MARIMED INC.

Previous wording

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.

Current wording

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 related legal fees when the amounts are probable and estimable.

Previous wording

We are typically considered the principal if we control the specified good or service before such good or service is transferred to our client, and typically considered the agent if we do not exert such control. We may also be deemed to be the principal even if we engage another party (an agent) to satisfy some of the performance obligations on our behalf, provided we (i) take on certain responsibilities, obligations and risks, (ii) possess certain abilities and discretion, or (iii) fulfill other relevant indicators of the sale. If deemed an agent, we do not recognize revenue for the performance obligations we do not satisfy.

Current wording

We are typically considered the principal if we control the specified good or service before such good or service is transferred to our client, and typically considered the agent if we do not possess such control. We may also be deemed to be the principal even if we engage another party (an agent) to satisfy some of the performance obligations on our behalf, provided we (i) take on certain responsibilities, obligations and risks, (ii) possess certain abilities and discretion, or (iii) fulfill other relevant indicators of the sale. If deemed an agent, we do not recognize revenue for the performance obligations we do not satisfy.

Previous wording

Revenue for the three months ended March 31, 2026 and 2025 was comprised of the following (in thousands, except percentages):

Current wording

Revenue for the three and six months ended June 30, 2026 and 2025 was comprised of the following (in thousands, except percentages):

Previous wording

Our product sales increased by $1.7 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in retail sales was primarily attributable to our dispensaries in Delaware and Maryland, partially offset by lower sales in certain of our other dispensaries in Illinois and, to a lesser extent, our Massachusetts dispensaries. The increase in our wholesale revenue was primarily attributable to higher wholesale revenue in Delaware and Illinois, partially offset by lower wholesale revenue in Maryland. The decrease in total other revenue in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily attributable to the cessation of revenue recognition from management fees, rental income and other components of other income from FSC prior to its acquisition by us in March 2025.

Current wording

Our product sales increased by $2.3 million and $4.0 million, respectively, in the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025. The increase in retail sales in each of the current year periods was primarily attributable to our dispensaries in Delaware and Maryland and, to a lesser extent, Ohio. These increases were partially offset by lower sales in our Massachusetts dispensaries and certain of our dispensaries in Illinois. The increase in our wholesale revenue in the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily attributable to higher wholesale revenue in Delaware and Illinois and, to a lesser extent, Maryland, partially offset by lower wholesale revenue in Missouri. Both our retail and wholesale revenue in the six months ended June 30, 2026 benefited from the inclusion of a full six months of revenue from Delaware, as the prior year six-month period included only four months of such revenue.

Previous wording

Three months ended March 31, 2026 and 2025

Current wording

The increase in other revenue in the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily attributable to the increase in revenue from licensing fees in the current year period. Other revenue was essentially unchanged in the six months ended June 30, 2026 compared to the same prior year period, as the increase in the three months ended June 30, 2026 was offset by the cessation of revenue recognition from management fees, rental income and other components, effective as of the FSC Acquisition Date in connection with the FSC Acquisition.

Previous wording

Our cost of revenue, gross profit and gross margin for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Current wording

Our cost of revenue, gross profit and gross margin for the three and six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Previous wording

The increase in our cost of revenue in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to higher employee- and facilities-related expenses. This increase primarily resulted from the inclusion of FSC expenses for the full quarter in 2026 and the expansion of our production footprint in Maryland.

Current wording

The increases in our cost of revenue in both the three and six months ended June 30, 2026 compared to the same prior year periods was primarily due to increases in certain production-related expenses, coupled with higher employee-related expenses. These increases were partially offset by reductions in certain inventory-related expenses. These increases primarily resulted from the inclusion of FSC expenses for the full six-month period in 2026 and the expansion of our production footprint in Maryland.

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 months ended March 31, 2026 and 2025 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 six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Previous wording

The decrease in our marketing and promotion expenses in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily attributable to our planned reductions to these expenditures; however, we continue to focus on judicious marketing initiatives that expand the branding and distribution of our licensed products.

Current wording

Our marketing and promotion expenses increased slightly in the three months ended June 30, 2026 compared to the three months ended June 30, 2025, and decreased slightly in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. We continue to focus on judicious marketing initiatives that expand the branding and distribution of our licensed products.

Previous wording

The increase in our general and administrative expenses in the three months ended March 31, 2026 compared to the three months ended March 31, 2025 were primarily attributable to higher facility-related, employee travel and entertainment, and depreciation expenses. These increases were largely offset by decreases in certain other general and administrative expenses, such as stock-based compensation, amortization of acquired intangible assets, and insurance.

Current wording

The increases in our general and administrative expenses in each of the three and six months ended June 30, 2026 compared to the respective three and six months ended June 30, 2025 were primarily attributable to higher facility-related expenses, professional fees and depreciation expense. These increases in both current year periods were partially offset by reductions in expense related to our employee equity incentive program and amortization of acquired intangible assets.

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 expenses in the three months ended March 31, 2026 primarily related to multiple pre-acquisitive and similar activities. Our acquisition-related and other expenses in the three months ended March 31, 2025 primarily related to the FSC Acquisition.

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 expenses in the three and six months ended June 30, 2026 primarily related to multiple pre-acquisitive and similar activities. Our acquisition-related and other expenses in the three and six months ended June 30, 2025 primarily related to the FSC Acquisition and other acquisitive activities.

Previous wording

We recorded $0.1 million of bad debt expense in the three months ended March 31, 2026 to reserve for certain trade receivable accounts. We recorded $1.4 million of bad debt expense in the three months ended March 31, 2025, comprised of $1.3 million of expense to fully reserve an amount due from a credit card service provider (the "Service Provider Receivable") and $0.1 million of expense to reserve for certain trade accounts receivable accounts. The reserve was reported as a component of Other assets in our condensed consolidated balance sheets at each of March 31, 2026 and December 31, 2025.

Current wording

We recorded $0.5 million and $0.6 million of bad debt expense in the three and six months ended June 30, 2026, respectively, to reserve for certain trade receivable accounts. 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 service providers (the "Service Provider Receivables") and $0.1 million of expense to reserve for certain trade receivable accounts. Of the $1.5 million 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 balances at each of June 30, 2026 and December 31, 2025.

Previous wording

Interest expense primarily relates to interest on mortgages and notes payable, as well as the CREM Loan (described below). Interest income primarily relates to our notes receivable.

Current wording

Interest expense primarily related to interest on mortgages and notes payable, as well as the CREM Loan (described below). Interest income primarily related to our notes receivable.

Previous wording

We recognized a gain on the extinguishment of debt of $0.7 million in connection with the Series B Restructuring Agreement described in the “Overview” section above.

Current wording

In the first quarter of 2026, we recognized a gain on the extinguishment of debt of $0.7 million in connection with the Series B Restructuring Agreement described in the “Overview” section above.

Previous wording

We recorded income tax provisions of $2.7 million and $2.8 million in the three months ended March 31, 2026 and 2025, respectively.

Current wording

We recorded income tax provisions of $4.7 million and $3.5 million in the six months ended June 30, 2026 and 2025, respectively.

Previous wording

We are subject to income taxes in the jurisdictions in which we operate, and consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As we operate in the federally illegal cannabis industry, we are subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended (the “IRC”), Section 280E, under which taxpayers are only allowed to deduct expenses directly related to cost of goods sold of cannabis products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and a higher effective tax rate than most industries. As a result, our effective tax rate can be highly variable and may not necessarily correlate to pre-tax income or loss.

Current wording

We are subject to income taxes in the jurisdictions in which we operate, and consequently, income tax expense is a function of the allocation of taxable income by jurisdiction and the various activities that impact the timing of taxable events. As we operate in the federally illegal cannabis industry, we are subject to the limitations of the U.S. Internal Revenue Code of 1986, as amended (the “IRC”), Section 280E, under which taxpayers are only allowed to deduct expenses directly related to cost of goods sold of non-medical cannabis products. This results in permanent differences between ordinary and necessary business expenses deemed non-allowable under IRC Section 280E and a higher effective tax rate than most industries. As a result, our effective tax rate can be highly variable and may not necessarily correlate to pre-tax income or loss.

Previous wording

As a result, business conducted within these categories is no longer subject to IRC Section 280E, allowing for full deduction of ordinary and necessary business expenses. Due to the timing of when the final order was issued, we did not record the impact in our income tax provision for the three months ended March 31, 2026. We continue to monitor guidance from the DOJ and the U.S. Internal Revenue Service (the "IRS") to properly record and disclose any impact in our future financial statements.

Current wording

On April 23, 2026, the U.S. Department of Justice (the “DOJ”) issued a final order that placed both FDA-approved drugs containing cannabis and cannabis subject to a qualifying state medical list in Schedule III of the Controlled Substances Act. As a result, business conducted within these categories is no longer subject to IRC Section 280E, allowing for full deduction of ordinary and necessary business expenses. Due to the timing of when the final order was issued, we recorded the impact in our income tax provision for the three months ended June 30, 2026. The impact of this change in 280E applicability was a reduction in income tax expense of approximately $786,000 in each of the three and six months ended

Previous wording

In February 2026, the IRS filed a lien against FSC in connection with an approximate $1 million tax liability for the years 2023 and 2024, which periods were prior to the FSC Acquisition Date. We recorded this liability as part of the allocation of the purchase consideration for FSC. In June 2025, the IRS filed a lien against us in connection with an approximate $6 million 2023 tax liability. We are disputing these assessments through Collection Due Process Hearings and pursuing resolutions, including potential reductions or collection alternatives. While the matters are pending, IRS enforcement is generally stayed. Although the liabilities are fully accrued in the accompanying condensed consolidated financial statements, unfavorable outcomes could materially impact our operations and financial position.

Current wording

In February 2026, the IRS filed a lien against FSC in connection with an approximate $1 million tax liability for the 2023 and 2024 tax periods, which periods were prior to the FSC Acquisition Date. We recorded this liability as part of the allocation of the purchase consideration for FSC. In June 2025, the IRS filed a lien against us in connection with an approximate $6 million 2023 tax liability. We are disputing these assessments through Collection Due Process Hearings and pursuing resolutions, including potential reductions or collection alternatives. While the matters are pending, IRS enforcement is generally stayed. Although the liabilities are fully accrued in the accompanying condensed consolidated financial statements, unfavorable outcomes could materially impact our operations and financial position.

Previous wording

We had cash, cash equivalents and restricted cash aggregating $7.9 million and $8.9 million at March 31, 2026 and December 31, 2025, respectively. In addition to the discussions below of our cash flows from operating, investing and financing activities, please also see our discussion of non-GAAP Adjusted EBITDA in the section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by GAAP which our management also uses to measure our liquidity.

Current wording

We had cash, cash equivalents and restricted cash aggregating $8.4 million and $8.9 million at June 30, 2026 and December 31, 2025, respectively. In addition to the discussions below of our cash flows from operating, investing and financing activities, please also see our discussion of non-GAAP Adjusted EBITDA in the section “Non-GAAP Measurement” below, which discusses an additional financial measure not defined by GAAP which our management also uses to measure our liquidity.

Previous wording

Our operating activities provided $0.9 million and $1.3 million of cash in the three months ended March 31, 2026 and 2025, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to expenses arising from expanding our geographic presence. These higher costs primarily relate to cultivation/manufacturing, personnel and facility-related expenses.

Current wording

Our operating activities provided $3.2 million and $1.6 million of cash in the six months ended June 30, 2026 and 2025, respectively. The change in cash from operating activities in the current year period compared to the prior year was primarily attributable to higher revenue, partially offset by expenses arising from expanding our geographic presence. These higher costs primarily relate to cultivation/manufacturing, personnel and facility-related expenses.

Previous wording

Our investing activities used $0.8 million and $0.1 million of cash in the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026, we used $0.4 million for each of purchases of cannabis licenses and for capital expenditures. During the three months ended March 31, 2025, we used $0.3 million of cash for capital expenditures and $0.1 million in the aggregate for advances toward future business acquisitions and purchases of cannabis licenses. These amounts were partially offset by $0.2 million of cash acquired in connection with the FSC Acquisition and approximately $26,000 of proceeds from notes receivable.

Current wording

Our investing activities used $1.3 million and $0.7 million of cash in the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, we used $0.7 million of cash for capital expenditures and $0.6 million for purchases and renewals of cannabis licenses. 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.

Previous wording

Our financing activities used $1.1 million and $1.3 million of cash in the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026, we made $1.1 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $49,000 of distribution payments. During the three months ended March 31, 2025, we made $1.2 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $58,000 of distribution payments.

Current wording

Our financing activities used $2.4 million and $2.1 million of cash in the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, we made $2.3 million of aggregate principal payments on our outstanding mortgages, promissory notes and finance leases, and approximately $80,000 of distribution payments. 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 approximately $81,000 of distribution payments.

Previous wording

The table below reconciles income (loss) from operations to Adjusted EBITDA for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The table below reconciles income (loss) from operations to Adjusted EBITDA for the three and six months ended June 30, 2026 and 2025 (in thousands):