the "Term Loan Discount"). The Term Loan Discount is being amortized to interest expense over the term of the Credit Agreement. The Company recorded $0.3 million of interest amortization for the three months ended March 31, 2023.

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Outstanding Balance

At March 31, 2023, the outstanding Term Loan balance reported on the Company's condensed consolidated balance sheet was $24.1 million, with the current portion totaling $3.3 million.

(11) MORTGAGES AND NOTES PAYABLE

The Company’s mortgages and notes payable are reported in the aggregate on the condensed consolidated balance sheets under the captions Mortgages and notes payable, current, and Mortgages and notes payable, net of current.

Mortgages

The Company’s mortgage balances at March 31, 2023 and December 31, 2022 were comprised of the following (in thousands):


	March 31, 2023		December 31, 2022
Bank of New England – New Bedford, MA and Middleboro, MA properties	$	12,038	$	12,141
Bank of New England – Wilmington, DE property	1,313		1,345
DuQuoin State Bank – Anna, IL and Harrisburg, IL properties	741		750
DuQuoin State Bank – Metropolis, IL property	2,474		2,508
Du Quoin State Bank - Mt. Vernon, IL property	2,957		2,974
South Porte Bank – Mt. Vernon, IL property	784		801
Total mortgages payable	20,307		20,519
Less: Mortgages payable, current	(1,483)		(1,491)
Mortgages payable, less current portion	$	18,824	$	19,028

The Company maintains an amended and restated mortgage agreement with the Bank of New England with an interest rate of 6.5% per annum, which matures in August 2025 (the “Amended BNE Mortgage”). The Amended BNE Mortgage is secured by the Company’s properties in New Bedford, Massachusetts and Middleboro, Massachusetts. Proceeds from the Amended BNE Mortgage were used to pay down a previous mortgage of $4.8 million with the Bank of New England on the New Bedford property, and $7.2 million of outstanding promissory notes as discussed below. The current portions of the outstanding principal balance under the Amended BNE Mortgage at March 31, 2023 and December 31, 2022 were approximately $387,000 and $382,000, respectively.

The Company maintains a second mortgage with Bank of New England that is secured by the Company’s property in Wilmington, Delaware (the “BNE Delaware Mortgage”). The mortgage matures in 2031, with monthly principal and interest payments. The interest rate is 5.25% per annum, with the rate adjusting every five years to the then-prime rate plus 1.5%, with a floor of 5.25% per annum. The next interest rate adjustment will occur in September 2026. The current portions of the outstanding principal balance under the BNE Delaware Mortgage at March 31, 2023 and December 31, 2022 were approximately $128,000 and $126,000, respectively.

The Company maintains a mortgage with DuQuoin State Bank (“DSB”) in connection with its purchase of properties in Anna, Illinois and Harrisburg, Illinois (the “DuQuoin Mortgage”). On May 5th of each year, the DuQuoin Mortgage becomes due unless it is renewed for another year at a rate determined by DSB’s executive committee. The DuQuoin Mortgage was renewed in May 2021 at a rate of 6.75% per annum. The current portions of the outstanding principal balance under the DuQuoin Mortgage at each of March 31, 2023 and December 31, 2022 were approximately $37,000 and $36,000, respectively.

In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, Illinois. The purchase price consisted of 750,000 shares of the Company’s common stock, which were valued at $705,000 on the date of the transaction, and payoff of the seller’s remaining mortgage balance of $1.6 million. In connection with this purchase, the Company entered into a second mortgage agreement with DSB for $2.7 million that matures in July 2041, and which initially bears interest at a rate of 6.25% per annum (the “DuQuoin Metropolis Mortgage”). The interest rate on the DuQuoin Metropolis Mortgage is adjusted each year based on a certain interest rate index plus a margin. As part of this transaction, the seller was provided with a 30.0% ownership interest in Mari Holdings Metropolis LLC (“Metro”), the Company’s subsidiary that owns the property and holds the related mortgage obligation, reducing the

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Company’s ownership interest in Metro to 70.0%. The current portions of the outstanding principal balance of the DuQuoin Metropolis Mortgage at March 31, 2023 and December 31, 2022 were approximately $79,000 and $77,000, respectively.

In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $3 million loan agreement and mortgage with DSB secured by property owned in Mt. Vernon, Illinois, which the Company is developing into a grow and production facility (the "DuQuoin Mt. Vernon Mortgage"). The DuQuoin Mt. Vernon Mortgage has a 20-year term and initially bears interest at the rate of 7.75% per annum, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75%). The proceeds of this loan are being utilized for the build-out of the property and other working capital needs. The current portions of the outstanding principal balance of the DuQuoin Mt. Vernon Mortgage were approximately $68,000 at each of March 31, 2023 and December 31, 2022.

In February 2020, the Company entered into a mortgage agreement with South Porte Bank for the purchase and development of a property in Mt. Vernon, Illinois, (the “South Porte Bank Mortgage”). Beginning in August 2021, pursuant to an amendment of the South Porte Bank Mortgage, the monthly payments of principal and interest aggregated approximately $6,000, with such payment amounts effective through June 2023, at which time all remaining principal, interest and fees are due.

Promissory Notes

Promissory Notes Issued as Purchase Consideration

Ermont Acquisition

In connection with the Ermont Acquisition, the Company issued the Ermont Note (see Note 2) totaling $7.0 million. The Ermont Note matures in March 2029, and bears interest at 6.0% per annum, with payments of interest only for two years, and thereafter quarterly payments of principal and interest in arrears. The outstanding balance on the Ermont Note is due and payable in full if and when the Company raises $75 million or more of equity capital. The Company recorded the Ermont Note at a present value of $4.6 million. The Company recorded $2.4 million as a debt discount, which is being accreted through the term 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 $4.6 million at March 31, 2023, all of which was recorded as noncurrent, as the first principal payment is not due until two years after the Ermont Acquisition Date.

Greenhouse Naturals Acquisition

In connection with the Greenhouse Naturals Acquisition, the Company issued the Greenhouse Naturals Note (see Note 2) totaling $5.0 million to the Greenhouse Sellers, payable on a monthly basis as a percentage of the monthly gross sales of the Company's Beverly, Massachusetts dispensary. The Company recorded the Greenhouse Naturals Note at a present value of $4.3 million. The Company recorded $0.7 million as a debt discount, which is being accreted through the term of the Greenhouse Naturals Note. The difference between the face value of the Greenhouse Naturals Note and the present value recorded at the time of the Greenhouse Naturals Acquisition is being amortized to interest expense over the term of the note, which matures in July 2026. The fair values of the Greenhouse Naturals Note were $4.4 million and $4.3 million at March 31, 2023 and December 31, 2022, respectively. The Company estimated that the current portions of the Greenhouse Naturals Note were $1.3 million and $0.9 million at March 31, 2023 and December 31, 2022, respectively, which are included in Mortgages and notes payable, current portion, in the Company's condensed consolidated balance sheets.

Kind Acquisition

In connection with the Kind Acquisition (see Note 2), the Company issued four-year promissory notes aggregating $6.5 million at the rate of 6.0% per annum to the members of Kind (the “Kind Notes”). At December 31, 2022, the outstanding balance of the Kind Notes totaled $5.5 million, of which $1.6 million was current.

On January 24, 2023, in connection with the Credit Agreement (see Note 10), 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.

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Promissory Note Conversion