What changed in this filing

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Item 1. Financial Statements

2021-08-13 compared with 2021-05-14 · 135 added, 123 removed, 734 unchanged (26% of the section changed)

Financial Statements

VIREO HEALTH INTERNATIONAL, INC.

GOODNESS GROWTH HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

2 unchanged sentences

Restricted cash

Accounts receivable

Accounts receivable, net of allowance for doubtful accounts of $ 257,729 and $ 132,490 , respectively

Prepayments and other current assets

36 unchanged sentences

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

VIREO HEALTH INTERNATIONAL, INC.

GOODNESS GROWTH HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS

1 unchanged sentence

Three Months Ended

Six Months Ended

Cost of sales

8 unchanged sentences

( 12,051,994 )

( 8,360,292 )

( 18,544,307 )

Other income (expense):

Gain on disposal of assets held for sale

Derivative gain

Derivative gain (loss)

( 2,292,130 )

Interest expenses, net

1 unchanged sentence

( 1,543,169 )

( 3,782,504 )

( 2,993,433 )

Other income (expenses)

Other expenses, net

( 1,323,042 )

( 3,693,440 )

( 1,696,884 )

( 4,287,048 )

Loss before income taxes

1 unchanged sentence

( 15,745,434 )

( 10,057,176 )

( 22,831,355 )

Current income tax expenses

4 unchanged sentences

( 16,115,334 )

( 12,467,176 )

( 23,628,355 )

Net loss per share - basic and diluted

1 unchanged sentence

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

VIREO HEALTH INTERNATIONAL, INC.

GOODNESS GROWTH HOLDINGS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

9 unchanged sentences

( 23,628,355 )

Balance at March 31, 2020

Balance at June 30, 2020

( 102,419,205 )

3 unchanged sentences

Shares issued in Nevada acquisition

Shares issued in legal settlement

Shares issued

Options exercised

3 unchanged sentences

( 12,467,176 )

Balance at March 31, 2021

Balance at June 30, 2021

( 114,200,220 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

VIREO HEALTH INTERNATIONAL, INC.

GOODNESS GROWTH HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars, except for per share data, unaudited and condensed)

Three Months Ended

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

6 unchanged sentences

Amortization of intangible assets

Share-based payments

Stock-based payments

Interest Expense

Deferred income tax

Deferred Gain/Loss Sale Leaseback

Loss on Sale of Property and Equipment

Derivative Loss

( 1,103,100 )

Derivative (Gain) Loss

( 1,689,900 )

Gain on disposal of OMS

1 unchanged sentence

Accounts Receivable

( 1,531,985 )

Prepaid expenses

1 unchanged sentence

Accounts payable and accrued liabilities

( 4,182,954 )

Change in assets and liabilities held for sale

5 unchanged sentences

( 11,028,976 )

( 1,402,085 )

Proceeds from sale of OMS net of cash

1 unchanged sentence

( 9,880,571 )

( 1,385,820 )

CASH FLOWS FROM FINANCING ACTIVITIES

2 unchanged sentences

Proceeds from long-term debt

Convertible debt payment

Proceeds from option exercises

2 unchanged sentences

Net change in cash and restricted cash

( 4,686,824 )

( 1,914,974 )

Cash and restricted cash, beginning of period

1 unchanged sentence

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

VIREO HEALTH INTERNATIONAL, INC.

GOODNESS GROWTH HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Description of Business and Summary

Vireo Health International Inc.

(“ Vireo ” or the “ Company ”) (formerly, Darien Business Development Corp.) was incorporated under the Alberta Business Corporations Act on November 23, 2004.

Goodness Growth Holdings, Inc.

(“ Goodness Growth ” or the “ Company ”) (formerly, Darien Business Development Corp.) was incorporated under the Alberta Business Corporations Act on November 23, 2004.

On March 18, 2019, the Company completed a Reverse Takeover Transaction (“ RTO ”) with Vireo Health Inc.

(“ Vireo U.S.

”), whereby the Company acquired Vireo U.S.

and the shareholders of Vireo U.S.

became the controlling shareholders of the Company ( Note 3 ).

Following the RTO, the Company is listed on the Canadian Securities Exchange (the “ CSE ”) under ticker symbol “VREO”.

Vireo is a physician-led, science-focused organization that cultivates and manufactures pharmaceutical-grade cannabis and cannabis extracts.

Vireo operates cannabis cultivation, production, and dispensary facilities in Arizona, Maryland, Minnesota, New Mexico, and New York through its subsidiaries.

While marijuana and CBD-infused products are legal under the laws of several U.S.

”), whereby the Company acquired Vireo U.S., the shareholders of Vireo U.S.

became the controlling shareholders of the Company, and the Company changed its name to Vireo Health International, Inc.

Following the RTO, the Company was listed on the Canadian Securities Exchange (the “ CSE ”) under ticker symbol “VREO”.

On June 9, 2021, the Company changed its name to Goodness Growth Holdings, Inc.

and its ticker symbol on the CSE to “GDNS.”

Goodness Growth is a physician-led, science-focused organization that cultivates and manufactures pharmaceutical-grade cannabis and cannabis extracts.

Goodness Growth operates cannabis cultivation, production, and dispensary facilities in Arizona, Maryland, Minnesota, New Mexico, and New York through its subsidiaries.

While marijuana and CBD-infused products are legal under the laws of a large number of U.S.

states (with vastly differing restrictions), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug.

14 unchanged sentences

GAAP ”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“ SEC ”).

These financial statements have been prepared on a going concern basis, which assumes the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

For the three months ended March 31, 2021, the Company reported a unaudited condensed consolidated net loss of $ 6,986,572 and a net loss of $ 7,513,021 for the three months ended March 31, 2020.

For the three months ended March 31, 2021, the Company had cash flows used in operating activities of $ 4,974,828 .

The Company had net cash outflows for the three months ended March 31, 2020 of $ 2,734,012 .

The Company had working capital of $ 34,497,476 and $ 27,098,496 as of March 31, 2021, and December 31, 2020, respectively, reflecting an increase in cash of $ 15,047,871 for the three months ended March 31, 2021.

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

For the three and six months ended June 30, 2021, the Company reported a net loss of $ 5,480,604 and $ 12,467,176 , respectively.

For the three and six months ended June 30, 2020, the Company reported a net loss of $ 16,115,334 and $ 23,628,355 , respectively.

For the six months ended June 30, 2021, the Company had cash flows used in operating activities of $ 17,491,337 .

The Company had net cash outflows for the six months ended June 30, 2021 of $ 4,686,824 .

The Company had working capital of $ 25,850,661 and $ 27,098,496 as of June 30, 2021, and December 31, 2020, respectively, reflecting a decrease in cash of $ 4,686,824 for the six months ended June 30, 2021.

Current management forecasts and related assumptions support the view that the Company can adequately manage the operational needs of the business.

These financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the Company’s financial position and results of operations.

These unaudited condensed consolidated financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the Company’s financial position and results of operations.

Basis of consolidation

These financial statements include the accounts of the following entities wholly owned, or effectively controlled by the Company during the period ended March 31, 2021:

These unaudited condensed consolidated financial statements include the accounts of the following entities wholly owned, or effectively controlled by the Company during the period ended June 30, 2021:

Name of entity

Place of incorporation

Vireo Health International, Inc.

Goodness Growth Holdings, Inc.

British Columbia, CAN

8 unchanged sentences

Maryland, USA

Vireo of Charm City, LLC

Maryland, USA

1776 Hemp, LLC

20 unchanged sentences

Massachusetts, USA

The entities listed above are wholly owned or effectively controlled by the Company and have been formed or acquired to support the intended operations of the Company, and all intercompany transactions and balances have been eliminated in the Company's financial statements.

Recently adopted accounting pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740) which is intended to simply the accounting for income taxes by eliminating certain exceptions and simplifying certain requirements under Topic 740.

Updates are related to intra-period tax allocation, deferred tax liabilities for equity method investments interim period tax calculations, tax laws or rate changes in interim periods, and income taxes related to employee stock ownership plans.

The guidance for ASU No.

2019-12 becomes effective on January 2021.

The adoption of the standard did not have a material impact on the Company's results of operations or cash flows.

to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ ASU 2020-01 ”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options

accounted for under Topic 815.

ASU 2020-01 is effective for the Company beginning January 1, 2021.

24 unchanged sentences

Leases – The Company applies judgment in determining whether a contract contains a lease and if a lease is classified as an operating lease or a finance lease.

The Company determines the lease term as the non-cancellable term of the lease,

which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

The Company determines the lease term as the non-cancellable term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

The Company has several lease contracts that include extension and termination options.

15 unchanged sentences

Since the Company is in a net loss for all periods presented in these financial statements, there is no difference between the Company’s basic and diluted net loss per share for the periods presented.

The anti-dilutive shares outstanding for three month periods ending March 31, 2021 and 2020 were as follows:

Period ended March 31,

The anti-dilutive shares outstanding for three month periods ending June 30, 2021 and 2020 were as follows:

Stock options

161 unchanged sentences

New accounting pronouncements not yet adopted

The Company has not adopted any new or amended standards during the period ended March 31, 2021.

The Company has not adopted any new or amended standards during the period ended June 30, 2021.

Business Combinations and Dispositions

2 unchanged sentences

As part of this transaction, the Company transferred assets and liabilities with a net book value of $ 712,893 .

Consideration received exceeded OMS’s net assets at the time of sale, resulting in a gain of $ 437,107 which was recorded in the statement of loss and comprehensive loss for the three months ended March 31, 2021.

Consideration received exceeded OMS’s net assets at the time of sale, resulting in a gain of $ 437,107 which was recorded in the unaudted condensed consolidated statement of loss and comprehensive loss for the six months ended June 30, 2021.

Asset Acquisitions

Acquisition of MJ Distributing C201, LLC and MJ Distributing P132, LLC

On April 10, 2019, the Company entered into a definitive agreement to acquire 100 % of the membership interests in MJ Distributing C201, LLC and MJ Distributing P132, LLC (“ MJ Distributing ”) which hold provisional licenses to cultivate and distribute, respectively, medical cannabis in the state of Nevada.

On April 10, 2019, the Company entered into a definitive agreement to acquire 100 % of the membership interests in MJ Distributing C201, LLC and MJ Distributing P132, LLC (“ MJ Distributing ”) which currently hold licenses to cultivate and distribute, respectively, medical and adult-use cannabis in the state of Nevada.

The purpose of this acquisition was to acquire a medical marijuana license in the state of Nevada.

10 unchanged sentences

Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2021, and December 31, 2020, indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of June 30, 2021, and December 31, 2020, indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

Quoted prices in

1 unchanged sentence

identical assets

March 31, 2021

June 30, 2021

Restricted cash

7 unchanged sentences

Adjustments to estimated fair value

Balance as of March 31, 2021

The resulting gain upon revaluation of $ 158,529 for the three month period ended March 31, 2021, is reflected in the statement of net loss and comprehensive loss.

( 1,689,900 )

Balance as of June 30, 2021

The resulting gain upon revaluation of $ 1,689,900 for the six month period ended June 30, 2021, is reflected in the unaudited condensed consolidated statement of net loss and comprehensive loss.

Items measured at fair value on a non-recurring basis

The Company's non-financial assets, such as prepayments and other current assets, long lived assets, including property and equipment and intangible assets, are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.

In connection with an evaluation of such non-financial assets during the year ended December 31, 2019, the carrying values of intangible assets and goodwill were concluded to exceed

their fair values.

As a result, the Company recorded impairment charges that incorporates fair value measurements based on Level 3 inputs (refer to Notes 12 & 13).

No additional impairment was determined necessary as of March 31, 2021.

The estimated fair value of cash and cash equivalents, accounts receivable, net, accounts payable, and accrued expenses and other current liabilities at March 31, 2021 and December 31, 2020 approximate their carrying amount due to short term nature of these instruments.

In connection with an evaluation of such non-financial assets during the year ended December 31, 2020, the fair values of intangible assets and goodwill were concluded to exceed their

carrying values.

As a result, the Company did not record impairment charges during the year ended December 31, 2020.

No additional impairment was determined necessary as of June 30, 2021.

The estimated fair value of cash and cash equivalents, accounts receivable, net, accounts payable, and accrued expenses and other current liabilities at June 30, 2021 and December 31, 2020 approximate their carrying amount due to short term nature of these instruments.

Trade Receivables

2 unchanged sentences

Tenant improvements receivable

Included in the trade receivables, net balance at March 31, 2021 is an allowance for doubtful accounts of $ 116,202 and $ 132,490 at December 31, 2020.

Included in the trade receivables, net balance at June 30, 2021 is an allowance for doubtful accounts of $ 257,729 and $ 132,490 at December 31, 2020.

Notes Receivable

As of March 31, 2021, the Company had a total of $ 3,948,471 in notes receivable and $ 4,043,700 at December 31, 2020.

The March 31, 2021 balance is comprised primarily of the $ 3,750,000 four-year note with an 8 percent coupon rate payable quarterly obtained as part of the disposition of Pennsylvania Medical Solutions in August of 2020.

Inventory is comprised of the following items net of inventory reserves of $ 86,000 and $ 290,000 as of March 31, 2021, and December 31, 2020, respectively:

As of June 30, 2021, the Company had a total of $ 3,850,561 in notes receivable and $ 4,043,700 at December 31, 2020.

The June 30, 2021 balance is comprised primarily of the $ 3,750,000 four-year note with an 8 percent coupon rate payable quarterly obtained as part of the disposition of Pennsylvania Medical Solutions in August of 2020.

Inventory is comprised of the following items net of inventory reserves of $ 161,000 and $ 290,000 as of June 30, 2021, and December 31, 2020, respectively:

Work-in-progress

3 unchanged sentences

Inventory valuation adjustments included in cost of sales on the statements of net loss and comprehensive loss is comprised of the following:

Three Months Ended June 30,

Six Months Ended June 30,

Work-in-progress

1 unchanged sentence

Non-cannabis inventory

During the three months ended March 31, 2021 and 2020, the Company recorded write downs to net realizable value and adjustments to the inventory reserve.

During the three and six months ended June 30, 2021 and 2020, the Company recorded write downs to net realizable value and adjustments to the inventory reserve.

Based on the market sales prices relative to the cost to produce certain inventories net realizable value was less than the carrying value of inventory.

Additionally, the inventory reserve associated with excess inventory on hand changed.

Inventory write downs were $ 152,000 and $ 76,137 , respectively, for the three months

ended March 31, 2021 and 2020.

The change in the inventory reserve was ($ 84,000 ) and $ 62,871 , respectively, for the three months ended March 31, 2021 and 2020.

Prepayments and other current assets

3 unchanged sentences

Deferred Acquisition Costs

As of March 31, 2021, the Company had a total of $ 0 in deferred acquisition costs.

As of June 30, 2021, the Company had a total of $ 0 in deferred acquisition costs.

The December 31, 2020 balance of $ 28,136 relating to the acquisition of MJ Distributing was released upon the closing of the acquisition on January 5, 2021 (Note 3).

8 unchanged sentences

( 4,890,039 )

For the three months ended March 31, 2021 and 2020, total depreciation on property and equipment was $ 679,920 and $ 477,869 , respectively.

For the three months ended March 31, 2021 and 2020, accumulated amortization of the right of use asset under finance lease amounted to $ 1,802,458 and $ 2,386,275 , respectively.

For the six months ended June 30, 2021 and 2020, total depreciation on property and equipment was $ 1,404,705 and $ 1,280,477 , respectively.

For the six months ended June 30, 2021 and 2020, accumulated amortization of the right of use asset under finance lease amounted to $ 2,024,551 and $ 2,786,418 , respectively.

The right of use asset under finance lease of $ 13,491,738 consists of leased processing and cultivation premises.

The Company capitalized into inventory $ 508,359 and $ 474,903 relating to depreciation associated with manufacturing equipment and production facilities as of March 31, 2021 and 2020, respectively.

The Company capitalized into inventory $ 986,896 and $ 1,057,849 relating to depreciation associated with manufacturing equipment and production facilities as of June 30, 2021 and 2020, respectively.

The capitalized depreciation costs associated are added to inventory and expensed through Cost of Sales Product Cost on the unaudited condensed consolidated statements of net loss and comprehensive loss.

8 unchanged sentences

Finance Leases

March 31, 2021

June 30, 2021

Total minimum lease payments

15 unchanged sentences

Goodwill - January 1, 2020

Goodwill - December 31, 2020 and March 31, 2021

Goodwill - December 31, 2020 and June 30, 2021

Goodwill is tested for impairment annually or more frequently if indicators of impairment exist or if a decision is made to dispose of business.

1 unchanged sentence

On this date the Company performed a Step 1 goodwill impairment analysis.

During the three months ended March 31, 2021, the Company acquired cannabis licenses in Nevada.

No indicators of impairment exist as of June 30, 2021.

During the six months ended June 30, 2021, the Company acquired cannabis licenses in Nevada.

The fair value allocated to a license is depreciated over its expected useful life, which is estimated to be 15 years .

5 unchanged sentences

Additions (Note 3)

Balance, March 31, 2021

Amortization expense for intangibles was $ 206,443 and $ 154,190 during the three months ending March 31, 2021 and 2020, respectively, and is recorded in operating expenses on the unaudited condensed consolidated statements of net loss and comprehensive loss.

Balance, June 30, 2021

Amortization expense for intangibles was $ 206,442 and $ 412,885 during the three and six months ended June 30, 2021, respectively, and $ 154,191 and $ 308,381 during the three and six months ending June 30, 2020, respectively.

Amortization expense is recorded in operating expenses on the unaudited condensed consolidated statements of net loss and comprehensive loss.

The Company estimates that amortization expense will be $ 825,772 per year for the next five fiscal years.

17 unchanged sentences

The Credit Facility matures on March 31, 2024.

On March 25, 2021, in connection with closing the Credit Facility, Vireo issued (a) five year warrants to the agent to and each lender to purchase an aggregate of 2,803,984 subordinate voting shares at an exercise price of C$ 3.50 per share, and (b) a five year warrant to the broker to purchase 233,665 subordinate voting shares at an exercise price of C$ 3.50 per share.

On March 25, 2021, in connection with closing the Credit Facility, Goodness Growth issued (a) five year warrants to the agent to and each lender to purchase an aggregate of 2,803,984 subordinate voting shares at an exercise price of C$ 3.50 per share, and (b) a five year warrant to the broker to purchase 233,665 subordinate voting shares at an exercise price of C$ 3.50 per share.

Each warrant provides customary anti-dilution provisions.

5 unchanged sentences

( 8,353,499 )

Amortization of deferred financing costs

End of period

4 unchanged sentences

Derivative Liability

On March 25, 2021, in connection with closing the Credit Facility (Note 15), Vireo issued (a) five year warrants to the agent to and each lender to purchase an aggregate of 2,803,984 subordinate voting shares at an exercise price of C$ 3.50 per share, and (b) a five year warrant to the broker to purchase 233,665 subordinate voting shares at an exercise price of C$ 3.50 per share.

On March 25, 2021, in connection with closing the Credit Facility (Note 15), Goodness Growth issued (a) five year warrants to the agent to and each lender to purchase an aggregate of 2,803,984 subordinate voting shares at an exercise price of C$ 3.50 per share, and (b) a five year warrant to the broker to purchase 233,665 subordinate voting shares at an exercise price of C$ 3.50 per share.

Because of the Canadian denominated exercise price, these warrants do not qualify to be classified within equity and are therefore classified as derivative liabilities at fair value through profit or loss.

6 unchanged sentences

C$ Exchange Rate:

On March 31, 2021, the warrants were subsequently revalued using the Black Scholes option pricing model at $ 5,237,230 using the following assumptions:

On June 30, 2021, the warrants were subsequently revalued using the Black Scholes option pricing model at $ 3,705,859 using the following assumptions:

Exercise Price:

8 unchanged sentences

On March 9, 2020, the warrants were valued

using the Black Scholes option pricing model at $ 3,555,030 using the following assumptions:

On March 9, 2020, the warrants were valued using the Black Scholes option pricing model at $ 3,555,030 using the following assumptions:

Exercise Price:

4 unchanged sentences

C$ Exchange Rate:

On March 31, 2021, the warrants were subsequently revalued using the Black Scholes option pricing model at $ 2,229,101 using the following assumptions:

On June 30, 2021, the warrants were subsequently revalued using the Black Scholes option pricing model at $ 4,521,230 using the following assumptions:

Exercise Price:

4 unchanged sentences

C$ Exchange Rate:

The resulting gain upon revaluation of $ 1,325,928 is reflected in the unaudited condensed consolidated statements of net loss and comprehensive loss.

The resulting loss upon revaluation of $ 2,292,130 is reflected in the unaudited condensed consolidated statements of net loss and comprehensive loss.

Convertible Notes

On June 17, 2019, the Company issued a convertible note with a face value of $ 900,000 in connection with the XAAS Argo, Inc.

The convertible note bears interest at a rate of 5.0 % per annum, payable monthly commencing June 17, 2019 and continuing on the first of each month, beginning on July 1, 2019.

Additional interest may accrue on the convertible note in specified circumstances.

The convertible note will mature on June 17, 2021 , unless earlier repurchased, redeemed or converted.

There are no principal payments required over the two-year term of the convertible note, except in the case of redemption or events of defaults.

The convertible note is the Company’s general unsecured obligation and ranks senior in right of payment to all of the Company’s indebtedness that is expressly subordinated in right of payment to the note;

equal in right of payment with any of the Company’s unsecured indebtedness that is not so subordinated;

effectively junior in right of payment to any of Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness;

and structurally junior to all indebtedness and other liabilities (including trade payables but excluding intercompany obligations) of the Company’s current or future subsidiaries.

The note includes customary covenants and sets forth certain events of default after which the convertible note may be declared immediately due and payable, including certain types of bankruptcy or insolvency involving the Company.

To the extent the Company or the holder so elects, the convertible note will be convertible at the conversion rate equal to the price per share of the Company’s capital stock as valued at in the RTO at $ 4.25 per share.

The initial conversion rate for the convertible note is 235.2944 per one-thousand-dollar principal amount of the note which represents 211,765 subordinate voting shares, based on the $ 900,000 aggregate principal amount of convertible notes outstanding as of March 31, 2021.

This note was repaid in full during the six month period ended June 30, 2021.

The following table sets forth the net carrying amount of the convertible notes:

March 31, 2021

June 30, 2021

December 31, 2020

20 unchanged sentences

Shares Issued

During the three months ended March 31, 2021, employee stock options were redeemed for 3,130,343 Subordinate Voting Shares.

During the six months ended June 30, 2021, employee stock options were redeemed for 3,659,668 Subordinate Voting Shares.

Proceeds from these transactions were $ 1,075,723 .

On June 4, 2021, the Company issued 295,774 shares with a fair value of $ 686,196 to a third party for ongoing corporate advisory services.

The fair value of the issued shares was recorded to stock-based compensation expense in the unaudited condensed consolidated statements of net loss and comprehensive loss for the three and six month periods ended June 30, 2021.

On March 31, 2021, as part of a settlement and release of claims regarding a dispute over certain post-termination terms under his employment agreement, the Company issued 7,110,481 subordinate voting shares to its former Executive Chairman, Bruce Linton, upon a cashless exercise of 10 million warrants that had an exercise price of $ 1.02 per share and issued him 889,519 subordinate voting shares with a fair value of $ 1,627,820 pursuant to an exemption from registration under the Securities Act.

The fair value of the 889,519 subordinate voting shares issued of $ 1,627,820 was recorded as stock-based compensation expense in the unaudited condensed consolidated statements of net loss and comprehensive loss for the three months ended March 31, 2021.

The Company did not receive any proceeds in connection with the warrant exercise or issuance of shares.

1 unchanged sentence

the additional 889,519 shares are subject to a holding period expiring on August 1, 2021.

He was previously issued 15,000,000 warrants under his employment agreement and as part of the settlement, he surrendered all right, title, and interest in the remaining 5,000,000 warrants for cancellation.

He was previously issued

15,000,000 warrants under his employment agreement and as part of the settlement, he surrendered all right, title, and interest in the remaining 5,000,000 warrants for cancellation.

On March 9, 2020, the Company closed the first tranche of a non-brokered private placement and issued 13,651,574 units at a price of C$ 0.77 per unit.

17 unchanged sentences

Expected Dividend Yield

Stock option activity for the three months ended March 31, 2021 and for the years ended December 31, 2020 and 2019, are presented below:

Stock option activity for the three months ended June 30, 2021 and for the years ended December 31, 2020 and 2019, are presented below:

Weighted Average

7 unchanged sentences

( 3,659,668 )

Options Outstanding at March 31, 2021

Options Exercisable at March 31, 2021

During the three months ended March 31, 2021 and 2020, the Company recognized $ 686,755 and $ 372,125 in stock-based compensation relating to stock options, respectively.

As of March 31, 2021, the total unrecognized compensation costs related to unvested stock options awards granted was $ 4,937,067 .

Options Outstanding at June 30, 2021

Options Exercisable at June 30, 2021

During the six months ended June 30, 2021 and 2020, the Company recognized $ 1,408,639 and $ 649,785 in stock-based compensation relating to stock options, respectively.

During the three months ended June 30, 2021 and 2020, the Company recognized $ 721,884 and $ 277,660 in stock-based compensation relating to stock options, respectively.

As of June 30, 2021, the total unrecognized compensation costs related to unvested stock options awards granted was $ 4,111,897 .

In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 2.5 years.

The total intrinsic value of stock options outstanding and exercisable as of March 31, 2021, was $ 45,145,652 and $ 32,812,131 , respectively.

The total intrinsic value of stock options outstanding and exercisable as of June 30, 2021, was $ 30,960,105 and $ 23,744,512 , respectively.

The Company does not estimate forfeiture rates when calculating compensation expense.

9 unchanged sentences

SVS Warrants Denominated in C$

March 31, 2021

March 31, 2020

Risk-Free Interest Rate

17 unchanged sentences

( 7,889,619 )

Warrants outstanding at March 31, 2021

Warrants exercisable at March 31, 2021

Warrants outstanding at June 30, 2021

Warrants exercisable at June 30, 2021

Weighted Average

4 unchanged sentences

Warrants outstanding at December 31, 2020

Warrants outstanding at March 31, 2021

Warrants exercisable at March 31, 2021

Warrants outstanding at June 30, 2021

Warrants exercisable at June 30, 2021

Weighted Average

4 unchanged sentences

Warrants outstanding at December 31, 2020

Warrants outstanding at March 31, 2021

Warrants exercisable at March 31, 2021

During the three months ended March 31, 2021, $ 0 (2020 - $ 2,309,596 ) in stock-based compensation expense was recorded in connection with the SVS compensation warrants and $ 0 (2020 - $ 54,217 ) in stock-based compensation was recorded in connection with the MVS warrants.

Warrants outstanding at June 30, 2021

Warrants exercisable at June 30, 2021

During the six months ended June 30, 2021, $ 0 (2020 - $ 10,981,157 ) in stock-based compensation expense was recorded in connection with the SVS compensation warrants and $ 0 (2020 - $ 90,418 ) in stock-based compensation was recorded in connection with the MVS warrants.

During the three months ended June 30, 2021, $ 0 (2020 - $ 8,671,561 ) in stock-based compensation expense was recorded in connection with the SVS compensation warrants and $ 0 (2020 - $ 36,200 ) in stock-based compensation was recorded in connection with the MVS warrants.

Commitments and Contingencies

15 unchanged sentences

for the purchase of MaryMed and assess any potential claims Capital may have as a result of the transaction.

The SLC, a retired judge who engaged another retired judge as legal counsel to the SLC, was appointed in accordance with Minnesota law issued a report in May, 2021, recommending that certain claims not be permitted to proceed by the court.

The SLC, a retired judge who engaged another retired judge as legal counsel to the SLC, was appointed in accordance with Minnesota law, issued a report in May, 2021, recommending, among other things, that certain claims be permitted to proceed and other claims not be permitted to proceed by the court.

As of May 6, 2021, the court has not yet issued a determination regarding any of the matters contained in the SLC’s report.

3 unchanged sentences

However, should we not ultimately prevail, it is not possible to estimate the amount or range of potential loss, if any.

In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters.

In the opinion of management, any potential liabilities resulting from such claims would not have a material effect on the financial statements.

Lease commitments

3 unchanged sentences

Three Months Ended

Six Months Ended

Salaries and benefits

22 unchanged sentences

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due.

As of March 31, 2021, the Company’s financial liabilities consist of accounts payable and accrued liabilities, debt, and convertible notes.

As of June 30, 2021, the Company’s financial liabilities consist of accounts payable and accrued liabilities,

debt, and convertible notes.

The Company manages liquidity risk by reviewing its capital requirements on an ongoing basis.

2 unchanged sentences

There can be no assurance of continued access to significant equity financing.

Vireo operates in the United States.

Goodness Growth operates in the United States.

federal government regulates drugs through the Controlled Substances Act (21 U.S.C.

2 unchanged sentences

federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the U.S., and a lack of accepted safety for the use of the drug under medical supervision.

Food and Drug

Administration has not approved marijuana as a safe and effective drug for any indication.

Food and Drug Administration has not approved marijuana as a safe and effective drug for any indication.

marijuana is largely regulated at the state level.

7 unchanged sentences

Related Party Transactions

As of March 31, 2021, and December 31, 2020, there were no amounts due from related parties.

For the three months ended March 31, 2021, and 2020, the Company paid a related party (Salo LLC, owned by a former member of the Board of Directors) for contract staffing expenses in the amount of $ 0 and $ 79,356 , respectively.

As of June 30, 2021, and December 31, 2020, there were no amounts due from related parties.

For the six months ended June 30, 2021, and 2020, the Company paid a related party (Salo LLC, owned by a former member of the Board of Directors) for contract staffing expenses in the amount of $ 0 and $ 79,356 , respectively.

Certain directors and officers of the Company (Kyle Kingsley, Amber Shimpa, and Stephen Dahmer) owned OMS, which was sold on March 31, 2021 (Note 3).

1 unchanged sentence

Subsequent Events

Subsequent to March 31, 2021, employee stock options were exercised for 459,001 Subordinate Voting Shares.

On July 8, 2021, the Company’s subsidiary, Vireo of Charm City, LLC, signed a definitive agreement to purchase substantially all the assets of Charm City Medicus, LLC, a medical cannabis dispensary located in Baltimore, Maryland for a purchase price of $ 8.0 million, comprised of $ 4.0 million in cash, $ 2.0 million in subordinate voting shares (subject to a one year lock up), and a $ 2.0 million promissory note to be issued to the seller.

The transaction is subject to approval of the dispensary license transfer by the Maryland Medical Cannabis Commission and customary closing conditions.

Subsequent to June 30, 2021, employee stock options were exercised for 329,676 Subordinate Voting Shares.

Proceeds from these transactions were $ 76,028 in cash.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements