Marimed Inc 10-Q for FY2024 Q3
Marimed Inc. (MRMD)
10-Q
2024-11-07
For: 2024-09-30
View Original
Added on
April 06, 2026
About this 10-Q
Marimed Inc filed this 10-Q on November 7, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $40.59M
- up 4.6% from $38.8M a year earlier
- Net loss
- $1.01M
- compared with a net loss of $4.26M a year earlier
- Diluted EPS
- $0.00
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the Quarterly Period ended September 30, 2024
For the transition period from ___________________ to ___________________
Commission File number 0-54433
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of Principal Executive Offices)
(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 | Not Applicable | 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 | x | |||||||||||||
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 November 7, 2024, 381,306,387 shares of the registrant’s common stock were outstanding.
MariMed Inc.
Table of Contents
| Page | ||||||||
2
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, obtainment of new licenses, estimates and projections of revenue, EBITDA and Adjusted EBITDA and other information about the Company's 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, 2023. 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.
3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
MariMed Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
| September 30, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Inventory | |||||||||||
| Deferred rents receivable | |||||||||||
| Notes receivable, current portion | |||||||||||
| Investments, current portion | |||||||||||
| Due from related parties | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Investments, net of current portion | |||||||||||
| Notes receivable, net of current portion | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Finance lease right-of-use assets | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities, mezzanine equity and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Mortgages and notes payable, current portion | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other | |||||||||||
| Income taxes payable | |||||||||||
| Operating lease liabilities, current portion | |||||||||||
| Finance lease liabilities, current portion | |||||||||||
| Total current liabilities | |||||||||||
| Mortgages and notes payable, net of current portion | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Finance lease liabilities, net of current portion | |||||||||||
4
MariMed Inc.
Condensed Consolidated Balance Sheets (continued)
(in thousands, except share and per share amounts)
(unaudited)
| September 30, 2024 | December 31, 2023 | ||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Mezzanine equity | |||||||||||
Series B convertible preferred stock, $ | |||||||||||
Series C convertible preferred stock $ | |||||||||||
| Total mezzanine equity | |||||||||||
| Stockholders’ equity | |||||||||||
Undesignated preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Noncontrolling interests | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities, mezzanine equity and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
5
MariMed Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Personnel | |||||||||||||||||||||||
| Marketing and promotion | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Acquisition-related and other | |||||||||||||||||||||||
| Bad debt | ( | ( | ( | ( | |||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Interest and other (expense) income: | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Other expense, net | ( | ( | ( | ||||||||||||||||||||
| Total interest and other expense, net | ( | ( | ( | ( | |||||||||||||||||||
| (Loss) income before income taxes | ( | ( | |||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net loss | ( | ( | ( | ( | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | ( | ( | |||||||||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
6
MariMed Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(unaudited)
| Nine months ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| 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, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Release of shares under stock grants | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued under licensing agreement | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2024 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Release of shares under stock grants | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Standalone warrants issued as payment for services | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued as purchase consideration - business acquisition | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued under licensing agreement | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2024 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Release of shares under stock grants | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Shares of newly vested common stock surrendered to the Company to satisfy tax withholding obligations | ( | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Common stock issued under licensing agreement | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances at September 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
7
MariMed Inc.
Condensed Consolidated Statements of Stockholders’ Equity (continued)
(in thousands, except share amounts)
(unaudited)
| Nine months ended September 30, 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 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Common stock subscribed but not issued | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of subscribed shares | — | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Warrants issued in connection with debt | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued as purchase consideration - Ermont Inc. | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued under licensing agreement | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2023 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of subscribed shares | — | ( | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Release of shares under stock grants | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Purchase of minority interests in certain of the Company's subsidiaries | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued to settle obligations | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Common stock issued under licensing agreement | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued to purchase property and equipment | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net (loss) income | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Common stock issued under licensing agreement | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balances at September 30, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
8
MariMed Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine months ended | |||||||||||
| September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | |||||||
| Net income (loss) attributable to noncontrolling interests | ( | ||||||||||
| Adjustments to reconcile net loss to cash provided by operating activities: | |||||||||||
| Depreciation and amortization of property and equipment | |||||||||||
| Amortization of intangible assets | |||||||||||
| Stock-based compensation | |||||||||||
| Amortization of warrants issued as payment for services received | |||||||||||
| Amortization of original debt issuance discount | |||||||||||
| Amortization of debt discount | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Payment-in-kind interest | |||||||||||
| Bad debt income | ( | ( | |||||||||
| Obligations settled with common stock | |||||||||||
| (Gain) loss on disposal of assets | ( | ||||||||||
| Gain on finance lease adjustment | ( | ||||||||||
| Write-down of prepaid purchase consideration | |||||||||||
| Loss (gain) on changes in fair value of investments | ( | ||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net | ( | ||||||||||
| Deferred rents receivable | |||||||||||
| Inventory | ( | ( | |||||||||
| Other current assets | |||||||||||
| Other assets | ( | ||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other | ( | ||||||||||
| Income taxes payable | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Business combinations, net of cash acquired, and asset purchases | ( | ( | |||||||||
| Advances toward future business combinations and asset purchases | ( | ||||||||||
| Purchases of investments | ( | ||||||||||
| Purchases and renewals of cannabis licenses | ( | ( | |||||||||
| Issuance of notes receivable | ( | ||||||||||
| Proceeds from notes receivable | |||||||||||
9
MariMed Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
| Nine months ended | |||||||||||
| September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Return on investment | |||||||||||
| Proceeds from disposal of assets | |||||||||||
| Due from related party | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from term loan | |||||||||||
| Proceeds from Construction to Permanent Commercial Real Estate Mortgage Loan | |||||||||||
| Proceeds from mortgages | |||||||||||
| Payment of third-party debt issuance costs in connection with debt | ( | ||||||||||
| Principal payments of term loan | ( | ||||||||||
| Principal payments of mortgages | ( | ( | |||||||||
| Repayment and retirement of mortgages | ( | ||||||||||
| Principal payments of promissory notes | ( | ( | |||||||||
| Repayment and retirement of promissory notes | ( | ||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Principal payments of finance leases | ( | ( | |||||||||
| Distributions | ( | ( | |||||||||
| Net cash provided by financing activities | |||||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ||||||||||
| Cash and equivalents, beginning of year | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Non-cash activities: | |||||||||||
| Common stock issued as purchase consideration | $ | $ | |||||||||
| Common stock issued to purchase minority interests in certain of the Company's subsidiaries | $ | $ | |||||||||
| Present value of promissory notes issued as purchase consideration | $ | $ | |||||||||
| Warrants to purchase common stock issued with debt | $ | $ | |||||||||
| Liability recorded for building improvements | $ | $ | |||||||||
| Notes payable issued to purchase property and equipment | $ | $ | |||||||||
| Entry into new operating leases | $ | $ | |||||||||
| Entry into new finance leases | $ | $ | |||||||||
| Write-off of finance leases | $ | $ | |||||||||
| Return of stock to the Company | $ | $ | |||||||||
| Issuance of common stock associated with subscriptions | $ | $ | |||||||||
10
MariMed Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
| Nine months ended | |||||||||||
| September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Conversion of preferred stock to common stock | $ | $ | |||||||||
| Adjustment to purchase price allocation to reclassify certain acquired intangible assets to goodwill | $ | $ | |||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
11
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”).
The Company completed two acquisitions during the nine months ended September 30, 2024 that it accounted for as asset purchases (see Note 2). On April 9, 2024 (the "Allgreens Acquisition Date"), the Company acquired 100 % of the membership interests of Allgreens Dispensary, LLC ("Allgreens"), which held a conditional adult-use cannabis dispensary license in Illinois. On April 5, 2024 (the "MedLeaf Acquisition Date"), the Company acquired 100 % of the membership interests of Our Community Wellness & Compassionate Care Center, Inc. ("MedLeaf"), which held a retail dispensary license in Maryland. The MedLeaf dispensary had been closed since July 1, 2023, but was reopened by the Company on August 19, 2024, upon receiving regulatory approval to commence adult use retail sales.
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 since the Ermont Acquisition Date (see Note 2).
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, 2023 (the “Annual Report”), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 7, 2024.
Certain reclassifications, not affecting previously reported net income or cash flows, have been made to the previously issued financial statements to conform to the current period presentation.
Significant Accounting Policies
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 nine-month period ended September 30, 2024.
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.
12
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 reported 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.
The Company had $0.2 million and $0.1 million of cash held in escrow at September 30, 2024 and December 31, 2023, respectively.
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 Combination
Ermont
On March 9, 2023, following approval by the Massachusetts Cannabis Control Commission (the "CCC"), the Company acquired the operating assets of Ermont, a medical-licensed vertical cannabis operator located in Quincy, Massachusetts. The Ermont Acquisition provided the Company with its third dispensary in Massachusetts, substantially completing its build-out to the maximum allowable by state regulations.
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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 subject to prepayment in the event the Company raises $75.0 million of equity capital. The Company recorded the Ermont Note at the present value as of the Ermont Acquisition Date of $4.6 million. The difference between the present value and face value of the Ermont Note is being amortized to interest expense through the term of such note.
The Company rebranded the dispensary as Panacea Wellness Dispensary and commenced medical sales immediately after the Ermont Acquisition Date. The Ermont Acquisition also includes a Host Community Agreement with the city of Quincy to conduct adult-use cannabis sales. Adult-use sales commenced on July 23, 2024. The Company expanded the existing medical dispensary to accommodate expected increased traffic associated with adult-use sales and repurposed Ermont's existing cultivation facility.
The Company's condensed consolidated statement of operations for the three months ended September 30, 2023 included $1.2 million of revenue and $0.7 million of net loss attributable to Ermont. The Company's condensed consolidated statement of operations for the nine months ended September 30, 2023 included $2.6 million of revenue and $1.9 million of net loss attributable to Ermont for the period since the Ermont Acquisition Date.
The Ermont Acquisition has been accounted for as a business combination. The Company did not assume any of Ermont's liabilities. The Company recorded adjustments to the amounts allocated to certain identifiable intangible assets and goodwill to reflect more precise forecasts of future revenue streams. These adjustments resulted in an increase to the tradename and trademarks intangible asset of $0.1 million, a decrease to the customer base intangible asset of $3.9 million and an increase to goodwill of $3.8 million.
A summary of the final 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 | $ | ||||
| Less cash acquired | ( | ||||
| Net cash consideration | |||||
| Common stock | |||||
| Promissory note | |||||
| Total fair value of consideration | $ | ||||
| Fair value of assets acquired and (liabilities assumed): | |||||
| Property and equipment | $ | ||||
| Intangible assets: | |||||
| Tradename and trademarks | |||||
| Customer base | |||||
| License | |||||
| Goodwill | |||||
| Fair value of net assets acquired | $ | ||||
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 12.19 years (see Note 8). Goodwill results from assets not separately identifiable as part of the transaction and is not deductible for tax purposes.
The following unaudited pro forma information presents the condensed combined results of MariMed and Ermont for the three and nine months ended September 30, 2023 as if the Ermont Acquisition had been completed on January 1, 2023, with adjustments to give effect to pro forma events that are directly attributable to the Ermont Acquisition. These pro
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forma adjustments include amortization expense for the acquired intangible assets and interest expense related to the Ermont Note.
The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of MariMed and Ermont. Accordingly, these unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the Ermont Acquisition occurred on January 1, 2023, nor are they intended to represent or be indicative of future results of operations. These unaudited pro forma results for the three and nine months ended September 30, 2023 are as follows (in thousands):
| Three months ended September 30, 2023 | Nine months ended September 30, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Revenue | $ | $ | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
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 tradenames and trademarks, licenses and customer bases, and non-compete intangible assets. The valuation for each of these intangible assets is based on estimated projections of expected cash flows to be generated by the assets discounted to the present value at discount rates commensurate with perceived risk. The valuation assumptions take into consideration the Company’s estimates of new markets, products and customers and its outcome through key assumptions driving asset values, including sales growth, royalty rates and other related costs.
Asset Purchases
Allgreens
In August 2022, the Company entered into an agreement to purchase 100 % of the membership interests in Allgreens Dispensary, LLC (the "Allgreens Agreement"), a conditional adult-use cannabis dispensary license in Illinois, for $3.25 million, comprised of $2.25 million of cash and a promissory note for $1.0 million, which note was issued to the Allgreens members on the Allgreens Acquisition Date. Completion of the acquisition was dependent upon certain conditions, including resolution of any remaining legal challenges affecting nearly 200 social equity dispensary licenses, and regulatory approval of the acquisition. With the closing conditions met and the acquisition completed, the Company now owns and operates five adult-use dispensaries in Illinois. For the interim period until the acquisition was completed, the Company entered into a management agreement with Allgreens, with the management fees calculated as a percentage of Allgreens' revenue. Under this management agreement, the Company funded the build-out of the dispensary, including purchasing and retaining ownership of the related fixed assets it intended to use upon the transfer ownership to the Company, hired and trained employees, and implemented the processes necessary to run the dispensary, all of which was completed prior to the state's approval of the license transfer to the Company. In connection with this agreement, the Company recorded expenses related to Allgreens aggregating approximately $250,000 for the period from January 1, 2024 through the Allgreens Acquisition Date as a component of Investments, net of current portion (the "Allgreens Expenses").
Pursuant to the Allgreens Agreement, the Company had made payments aggregating $1,375,000 to the Allgreens members prior to the Allgreens Acquisition Date. On the Allgreens Acquisition Date, the Company made the final cash payment of $875,000 and issued a $1.0 million promissory note (the "Allgreens Note"). The Allgreens Note bears interest at a rate of 7.5 % per annum and matures one year from the date the dispensary is permitted to commence operations.
The Company has allocated the purchase price, including the Allgreens Expenses, to its licenses intangible asset, with an estimated useful life of 10 years (see Note 8).
Our Community Wellness & Compassionate Care Center, Inc. ("MedLeaf")
On February 1, 2024 (the "P&S Date"), the Company entered into an agreement to acquire 100 % of the membership interests of MedLeaf (the "MedLeaf Agreement"), which held a retail dispensary license in Maryland. The MedLeaf dispensary had ceased its operations since July 1, 2023. Upon receiving regulatory approval, the Company reopened the
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dispensary and commenced adult-use retail sales on August 19, 2024. The acquisition of MedLeaf provides the Company with a second dispensary in the state of Maryland.
Pursuant to the MedLeaf Agreement, total purchase consideration was $5.25 million, comprised of $2.0 million of cash with adjustments to reflect amounts owed to the Company by the sellers of MedLeaf (the "MedLeaf Sellers"), a $2.0 million promissory note (the "MedLeaf Note"), and shares of the Company's common stock, valued at $1.25 million, with such number of shares calculated using the volume weighted average price based on the ten trading day period ending on the P&S Date. The Company made cash payments aggregating $0.5 million through the P&S Date, which funds were deposited into escrow. On the MedLeaf Acquisition Date, the outstanding cash balance was paid and the promissory note and 3.9 million shares of the Company's common stock were issued. The promissory note bears interest at a rate of 8.0 % per annum and matures on October 5, 2025.
The Company has allocated the purchase price to its licenses intangible asset, with an estimated useful life of 10 years (see Note 8).
Pending Transaction at September 30, 2024
Robust Missouri Process and Manufacturing, LLC ("Robust")
In September 2022, the Company entered into an agreement to acquire 100 % of the membership interests in Robust Missouri Processing and Manufacturing 1, LLC, a Missouri wholesale and cultivator ("Robust"), for $700,000 in cash (the "Robust Agreement"). Completion of the acquisition is dependent upon obtaining all requisite approvals from the Missouri Department of Health and Senior Services. In August 2024, the state of Missouri approved a facility license to conduct business, but has not yet approved the application to transfer the license from Robust to the Company (the "License Transfer"). The Company is currently conducting business under a managed service agreement until the final approval of the License Transfer. Pursuant to the Robust Agreement, the Company made an initial advance payment of $350,000 , with the balance due at closing, which will occur upon the state of Missouri's approval of the License Transfer.
(3) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) 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 shares used to compute loss per share were as follows (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| Weighted average shares outstanding - basic | |||||||||||||||||||||||
| Potential dilutive common shares | |||||||||||||||||||||||
| Weighted average shares outstanding - diluted | |||||||||||||||||||||||
(4) DEFERRED RENTS RECEIVABLE
The Company is the lessor under operating leases which contain escalating rents over time, rent holidays, options to renew, and requirements to pay property taxes, insurance and/or maintenance costs. The Company is not the lessor under any finance leases.
The Company recognizes fixed rental receipts from 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.
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The Company currently leases a cannabis cultivation, processing and dispensary facility that it owns in Delaware to a cannabis-licensed client under a triple net lease that expires in 2035. The Company had previously leased a portion of an owned property in Massachusetts under a lease that expired in February 2023, after which the tenant continued to rent the space on a month-to-month basis through November 2023. The Company expanded its cultivation footprint into this space and accordingly, it is currently utilizing this space for its operations.
The Company currently subleases two properties - a cannabis production facility with offices under a sublease that expires in January 2026 and contains an option to negotiate an extension of the sublease term, and a dispensary under a sublease that expires in April 2027. The Company also subleases a portion of a third property that it developed into a cultivation facility under a sublease that expires in March 2030, with an option to extend the term for three additional five-year periods. These properties are all subleased to a cannabis-licensed client in Delaware.
The Company received rental payments aggregating $0.3 million and $0.5 million in the three months ended September 30, 2024 and 2023, respectively, and $0.9 million and $1.3 million in the nine months ended September 30, 2024 and 2023, respectively. Revenue from these payments was recognized on a straight-line basis and aggregated $0.3 million and $0.4 million in the three months ended September 30, 2024 and 2023, respectively, and $0.9 million and $1.2 million in the nine months ended September 30, 2024 and 2023, respectively.
Future minimum rental receipts for non-cancellable leases and subleases as of September 30, 2024 were as follows (in thousands):
| Year ending December 31, | |||||
| Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| $ | |||||
(5) NOTE RECEIVABLE AND OMNIBUS
Note Receivable
At both September 30, 2024 and December 31, 2023, the Company had a note receivable from Healer LLC, an entity that provides cannabis education, dosage programs and products developed by Dr. Dustin Sulak ("Healer"), of approximately $866,000 6
Omnibus Agreement
On July 1, 2023 (the "Omnibus Agreement Date"), the Company entered into an Omnibus Agreement with First State Compassion Center ("FSCC"), the Company's cannabis-licensed client in Delaware: (a) consolidating all amounts owed by FSCC to the Company and its affiliated entities as described below, aggregating $11.0 million (the "Omnibus"); (b) providing for the automatic conversion of all amounts owed by FSCC to the Company, upon the approval of adult cannabis use in Delaware, into 100 % ownership of FSCC's licenses and business; and (c) extending to FSCC, in the Company's sole discretion, up to an additional $2.0 million of working capital loans. The Omnibus has a term of five years , with an automatic five-year extension if adult cannabis use is not approved in Delaware by the maturity date, and bears interest, compounded semiannually and payable annually, at the appropriate rate of interest in effect under Sections 1274(d), 482 and 7872 of the Internal Revenue Code of 1986, as amended, as calculated under Rev. Ruling 86-17, 1986-1 C.B. 377, for the period for which the amount of interest is being determined. The state of Delaware recently approved the adult use of cannabis, with the implementation period expected to extend through approximately November 2024. The Omnibus is included as a component of Other assets in the condensed consolidated balance sheets at both September 30, 2024 and December 31, 2023.
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(6) INVENTORY
Inventory at September 30, 2024 and December 31, 2023 consisted of the following (in thousands):
| September 30, 2024 | December 31, 2023 | ||||||||||
| Plants | $ | $ | |||||||||
| Ingredients and other raw materials | |||||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| $ | $ | ||||||||||
(7) PROPERTY AND EQUIPMENT, NET
The Company’s property and equipment, net, at September 30, 2024 and December 31, 2023 was comprised of the following (in thousands):
| September 30, 2024 | December 31, 2023 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and building improvements | |||||||||||
| Tenant improvements | |||||||||||
| Furniture and fixtures | |||||||||||
| Machinery and equipment | |||||||||||
| Construction in progress | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
The Company recorded depreciation expense related to property and equipment of $1.8 million and $1.6 million in the three months ended September 30, 2024 and 2023, respectively, and $5.7 million and $3.8 million in the nine months ended September 30, 2024 and 2023, respectively.
During the nine months ended September 30, 2024, the Company disposed of equipment and recorded a gain on the disposal of such assets aggregating approximately $20,000 , net of insurance proceeds for such disposal of approximately $22,000 .
In the first quarter of 2023, the Company disposed of equipment it had previously purchased in connection with its planned acquisition of The Harvest Foundation LLC ("Harvest") in Nevada as a result of the Company's withdrawal from the agreement to purchase Harvest. The Company recorded a loss on the disposal of assets aggregating $0.9 million, which is included as a component of Other expense, net, in the condensed consolidated statement of operations for the nine months ended September 30, 2023.
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(8) INTANGIBLE ASSETS AND GOODWILL
The Company’s acquired intangible assets at September 30, 2024 and December 31, 2023 consisted of the following (in thousands):
| September 30, 2024 | Weighted average amortization period (years) | Cost | Accumulated amortization | Net carrying value | |||||||||||||||||||
| Tradenames and trademarks | $ | $ | $ | ||||||||||||||||||||
| Licenses and customer base | |||||||||||||||||||||||
| Non-compete agreements | |||||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
| December 31, 2023 | Weighted average amortization period (years) | Cost | Accumulated amortization | Net carrying value | |||||||||||||||||||
| Tradenames and trademarks | $ | $ | $ | ||||||||||||||||||||
| Licenses and customer base | |||||||||||||||||||||||
| Non-compete agreements | |||||||||||||||||||||||
| $ | $ | $ | |||||||||||||||||||||
Estimated future amortization expense for the Company’s intangible assets at September 30, 2024 was as follows:
| Year ending December 31, | |||||
| Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total | $ | ||||
The changes in the carrying value of the Company’s goodwill in the nine months ended September 30, 2024 and 2023 were as follows (in thousands):
| 2024 | 2023 | ||||||||||
| Balance at January 1, | $ | $ | |||||||||
| Ermont Acquisition | |||||||||||
| Balance at September 30, | $ | $ | |||||||||
In connection with the finalization of the purchase price allocation for the Ermont Acquisition in the first quarter of 2024, the Company recorded reclassifications between its Tradename and trademarks intangible asset, Licenses and customer base intangible asset, and Goodwill (see Note 2).
(9) DEBT
Term Loan (the "CA Term Loan")
On January 24, 2023, the Company entered into a Loan and Security Agreement, by and among the Company, subsidiaries of the Company from time-to-time party thereto (collectively with the Company, the “CA Borrowers”), lenders from time-to-time party thereto (the “CA Lenders”), and Chicago Atlantic Admin, LLC (“Chicago Atlantic”), as administrative agent for the Lenders (the "CA Credit Agreement"). Proceeds from the CA Credit Agreement were designated to complete the 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
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expenditures, and repay in full the notes payable issued in 2022 in connection with the acquisition of Kind Therapeutics USA, which repayment occurred on January 24, 2023. The remaining balance, if any, was expected to be used to fund acquisitions.
The CA Credit Agreement allowed for $35.0 million in principal borrowings at the CA Borrowers’ option in the aggregate and further provides the CA Borrowers with the right, subject to customary conditions, to request an additional incremental term loan in the aggregate principal amount of up to $30.0 million, provided that the CA Lenders elected to fund such incremental term loan. $30.0 million of loan principal was funded at the initial closing (the "CA Term Loan"), which amount was reduced by an original issuance discount of $0.9 million (the "CA Original Issuance Discount"). The Company had the option, during the six-month period following the initial closing, to draw down an additional $5.0 million, which it did not elect to do. The loan required scheduled amortization payments of 1.0 % of the principal amount outstanding under the CA Credit Agreement per month commencing in May 2023, and the remaining principal balance was due in full on January 24, 2026, subject to extension to January 24, 2028 under certain circumstances.
The CA Credit Agreement provided the CA Borrowers with the right, subject to specified limitations, to incur (a) seller- provided debt in connection with future acquisitions, (b) additional mortgage financing from third-party lenders secured by real estate currently owned and acquired after the closing date, and (c) additional debt in connection with equipment leasing transactions. The obligations under the CA Credit Agreement were secured by substantially all of the assets of the CA Borrowers, excluding specified parcels of real estate and other customary exclusions.
The CA Credit Agreement provided for a floating annual interest rate equal to the prime rate then in effect plus 5.75 %, which rate could be increased by 3.00 % upon an event of default or 7.50 % upon a material event of default as provided in the CA Credit Agreement. At any time, the Company could voluntarily prepay amounts due under the facility in $5.0 million increments, subject to a three -percent prepayment premium and, during the first 20 -months of the term, a “make-whole” payment.
The CA Credit Agreement included customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency. The CA Credit Agreement also included customary negative covenants limiting the CA Borrowers’ ability to incur additional indebtedness and grant liens that were otherwise not permitted, among others. Additionally, the Credit Agreement required the CA Borrowers to meet certain financial tests. The Company was in compliance with the CA Credit Agreement covenants throughout the term of the CA Credit Agreement.
The CA Credit Agreement provided for 30 % warrant coverage against amounts funded under the facility, priced at a 20 % premium to the trailing 20 -day average price on the closing date of each such funding. At the initial closing, upon funding of the initial $30.0 million under the facility, the Company issued to the CA Lenders an aggregate of 19,148,936 warrants to purchase shares of the Company’s common stock at $0.47 per share, exercisable for a five-year period following issuance. The Company recorded the warrants at 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 CA Term Loan by $5.5 million (the "CA Warrant Discount"). The CA Warrant Discount was being amortized to interest expense over the term of the Credit Agreement.
The Company incurred $1.8 million of third party costs (i.e., legal fees, referral fees, etc.) in connection with the CA Term Loan, which were recorded as a discount to the CA Term Loan (the "CA Third-Party Costs Discount"), which was being amortized to interest expense over the term of the CA Credit Agreement.
The Company recorded $0.3 million of aggregate interest amortization for the three months ended March 31, 2023 related to the CA Original Issuance Discount, CA Warrant Discount and CA Third-Party Costs Discount.
On November 16, 2023, the Company repaid and retired the CA Term Loan (the "CA Term Loan Payoff") using proceeds from a new $58.7 million loan entered into on the same date (see "CREM Loan" below). The CA Term Loan Payoff amount totaled $32.7 million, comprised of $28.5 million for the outstanding principal, $3.7 million for the make-whole payment, $0.2 million for accrued unpaid interest and $0.3 million for transaction-related fees. The Company recognized a loss of $10.2 million in connection with the Term Loan Payoff, which it recorded in the fourth quarter of 2023.
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Mortgages and Notes Payable
The Company’s mortgages and notes payable are reported in the aggregate on the condensed consolidated balance sheets under the captions Mortgages and notes payable, current portion, and Mortgages and notes payable, net of current portion.
The Company’s mortgage and notes payable balances at September 30, 2024 and December 31, 2023 were comprised of the following (in thousands):
| September 30, 2024 | December 31, 2023 | ||||||||||
| Construction to Permanent Commercial Real Estate Mortgage Loan ("CREM Loan") | $ | $ | |||||||||
| Bank of New England - Wilmington, DE property | |||||||||||
| DuQuoin State Bank - Anna, IL and Harrisburg, IL properties | |||||||||||
| DuQuoin State Bank - Metropolis, IL property | |||||||||||
| Du Quoin State Bank - Mt. Vernon, IL property (grow and production) | |||||||||||
| DuQuoin State Bank - Mt. Vernon, IL property (retail) | |||||||||||
| Promissory note issued as purchase consideration - Ermont Acquisition | |||||||||||
| Promissory note issued as purchase consideration - Greenhouse Naturals Acquisition | |||||||||||
| Promissory notes issued as purchase consideration - MedLeaf Acquisition | |||||||||||
| Promissory note issued as purchase consideration - Allgreens Acquisition | |||||||||||
| Promissory note issued to purchase land | |||||||||||
| Promissory notes issued to purchase motor vehicles | |||||||||||
| Total mortgages and notes payable | |||||||||||
| Less: Mortgages and notes payable, current portion | ( | ( | |||||||||
| Mortgages and notes payable, net of current portion | $ | $ | |||||||||
Mortgages
CREM Loan
On November 16, 2023, Mari Holdings MD LLC, Hartwell Realty Holdings LLC, Kind Therapeutics USA, LLC, ARL Healthcare Inc., and MariMed Advisors, Inc., each a wholly-owned direct or indirect subsidiary of the Company (collectively, the "CREM Borrowers"), entered into a Loan Agreement (the "CREM Loan Agreement") by and among the CREM Borrowers, and Needham Bank, a Massachusetts co-operative bank (the "CREM Lender") pursuant to which the CREM Lender loaned to the CREM Borrowers an aggregate principal amount of $58.7 million (the "CREM Loan Transaction"). The Company guaranteed the obligations of the CREM Borrowers under the CREM Loan 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 %. The Company will make interest-only payments for the first twelve months of the term of the loan, with payments thereafter based upon a twenty-year amortization schedule.
The CREM Lender initially released $52.8 million to the CREM Borrowers (the "Initial CREM Distribution"), with the remaining proceeds of $5.9 million placed into escrow to complete the expansion of the Company's Hagerstown, Maryland cultivation facility (the "Hagerstown Facility"), with any unused proceeds to be released to the Company after completion of the Hagerstown Facility expansion. The Company used $46.8 million of the Initial CREM Distribution to fully repay certain of its outstanding debt obligations. These payments were comprised of $32.7 million to pay off the Term Loan, $11.9 million to pay off the mortgage with Bank of New England for the New Bedford, MA and Middleborough, MA properties, and $2.2 million to reduce the outstanding balance of the note issued by the Company in connection with the Ermont Acquisition.
The Company incurred bank closing costs and third party costs (i.e., legal fees, etc.) aggregating $1.5 million in connection with the CREM Loan Transaction, which were recorded as a discount to the Loan Transaction (the "CREM Closing Costs
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Discount"), and which are being amortized to interest expense over the term of the CREM Loan Transaction. The Company recorded approximately $18,000 and $55,000 of interest amortization in the three and nine months ended September 30, 2024, respectively, related to the CREM Closing Costs Discount.
The CREM Loan Agreement includes customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency. The CREM Loan Agreement also includes customary negative covenants limiting the CREM Borrowers' (but not the Company's) ability to incur additional indebtedness and grant liens that are otherwise not permitted, among others. The CREM Loan Agreement also requires the CREM Borrowers to meet certain periodic financial tests.
During the nine months ended September 30, 2024, $5.1 million of the escrowed portion of the loan proceeds was released to the Company, and the Company made interest-only payments to the CREM Lender aggregating $4.0 million. The current portion of the outstanding principal balance of the CREM Loan was $1.0 million at September 30, 2024.
Bank of New England (New Bedford, MA and Middleborough, MA)
The Company maintained an amended and restated mortgage secured by the Company's properties in New Bedford, MA and Middleborough MA in the original amount of $13.0 million and bearing interest of 6.5 % per annum that would mature in August 2025 (the “Refinanced Mortgage”). On November 16, 2023, the Company used $11.9 million of proceeds from the CREM Loan Transaction to pay the outstanding principal of the Refinanced Mortgage, and such mortgage was retired. The Company recorded a loss of $0.2 million on the early repayment of the Refinanced Mortgage, which it recorded in the fourth quarter of 2023. Concurrent with the repayment of the Refinanced Mortgage, the Company refinanced the properties through the CREM Loan and accordingly, effective November 16, 2023, the mortgage on these properties is held by Needham Bank, which mortgage matures in 2033 and which outstanding amount is included as a component of the CREM Loan outstanding balance.
Bank of New England (Wilmington, DE)
The Company maintains a mortgage with Bank of New England for the 2016 purchase of a building in Wilmington, DE, which was developed into a cannabis seed to sale facility that is currently leased to the Company's cannabis-licensed client in that state. The mortgage matures in 2031, with monthly principal and interest payments at a rate of 5.25 % per annum, with the rate adjusting every five years to the then-prime rate plus 1.5 % with a floor of 5.25 % per annum. The next interest rate adjustment will occur in September 2026. The current portions of the outstanding principal balance under this mortgage at September 30, 2024 and December 31, 2023 were approximately $138,000 and $133,000 , respectively.
DuQuoin State Bank (Anna, IL and Harrisburg IL)
In May 2016, the Company entered into a mortgage agreement with DuQuoin State Bank ("DSB") for the purchase of properties in Anna, IL and Harrisburg, IL, which the Company developed into two free-standing retail dispensaries. On May 5th of each year, this mortgage is due to be repaid unless it is renewed for another year at a rate determined by DSB’s executive committee. The mortgage was renewed in May 2024 at a rate of 9.5 % per annum. The current portions of the outstanding principal balance under this mortgage at September 30, 2024 and December 31, 2023 were approximately $26,000 and $27,000 , respectively.
DuQuoin State Bank (Metropolis, IL)
In July 2021, the Company purchased the land and building in which it operates its cannabis dispensary in Metropolis, Illinois. In connection with this purchase, the Company entered into a mortgage agreement with DSB in the amount of $2.7 million that matures in July 2041, and which currently bears interest at a rate of 11.25 % per annum, which rate is adjusted each year based on a certain interest rate index plus a margin. As part of this transaction, the seller was provided with a 30.0 % ownership interest in Mari Holdings Metropolis LLC (“Metro”), the Company’s subsidiary that owns the property and holds the related mortgage obligation, reducing the Company’s ownership interest in Metro to 70.0 %. The current portions of the outstanding principal balance of this mortgage at September 30, 2024 and December 31, 2023 were approximately $55,000 and $46,000 , respectively.
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DuQuoin State Bank (Mt. Vernon, IL)
In July 2022, Mari Holdings Mt Vernon LLC, a wholly owned subsidiary of the Company, entered into a $3.0 million loan agreement and mortgage with DSB secured by property owned by the Company in Mt. Vernon, Illinois, which it is developing into a grow and production facility. The mortgage has a 20 -year term and currently bears interest at the rate of 11.25 % per annum, subject to upward adjustment on each annual anniversary date to the Wall Street Journal U.S. Prime Rate (with an interest rate floor of 7.75 %). The proceeds of this loan are being utilized for the build-out of the property and other working capital needs. The current portions of the outstanding principal balance of this mortgage were approximately $59,000 and $48,000 at September 30, 2024 and December 31, 2023, respectively.
DuQuoin State Bank (Mt. Vernon, IL)
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. 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 were due. On May 26, 2023, the Company repaid the outstanding balance on this mortgage, which totaled approximately $778,000 . In January 2024, the Company refinanced this property and entered into a $1.2 million mortgage with DSB. The mortgage with DSB has a 17-year term and bears interest of 9.50 % per annum. The current portion of the outstanding principal balance of this mortgage was approximately $31,000 at September 30, 2024.
Promissory Notes
Promissory Notes Issued as Purchase Consideration
Ermont
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 quarterly payments of principal and interest in arrears thereafter. The outstanding balance on the Ermont Note is subject to prepayment in full in the event the Company raises $75.0 million or more of equity capital. The Company recorded the Ermont Note at a present value of $4.6 million. This amount is net of the $2.4 million recorded as a debt discount, which is being accreted through the term of the Ermont Note to interest expense. As discussed above, on November 26, 2023, the Company used $2.2 million of the proceeds from the CREM Loan Transaction to reduce the outstanding balance of the Ermont Note. The difference between the face value of the Ermont Note and the present value recorded at the time of the Ermont Acquisition is being amortized to interest expense over the term of the Ermont Note. The fair value of the Ermont Note was $2.9 million and $2.6 million at September 30, 2024 and December 31, 2023, respectively. The current portion of the outstanding principal balance of the Ermont Note was $0.3 million at September 30, 2024. The Ermont Note did no t have a current portion recorded at December 31, 2023.
Greenhouse Naturals LLC
In December 2022, the Company completed the acquisition from Greenhouse Naturals LLC of the assets associated with a cannabis dispensary in Beverly, Massachusetts (the "Beverly Dispensary"). In connection with this transaction, the Company issued a $5.0 million promissory note to the sellers, payable on a monthly basis as a percentage of the monthly gross sales of the Beverly Dispensary (the "Greenhouse Naturals Note"). The Company recorded $0.7 million as a debt discount, which is being accreted to interest expense through the term of the Greenhouse Naturals Note, which matures in July 2026. In the third quarter of 2023, the Company updated its forecast of revenue attributable to the Beverly Dispensary and, accordingly, adjusted the schedule of estimated future payments on the Greenhouse Naturals Note. The fair value of the Greenhouse Naturals Note was $3.9 million and $4.2 million at September 30, 2024 and December 31, 2023, respectively. The Company estimated that the current portion of the Greenhouse Naturals Note was $0.4 million and $0.3 million at September 30, 2024 and December 31, 2023, respectively.
MedLeaf
In connection with the MedLeaf Acquisition, the Company issued the MedLeaf Note, totaling $2.0 million (See Note 2). The MedLeaf Note bears interest at a rate of 8.0 % per annum and matures on October 5, 2025. The MedLeaf Note calls for
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six equal principal payments, paid quarterly, which payments began on July 5, 2024. At September 30, 2024, the current portion of the MedLeaf Note was $1.3 million.
Allgreens
In connection with the Allgreens Acquisition, the Company issued promissory notes aggregating $1.0 million (See Note 2). The Allgreens Notes bear interest at a rate of 7.5 % per annum and will mature one year from the date that the dispensary is permitted to commence operations. The Allgreens Notes had an aggregate outstanding balance of $1.0 million at September 30, 2024, all of which was recorded as current.
Kind Acquisition
In connection with the 2022 acquisition of Kind Therapeutics USA ("Kind"), the Company issued four-year promissory notes aggregating $6.5 million with an interest rate of 6.0 % per annum to the members of Kind (the “Kind Notes”). In connection with the CA Credit Agreement (described above), on January 24, 2023, the Company repaid the Kind Notes in full, aggregating $5.4 million, including approximately $420,000 of accrued interest. There was no penalty in connection with the early repayment of the Kind Notes.
Promissory Notes Issued to Purchase Property and Equipment
The Company had five outstanding promissory notes in connection with the purchase of commercial motor vehicles at both September 30, 2024 and December 31, 2023. At September 30, 2024, the outstanding notes had an aggregate outstanding balance of approximately $177,000 , of which approximately $35,000 was current. At December 31, 2023, the outstanding notes had an aggregate outstanding balance of approximately $178,000 , of which approximately $33,000 was current. The weighted average interest rates of the outstanding balances were 11.33 % and 11.07 % at September 30, 2024 and December 31, 2023, respectively. The weighted average remaining terms of these notes were 4.50 years and 4.61 years at September 30, 2024 and December 31, 2023, respectively.
The Company had an outstanding note in connection with the purchase, in the second quarter of 2024, of a parking lot adjacent to its Middleborough, MA dispensary totaling $352,000 (the "Middleborough Note"). The note bears interest at 4.0 %, with monthly interest-only payments and a balloon payment for the entire principal amount due on February 1, 2029.
Future Payments
The future principal amounts due under the Company outstanding mortgages and notes payable at September 30, 2024 were as follows (in thousands):
| Year ending December 31, | |||||
| Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Total future principal payments | |||||
| Less: discount | ( | ||||
| Total future principal payments, net of discount | $ | ||||
(10) MEZZANINE EQUITY
Series B Convertible Preferred Stock
The Company had 4,908,333 three
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Company's common stock as a single class, on most matters. However, the affirmative vote or consent of the Series B Holders voting separately as a class is required for certain acts taken by the Company, including an amendment or repeal of certain charter provisions, liquidation or winding up of the Company, creation of stock senior to the Series B Stock, and/or other acts defined in the certificate of designation.
The Series B Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank senior to the Company’s common stock. The Company shall not declare, pay, or set aside any dividends on shares of any other class or series of capital stock of the Company unless the Series B Holders shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Stock in an amount calculated pursuant to the certificate of designation.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Series B Holders shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of the Company's common stock by reason of their ownership thereof, an amount per share of Series B Stock equal to $3.00 , plus any dividends declared but unpaid thereon, with any remaining assets distributed pro-rata among the Series B Holders and the holders of the Company's common stock, based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted into shares of the Company's common stock.
At any time on or prior to the six-year anniversary of the 2020 issuance date of the Series B Stock, (i) the Series B Holders have the option to convert their shares of Series B Stock into shares of the Company's common stock at a conversion price of $3.00 per share, without the payment of additional consideration, and (ii) the Company has the option to convert all, but not less than all, shares of Series B Stock into shares of the Company's common stock at a conversion price of $3.00 if the daily volume weighted average price of the Company's common stock (the “VWAP”) exceeds $4.00 per share for at least consecutive trading days prior to the date on which the Company gives notice of such conversion to the Series B Holders.
On the day following the six-year anniversary of the issuance of the Series B Stock (February 28, 2026), all outstanding shares of Series B Stock (4,908,333 shares) shall automatically convert into shares of the Company's common stock as follows:
If the sixty-day VWAP is less than or equal to $0.50 per share, the Company shall have the option to:
•convert all shares of Series B Stock into shares of the Company's common stock at a conversion ratio of 1 :1 (4,908,333 shares), subject to adjustment upon the occurrence of certain events, and pay cash to the Series B Holders equal to the difference between the sixty-day VWAP and $3.00 per share; or
•pay cash to the Series B Holders equal to $3.00 per share ($14,725,000 ).
If the sixty-day VWAP is greater than $0.50 per share, the Company shall have the option to:
•convert all shares of Series B Stock into shares of the Company's common stock at a conversion price per share equal to $3.00 per share divided by the sixty-day VWAP; or
•pay cash to the Series B Holders equal to $3.00 per share ($14,725,000 ); or
•convert a number of shares of Series B Stock, such number at the Company's sole discretion, into shares of the Company's common stock valued at the sixty-day VWAP (the "Conversion Value") and pay cash to the Series B Holders equal to the difference between $14,725,000 and the Conversion Value (shares issued multiplied by the sixty-day VWAP).
The Company shall at all times when the Series B Stock is outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series B Stock, such number of its duly authorized shares of common stock as shall from time to time be sufficient to effect the conversion of all outstanding Series B Stock.
Series C Convertible Preferred Stock
The Company's Series C Convertible Preferred Stock (the "Series C Stock") is held by Hadron Healthcare Master Fund (“Hadron”). In 2021, the Company issued to Hadron 6,216,216 shares of Series C Stock and warrants to purchase up to an aggregate of 15,540,540 shares of its common stock in connection with a financing facility between the Company and Hadron. Each share of Series C Stock is convertible, at Hadron’s option, into five shares of the Company's common stock, and each warrant is exercisable at an exercise price of $1.087 per share. The warrants are subject to early termination if
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certain milestones are achieved and the market value of the Company’s common stock reaches certain predetermined levels.
The Series C Stock is zero coupon, non-voting, and has a liquidation preference equal to its original issuance price plus declared but unpaid dividends. Holders of Series C Stock are entitled to receive dividends on an as-converted basis.
During the year ended December 31, 2023, the Company converted, at Hadron's request in accordance with the terms and conditions of the Series C Stock certificate of designation, a total of 5,060,942 shares of Series C Stock into 25,304,710 shares of the Company's common stock (the "Conversions), comprised of 784,334 shares of Series C Stock converted into 3,921,670 shares of the Company's common stock in the third quarter of 2023 and 4,276,608 shares of Series C Stock converted into 21,383,040 shares of the Company's common stock in the second quarter of 2023. The Conversions were effected at a conversion rate of five shares of the Company's common stock for each share of Series C Stock converted. The Company did not recognize a gain or loss on the Conversions as they were effected in accordance with the Series C Stock certificate of designation. At both September 30, 2024 and December 31, 2023, 1,155,274
(11) STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION
Amended and Restated 2018 Stock Award and Incentive Plan
The Company’s Amended and Restated 2018 Stock Award and Incentive Plan (the “Plan”) provides for the award of options to purchase the Company’s common stock (“stock options”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”), restricted stock, deferred stock, dividend equivalents, performance shares or other stock-based performance awards and other stock- or cash-based awards. Awards can be granted under the Plan to the Company’s employees, officers and non-employee directors, as well as consultants and advisors of the Company and its subsidiaries.
On June 8, 2023, the Company's Board of Directors approved an amendment to the Plan to modify the one-year minimum vesting requirements.
Stock Options
A summary of the Company's stock option activity during the nine months ended September 30, 2024 is below:
| Shares | Weighted average exercise price | ||||||||||
| Outstanding at January 1, 2024 | $ | ||||||||||
| Granted | $ | ||||||||||
| Exercised | $ | ||||||||||
| Forfeited | ( | $ | |||||||||
| Expired | ( | $ | |||||||||
| Outstanding at September 30, 2024 | $ | ||||||||||
Stock options granted under the Plan generally expire five years from the date of grant. At September 30, 2024, the stock options outstanding had a weighted average remaining life of approximately two years .
The grant date fair value of the stock options granted in the nine months ended September 30, 2024 was estimated using the Black-Scholes valuation model with the following assumptions:
| Estimated life (in years) | |||||
| Weighted average volatility | |||||
| Weighted average risk-free interest rate | |||||
| Dividend yield | |||||
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Restricted Stock Units
Holders of unvested restricted stock units ("RSUs") do not have voting or dividend rights. The grant date fair values of RSUs are recognized as expense on a straight-line basis over the requisite service periods. The fair value of RSUs is determined based on the market value of the shares of the Company's common stock on the date of grant.
The activity related to the Company's RSUs for the nine months ended September 30, 2024 was as follows:
| RSUs | Weighted average grant date fair value | ||||||||||
| Unvested at January 1, 2024 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited | ( | $ | |||||||||
| Outstanding at September 30, 2024 | $ | ||||||||||
Of the 2,005,469 RSUs reported as vested in the table above, 85,071 shares, with an aggregate fair value of approximately $15,000 , were surrendered to the Company to satisfy the tax withholding obligations that arose in connection with the vesting of such RSUs.
Warrants
On May 2, 2024, the Company issued warrants to purchase 1,000,000 shares of the Company's common stock to an entity in consideration for introductory and other services rendered in connection with certain funding and acquisition transactions. The warrants have an exercise price of $0.32 per share, vested immediately, and expire on May 1, 2029. The Company calculated that the grant date fair value of the warrants was approximately $218,000 in the aggregate using the Black-Scholes valuation model. This expense is included as a component of Acquisition-related and other in the Company's condensed consolidated statements of operations for the nine months ended September 30, 2024.
At September 30, 2024, warrants to purchase up to 43,089,476 shares of the Company's common stock were outstanding, with a weighted average exercise price of $0.67 .
Other Common Stock Issuances
In addition to the activity related to stock options and RSUs, described above, during the nine months ended September 30, 2024, the Company also issued 3,917,267 shares of restricted common stock as purchase consideration (see Note 2) with a grant date fair value of approximately $1 million, and 28,369 shares of restricted common stock with an aggregate fair value of approximately $7,000 , under a royalty agreement.
Stock-Based Compensation
The Company recorded stock-based compensation of $0.3 0.8
(12) REVENUE
The Company’s main sources of revenue are comprised of the following:
•Product sales (retail and wholesale) – direct sales of cannabis and cannabis-infused products by the Company’s retail dispensaries and wholesale operations. This revenue is recognized when products are delivered or at retail points-of-sale.
•Real estate rental income – rental income generated from leasing of the Company’s state-of-the-art, regulatory-compliant cannabis facilities to its cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms.
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•Supply procurement fees – fees from facilitating purchases of cultivation and production resources, supplies and equipment for the Company's cannabis-licensed clients and third parties. The Company recognizes this revenue after the delivery and acceptance of goods by a purchaser.
•Management fees – fees for providing the Company’s cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations.
•Licensing fees – revenue from the licensing of the Company's branded products, including Betty's Eddies, Bubby's Baked, Vibations and Kalm Fusion, to wholesalers and to regulated dispensaries throughout the United States and Puerto Rico. The Company recognizes this revenue when the products are delivered.
The Financial Accounting Standards Board Accounting Standards Codification 606, Revenue from Contract with Customers, as amended by subsequently issued Accounting Standards Updates, requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The recognition of revenue is determined by performing the following consecutive steps:
•Identify the contract(s) with a customer;
•Identify the performance obligations in the contract(s);
•Determine the transaction price;
•Allocate the transaction price to the performance obligations in the contract(s); and
•Recognize revenue as the performance obligation is satisfied.
Additionally, when another party is involved in providing goods or services to the Company’s clients, a determination is made as to who - the Company or the other party - is acting in the capacity as the principal in the sale transaction, and who is the agent arranging for goods or services to be provided by the other party.
The Company is typically considered the principal if it controls the specified good or service before such good or service is transferred to its client, and typically considered the agent if it does not exert such control. The Company may also be deemed to be the principal even if it engages another party (an agent) to satisfy some of the performance obligations on its behalf, provided the Company (i) takes on certain responsibilities, obligations and risks, (ii) possesses certain abilities and discretion, or (iii) fulfills other relevant indicators of the sale. If deemed an agent, the Company does not recognize revenue for the performance obligations it does not satisfy.
Revenue for the three and nine months ended September 30, 2024 and 2023 was comprised of the following (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| Product revenue: | |||||||||||||||||||||||
| Product revenue - retail | $ | $ | $ | $ | |||||||||||||||||||
| Product revenue - wholesale | |||||||||||||||||||||||
| Total product revenue | |||||||||||||||||||||||
| Other revenue: | |||||||||||||||||||||||
| Real estate rentals | |||||||||||||||||||||||
| Supply procurement | |||||||||||||||||||||||
| Management fees | |||||||||||||||||||||||
| Licensing fees | |||||||||||||||||||||||
| Total other revenue | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
(13) MAJOR CUSTOMERS
The Company did not have any customers that contributed 10% or more of total revenue in any of the three- or nine-month periods ended September 30, 2024 or 2023.
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The Company did not have any customers that accounted for 10% or more of the Company’s accounts receivable balance at either September 30, 2024 or December 31, 2023. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on accounts receivable. The Company maintains an allowance for doubtful accounts and historical losses have been within management’s expectations.
(14) LEASES
Arrangements that are determined to be leases with a term greater than one year are accounted for by the recognition of right-of-use assets that represent the Company’s right to use an underlying asset for the lease term, and lease liabilities that represent the Company’s obligation to make lease payments arising from the lease. Non-lease components within lease agreements are accounted for separately.
Right-of-use assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term, utilizing the Company’s incremental borrowing rate. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
At September 30, 2024, the Company was the lessee under eight operating leases and thirty finance leases. These leases contain rent holidays and customary escalations of lease payments for the type of facilities being leased. The Company's operating leases include its corporate headquarters, dispensaries and cannabis production and processing facilities. The Company subleases three of these leased facilities to a cannabis-licensed client. The Company recognizes rent expense on a straight-line basis over the expected lease term, including cancelable option periods which the Company fully expects to exercise. Certain leases require the payment of property taxes, insurance and/or maintenance costs in addition to the rent payments. The Company leases machinery and office equipment under finance leases that expire from January 2026 through April 2030, with such terms being a major part of the economic useful life of the leased property.
The components of lease expense for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| Operating lease expense | $ | $ | $ | $ | |||||||||||||||||||
| Finance lease expenses: | |||||||||||||||||||||||
| Amortization of right of use assets | $ | $ | $ | $ | |||||||||||||||||||
| Interest on lease liabilities | |||||||||||||||||||||||
| Total finance lease expense | $ | $ | $ | $ | |||||||||||||||||||
The weighted average remaining lease terms and weighted average discount rates for the Company's operating leases and finance leases at September 30, 2024 and December 31, 2023 were as follows:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Weighted average remaining lease term (years): | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Weighted average discount rate: | |||||||||||
| Operating leases | % | % | |||||||||
| Finance leases | % | % | |||||||||
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Future minimum lease payments as of September 30, 2024 under all non-cancelable leases having an initial or remaining term of more than one year were (in thousands):
| Operating leases | Finance leases | ||||||||||
| Remainder of 2024 | $ | $ | |||||||||
| 2025 | |||||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | |||||||||||
| Less: imputed interest | ( | ( | |||||||||
| $ | $ | ||||||||||
(15) RELATED PARTY TRANSACTIONS
The Company’s corporate offices are leased from an entity in which the Company’s President and Chief Executive Officer (the "CEO") has an investment interest. This lease expires in October 2028 and contains a five-year extension option. Expenses incurred under this lease were approximately $64,000 and $61,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $168,000 and $190,000 for the nine months ended September 30, 2024 and 2023, respectively.
The Company procures nutrients, lab equipment, cultivation supplies, furniture, and tools from an entity owned by the family of the Company’s Chief Operating Officer (the “COO”). Purchases from this entity totaled $1.3 million and $1.4 million in the three months ended September 30, 2024 and 2023, respectively, and $3.5 million and $4.2 million in the nine months ended September 30, 2024 and 2023, respectively.
The Company pays royalties on the revenue generated from its Betty’s Eddies product line to an entity owned by the COO and its Chief Revenue Officer (the “CRO") under a royalty agreement. Under this agreement, the royalty percentage on all sales of Betty’s Eddies products is 3.0 % if sold directly by the Company and between 1.35 % and 2.5 % if licensed by the Company for sale by third parties. Future developed products (i.e., ice cream) have a royalty rate of 0.5 % if sold directly by the Company and between 0.125 % and 0.135 % if licensed by the Company for sale by third parties. The aggregate royalties earned by the entity under this agreement were approximately $178,000 and $149,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $427,000 and $614,000 for the nine months ended September 30, 2024 and 2023, respectively.
During the three months ended September 30, 2024 and 2023, one of the Company’s majority-owned subsidiaries paid distributions of approximately $1,900 and $3,000 , respectively, to the CEO, who owns a minority equity interest in such subsidiary. During the nine months ended September 30, 2024 and 2023, this majority-owned subsidiary made distribution payments of approximately $5,000 and $6,400 , respectively, to the CEO.
On June 10, 2024 (the "Membership Unit Purchase Date"), the CEO and COO purchased 5 % and 15 %, respectively, of the membership units of Mari Holdings Metropolis, LLC, one of the Company's majority-owned subsidiaries. These membership units were purchased from the previous minority interest-holder, and accordingly, the percentage of this majority-owned subsidiary held by noncontrolling interests remains unchanged. During the three months ended September 30, 2024, this majority-owned subsidiary accrued distribution payments of approximately $3,250 and $9,750 to the CEO and COO, respectively. During the nine months ended September 30, 2024, this majority-owned subsidiary accrued distribution payments of approximately $6,500 and $19,500 to the CEO and COO, respectively.
The Company holds a 49 % interest in a delivery company that delivers products purchased at certain of the Company's dispensaries (the "Delivery Company"). The remaining interest is held by a non-executive officer employee of the Company who was a founder of the Delivery Company. The Company has provided funding to the Delivery Company; during the nine months ended September 30, 2024 and 2023, the Company provided funding of approximately $197,000 and $58,000 , respectively. As of September 30, 2024, these amounts remained outstanding.
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Prior to December 31, 2023, FSCC, the cannabis-licensed client in Delaware that the Company manages, paid fees to BKR Management Inc., a company partially owned by the CEO, related to the initial formation, licensing and establishment of FSCC's cannabis operations. The aggregate fees paid by FSCC were $48,000 and $144,000 , respectively, for the three and nine months ended September 30, 2023. Payment of these fees terminated effective as of December 31, 2023.
At September 30, 2024, the Company’s mortgages with Bank of New England and DuQuoin State Bank were personally guaranteed by the CEO. Additionally, the CEO provided a limited guaranty to the Lenders under the Company's Credit Agreement with Chicago Atlantic through its repayment in November 2023. The CEO had also guaranteed the South Porte Bank Mortgage prior to its repayment in May 2023.
(16) COMMITMENTS AND CONTINGENCIES
Bankruptcy Claim
In 2019, MariMed Hemp, Inc. ("MMH"), a subsidiary of the Company, sold hemp seed inventory to GenCanna Global Inc., (“GenCanna”), recording a related party receivable of approximately $29 million, which was fully reserved at December 31, 2019. In early 2020, GenCanna entered a Chapter 11 bankruptcy, leading to a liquidating plan that remains ongoing. In 2022, the Plan Administrator filed a complaint against MMH for alleged preferential transfers, which was settled in 2023 by reducing MMH's general unsecured claim to $15.5 million. In the three months ended September 30, 2024, MMH received a liquidation distribution of $116,250 . As of the date of this filing, there is insufficient information to determine the amount of further liquidation distributions, if any, that MMH may receive on account of its general unsecured claim.
New Bedford, MA and Middleborough, MA Buildouts
In the third quarter of 2023, the Company recorded an increase of $2.0 million in building and building improvements and a corresponding accrued liability in the same amount for electrical work performed at the Company's New Bedford and Middleborough properties between December 2017 and June 2023. The electrical work was performed by an electrical contractor that is owned and/or controlled by the family of a non-officer/director Company stockholder who beneficially owned more than 5 % of the Company's common stock when the electrical work began. The electrical work was primarily paid for by an entity that is indirectly controlled by that individual and another non-officer/director Company stockholder who also beneficially owned more than 5 % of the Company's common stock when the electrical work began. The Company repaid the two shareholders $300,000 each as salary between 2021 and 2023 (at the rate of $100,000 each per year), which payments have since terminated. Discussions to reach agreement with the entity that paid for the electrical work and all other interested parties to address this liability and related payment terms are ongoing.
(17) SUBSEQUENT EVENTS
Equity Transactions
Subsequent to September 30, 2024, the Company issued 314,001 shares of common stock in the aggregate underlying RSUs that vested on various dates prior to the filing of this report.
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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, 2023 (the "2023 10-K"), which was filed with the U.S. Securities and Exchange Commission (“SEC”) on March 7, 2024.
Forward Looking Statements
When used in this Quarterly Report on Form 10-Q and in future filings by the Company with the SEC, words or phrases, such as “anticipate,” “believe,” “could,” “would,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or similar expressions, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on any such forward looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements.
These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. These factors include, but are not limited to, changes that may occur to general economic and business conditions; changes in current pricing levels that the Company can charge for its services and products or which it pays to its suppliers and business partners; changes in political, social and economic conditions in the jurisdictions in which the Company operates; changes to regulations that pertain to its operations; changes in technology that render the Company’s technology relatively inferior, obsolete or more expensive compared to others; changes in the business prospects of the Company’s business partners and customers; increased competition, including from the Company’s business partners; and enforcement of U.S. federal cannabis-related laws.
The following discussion should be read in conjunction with the financial statements and related notes which are included in this Quarterly Report on Form 10-Q.
The Company does not undertake to update its forward-looking statements or risk factors to reflect future events or circumstances, unless required by law.
Overview
We are a multi-state operator in the United States cannabis industry. We develop, operate, manage and optimize state-of-the-art, regulatory-compliant facilities for the cultivation, production and dispensing of medicinal and adult-use cannabis. We also license our proprietary brands of cannabis products, along with other top brands, in several domestic markets.
We completed two acquisitions during the nine months ended September 30, 2024, which we accounted for as asset purchase. On April 9, 2024, we acquired 100% of the membership interests of Allgreens Dispensary, LLC ("Allgreens"), which held a conditional adult-use cannabis dispensary license in Illinois. On April 5, 2024, we acquired 100% of the membership interests of Our Community Wellness & Compassionate Care Center, Inc. ("MedLeaf"), which held a retail dispensary license in Maryland. The MedLeaf dispensary had ceased operations since July 1, 2023, but we reopened it on August 19, 2024, upon receiving regulatory approval to commence adult use retail sales.
On March 9, 2023 (the "Ermont Acquisition Date"), we 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 our condensed consolidated financial statements for the period subsequent to the Ermont Acquisition Date.
During 2024, we continue to focus on executing our strategic growth plan, with priority on activities that include the following:
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•Completing the acquisition and consolidation of the client cannabis businesses we developed, managed and advised prior to becoming a seed to sale multi-state operator. There is one remaining business that we continue to manage and intend to acquire - Delaware operator First State Compassion Center ("FSCC"). Delaware's current cannabis regulations prevent such an acquisition.
•Increasing revenue organically in states where we currently do business by developing additional assets and increasing our product distribution within those states.
•Expanding our footprint into high-growth legal cannabis states through new license applications and/or acquisitions of existing cannabis businesses.
•Increasing product brand revenue by introducing new, innovative products that consumers want, expanding our award-winning brands to include new effects or to fill additional customer needs, and by identifying qualified licensing partners that will expand our distribution into new markets.
In November 2023, we announced the closing of a $58.7 million secured credit facility with a Needham Bank at a lower rate relative to both our previous outstanding debt with Chicago Atlantic Admin, LLC (“Chicago Atlantic”) and recent transactions announced by other cannabis companies. This debt refinancing enabled us to pay off our term loan with Chicago Atlantic, pay off the mortgage on our New Bedford and Middleborough, Massachusetts facilities with Bank of New England, and reduce the principal outstanding on the note we issued to the sellers in connection with our acquisition of the operating assets of Ermont, Inc. Our new credit facility has allowed us to unencumber our operating assets in Illinois, Ohio, and Delaware, as well as our branded products, providing additional levers for future loans at attractive rates if we choose to increase our borrowings. Additionally, the credit facility bolsters our ability to continue to execute our strategic plan, particularly as it relates to growing the Company through mergers and acquisitions.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given available information. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our condensed consolidated financial statements. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment: accounts receivable; valuation of inventory; estimated useful lives and depreciation and amortization of property and equipment and intangible assets; accounting for acquisitions and business combinations; loss contingencies and reserves; stock-based compensation; and accounting for income taxes.
Accounts Receivable
We provide credit to our clients in the form of payment terms. We limit our credit risk by performing credit evaluations of our clients and maintaining a reserve, as applicable, for potential credit losses. Such evaluations are judgmental in nature and include a review of each client’s outstanding balances with consideration toward such client’s historical collection experience, as well as prevailing economic and market conditions and other factors. Accordingly, the actual amounts collected could differ from expected amounts and require that we record additional reserves.
Inventory
Our inventory is valued at the lower of cost or market, including consideration of factors such as shrinkage, the aging of and future demand for inventory, expected future selling price, what we expect to realize by selling the inventory and the 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.
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Estimated Useful Lives and Depreciation and Amortization of Property, Equipment, and Intangible Assets
Depreciation and amortization of property, equipment, and intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.
Business Combinations and Asset Purchases
Classification of a business acquisition as a business combination or an asset acquisition depends on whether the assets acquired constitute a business, which can be a complex judgment. Whether an acquisition is classified as a business combination or asset acquisition can have a significant impact on how we record the transaction.
We allocate the purchase price of acquired assets and companies to identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net amount of the acquisition date fair values of the assets acquired and the liabilities assumed and represents the expected future economic benefits from other assets acquired in the acquisition or business combination that are not individually identified and separately recognized. Significant judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, which are principally based upon estimates of the future performance and cash flows expected from the acquired asset or business and applied discount rates. While we use our best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates and assumptions are inherently uncertain and subject to refinement. If different assumptions are used, it could materially impact the purchase price allocation and our financial position and results of operations. Any adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period are included in operating results in the period in which the adjustments are determined. Intangible assets typically are comprised of trademarks and trade names, licenses and customer relationships, and non-compete agreements.
Loss Contingencies and Reserves
We are subject to ongoing business risks arising in the ordinary course of business that affect the estimation process of the carrying value of assets, the recording of liabilities, and the possibility of various loss contingencies. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to determine whether such amounts should be adjusted and record changes in estimates in the period they become known. We are subject to legal claims from time to time. We reserve for legal contingencies and legal fees when the amounts are probable and estimable.
Stock-Based Compensation
Our stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized over the requisite service period, which is generally the vesting period. We use the Black-Scholes valuation model for estimating the fair value of stock options as of the date of grant. Determining the fair value of stock option awards at the grant date requires judgment regarding certain valuation assumptions, including the volatility of our stock price, expected term of the stock option, risk-free interest rate and expected dividends. Changes in such assumptions and estimates could result in different fair values and could therefore impact our earnings. Such changes, however, would not impact our cash flows.
Income Taxes
We use the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to 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.
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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 and nine months ended September 30, 2024 and 2023
Revenue
Our main sources of revenue are comprised of the following:
•Product sales (retail and wholesale) - direct sales of cannabis and cannabis-infused products primarily by our retail dispensaries and wholesale operations in multiple states. We recognize this revenue when products are delivered or at retail points-of-sale.
•Supply procurement fees – fees from facilitating purchases of cultivation and production resources, supplies and equipment for our cannabis-licensed clients and third parties. We recognize this revenue after the delivery and acceptance of goods by a purchaser.
•Real estate rentals - rental income generated from leasing of our state-of-the-art, regulatory-compliant cannabis facilities to our cannabis-licensed clients. Rental income is generally a fixed amount per month that escalates over the respective lease terms.
•Management fees - fees for providing our cannabis clients with comprehensive oversight of their cannabis cultivation, production and dispensary operations.
•Licensing fees - revenue from the licensing of our branded products, including Betty's Eddies, Bubby's Baked, Vibations and Kalm Fusion, to wholesalers and regulated dispensaries throughout the United States and Puerto Rico. We recognize this revenue when the products are delivered.
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Our revenue for the three and nine months ended September 30, 2024 and 2023 was comprised of the following (in thousands):
| Increase (decrease) from prior year | |||||||||||||||||||||||
2024 | 2023 | $ | % | ||||||||||||||||||||
| Three months ended September 30, | |||||||||||||||||||||||
Product revenue: | |||||||||||||||||||||||
Product sales - retail | $ | 23,384 | $ | 24,121 | $ | (737) | (3.1) | % | |||||||||||||||
Product sales - wholesale | 16,310 | 13,643 | 2,667 | 19.5 | % | ||||||||||||||||||
| Total product revenue | 39,694 | 37,764 | 1,930 | 5.1 | % | ||||||||||||||||||
Other revenue: | |||||||||||||||||||||||
| Real estate rentals | 319 | 631 | (312) | (49.4) | % | ||||||||||||||||||
| Supply procurement | 323 | 321 | 2 | 0.6 | % | ||||||||||||||||||
| Management fees | 189 | 37 | 152 | 410.8 | % | ||||||||||||||||||
| Licensing fees | 66 | 47 | 19 | 40.4 | % | ||||||||||||||||||
| Total other revenue | 897 | 1,036 | (139) | (13.4) | % | ||||||||||||||||||
| Total revenue | $ | 40,591 | $ | 38,800 | $ | 1,791 | 4.6 | % | |||||||||||||||
| Nine months ended September 30, | |||||||||||||||||||||||
Product revenue: | |||||||||||||||||||||||
Product sales - retail | $ | 69,353 | $ | 71,640 | $ | (2,287) | (3.2) | % | |||||||||||||||
Product sales - wholesale | 46,683 | 35,050 | 11,633 | 33.2 | % | ||||||||||||||||||
| Total product revenue | 116,036 | 106,690 | 9,346 | 8.8 | % | ||||||||||||||||||
Other revenue: | |||||||||||||||||||||||
| Real estate rentals | 976 | 1,570 | (594) | (37.8) | % | ||||||||||||||||||
| Supply procurement | 1,020 | 1,125 | (105) | (9.3) | % | ||||||||||||||||||
| Management fees | 787 | 91 | 696 | 764.8 | % | ||||||||||||||||||
| Licensing fees | 143 | 223 | (80) | (35.9) | % | ||||||||||||||||||
| Total other revenue | 2,926 | 3,009 | (83) | (2.8) | % | ||||||||||||||||||
| Total revenue | $ | 118,962 | $ | 109,699 | $ | 9,263 | 8.4 | % | |||||||||||||||
Our total revenue increased $1.8 million, or 4.6%, in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Our total product revenue increased $1.9 million, or 5.1%, in the three months ended September 30, 2024, compared to the same prior year period. The $2.7 million increase in revenue from our wholesale operations was partially offset by a $0.7 million decrease in retail sales. The increase in wholesale revenue was attributable to the inclusion of wholesale revenue in Illinois in the current year, coupled with higher revenue in our other wholesale locations. Our retail operations in Massachusetts reported higher retail revenue in the three months ended September 30, 2024, partially offset by lower retail revenue in our other locations, primarily certain of our Illinois dispensaries. The decrease in other revenue in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily attributable to lower real estate rentals, partially offset by management fees.
Our total revenue increased $9.3 million, or 8.4%, in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily attributable to wholesale revenue, partially offset by lower retail sales and other revenue. The increase in wholesale revenue was attributable to the inclusion of wholesale revenue in Illinois in the current year, coupled with higher revenue in our other wholesale locations, particularly in Maryland. Our retail operations in Illinois reported lower revenue in the aggregate; however, this decrease was partially offset by higher net sales in our Massachusetts dispensaries and in Maryland. Our other revenue was relatively unchanged in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in management fees principally related to Allgreens prior to the Allgreens Acquisition Date. This increase was offset by reductions to our remaining other revenue sources.
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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 and nine months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages):
| Increase (decrease) from prior year | |||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Three months ended September 30, | |||||||||||||||||||||||
| Cost of revenue | $ | 23,813 | $ | 21,962 | $ | 1,851 | 8.4 | % | |||||||||||||||
| Gross profit | $ | 16,778 | $ | 16,838 | $ | (60) | (0.4) | % | |||||||||||||||
| Gross margin | 41.3 | % | 43.4 | % | |||||||||||||||||||
| Nine months ended September 30, | |||||||||||||||||||||||
| Cost of revenue | $ | 68,803 | $ | 61,097 | $ | 7,706 | 12.6 | % | |||||||||||||||
| Gross profit | $ | 50,159 | $ | 48,602 | $ | 1,557 | 3.2 | % | |||||||||||||||
| Gross margin | 42.2 | % | 44.3 | % | |||||||||||||||||||
Our cost of revenue increased in both the three- and nine-month periods ended September 30, 2024 compared to the same periods in the prior year. These increases were primarily attributable to increases in employee-related expenses and materials costs aggregating approximately $2 million and $6 million in the three and nine months ended September 30, 2024, respectively. Our higher personnel costs were primarily due to our increased headcount in connection with our recent acquisitions and expanded footprint. These increases were partially offset by decreases in certain inventory-related expenses.
Operating Expenses
Our operating expenses are comprised of personnel, marketing and promotion, general and administrative, acquisition-related and other, and bad debt expenses. Our operating expenses for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages):
| Increase (decrease) from prior year | |||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Three months ended September 30, | |||||||||||||||||||||||
| Personnel | $ | 7,255 | $ | 5,916 | $ | 1,339 | 22.6 | % | |||||||||||||||
| Marketing and promotion | 1,828 | 1,585 | 243 | 15.3 | % | ||||||||||||||||||
| General and administrative | 6,100 | 6,135 | (35) | (0.6) | % | ||||||||||||||||||
| Acquisition-related and other | 371 | 32 | 339 | 1059.4 | % | ||||||||||||||||||
| Bad debt | (116) | (122) | 6 | (4.9 | %) | ||||||||||||||||||
| $ | 15,438 | $ | 13,546 | $ | 1,892 | 14.0 | % | ||||||||||||||||
| Nine months ended September 30, | |||||||||||||||||||||||
| Personnel | $ | 20,678 | $ | 16,191 | $ | 4,487 | 27.7 | % | |||||||||||||||
| Marketing and promotion | 5,446 | 4,397 | 1,049 | 23.9 | % | ||||||||||||||||||
| General and administrative | 19,044 | 15,520 | 3,524 | 22.7 | % | ||||||||||||||||||
| Acquisition-related and other | 805 | 647 | 158 | 24.4 | % | ||||||||||||||||||
| Bad debt | (131) | (127) | (4) | 3.1 | % | ||||||||||||||||||
| $ | 45,842 | $ | 36,628 | $ | 9,214 | 25.2 | % | ||||||||||||||||
The increase in our personnel expenses in both the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was primarily due to the hiring of additional staff to support higher levels of projected revenue from existing operations and our recent acquisitions. Personnel costs increased to approximately 18%
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and 17% of revenue in the three and nine months ended September 30, 2024, respectively, compared to approximately 15% of revenue in both the three and nine months ended September 30, 2023.
The increase in our marketing and promotion expenses in both the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023 was primarily attributable to our continued focus on upgrading our marketing initiatives in order to expand branding and distribution of our licensed products.
Our general and administrative expenses in the three months ended September 30, 2024 were essentially flat compared to the three months ended September 30, 2023. The moderate increases in our deal costs and facility and related expenses were virtually offset by lower professional fees (i.e., legal, accounting and consulting), depreciation and amortization, and other general and administrative expenses. The increase in our general and administrative expenses in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily attributable to higher facility and related expenses, depreciation and amortization of fixed assets, and professional fees. These increases were primarily attributable to the addition of new facilities and related fixed assets, coupled with higher professional fees, primarily legal fees in connection with our acquisitive and financing activities.
Acquisition-related and other expenses include those expenses related to acquisitions and other significant transactions that we would otherwise not have incurred, and include professional and services fees, such as legal, audit, consulting, paying agent and other fees. Our acquisition-related and other expense in both the three and nine months ended September 30, 2024 primarily related to the acquisitions of MedLeaf and Allgreens, which were both consummated in April 2024, and non-cash expense for warrants to purchase our common stock issued to an entity in consideration for introductory and other services rendered in connection with certain funding and acquisitive transactions. Our acquisition-related and other expense in the three and nine months ended September 30, 2023 primarily related to our acquisitions and professional fees incurred to obtain the CA Credit Agreement (described below).
Interest
Interest expense primarily relates to interest on mortgages and notes payable, as well as the CREM Loan (described below) in 2024 and the CA Term Loan (described below) in 2023. Interest income primarily relates to our notes receivable.
Our net interest expense decreased $0.8 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023, and $2.4 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. These decreases were primarily due to lower non-cash interest expense in the current year periods, coupled with lower interest rates on our CREM Loan compared to our previous financing facility.
Other Expense, Net
We reported net other expense of approximately $50,000 in the nine months ended September 30, 2024. We did not record other income or expense in the three months ended September 30, 2024.
We reported net other expense of $0.6 million and $1.6 million in the three and nine months ended September 30, 2023. The expense for the three months ended September 30, 2023 primarily relates to a $0.7 million term loan payment that we initiated in error to an account provided in a fraudulent email we received. We were initially advised by JPM Chase, the recipient's bank ("Chase") that we had identified the problem before the payment was delivered to the account identified by the email, and that the funds were being held by Chase pending its completion of an internal investigation. Chase has subsequently advised us that the funds were delivered to the fraudulent recipient's account. We continue to pursue all channels through our bank to recover these funds. In addition, we initiated, and are pursuing, a claim under our insurance coverage to recover this amount. There is no assurance that we will successfully recover all or any portion of this amount, including under our insurance claim. We reduced our cash balance and included this amount as a component of Other expense, net, in our condensed consolidated statement of operations for the three and nine months ended September 30, 2023. If these funds, or any portion of these funds, are recovered, we will reverse the expense accordingly. We have implemented additional safeguards to protect ourselves from future fraudulent activity; please see Part I, Item 1A. Risk Factors and Item 1C. Cybersecurity of our 2023 10-K. In addition to the aforementioned payment, the amount for the nine months ended September 30, 2023 also includes the write-off of assets in the first quarter of 2023 in connection with our decision to abandon a project to expand into Nevada.
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Income Tax Provision
We recorded income tax provisions of $3.2 million and $8.9 million in the nine months ended September 30, 2024 and 2023, respectively. Our income tax provisions are impacted by Section 280E of the Internal Revenue Code, which prohibits the deduction of certain ordinary business expenses.
Liquidity and Capital Resources
We had cash and cash equivalents of $9.8 million and $14.6 million at September 30, 2024 and December 31, 2023, 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.
CA Credit Agreement
On January 24, 2023, we entered into a Loan and Security Agreement, by and among the Company, subsidiaries of the Company from time-to-time party thereto (collectively with the Company, the “CA Borrowers”), lenders from time-to-time party thereto (the “CA Lenders”), and Chicago Atlantic Admin, LLC (“Chicago Atlantic”), as administrative agent for the Lenders (the "CA Credit Agreement").
Proceeds from the CA Credit Agreement were designated to complete the build-out of a new cultivation and processing facility in Illinois, complete the build-out of a new processing kitchen in Missouri, expand existing cultivation and processing facilities in Massachusetts and Maryland, fund certain capital expenditures, and repay in full the Kind Therapeutics seller notes incurred in connection with the Kind Acquisition, which repayment occurred on January 24, 2023. The remaining balance, if any, was expected to be used to fund acquisitions.
The CA Credit Agreement provided for $35.0 million in principal borrowings at our option in the aggregate and further provided the CA Borrowers with the right, subject to customary conditions, to request an additional incremental term loan in the aggregate principal amount of up to $30.0 million; provided that the CA Lenders elect to fund such incremental term loan. $30.0 million of loan principal was funded at the initial closing (the "CA Term Loan") and we had the option, during the six-month period following the initial closing, to draw down an additional $5.0 million, which we did not elect to do. The loans required scheduled amortization payments of 1.0% of the principal amount outstanding under the CA Credit Agreement per month commencing in May 2023, and the remaining principal balance was due in full on January 24, 2026, subject to extension to January 24, 2028 under certain circumstances.
The CA Credit Agreement provided the CA Borrowers with the right, subject to specified limitations, to incur (a) seller provided debt in connection with future acquisitions, (b) additional mortgage financing from third-party lenders secured by real estate currently owned and acquired after the closing date, and (c) additional debt in connection with equipment leasing transactions.
The obligations under the CA Credit Agreement were secured by substantially all of the assets of the CA Borrowers, excluding specified parcels of real estate and other customary exclusions.
The CA Credit Agreement provided for a floating annual interest rate equal to the prime rate then in effect plus 5.75%, which rate could be increased by 3.00% upon an event of default or 7.50% upon a material event of default as provided in the Credit Agreement.
At any time, we could voluntarily prepay amounts due under the facility in $5.0 million increments, subject to a three-percent prepayment premium and, during the first 20-months of the term, a “make-whole” payment.
The CA Credit Agreement included customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency.
The CA Credit Agreement also included customary negative covenants limiting our ability to incur additional indebtedness and grant liens that are otherwise not permitted, among others. Additionally, the CA Credit Agreement required us to meet
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certain financial tests. We were in compliance with the CA Credit Agreement covenants at all times while the Term Loan was outstanding.
The CA Credit Agreement provided for 30% warrant coverage against amounts funded under the facility, priced at a 20% premium to the trailing 20-day average price on the closing date of each such funding. At the initial closing, upon funding of the initial $30.0 million under the facility, we issued to the CA Lenders warrants to purchase an aggregate of 19,148,936 shares of our common stock at $0.47 per share, exercisable for a five-year period following issuance.
On November 16, 2023 (the "Payoff Date"), we repaid and retired the CA Term Loan (the "Term Loan Payoff") using proceeds from a new $58.7 million loan entered into on the same date (see "CREM Loan" below). The Term Loan Payoff amount totaled $32.7 million, comprised of $28.5 million for the outstanding principal, $3.7 million for the make-whole payment, $0.2 million for accrued unpaid interest and $0.3 million for transaction-related fees. We recognized a loss of $10.2 million in connection with the Term Loan Payoff.
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 will make interest-only payments for the first twelve months of the term of the loan, with payments thereafter based upon a twenty-year amortization schedule.
The CREM Lender initially released $52.8 million to the CREM Borrowers (the "Initial CREM Distribution"), 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 Term Loan, $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 Ermont Acquisition. 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 Needham Bank, which mortgage matures in 2033 and which outstanding amount is included as a component of the CREM Loan amount in our consolidated balance sheet at December 31, 2023. During the nine months ended September 30, 2024, $5.1 million of the escrowed portion of the loan proceeds was released to us,
The CREM Loan Agreement includes customary representations and warranties and customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to material indebtedness, and events of bankruptcy and insolvency. The CREM Loan Agreement also includes customary negative covenants limiting the CREM Borrowers' (but not the Company's) ability to incur additional indebtedness and grant liens that are otherwise not permitted, among others. The CREM Loan Agreement also requires the CREM Borrowers to meet certain periodic financial tests.
Cash Flows from Operating Activities
Our primary sources of cash from operating activities are from sales to customers in our dispensaries and to our wholesale customers. We expect cash flows from operating activities to be affected by increases and decreases in sales volumes and timing of collections, and by purchases of inventory and shipment of our products. Our primary uses of cash for operating
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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 $7.2 million and $4.7 million of cash in the nine months ended September 30, 2024 and 2023, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to higher costs and operating expenses arising from expanding our sales activities, facilities and geographic footprint, both in the states where we currently operate and to expand into other states. These higher costs primarily relate to personnel, cultivation/manufacturing and facility expenses.
Cash Flows from Investing Activities
Our investing activities used $15.9 million and $19.6 million of cash in the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, we used $10.9 million of cash for capital expenditures, $4.3 million for purchase consideration in connection with the MedLeaf Acquisition and Allgreens Acquisition, and $0.7 million for purchases of cannabis licenses. During the nine months ended September 30, 2023, we used $14.7 million of cash for capital expenditures, $3.0 million as part of the purchase consideration for the Ermont Acquisition, $0.6 million for cannabis licenses, $0.3 million for advances toward future acquisitions and $0.2 million for the purchase of certain investments. We also issued $0.9 million of notes receivable to a cannabis-licensed client.
Cash Flows from Financing Activities
Our financing activities provided $3.9 million of cash in the nine months ended September 30, 2024 and $18.5 million of cash in the nine months ended September 30, 2023. During the nine months ended September 30, 2024, we received $5.1 million of additional proceeds from the CREM Loan and $1.2 million of proceeds from the refinancing of our retail facility in Mt. Vernon, Illinois. We made $2.2 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $120,000 of distribution payments.
During the nine months ended September 30, 2023, we received proceeds of $29.1 million from the CA Credit Agreement, of which we used $5.5 million to repay in full the notes issued in connection with our 2022 acquisition of Kind Therapeutics USA (the "Kind Acquisition"). Excluding the aforementioned repayment of the notes in connection with the Kind Acquisition, we made $1.3 million of aggregate principal payments on our outstanding mortgages and promissory notes, including the repayment in full in May 2023 of our mortgage with South Porte Bank. We also paid $1.8 million for third-party debt issuance costs in connection with the CA Credit Agreement, and made $1.5 million of payments toward the outstanding balance of the CA Credit Agreement, $0.5 million of principal payments of finance leases, and $0.1 million of distribution payments.
Based on our current expectations, we believe our current cash and future funding opportunities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at September 30, 2024, and our ability to raise additional cash through financing activities. We anticipate devoting substantial capital resources to continue our efforts to execute our strategic growth plan as described above.
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.
Management defines Adjusted EBITDA as income from operations, determined in accordance with GAAP, excluding the following:
•depreciation and amortization of property and equipment;
•amortization of acquired intangible assets;
•impairments or write-downs of acquired intangible assets;
•stock-based compensation;
•legal settlements; and
•acquisition-related and other.
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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.
Management believes that investors and analysts benefit from considering Adjusted EBITDA in assessing our financial results and our ongoing business, as it allows for meaningful comparisons and analysis of trends in the business. Adjusted EBITDA is used by many investors and analysts themselves, along with other metrics, to compare financial results across accounting periods and to those of peer companies.
As there are no standardized methods of calculating non-GAAP measurements, our calculations may differ from those used by analysts, investors, and other companies, even those within the cannabis industry, and therefore they may not be directly comparable to similarly titled measures used by others.
Reconciliation of Income from Operations to Adjusted EBITDA (a Non-GAAP Measurement)
The table below reconciles income from operations to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| GAAP Income from operations | $ | 1,340 | $ | 3,292 | $ | 4,317 | $ | 11,974 | |||||||||||||||
| Depreciation and amortization of property and equipment | 1,803 | 1,591 | 5,749 | 3,838 | |||||||||||||||||||
| Amortization of acquired intangible assets | 882 | 844 | 2,065 | 2,181 | |||||||||||||||||||
| Stock-based compensation | 280 | 296 | 772 | 801 | |||||||||||||||||||
| Acquisition-related and other | 371 | 32 | 805 | 647 | |||||||||||||||||||
| Adjusted EBITDA | $ | 4,676 | $ | 6,055 | $ | 13,708 | $ | 19,441 | |||||||||||||||
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 the Company through increased costs of ingredients, nutrients and packaging. We recently negotiated with certain of our suppliers to reduce our costs for future purchases of ingredients, nutrients and packaging, all of which have increased significantly as a result of current economic conditions.
Seasonality
In the opinion of management, our financial condition and results of its operations are not materially impacted by seasonal sales.
Recent Accounting Pronouncements
We have reviewed all recently issued, but not yet effective, accounting pronouncements, and we do not believe the future adoption of any such pronouncements will have a material impact on our financial condition or results of operations.
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.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s disclosure controls and procedures (defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2024 (the “Evaluation Date”). Based upon that evaluation, the Company's management concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) are accumulated and communicated to the Company’s management, including its CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There was no change to the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) under the Exchange Act that occurred during the fiscal quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There has been no material change to the status of the Company’s previously reported legal proceedings.
Item 1A. Risk Factors
As a smaller reporting company, the Company is not required to provide the information contained in this item pursuant to Regulation S-K. However, information regarding the Company’s risk factors appears in Part I, Item 1A. of its Annual Report on Form 10-K for the year ended December 31, 2023 (the "Annual Report"). These risk factors describe some of the assumptions, risks, uncertainties, and other factors that could adversely affect the Company’s business or that could otherwise result in changes that differ materially from management’s expectations. There have been no material changes to the risk factors contained in the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, 2024, the Company issued unregistered securities as described below:
•19,205 shares of restricted common stock with an aggregate fair value of approximately $4,600 issued under a royalty agreement.
The issuance of the shares of common stock described above were deemed to be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance upon Sections 4(a)(2) and/or 4(a)(5) of the Securities Act. A legend restricting the sale, transfer, or other disposition of the shares of restricted common stock other than in compliance with the Securities Act was placed on the shares of restricted common stock issued in the foregoing transactions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
Termination of Insider Trading Arrangements
Effective as of August 27, 2024 , Jon Levine , our President and Chief Executive Officer , and Timothy Shaw , our Chief Operating Officer , terminated trading plans
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Item 6. Exhibits
| Exhibit No. | Description | ||||
| 3.1 | Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10-12G, File No. 000-54433, filed on June 9, 2011 with the SEC). | ||||
| 3.1.1 | Certificate of Amendment to the Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 9, 2017 (incorporated by reference to Exhibit 3.1.1 to the Company’s Annual Report on Form 10-K filed on April 17, 2017 with the SEC). | ||||
| 3.1.2 | |||||
| 3.1.3 | |||||
| 3.1.4 | |||||
| 3.1.5 | |||||
| 3.1.6 | |||||
| 3.2 | |||||
| 31.1 * | |||||
| 31.2 * | |||||
| 32.1 ** | |||||
| 32.2 ** | |||||
| 101.INS XBRL * | Instance Document | ||||
| 101.SCH XBRL * | Taxonomy Extension Schema | ||||
| 101.CAL XBRL * | Taxonomy Extension Calculation Linkbase | ||||
| 101.DEF XBRL * | Taxonomy Extension Definition Linkbase | ||||
| 101.LAB XBRL * | Taxonomy Extension Label Linkbase | ||||
| 101.PRE XBRL * | Taxonomy Extension Presentation Linkbase | ||||
| 104 * | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||
* Filed herewith.
** Furnished herewith in accordance with Item 601 (32)(ii) of Regulation S-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 7, 2024
| MARIMED INC. | ||||||||
| By: | /s/ Mario Pinho | |||||||
Mario Pinho | ||||||||
Chief Financial Officer (Principal Financial Officer) | ||||||||
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EXHIBIT 31.1
Rule 13a-14(a)/15d-14(a) Certification
I, Jon R. Levine, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MariMed Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 7, 2024 | ||
/s/ Jon R. Levine | ||
Jon R. Levine | ||
Chief Executive Officer (Principal Executive Officer) | ||
EXHIBIT 31.2
Rule 13a-14(a)/15d-14(a) Certification
I, Mario Pinho, certify that:
1. I have reviewed this quarterly report on Form 10-Q of MariMed Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 7, 2024 | ||
| /s/ Mario Pinho | ||
| Mario Pinho | ||
| Chief Financial Officer (Principal Financial Officer) | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of MariMed Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jon R. Levine, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: November 7, 2024 | /s/ Jon R. Levine | ||||
| Jon R. Levine | |||||
| Chief Executive Officer (Principal Executive Officer) | |||||
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of MariMed Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mario Pinho, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: November 7, 2024 | /s/ Mario Pinho | ||||
| Mario Pinho | |||||
| Chief Financial Officer (Principal Financial Officer) | |||||
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.