MARIMED INC.

Previous wording

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.

Current wording

We use the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recorded for the future tax consequences of differences between the tax basis and financial reporting basis of assets and liabilities, measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent our management concludes that it is more likely than not that the assets will not be realized. To assess the recoverability of any tax assets recorded on the balance sheet, we consider all available positive and negative evidence, including our past operating results, the existence of cumulative income in the most recent years, changes in the business in which we operate and our forecast of future taxable income. In determining future taxable income, we make assumptions, including the amount of state and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage our businesses.

Previous wording

Revenue for the three and six months ended June 30, 2025 and 2024 was comprised of the following (in thousands):

Current wording

Revenue for the three and nine months ended September 30, 2025 and 2024 was comprised of the following (in thousands):

Previous wording

Our product sales increased by $0.1 million and $0.8 million in the three and six months ended June 30, 2025, respectively, compared to the three and six months ended June 30, 2024, respectively. Decreases in retail sales were more than offset by increases in wholesale sales in each of the three and six month periods ended June 30, 2025, compared to the same prior year periods. The decreases in retail sales in both current periods were primarily attributable to lower sales in certain of our dispensaries in Illinois, Massachusetts and Maryland. These decreases were partially offset by higher sales in our other dispensaries in Maryland, Massachusetts and Ohio, as well as the inclusion of retail revenue from FSC for the period since the FSC Acquisition Date. The increases in our wholesale revenue were primarily attributable to higher wholesale revenue in Maryland, Illinois, Missouri and Delaware, partially offset by a decline in wholesale revenue in Massachusetts. The decreases in total other revenue in the three and six months ended June 30, 2025 compared to the same prior year periods were primarily attributable to lower other revenue due to the cessation of revenue recognition from management fees, rental income and other components of other income, effective as of the FSC Acquisition Date.

Current wording

Our product sales increased by $0.9 million and $1.8 million, respectively, in the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024. Decreases in retail sales were more than offset by increases in wholesale sales in each of the three and nine month ended September 30, 2025, compared to the same prior year periods. The decreases in retail sales in both current periods were primarily attributable to lower sales in our Metropolis, Illinois dispensary and, to a lesser extent, certain of our dispensaries in Massachusetts, Maryland and our other Illinois dispensaries. These decreases were partially offset by higher sales in our other dispensaries in Delaware, Maryland, Ohio and Massachusetts, as well as the inclusion of retail revenue from FSC for the period since the FSC Acquisition Date. The increases in our wholesale revenue were primarily attributable to higher wholesale revenue in Delaware, Illinois and Massachusetts. These increases were partially offset by a decline in wholesale revenue in Maryland. The decreases in total other revenue in the three and nine months ended September 30, 2025 compared to the same prior year periods were primarily attributable to the cessation of revenue recognition from management fees, rental income and other components of other income, effective as of the FSC Acquisition Date.

Previous wording

Our cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

Current wording

Our cost of revenue, gross profit and gross margin for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages):

Previous wording

Our cost of revenue increased nominally in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Our cost of revenue increased by $1.4 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to higher employee-related, facilities and related expenses, partially offset by lower inventory-related expenses. The increases in employee-related, facilities and related expenses were primarily due to our increased headcount in connection with our recent acquisitions and expanded footprint.

Current wording

The increases in our cost of revenue in both the three and nine months ended September 30, 2025 compared to the same prior year periods were primarily due to higher employee-related, facilities and related expenses, partially offset by lower inventory-related expenses. The increases in employee-related, facilities and related expenses were primarily due to our increased headcount in connection with our recent acquisitions and expanded footprint.

Previous wording

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 six months ended June 30, 2025 and 2024 were as follows (in thousands, except percentages):

Current wording

Our operating expenses are comprised of personnel, marketing and promotion, general and administrative, acquisition-related and other, and bad debt expenses. Our operating expenses for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages):

Previous wording

The decreases in our marketing and promotion expenses in each of the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 were primarily attributable to our planned reductions to these expenditures; however, we continue to focus on judicious marketing initiatives that expand the branding and distribution of our licensed products.

Current wording

The decreases in our marketing and promotion expenses in each of the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 were primarily attributable to our planned reductions to these expenditures; however, we continue to focus on judicious marketing initiatives that expand the branding and distribution of our licensed products.

Previous wording

The increases in our general and administrative expenses in each of the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 were primarily attributable to higher facilities, stock-based compensation and insurance expenses. These increases were largely offset by decreases in certain other general and administrative expenses, such as professional fees, travel and entertainment, and depreciation.

Current wording

The increases in our general and administrative expenses in each of the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 were primarily attributable to higher facilities, stock-based compensation and insurance expenses. These increases were largely offset by decreases in certain other general and administrative expenses, such as professional fees, travel and entertainment.

Previous wording

Acquisition-related and other expenses include those expenses related to acquisitive activities and other significant transactions that we would otherwise not have incurred, and include professional and services fees, such as legal, audit, consulting, paying agent and other fees. Our acquisition-related and other expense in each of the three and six months ended June 30, 2025 primarily related to the FSC Acquisition and other acquisitive activities. Our acquisition-related and other expense in the three and six months ended June 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.

Current wording

Acquisition-related and other expenses include those expenses related to acquisitive activities and other significant transactions that we would otherwise not have incurred, and include professional and services fees, such as legal, audit, consulting, paying agent and other fees. Our acquisition-related and other expense in each of the three and nine months ended September 30, 2025 primarily related to the FSC Acquisition and other acquisitive activities. Our acquisition-related and other expense in the three and nine months ended September 30, 2024 primarily related to the acquisitions of MedLeaf and Allgreens, which were both consummated in April 2024, and non-cash expense for warrants to purchase our common stock issued to an entity in consideration for introductory and other services rendered in connection with certain funding and acquisitive transactions.

Previous wording

We recorded $0.2 million and $1.6 million of bad debt expense in the three and six months ended June 30, 2025, respectively. The six-month amount included $1.5 million of expense to fully reserve amounts due from two credit card service providers (the "Service Provider Receivables") and $0.1 million of expense to reserve for certain trade receivable accounts. Of the $1.5 million of Service Provider Receivables, $1.3 million and the related reserve were included as components of Other assets and $0.2 million and the related reserve were included as components of Accounts Receivable in the condensed consolidated balance sheet at June 30, 2025. At December 31, 2024, the Service Provider Receivables were included as components of Cash. We recorded a nominal credit to bad debt expense in each of the three and six months ended June 30, 2024.

Current wording

We recorded $0.1 million of credits to bad debt expense and $1.5 million of bad debt expense in the three and nine months ended September 30, 2025, respectively. The nine-month amount included $1.5 million of expense to fully reserve amounts due from two credit card service providers (the "Service Provider Receivables"). Of the $1.5 million of Service Provider Receivables, $1.3 million and the related reserve were included as components of Other assets and $0.2 million and the related reserve were included as components of Accounts Receivable in the condensed consolidated balance sheet at September 30, 2025. At December 31, 2024, the Service Provider Receivables were included as components of Cash. We recorded $0.1 million of credits to bad debt expense in each of the three and nine months ended September 30, 2024.

Previous wording

Our net interest expense increased nominally in the three months ended June 30, 2025 compared to the three months ended June 30, 2024, and increased $0.2 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. These increases were primarily due to the interest on additional finance leases and the refinancing of one of our mortgages.

Current wording

Our net interest expense increased by $0.1 million in the three months ended September 30, 2025 compared to the three months ended September 30, 2024, and increased by $0.3 million in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. These increases were primarily due to the interest on additional finance leases and the refinancing of one of our mortgages.

Previous wording

We recorded net other income of approximately $17,000 in each of the three and six months ended June 30, 2025 in connection with gains on the disposal of assets. We recorded net other expense of approximately $30,000 and $50,000 in the three and six months ended June 30, 2024, respectively, primarily related to changes in the fair value of investments.

Current wording

We recorded net other income of approximately $19,000 and $36,000 in the three and nine months ended September 30, 2025, respectively. We recorded net other expense of approximately $50,000 in the nine months ended September 30, 2024, primarily related to changes in the fair value of investments. We did not record other income or expense in the three months ended September 30, 2024.

Previous wording

We recorded income tax provisions of $0.7 million and $3.5 million in the three and six months ended June 30, 2025, respectively, and $0.9 million and $2.6 million in the three and six months ended June 30, 2024, respectively.

Current wording

We recorded income tax provisions of $2.8 million and $6.3 million in the three and nine months ended September 30, 2025, respectively, and $0.7 million and $3.2 million in the three and nine months ended September 30, 2024, respectively.

Previous wording

In June 2025, the IRS filed a lien against us in connection with an approximate $6 million 2023 alleged tax liability. We are disputing the assessment through a Collection Due Process (“CDP”) Hearing and pursuing a resolution, including potential reduction or collection alternatives. While the matter is pending, IRS enforcement is generally stayed. Although the liability is fully accrued in the accompanying condensed consolidated financial statements, an unfavorable outcome could materially impact our operations and financial position.

Current wording

In June 2025, the IRS filed a lien against us in connection with an approximate $6 million 2023 tax liability. We are disputing the assessment through a Collection Due Process (“CDP”) Hearing and pursuing a resolution, including potential reduction or collection alternatives. While the matter is pending, IRS enforcement is generally stayed. Although the liability is fully accrued in the accompanying condensed consolidated financial statements, an unfavorable outcome could materially impact our operations and financial position.

Previous wording

We had cash and cash equivalents of $6.1 million and $7.3 million at June 30, 2025 and December 31, 2024, respectively. In addition to the discussions below of our cash flows from operating, investing, and financing activities, please also see our discussion of non-GAAP Adjusted EBITDA in the section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by GAAP which our management also uses to measure our liquidity.

Current wording

We had cash and cash equivalents of $6.6 million and $7.3 million at September 30, 2025 and December 31, 2024, respectively. In addition to the discussions below of our cash flows from operating, investing, and financing activities, please also see our discussion of non-GAAP Adjusted EBITDA in the section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by GAAP which our management also uses to measure our liquidity.

Previous wording

Our operating activities provided $1.6 million and $6.4 million of cash in the six months ended June 30, 2025 and 2024, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to higher personnel costs and operating expenses arising from expanding our geographic presence. These higher costs primarily relate to personnel, cultivation/manufacturing and facility expenses.

Current wording

Our operating activities provided $4.3 million and $7.2 million of cash in the nine months ended September 30, 2025 and 2024, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to higher personnel costs and operating expenses arising from expanding our geographic presence. These higher costs primarily relate to personnel, cultivation/manufacturing and facility expenses.

Previous wording

Our investing activities used $0.7 million and $13.8 million of cash in the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2025, we used $0.6 million of cash for capital expenditures and $0.4 million in the aggregate for advances toward future business acquisitions and purchases and renewals of cannabis licenses. These amounts were partially offset by $0.2 million of cash acquired in connection with the FSC Acquisition and approximately $26,000 of proceeds from notes receivable. During the six months ended June 30, 2024, we used $8.3 million of cash for capital expenditures, $4.3 million in the aggregate for purchase consideration in connection with the MedLeaf Acquisition and Allgreens Acquisition, $0.6 million for purchases and renewals of cannabis licenses and $0.5 million for advances toward future business acquisitions.

Current wording

Our investing activities used $1.2 million and $15.9 million of cash in the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025, we used $1.1 million of cash for capital expenditures and an aggregate of $0.4 million for advances toward future business acquisitions and purchases and renewals of cannabis licenses. These amounts were partially offset by $0.2 million of cash acquired in connection with the FSC Acquisition, approximately $45,000 of cash proceeds from the disposal of assets and approximately $26,000 of proceeds from notes receivable. During the nine months ended September 30, 2024, we used $10.9 million of cash for capital expenditures, an aggregate of $4.3 million for purchase consideration in connection with the MedLeaf Acquisition and Allgreens Acquisition, and $0.7 million for purchases and renewals of cannabis licenses.

Previous wording

Our financing activities used $2.1 million of cash in the six months ended June 30, 2025 and provided $3.0 million of cash in the six months ended June 30, 2024. During the six months ended June 30, 2025, we made $4.0 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases and made approximately $81,000 of distribution payments. We received $2.0 million from the refinancing of the mortgage on one of our facilities in Illinois, of which we used $0.7 million of proceeds to retire the previous mortgage on this facility, which amount is included in the aggregate principal payments discussed above. During the six months ended June 30, 2024, we received $2.9 million of additional proceeds from the CREM Loan (described above) and $1.2 million of proceeds from the refinancing of our retail facility in Mt. Vernon, Illinois. We made $1.1 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $83,000 of distribution payments.

Current wording

Our financing activities used $3.8 million of cash in the nine months ended September 30, 2025 and provided $3.9 million of cash in the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we made $5.6 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases and made approximately $115,000 of distribution payments. We received $2.0 million from the refinancing of the mortgage on one of our facilities in Illinois, of which we used $0.7 million of proceeds to retire the previous mortgage on this facility, which amount is included in the aggregate principal payments discussed above. During the nine months ended September 30, 2024, we received $5.1 million of additional proceeds from the CREM Loan (described above) and $1.2 million of proceeds from the refinancing of our retail facility in Mt. Vernon, Illinois. We made $2.2 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $120,000 of distribution payments.

Previous wording

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 June 30, 2025, and our ability to raise additional cash through financing activities. Our contractual obligations at June 30, 2025 were primarily comprised of our outstanding CREM Loan, mortgages, promissory notes, and operating and finance leases. Our CREM Loan, mortgage and promissory note obligations totaled approximately $74 million at June 30, 2025.

Current wording

Based on our current expectations, we believe our current cash and future funding opportunities will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months. The rate at which we consume cash is dependent on the cash needs of our future operations, including our contractual obligations at September 30, 2025, and our ability to raise additional cash through financing activities. Our contractual obligations at September 30, 2025 were primarily comprised of our outstanding CREM Loan, mortgages, promissory notes, and operating and finance leases. Our CREM Loan, mortgage and promissory note obligations totaled approximately $73 million at September 30, 2025.

Previous wording

The table below reconciles income from operations to Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024 (in thousands):

Current wording

The table below reconciles income from operations to Adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands):