What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-03-15 compared with 2021-03-31 · 386 added, 854 removed, 231 unchanged (84% of the section changed)

Vireo Health International, Inc.

is a reporting

issuer in Canada, with its securities listed for trading on the Canadian Securities Exchange (the “ CSE ”) under

the symbol “VREO” and on the OTCQX under the symbol “VREOF”.

Vireo is a physician-led, science-focused

cannabis company focused on building long-term, sustainable value by bringing the best of medicine, science, and engineering to

the cannabis industry.

With our core operations strategically located in five limited-license medical and adult-use markets, Vireo

cultivates and manufactures cannabis products in environmentally friendly greenhouses and other facilities and distributes these

products through our growing network of Green Goods™ and other Vireo branded retail dispensaries, as well as third-party

dispensaries in the markets in which our subsidiaries hold operating licenses.

As of March 31, 2021, Vireo is licensed in eight

states and territories, consisting of Arizona, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, and Puerto Rico.

March 22, 2021, Vireo retails cannabis products in 16 dispensaries located in Arizona (1), Maryland (1), Minnesota (8), New Mexico (2),

and New York (4) and wholesales cannabis products, through third-party companies, in Arizona, Maryland, and New York.

We expect to open

two additional dispensaries in New Mexico during the second quarter of 2021.

The following chart depicts the organizational

structure of the Company as of March 31 , 2021.

Vireo’s registered office is located

at 1500 Royal Centre, 1055 West Georgia Street, P.O.

Goodness Growth Holdings, Inc.

is a reporting issuer in Canada, with its securities listed for trading on the Canadian Securities Exchange (the “ CSE ”) under the symbol “GDNS” and on the OTCQX under the symbol “GDNSF”.

Goodness Growth is a physician-led, science-focused cannabis company focused on building long-term, sustainable value by bringing the best of medicine, science, and engineering to the cannabis industry.

With our core operations strategically located in four limited-license medical and adult-use markets, Goodness Growth cultivates and manufactures cannabis products in environmentally friendly greenhouses and other facilities and distributes these products through our growing network of Green Goods™ and other Goodness Growth branded retail dispensaries, as well as third-party dispensaries in the markets in which our subsidiaries hold operating licenses.

As of March 11, 2022, Goodness Growth is licensed in eight states and territories, consisting of Arizona, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, and Puerto Rico.

As of March 11, 2022, we retail cannabis products in 18 dispensaries located in Maryland (2), Minnesota (8), New Mexico (4), and New York (4) and wholesales cannabis products, through third-party companies, in Arizona, Maryland, Minnesota, and New York.

Our registered office is located at 1500 Royal Centre, 1055 West Georgia Street, P.O.

Box 11117, Vancouver, British Columbia V6E 4N7.

The head office is located

at 207 South Ninth Street, Minneapolis, Minnesota 55402.

of the Company

Vireo’s business was established

in 2014 as Minnesota Medical Solutions, LLC, and we received our first license in December 2014.

Darien was incorporated under

the Business Corporations Act (Alberta) on November 23, 2004 under the name “Initial Capital Inc.” On May 8, 2007,

Darien changed its name to “Digifonica International Inc.” following the completion of a qualifying transaction.

December 9, 2013, Darien continued into British Columbia under the name of “Dominion Energy Inc.” Darien had several

name changes before ultimately changing its name to “Darien Business Development Corp.” on March 13, 2017.

Vireo Health,

Our head office is located at 207 South Ninth Street, Minneapolis, Minnesota 55402.

History of the Company

Our business was established in 2014 as Minnesota Medical Solutions, LLC, and we received our first license in December 2014.

The Company was incorporated under the Business Corporations Act (Alberta) on November 23, 2004 under the name “Initial Capital Inc.” On May 8, 2007, the Company changed its name to “Digifonica International Inc.” following the completion of a qualifying transaction.

On December 9, 2013, the Company continued into British Columbia under the name of “Dominion Energy Inc.” The Company had several name changes before ultimately changing its name to “Darien Business Development Corp.” on March 13, 2017.

Vireo Health, Inc.

(“ Vireo U.S.

”) was organized as a limited liability company under Minnesota law on February 4, 2015 and

converted to a Delaware corporation on January 1, 2018.

acquired all the equity of Minnesota Medical Solutions, LLC,

and Empire State Health Solutions, LLC, in an equity interest swap transaction on January 1, 2018.

”) was organized as a limited liability company under Minnesota law on February 4, 2015 and converted to a Delaware corporation on January 1, 2018.

acquired all the equity of Minnesota Medical Solutions, LLC, and Empire State Health Solutions, LLC, in an equity interest swap transaction on January 1, 2018.

On March 18, 2019, Vireo U.S.

completed the reverse takeover transaction of Vireo Health International Inc.

(formerly Darien Business Development Corp.

or “ Darien ”)

(the “ RTO ”) whereby Darien acquired all the issued and outstanding shares of Vireo U.S.

Following the completion

of the reverse takeover, the former shareholders of Vireo U.S.

acquired control of the Company as they owned a majority of the

outstanding shares of the Company upon completion of the RTO.

Concurrently with the completion of the RTO, the Company changed

our name to “Vireo Health International, Inc.”

General Development of the Business

than the developments described below, there have been no material developments in the business since the full description contained

in our Registration Statement on Form 10, Amendment No.

2 filed with the SEC on January 20, 2021 , which is incorporated

by reference herein.

Credit Facility

On March 25, 2021, we entered into a Credit Agreement

by and among the Company and certain of our subsidiaries (the “

Borrowers ”), the persons from time-to-time party thereto

as guarantors, the lenders party thereto, and Chicago Atlantic Admin, LLC (the “

Agent ”) as administrative and collateral

agent, for a senior secured delayed draw term loan with an aggregate principal amount of up to $46 million (the “

Credit Facility ”).

Green Ivy Capital, LLC served as the lead arranger for the Credit Agreement.

The initial term loan was funded at an original issue discount

of 3% with Vireo receiving 97% of the $26 million principal amount.

Net of fees and closing costs, we received $23.5 million of the first

tranche on March 25, 2021.

The delayed draw term loans will be funded at a discount rate of up to 3%, to be negotiated by the parties.

The proceeds of the initial term loan may be used to pay the transaction fees, costs and expenses incurred directly in connection with

the Credit Facility and for any lawful purpose, including general working capital purposes.

Obligations under the Credit Agreement are

secured by substantially all the assets of the Borrowers.

The Credit Agreement and related documents also provide for the payment of certain

fees to the Agent, including a closing fee equal to 3% of each loan advanced.

The unpaid principal amounts outstanding under the Credit

Facility bear interest at a rate of (a) 13.625% per annum payable monthly in cash, and (b) 2.75% per annum, which will be added to

the outstanding principal amount on the last day of each month will thereafter be deemed to be part of the principal amount under the

Credit Facility.

The Credit Facility matures on March 31, 2024.

connection with the Credit Facility, for each portion of the Credit Facility funded, we issued to the participating lenders warrants

representing 20% of the amount drawn and to the Agent warrants representing 10% of the amount drawn, each with a strike price equal to

the volume weighted average price of our subordinate voting shares (the “

Shares ”) for the ten trading days immediately

prior to the funding date.

On March 25, 2021, in connection with closing the Credit Facility, Vireo issued (a) five year warrants to

Agent and each lender to purchase an aggregate of 2,803,984 Shares at an exercise price of CDN$3.50 per Share, and (b) a five year warrant

to the broker to purchase 233,665 Shares at an exercise price of CDN$3.50 per Share.

Each warrant contains customary anti-dilution provisions.

Sale of Ohio Business

On October 1, 2020, Vireo caused three of

our executives to enter into an agreement with a third party to sell Vireo’s affiliated entity Ohio Medical Solutions, Inc.

OMS ”) to the third party for $1.15 million.

OMS was directly owned by such executives who directly held a license

to operate a processing facility in Ohio.

In compliance with Ohio regulatory requirements, in December of 2017, each of the four

Vireo executives who then owned OMS jointly executed a $100,000 promissory note to Vireo in exchange for Vireo’s funding of OMS’

capital and operating costs.

Since December 2017, additional amounts have been loaned to OMS by Vireo through informal, verbal arrangements.

In further compliance with Ohio regulatory requirements, in December of 2017, Vireo entered into an option agreement with the four

executives then holding the Ohio license to purchase OMS at a fixed price once the Ohio processing facility had been operational for one

This option is currently exercisable.

Given the various indicia of control over OMS, Vireo has consolidated the operations of OMS

for financial statement reporting purposes and treated OMS as a controlled entity of Vireo through which we have conducted our Ohio operations.

On March 31, 2021, the sale of OMS was completed.

We received $1.15 million in cash proceeds and were relieved of $3.6 million in right of use liabilities affiliated with lease obligations.

We used the cash proceeds to cancel a total of $1.15 million in loans and cash advances made by Vireo to OMS, as well as all amounts

incurred as shared services costs by OMS since 2018.

The proceeds did not exceed these amounts owed to Vireo.

Following the sale

of OMS, we have no remaining operations in Ohio.

completed the reverse takeover transaction of Goodness Growth (formerly Vireo Health International Inc., which was formerly Darien Business Development Corp.

or “ Darien ”) (the “ RTO ”) whereby Darien acquired all the issued and outstanding shares of Vireo U.S.

Following the completion of the reverse takeover, the former shareholders of Vireo U.S.

acquired control of the Company as they owned a majority of the outstanding shares of the Company upon completion of the RTO.

Concurrently with the completion of the RTO, the Company changed our name to “Vireo Health International, Inc.” In June 2021, we changed our name to “Goodness Growth Holdings, Inc.”

Arrangement Agreement

On January 31, 2022, we entered into an Arrangement Agreement (the “Arrangement Agreement”) with Verano Holdings Inc.

(“Verano”), pursuant to which Verano will acquire all of the issued and outstanding common shares of Goodness Growth pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) (the “Arrangement”).

Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, holders of Goodness Growth Shares will receive 0.22652 of a subordinate voting share of Verano (each a “Verano Subordinate Voting Share”), subject to adjustment as described below (the “Exchange Ratio”), for each Subordinate Voting Share held, and 22.652 Verano Subordinate Voting Shares for each Multiple Voting Share and Super Voting Share held, immediately prior to the effective time of the Arrangement (the “Effective Time”).

At the Effective Time, in accordance with the terms of Goodness Growth’s 2019 Company Equity Incentive Plan, the terms of each Goodness Growth option and RSU will be adjusted to entitle the holder to receive, upon exercise, in substitution for the number of Goodness Growth Shares subject to such option or RSU, that number of Verano Shares based on the Exchange

In accordance with the terms of Goodness Growth’s outstanding warrants, the terms of each Goodness Growth warrant will be adjusted to entitle the holder to receive, upon exercise, in substitution for the number of Goodness Growth Shares subject to such warrant, that number of Verano Shares based on the Exchange Ratio.

The Arrangement is subject to a number of conditions, including the approval by at least (i) 66 2/3% of the holders of the Goodness Growth Shares (“Goodness Growth Shareholders”) represented in person or by proxy at a special meeting of Goodness Growth Shareholders (the “Meeting”), voting together as a single class, and (ii) pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), the approval of the majority of the votes cast by the holders of Subordinate Voting Shares, Multiple Voting Shares and Super Voting Shares, on a class basis, excluding the votes of Goodness Growth Shareholders whose votes are required to be excluded for the purposes of “minority approval” pursuant to MI 61-101.

It is a condition to closing in favor of Verano that holders of less than 3% of the outstanding Goodness Growth Shares shall have validly exercised dissent rights with respect to the Arrangement that have not been withdrawn as of the effective date of the Arrangement.

In addition, the Arrangement is subject to approval of the Supreme Court of British Columbia (or any other court with appropriate jurisdiction) at a hearing upon the procedural and substantive fairness of the terms and conditions of the Arrangement, certain regulatory approvals, including the approval under New York State regulatory requirements and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other customary conditions of closing.

The Arrangement is also conditional upon the approval, subject to customary conditions, of the listing of Verano Subordinate Voting Shares issuable pursuant to the Arrangement on the Canadian Securities Exchange.

The Arrangement Agreement may be terminated by mutual written consent of the Verano and Goodness Growth and by either party in certain circumstances as more particularly set forth in the Arrangement Agreement.

In connection with the proposed transaction, Goodness Growth will file a management information circular and proxy statement on Schedule 14A containing important information about the proposed transaction and related matters.

Additionally, we will file other relevant materials in connection with the proposed transaction with the applicable securities regulatory authorities.

Goodness Growth investors and security holders are urged to carefully read the entire management information circular and proxy statement (including any amendments or supplements to such documents) before making any voting decision with respect to the proposed transaction because they contain important information about the proposed transaction and the parties to the transaction.

The management information circular and proxy statement will be mailed to the Goodness Growth shareholders and available on the Company’s SEDAR and EDGAR profile.

We have prepared this Annual Report on Form 10-K and the forward-looking statements contained in this Annual Report on Form 10-K as if we were going to remain an independent company.

If the Arrangement is consummated, many of the forward-looking statements contained in this Annual Report on Form 10-K will no longer be applicable.

Description of the Business

of the Company

Vireo is a United States-based multi-state cannabis

company with significant operations in our five core markets of Arizona, Maryland, Minnesota, New Mexico, and New York.

We are science-focused

and dedicated to providing patients and adult-use customers with high quality cannabis-based products.

We cultivate cannabis in environmentally

friendly greenhouses, manufacture pharmaceutical-grade cannabis extracts, and sell our products at both Company-owned and third-party

dispensaries to qualifying patients and adult-use customers.

Overview of the Company

Goodness Growth is a United States-based multi-state cannabis company with significant operations in our four core markets of Maryland, Minnesota, New Mexico, and New York.

We are science-focused and dedicated to providing patients and adult-use customers with high quality cannabis-based products.

We cultivate cannabis in environmentally friendly greenhouses, manufacture pharmaceutical-grade cannabis extracts, and sell our products at both Company-owned and third-party dispensaries to qualifying patients and adult-use customers.

We currently serve thousands of customers each month.

In the November 2020 election, Arizona voters

approved adult-use marijuana in Arizona.

Our remaining core medical markets of Maryland, Minnesota, New Mexico, and New York all also

have the potential to enact adult-use legalization in the next 24 months.

The licenses in Massachusetts, Nevada, and Puerto Rico also

have potential for commercialization, and we are actively seeking opportunities in Massachusetts and Nevada.

Combined with our team’s

focus on driving scientific innovation within the industry, improving operational efficiency, and continuing the process of securing

meaningful intellectual property complementary to our core business, we believe we are well positioned to become a global market leader

in the cannabis industry.

As of March 31, 2021, five of our eight markets are operational, with 16 of our total retail dispensary licenses

open for business.

Adult-use cannabis sales began in Arizona in 2021.

New Mexico sales of adult-use products are expected to begin in the first half of 2022.

In 2021, New York adopted legislation allowing adult-use cannabis and sales are expected to begin in 2023.

Our remaining core markets of Maryland and Minnesota also have the potential to enact adult-use legalization in the next 24 months.

As of March 11, 2022, five of our eight markets are operational, with 18 of our total retail dispensary licenses open for business.

Our principal locations and type of operation are listed below:

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Acquired in 2019

Phoenix, Arizona

Fully operational dispensary facility

Acquired in 2019

Hurlock, Maryland

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Opened in 2018

Massey, Maryland

Fully operational cultivation facility

Opened in 2021

Baltimore, Maryland

Fully operational dispensary facility

Acquired in 2021

Frederick, Maryland

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Opened in 2021

Massey, Maryland

Fully operational cultivation facility

Opened in 2021

Holland, Massachusetts

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Gallup, New Mexico

Cultivation land leased;

construction completed;

awaiting final operational approval

Pending final approval

Fully operational cultivation facility

Opened in 2021

Santa Fe, New Mexico

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Las Cruces, New Mexico

construction complete;

awaiting final operational approval

Pending final approval

Fully operational dispensary facility

Opened in 2021

Albuquerque, New Mexico

Dispensary leased;

construction commenced

Under construction

Fully operational dispensary facility

Opened in 2021

Johnstown, New York

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Cultivation and processing facility lease executed;

pre-development

Pre-development

construction completed;

awaiting final approval

Pending approval

Vega Baja, Puerto Rico

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Pre-development

Our mission is to provide patients and

consumers with best-in-class cannabis products and expert advice, informed by medicine and science.

We also are seeking to develop

intellectual property that is complementary to our mission, including novel product formulations, novel delivery systems and harm-mitigation

For example, in July 2020, we entered into a licensing agreement with eBottles420 related to our patent-pending, terpene-preserving

packaging system.

We have developed proprietary cannabis

strains, cultivation methods, carbon dioxide extraction, ethanol extraction, and other processes related to the extraction, refinement,

and packaging of cannabis products.

We have documented the relevant processes in the form of standard operating procedures and

work instructions, which are only shared with third parties when absolutely required and then only upon receipt of written non-disclosure

We have sought and continue to seek to protect

our trademark and service mark rights.

Because the cultivation, processing, possession, transport and sale of cannabis and cannabis-related

products remain illegal under the Controlled Substances Act (as defined below) we are not able to fully protect our intellectual property

at the federal level.

As a result, we have sought and continue to seek federal registrations in limited classes of goods and services

and have obtained several state registrations in our markets.

(1) Operated for licensee pursuant to cultivation management services agreement

Our mission is to provide patients and consumers with best-in-class cannabis products and expert advice, informed by medicine and science.

We also are seeking to develop intellectual property that is complementary to our mission, including novel product formulations, novel delivery systems and harm-mitigation processes.

We have developed proprietary cannabis strains, cultivation methods, carbon dioxide extraction, ethanol extraction, and other processes related to the production, refinement, and packaging of cannabis products.

We have documented the relevant processes in the form of standard operating procedures and work instructions, which are only shared with third parties when absolutely required and then only upon receipt of written non-disclosure agreements.

We have sought and continue to seek to protect our trademark and service mark rights.

Because the cultivation, processing, possession, transport and sale of cannabis and cannabis-related products remain illegal under the Controlled Substances Act (as defined below) we are not able to fully protect our intellectual property at the federal level.

As a result, we have sought and continue to seek federal registrations in limited classes of goods and services and have obtained several state registrations.

The Cannabis Industry and Business Lines of the Company

According to market research projections

by BDSA Analytics, Inc., global legal cannabis sales are expected to reach over $47 billion by 2025, including U.S.

sales of $34.5

billion in 2025.

As described further below, United States

federal law now bifurcates the legality of “hemp” from “marihuana” (also commonly known as marijuana).

For purposes of this filing, the term “cannabis” means “marihuana” as set forth in the Controlled Substances

Act (21 U.S.C.

According to market research projections by BDSA Analytics, Inc., global legal cannabis sales are expected to reach over $61 billion by 2026, including U.S.

sales of $46 billion in 2026.

As described further below, United States federal law now bifurcates the legality of “hemp” from “marihuana” (also commonly known as marijuana).

For purposes of this filing, the term “cannabis” means “marihuana” as set forth in the Controlled Substances Act (21 U.S.C.

§ 811) (the “ Controlled Substances Act ”) and is used interchangeably with the term “marijuana.”

To date, in the United States, medical cannabis has been legalized

in 36 states and the District of Columbia, while 14 states and the District of Columbia have approved cannabis for recreational

use by adults (adult-use).

Gallup national poll in the fall of 2020 indicates that nearly 7 in 10 people support legalization of cannabis.

within states where medical and/or recreational use has been approved by state and local governing bodies.

Vireo strives to meet best-in-class health,

safety and quality standards relating to the growth, production and sale of cannabis medicines, and products for consumers.

offerings include cannabis flower, cannabis oil, cannabis topicals, orally ingestible tablets, capsules featuring cannabinoids,

and vaporizer pens and cartridges.

Vireo is a vertically integrated cannabis

company that operates from “seed-to-sale.” We have three business lines:

To date, in the United States, medical cannabis has been legalized in 39 states and the District of Columbia, while 19 states and the District of Columbia have approved cannabis for recreational use by adults (adult-use).

A Gallup national poll in the fall of 2021 indicates that nearly 7 in 10 people support legalization of cannabis.

We operate within states where medical and/or recreational use has been approved by state and local governing bodies.

We strive to meet best-in-class health, safety and quality standards relating to the growth, production and sale of cannabis medicines, and products for consumers.

Our offerings include cannabis flower, cannabis oil, cannabis topicals, orally ingestible tablets, capsules featuring cannabinoids, and vaporizer pens and cartridges.

We are a vertically integrated cannabis company that operates from “seed-to-sale.” We have three business lines:

Cultivation :

Vireo grows cannabis in outdoor, indoor and greenhouse facilities.

Our expertise in growing enables the Company to produce award-winning

and proprietary strains in a cost-effective manner.

We sell our products in Vireo-owned or -managed dispensaries and to third parties

where lawful.

Vireo converts cannabis biomass into formulated oil, using a variety of extraction techniques.

We use some of this oil to produce consumer

products such as vaporizer cartridges and edibles, and we sell some oil to third parties in jurisdictions where this practice is lawful.

Dispensaries :

Vireo operates retail dispensaries that sell proprietary and, where lawful, third-party cannabis products to retail

customers and patients.

We have rights to operate cultivation facilities

in seven states and Puerto Rico.

Although pricing pressure for dried flower in several mature cannabis markets has led some operators

to eschew cultivation, in certain markets the transition from medical-only to adult-use cannabis has increased wholesale market

prices significantly.

We grow cannabis in outdoor, indoor and greenhouse facilities.

Our expertise in growing enables us to produce award-winning and proprietary strains in a cost-effective manner.

We sell our products in company-owned or -managed dispensaries and to third parties where lawful.

We convert cannabis biomass into formulated oil, using a variety of extraction techniques.

We use some of this oil to produce consumer products such as vaporizer cartridges and edibles, and we sell some oil to third parties in jurisdictions where this practice is lawful.

Retail Dispensaries :

We operate retail dispensaries that sell proprietary and, where lawful, third-party cannabis products to retail customers and patients.

We have rights to operate cultivation facilities in seven states and Puerto Rico.

Although pricing pressure for dried flower in several mature cannabis markets has led some operators to eschew cultivation, in certain markets the transition from medical-only to adult-use cannabis has increased wholesale market prices significantly.

We believe that our cultivation operations provide certain other benefits, including:

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By having control over our own cultivation, we can reduce input costs and maximize margins.

We believe that production at scale, including outdoor cultivation for bulk oil production, is critical to drive down unit cost.

that production at scale, including outdoor cultivation for bulk oil production, is critical to drive down unit cost.

Product Availability :

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Quality Assurance :

Quality and safety of cannabis products are critically important to our retail customers.

Quality and safety of cannabis products are critically important to our customers.

Control over growing processes greatly reduces the risk of plant contamination or infestation.

We believe that products with consistent quality can demand higher retail prices.

Our focuses on quality, potency, strain

diversity and production at scale are important because it believes that the wholesale market for cannabis plant material will

become increasingly price competitive over time.

More companies are entering, and will likely continue to enter, this segment of

the industry.

However, we believe that manufacturers and retailers that can source high-quality, low-cost plant material will have

a significant advantage in the medium and long term.

Our focuses on quality, potency, strain diversity and production at scale are important because it believes that the wholesale market for cannabis plant material will become increasingly price competitive over time.

More companies are entering, and will likely continue to enter, this segment of the industry.

We believe that manufacturers and retailers that source high-quality, low-cost plant material will have a significant advantage in the medium and long term.

Cultivation and Production Facilities

Except for our bifurcated cultivation-only and production-only facilities in Maryland,

we operate combined cultivation and production facilities.

Each cultivation and production facility focuses primarily on the development

of cannabis products and, where allowed, dried cannabis plant material for medical and other consumer use, as well as the research

and development of new strains of cannabis.

Except for our bifurcated cultivation-only and production-only facilities in Maryland and the cultivation-only facility we operate in Arizona, we operate combined cultivation and production facilities.

Each cultivation and production facility focuses primarily on the development of cannabis products and dried cannabis plant material for medical and other consumer use, as well as the research and development of new strains of cannabis.

At all our facilities, we focus on consumer safety and maintaining strict quality control.

The methods used in our facilities result in several key benefits, including consistent production of high-quality product and

the minimization of product recalls and patient complaints.

We operate the following principal cultivation

and production facilities as of the close of business on March 31, 2021:

Operate and control one retail dispensary and an outdoor cultivation facility with production operations.

Current cultivation capacity is insufficient to supply our dispensary adequately and, therefore, we must purchase a portion of our flower inventory, as well as all manufactured cannabis products, from licensed, third-party suppliers.

However, we have recently increased cultivation capacity ninefold and are continuing to seek opportunities to add more cultivation capacity.

We expect to complete the construction on further expanded cultivation capacity during the third quarter of 2021.

We have a large number of customers;

The methods used in our facilities result in several key benefits, including consistent production of high-quality product and the minimization of product recalls and patient complaints.

We operate the following cultivation and production facilities as of the close of business on March 11, 2022:

We operate one cultivation facility of approximately 18 acres for a licensee pursuant to a cultivation management services agreement.

Our results of operations and financial results in Arizona are not dependent upon sales to one or a few major customers.

We operate one dispensary, one cultivation facility of approximately 110,000 square feet, and one production facility of approximately 30,000 square feet.

We operate two dispensaries, one cultivation facility of approximately 110,000 square feet, and one production facility of approximately 30,000 square feet.

In November 2021, we acquired our second dispensary in Baltimore, Maryland.

In March 2021, we transferred the cultivation license from our formerly co-located cultivation and processing facility to another facility consisting of approximately 110,000 square feet of greenhouse space and associated land and buildings.

We expect to complete the construction on further expanded cultivation capacity during the third quarter of 2021.

The production operation remains at the original cultivation and processing facility.

The production operation remains at the original combined cultivation and processing facility.

Our wholesale business is continuing to experience growth in this medical market.

Investments in operational expansion within this market during calendar year 2020 are expected to contribute to continued increased available product in fiscal year 2021, with the potential for improved financial results from increased scale and the significant expansion of flower production capacity.

Investments in proprietary edible formulations and the introduction of new brands have the potential for improved financial results.

We have a number of customers;

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our results of operations and financial results in Minnesota are not dependent upon sales to one or a few major customers.

Currently operate and control approximately 3,000 square feet of cultivation and production and have two operational retail dispensaries.

We are awaiting final approval of our expanded cultivation capacity, which will add an additional 12,600 square feet.

We also are seeking to open two additional retail dispensary locations during the second quarter of 2021.

Currently operate and control approximately 3,000 square feet of cultivation and production and have four operational retail dispensaries.

In April 2021, we obtained final approval of our expanded cultivation capacity, which added an additional 12,600 square feet.

We also opened two additional retail dispensary locations in August 2021.

We have a large number of customers;

our results of operations and financial results in New Mexico are not dependent upon sales to one or a few major customers.

Current cultivation capacity in New Mexico is

insufficient to supply our dispensaries adequately and, therefore, we must purchase a portion of our flower inventory, as well as

most manufactured cannabis products, from licensed, third-party suppliers.

Our principal suppliers of flower in New Mexico are Seven

Points Farms and Urban Wellness.

Current cultivation capacity in New Mexico is insufficient to supply our dispensaries adequately and, therefore, we must purchase a portion of our flower inventory, as well as most manufactured cannabis products, from licensed, third-party suppliers.

Our principal suppliers of flower in New Mexico are Seven Points Farms and Urban Wellness.

The availability of flower from these suppliers is inconsistent.

Our principal suppliers of

manufactured cannabis products in New Mexico are Hi Extracts/Bloom, Budder Pros, Slang Worldwide/O.

Pen Vape, and Vitality

Extracts/Elevated.

Our principal suppliers of manufactured cannabis products in New Mexico are Hi Extracts/Bloom, Budder Pros, Slang Worldwide/O.

Pen Vape, and Vitality Extracts/Elevated.

The availability of manufactured cannabis products from these suppliers is consistent.

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Manufacturing

We manufacture, assemble, and package cannabis

finished goods across a variety of product segments:

We manufacture, assemble, and package cannabis finished goods across a variety of product segments:

flower and trim, dabbable concentrates (e.g., Hash, Rosin, Temple Balls), distillate pre-filled vaporizer pens and cartridges, pre-rolls, distillate syringes.

tablets, softgels, oral solutions, oral spray, tinctures, lozenges.

edibles, tablets, softgels, oral solutions, oral spray, tinctures, lozenges.

balms and topical bars.

We have wholesale operations in Arizona, Maryland,

and New York.

Manufactured products are sold to third parties, where allowed, and are also distributed to Vireo-owned and operated retail

dispensaries.

We have wholesale operations in Arizona, Maryland, Minnesota, and New York.

Manufactured products are sold to third parties, where allowed, and are also distributed to Company-owned and operated retail dispensaries.

Principal Products or Services

Vireo’s brands include:

Vireo Health®

brand pre-filled distillate vaporizer pens and cartridges, syringes, distilled oil, softgels, tablets, oral solutions, oral spray, tinctures, topical bars, and topical balms;

Our brands include:

● Vireo Health® brand pre-filled distillate vaporizer pens and cartridges, syringes, distilled oil, softgels, tablets, oral solutions, oral spray, tinctures, topical bars, and topical balms;

● Vireo Spectrum™ brand pre-filled distillate vaporizer pens and cartridges, syringes, bulk oil, softgels, tablets, oral solutions, oral spray, topical bars, and topical balms;

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● LiteBud™ pre-roll and flower products;

● Hi-Color™ edibles;

● Kings and Queens™ concentrates, including live and cured resin badder, budder, sugar, and sauce;

● Various other flower and trim brands.

The following table shows which principal manufactured products

we currently sell at our dispensaries in our various markets:

The following table shows which principal manufactured products we currently sell at our dispensaries in our various markets:

Principal Products

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1937 Temple Balls;

Kings and Queens™ concentrates;

Elephant Head Farm flower products

1937 Vape Cartridges;

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1937 Bulk Trim;

Hi-Color™ edibles;

Kings and Queens™ concentrates

Vireo Spectrum Vape Cartridges;

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Retail Strategy

We have invested substantial resources

in developing customer-friendly store designs and floorplans.

In 2020, we began constructing new dispensaries using a new layout

and color scheme tied to the Green Goods™ trademark and began converting existing dispensaries to this new theme.

Members of our management team have experience

in real estate development, which has enabled us to secure premium locations for some of our dispensaries.

Typically, we seek locations

with high foot traffic and good visibility, close to densely populated residential areas.

We also consider location, vehicular

traffic, demographics, and competitor locations when selecting retail locations.

We have invested substantial resources in developing customer-friendly store designs and floorplans.

In 2020, we began constructing new dispensaries using a new layout and color scheme tied to the Green Goods™ trademark and began converting existing dispensaries to this new theme.

Members of our management team have experience in real estate development, which has enabled us to secure premium locations for some of our dispensaries.

Typically, we seek locations with high foot traffic and good visibility, close to densely populated residential areas.

We also consider location, vehicular traffic, demographics, and competitor locations when selecting retail locations.

Principal Business Objectives

Our principal business objectives over the next

12-month period include achieving positive operating cash flow, commencing cultivation and processing operations in Nevada, expanding

cultivation and processing capacity in certain other markets, opening or acquiring additional dispensaries in one or more states, improving

operational efficiencies, continued asset development, converting the New York dispensaries to our Green Goods TM retail concept,

and subject to regulatory approval.

As of March 15, 2021, we had 477 employees,

376 of whom were full time employees.

Certain of our employees in Maryland, Minnesota and New York are represented by local offices

of the United Food and Commercial Workers International Union (“ UFCW ”).

The collective bargaining agreements

with the employees in these states expire as follows:

Our principal business objectives over the next 12-month period include achieving positive operating cash flow;

continuing growth and expansion in the Minnesota market through flower offerings and, beginning in August 2022, edibles, subject to regulatory approval;

planning and execution in New York for impending adult use program through expanding our facilities and product offerings, subject to regulatory approval;

successfully transitioning to adult-use in New Mexico;

and increasing wholesale sales in our core markets.

As of March 1, 2022, we had 549 employees, 422 of whom were full time employees.

Certain of our employees in Maryland, Minnesota and New York are represented by local offices of the United Food and Commercial Workers International Union (“ UFCW ”).

The collective bargaining agreements with the employees in these states expire as follows:

Agreement Expiration

March 31, 2022

November 21, 2024

New York (non-drivers)

July 31, 2022

In addition, our home delivery drivers

in New York are represented by the Warehouse Production Sales & Allied Service Employees Union, AFL-CIO Local 811 (“ Local

In addition, our home delivery drivers in New York are represented by the Warehouse Production Sales & Allied Service Employees Union, AFL-CIO Local 811 (“ Local 811 ”).

Our collective bargaining agreement with Local 811 expires July 31, 2023.

We consider our relations with our employees,

with UFCW and with Local 811 to be good overall.

We consider our relations with our employees, with UFCW and with Local 811 to be good overall.

Research and Development

Our research and development activities

have primarily focused on developing new, innovative, and patent-protectable products for the cannabis market.

These efforts focus

on novel cannabinoid formulations as well as accessory products designed to improve the cannabis experience.

We also experiment

with plant spacing and nutrient blends, cannabis variety trialing and improved pest management techniques.

We also engage in research

and development activities focused on developing new extracted or infused products.

Our research and development activities have primarily focused on developing new, innovative, and patent-protectable products for the cannabis market.

These efforts focus on novel cannabinoid formulations as well as accessory products designed to improve the cannabis experience.

We also experiment with plant spacing and nutrient blends, cannabis variety trialing and improved pest management techniques.

We also engage in research and development activities focused on developing new extracted or infused products.

Patents and Trademarks

We hold two patents for “Tobacco

Products with Cannabinoid Additives and Methods for Reducing the Harm Associated with Tobacco Use” (US Patents 10,369,178

and 10,702,565) and have a number of other patents pending with the United States Patent and Trademark Office (“ USPTO ”).

We have successfully registered the trademark Vireo Health®

with the USPTO and have applied to register a number of other trademarks with the USPTO, including:

Green Goods™

Lite Bud™

Chandra™

Terp Safe™

Relief Ratio™

Amplifi™

We have also received registrations of certain of these marks in some

of the states in which we sell cannabis products.

Competitive Conditions and Position of Vireo

We employ a multi-tiered approach to entering

markets and building out our operational footprint.

We hold two patents for “Tobacco Products with Cannabinoid Additives and Methods for Reducing the Harm Associated with Tobacco Use” (US Patents 10,369,178 and 10,702,565) and have a number of other patents pending with the United States Patent and Trademark Office (“ USPTO ”).

We have successfully registered the trademarks Vireo Health® Green Goods® with the USPTO and have applied to register a number of other trademarks with the USPTO, including:

● Relief Ratio™

We have also received registrations of certain of these marks in some of the states in which we sell cannabis products.

Competitive Conditions and Position

We employ a multi-tiered approach to entering markets and building out our operational footprint.

Historically, Vireo U.S.

won licenses in competitive, merit-based selection

Since the RTO, we have primarily pursued a dual strategy of limited acquisitions in additional markets and adding cultivation,

processing, and dispensary capacity in states where we are already licensed.

We evaluate each market and associated opportunities

to determine an appropriate strategy for market entry and development, which in some markets has included acquiring an existing

In most instances, we have developed a fully vertically integrated supply chain from seed to sale, building out cultivation,

production, and retail operations.

Historically, we have pursued opportunities in limited license markets with higher barriers

to entry presenting an opportunity for higher returns or the development of strategic opportunities.

We also plan for overcapacity

in our production facilities to enable rapid increases in production capacity when adult-use cannabis sales are permitted.

The industry is highly competitive with

many operators, including large multi-state operators and smaller regional and local enterprises.

We face competition from other

companies that may have greater resources, enhanced access to public equity and debt markets, more experienced management, or that

may be more mature as businesses.

There are several multi-state operators that we compete directly with in some of our operating

Aside from current direct competition, other multi-state operators that are sufficiently capitalized to enter the Company’s

markets through acquisitive growth are also considered potential competitors.

Similarly, if and to the extent we continue to enter

new markets, we will encounter new direct competitors.

We also face an increased competitive environment across several markets

as those markets mature arising from better capitalized competitors, some with superior locations and lower costs than Vireo.

See “ Risk Factors – We face

intense competition in a new and rapidly growing industry from licensed companies with more experience and financial resources

than we have and from unlicensed and unregulated participants.

won licenses in competitive, merit-based selection processes.

Since the RTO, we have primarily pursued a dual strategy of limited acquisitions in additional markets and adding cultivation, processing, and dispensary capacity in states where we are already licensed.

We evaluate each market and associated opportunities to determine an appropriate strategy for market entry and development, which in some markets has included acquiring an existing licensee.

In most instances, we have developed a fully vertically integrated supply chain from seed to sale, building out cultivation, production, and retail operations.

Historically, we have pursued opportunities in limited license markets with higher barriers to entry presenting an opportunity for higher returns or the development of strategic opportunities.

We also plan for overcapacity in our production facilities to enable rapid increases in production capacity when adult-use cannabis sales are permitted.

The industry is highly competitive with many operators, including large multi-state operators and smaller regional and local enterprises.

We face competition from other companies that may have greater resources, enhanced access to public equity and debt markets, more experienced management, or that may be more mature as businesses.

There are several multi-state operators that we compete directly with in some of our operating markets.

Aside from current direct competition, other multi-state operators that are sufficiently capitalized to enter the Company’s markets through acquisitive growth are also considered potential competitors.

Similarly, if and to the extent we continue to enter new markets, we will encounter new direct competitors.

We also face an increased competitive environment across several markets as those markets mature arising from better capitalized competitors, some with superior locations and lower costs than the Company.

See “ Risk Factors – We face intense competition in a new and rapidly growing industry from licensed companies with more experience and financial resources than we have and from unlicensed and unregulated participants.

Regulation of Cannabis in the United States

Below is a discussion of the federal and state-level

Below is a discussion of the federal and state-level U.S.

regulatory regimes in those jurisdictions where we operate through our subsidiaries.

We currently operate facilities in Arizona,

Maryland, Minnesota, New Mexico, and New York,.

We will evaluate, monitor and reassess this disclosure, and any related risks, and will

provide updated information to investors in public filings, including in the event of government policy changes or the introduction of

new or amended guidance, laws or regulations regarding cannabis regulation, to the extent required by applicable securities laws.

non-compliance, citations or notices of violation that may impact the Company’s licenses, business activities or operations will

be promptly disclosed.

We currently operate facilities in Arizona, Maryland, Minnesota, New Mexico, and New York.

Regulation of Cannabis in the United States Federally

Supreme Court has ruled that Congress

has the constitutional authority to enact the existing federal prohibition on cannabis.

Supreme Court has ruled that Congress has the constitutional authority to enact the existing federal prohibition on cannabis.

As described further below, U.S.

law now bifurcates the legality of “hemp” from “marihuana” (also commonly known as marijuana).

of this filing, the term “cannabis” means “marihuana” as set forth in the Controlled Substances Act (21

federal law now bifurcates the legality of “hemp” from “marihuana” (also commonly known as marijuana).

For purposes of this filing, the term “cannabis” means “marihuana” as set forth in the Controlled Substances Act (21 U.S.C.

§ 811) (the “ Controlled Substances Act ”) and is used interchangeably with the term “marijuana.”

federal government regulates drugs

through the Controlled Substances Act, which places controlled substances, including marijuana, on a schedule.

Marijuana is classified

as a Schedule I drug.

The Department of Justice defines Schedule I drugs, substances or chemicals as “drugs with no currently

accepted medical use and a high potential for abuse.” With the limited exceptions of Epidiolex, a pharmaceutical derived

from the cannabis extract cannabidiol (“ CBD ”), and certain drugs that incorporate synthetically derived cannabinoids

(i.e., Marinol, Syndros, and Cesamet), the U.S.

Food and Drug Administration has not approved marijuana as a safe and effective

drug for any indication.

Moreover, under the Agriculture Improvement Act of 2018 (commonly referred to as the 2018 Farm Bill),

marijuana remains a Schedule I controlled substance under the Controlled Substances Act, with the exception of hemp and extracts

derived from hemp (such as CBD) with a tetrahydrocannabinol (“ THC ”) concentration of less than 0.3%.

Unlike in Canada, which has federal legislation

uniformly governing the cultivation, distribution, sale, and possession of medical marijuana under the Access to Cannabis for Medical

Purposes Regulations, marijuana is largely regulated at the state level in the U.S.

State laws regulating cannabis are in direct

conflict with the Controlled Substances Act.

federal government regulates drugs through the Controlled Substances Act, which places controlled substances, including marijuana, on a schedule.

Marijuana is classified as a Schedule I drug.

The Department of Justice defines Schedule I drugs, substances or chemicals as “drugs with no currently accepted medical use and a high potential for abuse.” With the limited exceptions of Epidiolex, a pharmaceutical derived from the cannabis extract cannabidiol (“ CBD ”), and certain drugs that incorporate synthetically derived cannabinoids (i.e., Marinol, Syndros, and Cesamet), the U.S.

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

Moreover, under the Agriculture Improvement Act of 2018 (commonly referred to as the 2018 Farm Bill), marijuana remains a Schedule I controlled substance under the Controlled Substances Act, with the exception of hemp and extracts derived from hemp (such as CBD) with a tetrahydrocannabinol (“ THC ”) concentration of less than 0.3%.

Unlike in Canada, which has federal legislation uniformly governing the cultivation, distribution, sale, and possession of medical marijuana under the Access to Cannabis for Medical Purposes Regulations, marijuana is largely regulated at the state level in the U.S.

State laws regulating cannabis are in direct conflict with the Controlled Substances Act.

Although certain states and territories of the U.S.

authorize medical or recreational cannabis

production and distribution by licensed or registered entities, under U.S.

federal law, the possession, use, cultivation, and transfer

of cannabis and any related drug paraphernalia is illegal;

any such acts are criminal acts under federal law under the Controlled Substances

Although our activities are compliant with applicable state and local laws, strict compliance with state and local laws with respect

to cannabis may neither absolve the Company of liability under U.S.

federal law, nor may it provide a defense to any federal proceeding

which may be brought against the Company.

In August 2013, then-Deputy Attorney General,

James Cole, authored a memorandum (the “ Cole Memorandum ”) addressed to all United States district attorneys

acknowledging that, notwithstanding the designation of cannabis as a controlled substance at the federal level in the United States,

several states had enacted laws relating to cannabis for medical purposes.

The Cole Memorandum outlined the priorities for

the Department of Justice (the “ DOJ ”) relating to the prosecution of cannabis offenses.

In particular, the Cole Memorandum

noted that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective

regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of cannabis, conduct in compliance

with those laws and regulations is less likely to be a priority at the federal level.

Notably, however, the DOJ never provided specific

guidelines for what regulatory and enforcement systems it deemed sufficient under the Cole Memorandum standard.

In light of limited investigative

and prosecutorial resources, the Cole Memorandum concluded that the DOG should be focused on addressing only the most significant threats

related to cannabis.

authorize medical or recreational cannabis production and distribution by licensed or registered entities, under U.S.

federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal;

any such acts are criminal acts under federal law under the Controlled Substances Act.

Although our activities are compliant with applicable state and local laws, strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S.

federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company.

In August 2013, then-Deputy Attorney General, James Cole, authored a memorandum (the “ Cole Memorandum ”) addressed to all United States district attorneys acknowledging that, notwithstanding the designation of cannabis as a controlled substance at the federal level in the United States, several states had enacted laws relating to cannabis for medical purposes.

The Cole Memorandum outlined the priorities for the Department of Justice (the “ DOJ ”) relating to the prosecution of cannabis offenses.

In particular, the Cole Memorandum noted that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level.

Notably, however, the DOJ never provided specific guidelines for what regulatory and enforcement systems it deemed sufficient under the Cole Memorandum standard.

In light of limited investigative and prosecutorial resources, the Cole Memorandum concluded that the DOG should be focused on addressing only the most significant threats related to cannabis.

States where medical cannabis had been legalized were not characterized as a high priority.

In March 2017, the newly appointed Attorney

General Jeff Sessions again noted limited federal resources and acknowledged that much of the Cole Memorandum had merit.

on January 4, 2018, Mr.

Sessions issued a new memorandum that rescinded and superseded the Cole Memorandum effective immediately

(the “ Sessions Memorandum ”).

The Sessions Memorandum stated, in part, that current law reflects Congress’

determination that cannabis is a dangerous drug and cannabis activity is a serious crime”, and Mr.

Sessions directed

Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions

related to marijuana activities.

In March 2017, the newly appointed Attorney General Jeff Sessions again noted limited federal resources and acknowledged that much of the Cole Memorandum had merit.

However, on January 4, 2018, Mr.

Sessions issued a new memorandum that rescinded and superseded the Cole Memorandum effective immediately (the “ Sessions Memorandum ”).

The Sessions Memorandum stated, in part, that current law reflects Congress’ determination that cannabis is a dangerous drug and cannabis activity is a serious crime”, and Mr.

Sessions directed all U.S.

Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities.

The inconsistency between federal and state laws and regulations is a major risk factor.

As a result of the Sessions Memorandum,

federal prosecutors were free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities despite

the existence of state-level laws that may be inconsistent with federal prohibitions.

No direction was given to federal prosecutors

in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities, and resultantly it is uncertain

how active federal prosecutors will be in relation to such activities.

Furthermore, the Sessions Memorandum did not discuss the

treatment of medical cannabis by federal prosecutors.

As an industry best practice, despite the rescission of the Cole Memorandum,

Vireo continues to do the following to ensure compliance with the guidance provided by the Cole Memorandum:

As a result of the Sessions Memorandum, federal prosecutors were free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities despite the existence of state-level laws that may be inconsistent with federal prohibitions.

No direction was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities, and resultantly it is uncertain how active federal prosecutors will be in relation to such activities.

Furthermore, the Sessions Memorandum did not discuss the treatment of medical cannabis by federal prosecutors.

As an industry best practice, despite the rescission of the Cole Memorandum, we continue to do the following to ensure compliance with the guidance provided by the Cole Memorandum:

● Ensure the operations of our subsidiaries and business partners are compliant with all licensing requirements that are set forth with regards to cannabis operation by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions.

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● Our subsidiaries have implemented inventory-tracking systems and necessary procedures to ensure that inventory is effectively tracked, and the diversion of cannabis and cannabis products is prevented.

Former Attorney General William Barr, who succeeded

Attorney General Sessions, did not provide a clear policy directive for the United States related to state-legal cannabis-related activities.

Former Attorney General William Barr, who succeeded Attorney General Sessions, did not provide a clear policy directive for the United States related to state-legal cannabis-related activities.

However, in a written response to questions from U.S.

Senator Cory Booker made as a nominee, Attorney General Barr stated, “I do

not intend to go after parties who have complied with state law in reliance on the Cole Memorandum.”

Attorney General Barr’s

statements were not an official declaration of the DOJ policy and were not binding on the DOJ, on any U.S.

Attorney or on the Federal

Senator Cory Booker made as a nominee, Attorney General Barr stated, “I do not intend to go after parties who have complied with state law in reliance on the Cole Memorandum.” Attorney General Barr’s statements were not an official declaration of the DOJ policy and were not binding on the DOJ, on any U.S.

Attorney or on the Federal courts.

On March 11, 2021, Merrick Garland was confirmed as the new Attorney General.

Attorney General Garland has not yet made a formal

statement or written response on the matter;

however, during his confirmation hearings he stated that federal prosecution of state-licensed

cannabis operators is not a “useful use”

of limited prosecutorial resources.

Moreover, there is no guarantee that state laws

legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will

not limit the applicability of state laws within their respective jurisdictions.

Attorney General Garland has not yet made a formal statement or written response on the matter;

however, during his confirmation hearings he stated that federal prosecution of state-licensed cannabis operators is not a “useful use” of limited prosecutorial resources.

Moreover, there is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions.

Unless and until the U.S.

Congress amends the Controlled

Substances Act with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there

is a risk that Federal authorities may enforce current U.S.

We will continue to monitor compliance on an ongoing basis in

accordance with our compliance program and standard operating agreement procedures.

While our operations are in full compliance with

all applicable state laws, regulations and licensing requirements, such activities remain illegal under United States federal law.

the reasons described above and the risks further described in the Risk Factors section below, there are significant risks associated

with our business.

Although the Cole Memorandum has been rescinded,

Congress has passed a so-called “rider”

provision in the FY 2015, 2016, 2017, 2018, and 2019 Consolidated Appropriations

Acts to prevent the DOJ from using congressionally appropriated funds to prevent any state or jurisdiction from implementing a law that

authorizes the use, distribution, possession, or cultivation of medical marijuana.

The rider is known as the “Rohrabacher-Farr”

Amendment after its original lead sponsors (it is also sometimes referred to as the “Rohrabacher-Blumenauer”

or, in its Senate

Form, the “Leahy”

Amendment, but it is referred to in this report as “

Rohrabacher-Farr ”).

Rohrabacher-Farr is typically included

in short-term funding bills or continuing resolutions by the House of Representatives, whereas the Leahy Amendment was included

in the fiscal year 2020 budget by the Senate, which was signed on December 20, 2019.

The Leahy Amendment prevents the DOJ from

using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in

compliance with state and local law.

Congress amends the Controlled Substances Act with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that Federal authorities may enforce current U.S.

We will continue to monitor compliance on an ongoing basis in accordance with our compliance program and standard operating agreement procedures.

While our operations are in material compliance with all applicable state laws, regulations and licensing requirements, such activities remain illegal under United States federal law.

For the reasons described above and the risks further described in the Risk Factors section below, there are significant risks associated with our business.

Although the Cole Memorandum has been rescinded, Congress has passed a so-called “rider” provision in the FY 2015, 2016, 2017, 2018, and 2019 Consolidated Appropriations Acts to prevent the DOJ from using congressionally appropriated funds to prevent any state or jurisdiction from implementing a law that authorizes the use, distribution, possession, or cultivation of medical marijuana.

The rider is known as the “Rohrabacher-Farr” Amendment after its original lead sponsors (it is also sometimes referred to as the “Rohrabacher-Blumenauer” or, in its Senate Form, the “Leahy” Amendment, but it is referred to in this report as “ Rohrabacher-Farr ”).

Rohrabacher-Farr is typically included in short-term funding bills or continuing resolutions by the House of Representatives, whereas the Leahy Amendment was included in the fiscal year 2020 budget by the Senate, which was signed on December 20, 2019.

The Leahy Amendment prevents the DOJ from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law.

The Leahy Amendment was in effect until September 30, 2020 when the fiscal year ended.

Rohrabacher-Farr

was renewed through the signing of a series of stopgap spending bills until December 27, 2020, when Rohrabacher-Farr was renewed

through the signing of the Consolidated Appropriations Act, 2021, effective through September 30, 2021.

The risk of federal enforcement and

other risks associated with the Company’s business are described in Item 1A.—"Risk Factors.”

Regulation of the Cannabis Market at

State and Local Levels

Below is a summary overview of the licensing

and regulatory framework in the states where Vireo or our subsidiaries are currently operating or expect to operate within the

next 12 months, under licenses or rights to operate.

Rohrabacher-Farr was renewed through the signing of a series of stopgap spending bills until December 27, 2020, when Rohrabacher-Farr was renewed through the signing of the Consolidated Appropriations Act, 2021, effective through September 30, 2021.

The risk of federal enforcement and other risks associated with the Company’s business are described in Item 1A.—"Risk Factors.”

Regulation of the Cannabis Market at State and Local Levels

Below is a summary overview of the licensing and regulatory framework in the states where Goodness Growth or our subsidiaries are currently operating under licenses or rights to operate.

Arizona Regulatory Landscape

On November 2, 2010, Arizona voters enacted

a medical cannabis initiative - Proposition 203 - with 50.13% of the vote.

The Arizona legislature thereafter enacted the Arizona

Medical Marijuana Act (“ AMMA ”), decriminalizing the medical use of cannabis.

Arizona Department of Health Services

(“ AZDHS ”) finalized dispensary and registry identification card regulations on March 28, 2011.

2011, it began accepting applications for registry cards that provide patients and their caregivers with protection from arrest.

AZDHS was preparing to accept dispensary applications starting in June and to register one dispensary for every 10 pharmacies in

the state, totaling 125.

On November 2, 2010, Arizona voters enacted a medical cannabis initiative - Proposition 203 - with 50.13% of the vote.

The Arizona legislature thereafter enacted the Arizona Medical Marijuana Act (“ AMMA ”), decriminalizing the medical use of cannabis.

Arizona Department of Health Services (“ AZDHS ”) finalized dispensary and registry identification card regulations on March 28, 2011.

On April 14, 2011, it began accepting applications for registry cards that provide patients and their caregivers with protection from arrest.

AZDHS was preparing to accept dispensary applications starting in June and to register one dispensary for every 10 pharmacies in the state, totaling 125.

However, on May 27, 2011, Gov.

Jan Brewer led a federal lawsuit seeking a declaratory judgment on whether

Arizona’s new medical cannabis program conflicted with federal law.

Jan Brewer led a federal lawsuit seeking a declaratory judgment on whether Arizona’s new medical cannabis program conflicted with federal law.

Her lawsuit was rejected in 2012.

The Arizona legislature subsequently rolled

back some of Proposition 203’s protections, such as possibly allowing an employer to fire a medical cannabis patient based

on a report alleging workplace impairment from a colleague who is “believed to be reliable.” The legislature also passed

2585, which contradicts Proposition 203 by adding medical cannabis patient data to the prescription drug-monitoring program.

In 2015, the legislature again undermined patient protections again with the passage of H.B.

2346, which specifies that nothing

requires a government medical assistance program, a private health insurer or a workers’ compensation carrier or self-insured

employer providing workers’ compensation benefits to reimburse a person for costs associated with the medical use of marijuana.

To qualify under Arizona’s program,

patients must have one of the listed debilitating medical conditions:

All medical cannabis certificates are vertically integrated and authorize the holders to cultivate and dispense medical cannabis to patients.

To qualify under Arizona’s program, patients must have one of the listed debilitating medical conditions:

cancer, HIV-positive;

lateral sclerosis (ALS);

amyotrophic lateral sclerosis (ALS);

Crohn’s disease;

agitation of Alzheimer’s disease;

or a medical condition that produces wasting

syndrome, severe and chronic pain, severe nausea, seizures, or severe and persistent muscle spasms, including those characteristics

of multiple sclerosis.

On November 3, 2020, 60% of Arizona voters supported

and enacted the Smart and Arizona Safe Act (“Proposition 207”), which took effect on November 30, 2020, following certification

of the 2020 election results by the Arizona Secretary of State.

Proposition 207 legalizes the possession and use of marijuana for adults

age 21 years and older in Arizona.

Individuals are permitted to grow up to six marijuana plants within their own residence, in a lockable,

enclosed area out of public view.

The AZDHS is responsible for adopting rules to regulate adult-use marijuana, including the licensing

of marijuana retail stores, cultivation facilities, and production facilities.

Among other provisions, Proposition 207 imposes an additional

16 percent tax on marijuana sales and creates a Social Equity Ownership Program, which issues licenses to entities whose owners are “from

communities disproportionately impacted by the enforcement of previous marijuana laws.” It also restricts local governments from

enacting adult-use regulations, zoning, or license controls more restrictive than those that apply to medical marijuana facilities.

Vireo’s Licenses in Arizona

All medical cannabis certificates are vertically

integrated and authorize the holders to cultivate and dispense medical cannabis to patients.

Our subsidiaries Elephant Head Farm, LLC

and Retail Management Associates, LLC perform fee-based management services consisting of the operation of one dispensary, dually licensed

for adult-use and medical sales, and one medical cultivation facility for a non-profit licensee and affiliate of Vireo, Arizona Natural

Remedies, Inc.

ANR ”) (executives of the Company constitute all of the members of the board of directors of ANR).

The non-profit licensee holds a Medical Marijuana Dispensary Registration Certificate, Marijuana Establishment License for adult-use

sales, and Approval to Operate, issued by the DHS, as well as a Special Use permit issued by the city of Phoenix, which collectively permit

ANR to own a single, dual licensed dispensary in Phoenix and a cultivation facility in southern Arizona designated for use with ANR’s

medical license.

ANR’s medical cultivation facility license permits it to wholesale cannabis to other medical and/or adult

use licensed dispensaries within Arizona.

The adult-use component of ANR’s dual license allows for one additional off-site adult-use

cultivation facility that has yet to be developed.

or a medical condition that produces wasting syndrome, severe and chronic pain, severe nausea, seizures, or severe and persistent muscle spasms, including those characteristics of multiple sclerosis.

On November 3, 2020, 60% of Arizona voters supported and enacted the Smart and Arizona Safe Act (“Proposition 207”), which took effect on November 30, 2020, following certification of the 2020 election results by the Arizona Secretary of State.

Proposition 207 legalizes the possession and use of marijuana for adults age 21 years and older in Arizona.

Individuals are permitted to grow up to six marijuana plants within their own residence, in a lockable, enclosed area out of public view.

The AZDHS is responsible for adopting rules to regulate adult-use marijuana, including the licensing of marijuana retail stores, cultivation facilities, and production facilities.

Among other provisions, Proposition 207 imposes an additional 16 percent tax on marijuana sales and creates a Social Equity Ownership Program, which issues licenses to entities whose owners are “from communities disproportionately impacted by the enforcement of previous marijuana laws.” It also restricts local governments from enacting adult-use regulations, zoning, or license controls more restrictive than those that apply to medical marijuana facilities.

Operations in Arizona

Our subsidiaries Elephant Head Farm, LLC (“EHF”) and Retail Management Associates, LLC (“RMA”) perform fee-based management services consisting of the operation of one dispensary, dually licensed for adult-use and medical sales, and one medical cultivation facility for a non-profit licensee and affiliate of Goodness Growth, Arizona Natural Remedies, Inc.

(“ANR”) (executives of the Company constitute all of the members of the board of directors of ANR).

The non-profit licensee held a Medical Marijuana Dispensary Registration Certificate, Marijuana Establishment License for adult-use sales, and Approval to Operate, issued by the DHS, as well as a Special Use permit issued by the city of Phoenix, which collectively permitted ANR to own a single, dual licensed dispensary in Phoenix and a cultivation facility in southern Arizona designated for use with ANR’s medical license.

On November 22, 2021, our subsidiary, Vireo Health of Arizona, LLC, which is the owner of EHF and RMA, completed the sale of ANR’s dispensary license to S Flower N Phoenix, LLC (“S Flower”).

As part of the transaction, our subsidiary, EHF Cultivation Management, LLC (“EHF Cultivation”), entered into a cultivation management services agreement with S Flower, which allows EHF Cultivation to operate pursuant to S Flower’s medical cultivation facility license.

EHF Cultivation is permitted to wholesale cannabis to other medical and/or adult use licensed dispensaries within Arizona.

Arizona Licenses and Regulations

1 unchanged sentence

Every other year, licensees are required to submit a renewal application per guidelines published by the AZDHS.

While renewals

are biennial, there is no ultimate expiry after which no renewals are permitted.

Additionally, in respect of the renewal process,

provided that the requisite renewal fees are paid, the renewal application is submitted in a timely manner, and there are no material

violations noted against the applicable licenses, the Company would expect to receive the applicable renewed license in the ordinary

course of business.

While the Company’s compliance controls have been developed to mitigate the risk of any material violations

of a license arising, there is no assurance that the Company’s licenses will be renewed in the future in a timely manner.

Arizona is a vertically integrated system, so

that each license permits the holder to acquire, cultivate, process, distribute and/or dispense, deliver, manufacture, transfer, and supply

medical marijuana in compliance with the AMMA and AZDHS rules and regulations.

For every ten (10) pharmacies that have registered under

32-1929, have obtained a pharmacy permit from the Arizona Board of Pharmacy, and operate in the State, the AZDHS may issue

one non-profit medical cannabis dispensary registration certificate and one marijuana establishment license.

Non-profit medical cannabis

dispensaries may acquire, possess, cultivate, manufacture, deliver, transfer, transport, supply, sell or dispense marijuana or related

supplies and educational materials to qualifying patients, a designated caregiver, a nonprofit medical cannabis dispensary agent or an

independent third-party laboratory agent who has been issued and possesses a valid registry identification card.

Marijuana establishment

licensees may operate all of the following:

(1) a single retail location at which the licensee may sell marijuana and marijuana products

to consumers, cultivate marijuana and manufacture marijuana products;

(2) a single off-site cultivation location at which the licensee

may cultivate marijuana, process marijuana and manufacture marijuana products, but from which marijuana and marijuana products may not

be transferred or sold to consumers;

and (3) a single off-site location at which the licensee may manufacture marijuana products and package

and store marijuana and marijuana products, but from which marijuana and marijuana products may not be transferred or sold to consumer.

Cultivation and processing sites can be located anywhere in the State and are not limited to their district (Community Health Analysis

While renewals are biennial, there is no ultimate expiry after which no renewals are permitted.

Additionally, in respect of the renewal process, provided that the requisite renewal fees are paid, the renewal application is submitted in a timely manner, and there are no material violations noted against the applicable licenses, a licensee would expect to receive the applicable renewed license in the ordinary course of business.

Arizona is a vertically integrated system, so that each license permits the holder to acquire, cultivate, process, distribute and/or dispense, deliver, manufacture, transfer, and supply medical marijuana in compliance with the AMMA and AZDHS rules and regulations.

EHF Cultivation is subject to the AMMA and AZDHS rules and regulations pursuant to its contractual relationship with S Flower to operate a medical cultivation facility.

For every ten (10) pharmacies that have registered under A.R.S.

§ 32-1929, have obtained a pharmacy permit from the Arizona Board of Pharmacy, and operate in the State, the AZDHS may issue one non-profit medical cannabis dispensary registration certificate and one marijuana establishment license.

Non-profit medical cannabis dispensaries may acquire, possess, cultivate, manufacture, deliver, transfer, transport, supply, sell or dispense marijuana or related supplies and educational materials to qualifying patients, a designated caregiver, a nonprofit medical cannabis dispensary agent or an independent third-party laboratory agent who has been issued and possesses a valid registry identification card.

Marijuana establishment licensees may operate all of the following:

(1) a single retail location at which the licensee may sell marijuana and marijuana products to consumers, cultivate marijuana and manufacture marijuana products;

(2) a single off-site cultivation location at which the licensee may cultivate marijuana, process marijuana and manufacture marijuana products, but from which marijuana and marijuana products may not be transferred or sold to consumers;

and (3) a single off-site location at which the licensee may manufacture marijuana products and package and store marijuana and marijuana products, but from which marijuana and marijuana products may not be transferred or sold to consumer.

Cultivation and processing sites can be located anywhere in the State and are not limited to their district (Community Health Analysis Area).

Dispensaries are limited to their district for their first three years of operation and may apply to relocate thereafter.

dispensary registration certificates are valid for two years after the date of issuance.

The holder of a dispensary registration certificate

must also submit an application for approval to operate a dispensary to the AZDHS.

A dispensary that has approval to operate as a dispensary

issued by the AZDHS is subject to biennial renewals of its Medical Marijuana Dispensary Registration Certificate and Marijuana Establishment

Arizona dispensary registration certificates are valid for two years after the date of issuance.

The holder of a dispensary registration certificate must also submit an application for approval to operate a dispensary to the AZDHS.

A dispensary that has approval to operate as a dispensary issued by the AZDHS is subject to biennial renewals of its Medical Marijuana Dispensary Registration Certificate and Marijuana Establishment License.

Arizona Reporting Requirements

The ADHS requires that dispensaries implement

policies and procedures regarding inventory control, including tracking, packaging, acquisition, and disposal of cannabis.

uses BioTrackTHC as its in-house computerized seed to sale software, which integrates with the state’s program and captures

the required data points for cultivation, manufacturing and retail as required in Arizona’s medical cannabis laws and regulations.

ANR is required to submit audited financial statements annually to AZDHS.

The State of Arizona uses the AZDHS Facility

Licensing Portal (“ AZDHS FLP ”) to validate card holders, verify allotment amounts, and track all retail transactions

The ADHS requires that dispensaries implement policies and procedures regarding inventory control, including tracking, packaging, acquisition, and disposal of cannabis.

We use BioTrack software as our computerized, seed-to-sale tracking and inventory system.

Individual licensees whether directly or through third-party integration systems are required to capture and retain all information pertaining to the acquisition, possession, cultivation, manufacturing, delivery, transfer,

transportation, supplying, selling, distributing, or dispensing of medical marijuana, to meet all reporting requirements for the State of Arizona.

The State of Arizona uses the AZDHS Facility Licensing Portal (“ AZDHS FLP ”) to validate card holders, verify allotment amounts, and track all retail transactions for Arizona.

The AZDHS FLP system is also used by license holders to renew the dispensary registration certificates.

We use BioTrack software as our computerized,

seed-to-sale tracking and inventory system.

Individual licensees whether directly or through third-party integration systems are required

to capture and retain all information pertaining to the acquisition, possession, cultivation, manufacturing, delivery, transfer, transportation,

supplying, selling, distributing, or dispensing of medical marijuana, to meet all reporting requirements for the State of Arizona.

Maryland Regulatory Landscape

In 2012, a state law was enacted in Maryland

to establish a state-regulated medical cannabis program.

Legislation was signed in May 2013 and the program became operational

on December 1, 2017.

In 2012, a state law was enacted in Maryland to establish a state-regulated medical cannabis program.

Legislation was signed in May 2013 and the program became operational on December 1, 2017.

The Natalie M.

LaPrade Maryland Medical Cannabis Commission (the “ MMCC ”) regulates the

state program and awarded operational licenses in a highly competitive application process.

The market is divided into three primary

classes of licenses:

LaPrade Maryland Medical Cannabis Commission (the “ MMCC ”) regulates the state program and awarded operational licenses in a highly competitive application process.

The market is divided into three primary classes of licenses:

dispensary, cultivation, and processing.

Medical cannabis dispensary license pre-approvals were issued to

102 dispensaries out of a pool of over 800 applicants, 15 processing licenses were awarded out of a pool of 124 applicants and

15 cultivation licenses were awarded out of a pool of 145 applicants.

The medical cannabis program was written

to allow access to medical cannabis for patients with qualifying medical conditions, including chronic pain, nausea, seizures,

glaucoma, and post-traumatic stress disorder or “PTSD.”

In April 2018, Maryland lawmakers agreed

to expand the state’s medical cannabis industry by adding another 20 licenses:

Medical cannabis dispensary license pre-approvals were issued to 102 dispensaries out of a pool of over 800 applicants, 15 processing licenses were awarded out of a pool of 124 applicants and 15 cultivation licenses were awarded out of a pool of 145 applicants.

The medical cannabis program was written to allow access to medical cannabis for patients with qualifying medical conditions, including chronic pain, nausea, seizures, glaucoma, and post-traumatic stress disorder or “PTSD.”

In April 2018, Maryland lawmakers agreed to expand the state’s medical cannabis industry by adding another 20 licenses:

7 for cultivation and 13 for processing.

products for sale and consumption include oil-based formulations, dry flower and edibles and other concentrates.

Vireo’s Licenses in Maryland

In Maryland, we operate one dispensary

in Frederick, Maryland, which opened in March 2021.

We also operate in Maryland a production facility of 30,000 square feet to

serve the wholesale market and a new, 110,000 square-foot cultivation facility.

We hold phase 2 licenses for cultivation, processing,

and dispensing.

Permitted products for sale and consumption include oil-based formulations, dry flower and edibles and other concentrates.

Licenses in Maryland

In Maryland, we operate one dispensary in Frederick, Maryland, which opened in March 2021 and one dispensary in Baltimore, Maryland, which we acquired in November 2021.

We also operate in Maryland a production facility of 30,000 square feet to serve the wholesale market and a 110,000 square-foot cultivation facility.

We hold phase 2 licenses for cultivation, processing, and dispensing.

Wholesale revenues have grown, driven in part by new product offerings and increased market penetration.

into fiscal year 2021, we anticipate continued revenue growth.

Our licenses in Maryland were awarded to our affiliate MaryMed,

LLC through merit-based license application processes.

Merit-based license awards require limited investment and thus present high-return

opportunities.

We believe that our medical and scientific background has helped Vireo develop a competitive advantage in the marketplace

with respect to applying and winning some merit-based license awards.

Heading into fiscal year 2022, we anticipate continued revenue growth.

Our cultivation and production licenses, as well as the license for our Frederick, Maryland dispensary, were awarded to our affiliate MaryMed, LLC through merit-based license application processes.

Merit-based license awards require limited investment and thus present high-return opportunities.

Our dispensary license for our Baltimore, Maryland location was acquired from Charm City Medicus, LLC on November 19, 2021.

We believe that our medical and scientific background has helped Goodness Growth develop a competitive advantage in the marketplace with respect to applying and winning some merit-based license awards.

Maryland Licenses and Regulations

Maryland licenses are valid for a period

of six years and are subject to four-year renewals after required fees are paid and provided that the business remains in good

Maryland licenses are valid for a period of six years and are subject to four-year renewals after required fees are paid and provided that the business remains in good standing.

Renewal requests are typically communicated through email from the MMCC and include a renewal form.

Maryland Reporting Requirements

The State of Maryland uses Marijuana Enforcement

Tracking Regulation and Compliance system (METRC) as the state’s computerized T&T system for seed-to-sale.

licensees whether directly or through third-party integration systems are required to use this system for all reporting.

The State of Maryland uses METRC as the state’s

computerized T&T system for seed-to-sale.

Individual licensees whether directly or through third-party integration systems are required

to push data to the state to meet all reporting requirements.

We use a third-party application for our computerized seed to sale software,

which integrates with the state’s Metric program and captures the required data points for cultivation, manufacturing and retail

as required in the Maryland Medical Cannabis law.

The State of Maryland uses Marijuana Enforcement Tracking Regulation and Compliance system (METRC) as the state’s computerized T&T system for seed-to-sale.

Individual licensees whether directly or through third-party integration systems are required to use this system for all reporting.

The State of Maryland uses METRC as the state’s computerized T&T system for seed-to-sale.

Individual licensees whether directly or through third-party integration systems are required to push data to the state to meet all reporting requirements.

We use a third-party application for our computerized seed to sale software, which integrates with the state’s Metric program and captures the required data points for cultivation, manufacturing and retail as required in the Maryland Medical Cannabis law.

Minnesota Regulatory Landscape

Legislation passed during the 2014 Minnesota legislative

session created a new process allowing seriously ill individuals from Minnesota to use medical cannabis to treat a set of nine qualifying

medical conditions.

Legislation passed during the 2014 Minnesota legislative session created a new process allowing seriously ill individuals from Minnesota to use medical cannabis to treat a set of nine qualifying medical conditions.

The qualifying medical conditions have been expanded to now include 15 qualifying conditions.

Effective August 2021,

two additional qualifying conditions will be added:

Effective August 2021, two additional qualifying conditions will be added:

sickle cell disease and chronic motor or vocal tic disorder.

The Medical Cannabis

Program is regulated and administered by the Minnesota Department of Health which oversees all cultivation, production, and distribution

In the initial program the Minnesota Department of Health had registered two manufacturers, with each manufacturer having

licenses for four distribution facilities across the state.

Minnesota now allows a manufacturer to operate eight distribution facilities,

which may include the manufacturer’s single location for cultivation, harvesting, manufacturing, packaging, and processing but is

not required to include that location.

Medical cannabis is provided to patients

as a liquid, pill, topical (lotions, balms, and patches), vaporized delivery method that does not require the use of dried leaves

or plant form, water-soluble cannabinoid multi-particulates (for example, granules, powders, and sprinkles) and orally dissolvable

products such as lozenges, gums, mints, buccal tablets, and sublingual tablets.

In terms of safety and security, there

are several precautions built into the program.

For example, registered manufacturers must contract with a laboratory for testing

the quality and consistency of the medical cannabis products.

The Medical Cannabis Program is regulated and administered by the Minnesota Department of Health which oversees all cultivation, production, and distribution facilities.

In the initial program the Minnesota Department of Health had registered two manufacturers, with each manufacturer having licenses for four distribution facilities across the state.

Minnesota now allows a manufacturer to operate eight distribution facilities, which may include the manufacturer’s single location for cultivation, harvesting, manufacturing, packaging, and processing but is not required to include that location.

Medical cannabis is provided to patients as a dried raw cannabis, liquid, pill, topical (lotions, balms, and patches), vaporized delivery method that does not require the use of dried leaves or plant form, water-soluble cannabinoid multi-particulates (for example, granules, powders, and sprinkles) and orally dissolvable products such as lozenges, gums, mints, buccal tablets, and sublingual tablets.

In terms of safety and security, there are several precautions built into the program.

For example, registered manufacturers must contract with a laboratory for testing the quality and consistency of the medical cannabis products.

Manufacturers’ facilities are also subject to state inspections.

Minnesota has also implemented a process

for monitoring and evaluating the health impacts of medical cannabis on patients which will be used to help patients and health

professionals grow their understanding of the benefits, risks, and side effects of medical cannabis.

In 2021, there is potential for the addition of raw flower to

the medical program in Minnesota.

Vireo’s Licenses and Permits in

Our license in Minnesota was awarded to

Vireo through merit-based license application processes.

Merit-based license awards require limited investment and thus present

high-return opportunities.

We believe that our medical and scientific background has helped us develop a competitive advantage

in the marketplace with respect to applying and winning some merit-based license awards.

Vireo Health of Minnesota, LLC (“ Vireo

Minnesota ”), which is a subsidiary of Vireo, holds one vertically-integrated medical cannabis license to operate one

cultivation and production facility in Otsego, MN and eight retail medical cannabis dispensaries in the state of Minnesota, located

in Blaine, Bloomington, Burnsville, Hermantown, Rochester, Minneapolis, Moorhead, and Woodbury.

Minnesota has also implemented a process for monitoring and evaluating the health impacts of medical cannabis on patients which will be used to help patients and health professionals grow their understanding of the benefits, risks, and side effects of medical cannabis.

In August 2022, edibles are scheduled to be added to the medical program in Minnesota.

Licenses and Permits in Minnesota

Our license in Minnesota was awarded to the Company through merit-based license application processes.

Merit-based license awards require limited investment and thus present high-return opportunities.

We believe that our medical and scientific background has helped us develop a competitive advantage in the marketplace with respect to applying and winning some merit-based license awards.

Vireo Health of Minnesota, LLC (“ Vireo Minnesota ”), which is a subsidiary of Goodness Growth, holds one vertically-integrated medical cannabis license to operate one cultivation and production facility in Otsego, MN and eight retail medical cannabis dispensaries in the state of Minnesota, located in Blaine, Bloomington, Burnsville, Hermantown, Rochester, Minneapolis, Moorhead, and Woodbury.

Minnesota Licenses and Regulations

We currently operate eight retail dispensaries

and one cultivation and production facility of approximately 90,000 square feet.

Recent changes to the state’s qualifying

conditions for medical cannabis patients have contributed to increases in patient enrollment, and the legislature also recently

granted Vireo four additional dispensary licenses, all of which opened in the fourth quarter of 2020.

These additional dispensary

licenses, combined with the potential for the state to add dry flower to the list of allowed delivery methods, give our management

team optimism that the Minnesota market remains a strong near-term growth opportunity for the Company.

Minnesota state licenses are renewed every

Every two years, licensees are required to submit a renewal application with the commissioner at least six months before

its registration term expires per Minnesota Administrative Rule 4770.1460.

The most recent manufacturer annual fee paid in

2019 was $146,000 and is non-refundable.

Additionally, provided that the requisite renewal fees are paid, the renewal application

is submitted in a timely manner, and there are no material violations noted against the applicable licenses, Vireo Minnesota expects

to receive the applicable renewed license in the ordinary course of business.

While Vireo Minnesota’s compliance controls

have been developed to mitigate the risk of any material violations of a license arising, there is no assurance that Vireo Minnesota’s

license will be renewed in the future in a timely manner.

Any unexpected delays or costs associated with the licensing renewal

process could impede the ongoing or planned operations of the Company and have a material, adverse effect on the Company’s

business and financial results.

We currently operate eight retail dispensaries and one cultivation and production facility of approximately 90,000 square feet.

Recent changes to the state’s qualifying conditions for medical cannabis patients have contributed to increases in patient enrollment, and the legislature also recently granted Vireo Minnesota four additional dispensary licenses, all of which opened in the fourth quarter of 2020.

These additional dispensary licenses, combined with the March 2022 addition of dried raw cannabis to the list of allowed delivery methods, give our management team optimism that the Minnesota market remains a strong near-term growth opportunity for the Company.

Minnesota state licenses are renewed every two years.

Every two years, licensees are required to submit a renewal application with the commissioner at least six months before its registration term expires per Minnesota Administrative Rule 4770.1460.

The most recent manufacturer annual fee paid in 2021 was $189,220 and is non-refundable.

Additionally, provided that the requisite renewal fees are paid, the renewal application is submitted in a timely manner, and there are no material violations noted against the applicable licenses, Vireo Minnesota expects to receive the applicable renewed license in the ordinary course of business.

While Vireo Minnesota’s compliance controls have been developed to mitigate the risk of any material violations of a license arising, there is no assurance that Vireo Minnesota’s license will be renewed in the future in a timely manner.

Any unexpected delays or costs associated with the licensing renewal process could impede the ongoing or planned operations of the Company and have a material, adverse effect on the Company’s business and financial results.

Minnesota Reporting Requirements

The State of Minnesota does not require

a specific computerized T&T system for seed-to-sale.

Individual licensees whether directly or through third-party integration

systems are required to push data to the state to meet all reporting requirements.

Vireo Minnesota currently uses Leaf Logix

to satisfy our reporting requirements.

Nevada Regulatory Landscape

In Nevada, medical marijuana use was legalized

by a ballot initiative (Nevada Medical Marijuana Act, Question 9) in 2000.

State-certified medical marijuana establishments were first

operational in 2015.

On November 8, 2016, voters in Nevada passed the Nevada Marijuana Legalization Initiative (Ballot Question 2) to

allow for the sale, possession, and consumption of recreational marijuana in the state for adults 21 and older.

The first dispensaries

providing adult-use cannabis began sales in July 2017.

The Nevada Cannabis Compliance Board is the regulatory agency overseeing the medical

and adult-use cannabis programs.

Cities and counties in Nevada can determine the number of local cannabis licenses they will issue.

Vireo’s Licenses in Nevada

Vireo Health of Nevada I, LLC (“ Vireo

Nevada ”), which is a subsidiary of Vireo, holds the equity interest of MJ Distributing C201, LLC (“ C201 ”).

C201 holds medical and adult-use cannabis cultivation licenses to operate a cultivation facility in Caliente, NV.

Vireo Nevada also holds the equity interest

of MJ Distributing P132, LLC (“ P132 ”).

P132 holds medical and recreational cannabis production license to operate

a product manufacturing facility in Caliente, NV.

Nevada Licenses and Regulations

the state of Nevada, only cannabis that is grown/produced in the state by a licensed establishment may be sold in the state.

also allows Vireo to make wholesale sales of cannabis to other licensed entities within the state.

There are three principal license

categories in Nevada:

(1) cultivation, (2) processing and (3) dispensary.

The medical and recreational cultivation

licenses permit C201 to acquire, possess, cultivate, deliver, transfer, have tested, transport, supply or sell marijuana and related

supplies to medical marijuana dispensaries, facilities for the production of medical marijuana products and/or medical marijuana-infused

products, or other medical marijuana cultivation facilities.

The medical and recreational product manufacturing

licenses permit P132 to acquire, possess, manufacture, deliver, transfer, transport, supply, or sell marijuana products or marijuana

infused products to other medical marijuana production facilities or medical marijuana dispensaries.

Nevada Reporting Requirements

The state of Nevada uses METRC as the state’s

computerized T&T system used to track commercial cannabis activity and seed-to-sale.

Individual licensees, whether directly or through

third-party integration systems, are required to push data to the state to meet all reporting requirements.

For the cultivation and processing

licenses P132 and C201 will designate an inhouse computerized seed to sale software that will integrate with METRC via API.

seed-to-sale system must capture the required data points for cultivation and manufacturing as required in Nevada Revised Statutes section

The State of Minnesota does not require a specific computerized T&T system for seed-to-sale.

Individual licensees whether directly or through third-party integration systems are required to push data to the state to meet all reporting requirements.

Vireo Minnesota currently uses Leaf Logix to satisfy our reporting requirements.

New Mexico Regulatory Landscape

The Lynn and Erin Compassionate Use Act

(“ Compassionate Use Act ”) was signed into law in 2007 and became effective July 1, 2007.

The Compassionate Use

Act established the regulatory framework for use of medical cannabis by New Mexico residents and created the New Mexico Medical

Cannabis Program (“ NMMCP ”).

It allows practitioners to prescribe medical cannabis to patients with a debilitating

medical condition (as defined in the Compassionate Use Act).

Currently, there are at least 23 qualifying conditions under the Compassionate

When a practitioner determines that the patient has a debilitating medical condition and provides written certification

so stating and that the potential health benefits of the cannabis use would likely outweigh the health risks for the patient, the

patient can apply with the New Mexico Department of Health (“ NMDOH ”) for a registry identification card.

patient is allowed to possess cannabis in an amount that is reasonably necessary to ensure uninterrupted availability of cannabis

for a period of three months.

In 2019, New Mexico announced it would begin permitting non-residents of the state to obtain cannabis

under the Compassionate Use Act and as of July 1, 2020, the state now extends reciprocity to residents of all other medical cannabis

states, allowing visiting medical marijuana patients to use their home-state credentials to purchase at licensed New Mexico medical

marijuana dispensaries.

The governor of New Mexico said she will call lawmakers into

a special session in late March 2021 to work on proposed legislation legalizing adult-use cannabis.

Vireo’s Licenses in New Mexico

Pursuant to a management agreement with

our affiliate Red Barn Growers, Inc., a New Mexico non-profit corporation and NMDOH licensee, Vireo Health of New Mexico, LLC (“ VHNM ”),

a wholly-owned subsidiary of Vireo, currently operates two dispensaries located in Santa Fe and Gallup and a cultivation and processing

facility located in Gallup.

The Lynn and Erin Compassionate Use Act (“ Compassionate Use Act ”) was signed into law in 2007 and became effective July 1, 2007.

The Compassionate Use Act established the regulatory framework for use of medical cannabis by New Mexico residents and created the New Mexico Medical Cannabis Program (“ NMMCP ”).

It allows practitioners to prescribe medical cannabis to patients with a debilitating medical condition (as defined in the Compassionate Use Act).

Currently, there are at least 23 qualifying conditions under the Compassionate Use Act.

When a practitioner determines that the patient has a debilitating medical condition and provides written certification so stating and that the potential health benefits of the cannabis use would likely outweigh the health risks for the patient, the patient can apply with the New Mexico Department of Health (“ NMDOH ”) for a registry identification card.

A qualified patient is allowed to possess cannabis in an amount that is reasonably necessary to ensure uninterrupted availability of cannabis for a period of three months.

In 2019, New Mexico announced it would begin permitting non-residents of the state to obtain cannabis under the Compassionate Use Act and as of July 1, 2020, the state now extends reciprocity to residents of all other medical cannabis states, allowing visiting medical marijuana patients to use their home-state credentials to purchase at licensed New Mexico medical marijuana dispensaries.

The Cannabis Regulation Act (“ Cannabis Regulation Act ”) was signed into law on April 12, 2021.

The Cannabis Regulation Act established the regulatory framework for use of recreational cannabis within the State of New Mexico to allow for the sale, possession, and consumption of recreational marijuana in the state for adults 21 and older.

The Cannabis Regulation Act also created the Cannabis Control Division (“ NMCCD ”) under the New Mexico Regulation and Licensing Department, which now oversees the NMMCP which was previously subject to the regulatory authority of NMDOH.

The first dispensaries providing adult-use cannabis will begin sales in April 2022.

Licenses in New Mexico

Pursuant to a management agreement with our affiliate Red Barn Growers, Inc.

(“ Red Barn ”), a New Mexico non-profit corporation and NMCCD licensee, Vireo Health of New Mexico, LLC (“ VHNM ”), a wholly-owned subsidiary of Goodness Growth, currently operates four dispensaries located in Albuquerque, Las Cruces, Santa Fe and Gallup and a cultivation and processing facility located in Gallup.

New Mexico Licenses and Regulations

In New Mexico, we currently operate an approximately

10,000 square feet of cultivation and production and have two operational retail dispensaries.

The licensee is in the process of developing

two additional dispensaries, located in Albuquerque and Las Cruces, as well as additional cultivation capacity in Gallup, which will also

be operated by VHNM.

We expect that the expansion of the cultivation capacity, if and when approved by regulators, will enable us to begin

wholesaling in this market.

The NMMCP is overseen by the NMDOH.

NMMCP has at least 35 Licensed Non-Profit Producers (LNPPs).

LNPPs cultivate and distribute cannabis to qualified patients.

NMDOH is not currently accepting new applications for licensure of LNPPs.

Each LNPP can operate an unlimited number of dispensaries.

The NMMCP approves third-party manufactures to make cannabis-derived products that are then sold through the LNPPs.

With approval by

the NMMCP, LNPPs can also manufacture products to sell to patients.

In New Mexico, we currently operate an approximately 15,000 square feet of cultivation and production and have four operational retail dispensaries.

The NMCCD has established the following types of cannabis licenses:

manufacturers;

microbusinesses;

cannabis consumption lounges;

vertically integrated establishments;

and integrated microbusinesses.

Red Barn operates pursuant to a vertically integrated establishment license issued by NMCCD.

Red Barn’s vertically integrated establishment licenses allows it to cultivate, process, and distribute cannabis..

Each vertically integrated licensee can operate an unlimited number of dispensaries.

New Mexico Reporting Requirements

as the state’s computerized T&T system used to track commercial cannabis activity and seed-to-sale.

Individual licensees

are required to push data to the state to meet all reporting requirements.

The state of New Mexico uses BIOTRACKTHC © as the state’s computerized T&T system used to track commercial cannabis activity and seed-to-sale.

Individual licensees are required to push data to the state to meet all reporting requirements.

New York Regulatory Landscape

The Compassionate Care Act was signed into

law on July 5, 2014.

It allows patients to use medical cannabis if they have been diagnosed with a specific severe, debilitating, or

life-threatening condition that is accompanied by an associated or complicating condition.

The law was expanded to include chronic

pain and PTSD.

The law has a sunset provision whereby it will expire after seven years (July 5, 2021) unless renewed by the

Physicians must complete a New York State

Department of Health-approved course and register with the New York Department of Health Medical Marijuana Program to certify patients.

Practitioners must consult the New York State Prescription Monitoring Program Registry prior to issuing a certification to a patient

for medical cannabis.

Patients who are certified by their practitioners

are required to apply to obtain a registry identification card in order to obtain medical cannabis certified patients may designate

up to two caregivers, who must also register with the Department of Health, to obtain and administer medical cannabis products

on behalf of the patients.

There are ten registered organizations,

which each hold a vertically integrated license allowing the cultivation, manufacture, transport, distribution, and dispensation

of medical cannabis.

Registered organizations may only manufacture medical cannabis products in forms approved by the Commissioner

of the Department of Health.

Approved forms currently include metered liquid or oil preparations, solid and semisolid preparations

(e.g., capsules, chewable and effervescent tablets, lozenges), metered ground plant preparations, and topical forms and transdermal

The Compassionate Care Act expressly provides that a certified medical use of cannabis does not include smoking and that

all prices must be approved by the New York Department of Health.

Each registered organization may have up

to four dispensing facilities, owned and operated by the registered organization, where approved medical cannabis products will

be dispensed to certified patients or their designated caregivers, who have registered with the Department.

Dispensing facilities

must report dispensing data to the New York State Prescription Monitoring Program Registry and consult the registry prior to dispensing

approved medical cannabis products to certified patients or their designated caregivers.

Adult-use cannabis legislation has been

proposed in New York and we believe it has broad support of the legislature and the governor.

However, it is unclear how such legislation,

if enacted, will interact with the current medical cannabis regime and what effect, if any, such proposal will have on our business.

Vireo’s Licenses and Permits in

Our licenses in New York were each awarded

to Vireo through merit-based license application processes.

Merit-based license awards require limited investment and thus present

high-return opportunities.

We believe that our medical and scientific background has helped the Company develop a competitive advantage

in the marketplace with respect to applying and winning some merit-based license awards.

Through our subsidiary Vireo Health of

New York, LLC, we hold one of ten vertically integrated medical cannabis licenses.

We currently have a cultivation and processing

facility in Johnstown, NY and four dispensaries throughout the State in New York City (Queens County), Binghamton, White Plains

The Compassionate Care Act was signed into law on July 5, 2014.

The law was expanded in January 2022 to remove a previous list of qualifying conditions.

The law now allows patients to use medical cannabis for any condition that could be treated by medical cannabis as recommended by their doctor.

Physicians must complete a New York State Department of Health-approved course and register with the New York Department of Health Medical Marijuana Program to certify patients.

Practitioners must consult the New York State Prescription Monitoring Program Registry prior to issuing a certification to a patient for medical cannabis.

Patients who are certified by their practitioners are required to apply to obtain a registry identification card in order to obtain medical cannabis certified patients may designate up to two caregivers, who must also register with the Department of Health, to obtain and administer medical cannabis products on behalf of the patients.

There are ten registered organizations, which each hold a vertically integrated license allowing the cultivation, manufacture, transport, distribution, and dispensation of medical cannabis.

Registered organizations may only manufacture medical cannabis products in forms approved by the Commissioner of the Department of Health.

Approved forms currently include whole flower, metered liquid or oil preparations, solid and semisolid preparations (e.g., capsules, chewable and effervescent tablets, lozenges), metered ground plant preparations, and topical forms and transdermal patches.

The Compassionate Care Act expressly provides that a certified medical use of cannabis does not include smoking and that all prices must be approved by the New York Department of Health.

Each registered organization may have up to four dispensing facilities, owned and operated by the registered organization, where approved medical cannabis products will be dispensed to certified patients or their designated caregivers, who have registered with the Department.

Dispensing facilities must report dispensing data to the New York State Prescription Monitoring Program Registry and consult the registry prior to dispensing approved medical cannabis products to certified patients or their designated caregivers.

The Marihuana Regulation & Taxation Act was signed into law on March 31, 2022, legalizing adult-use cannabis in New York State.

MRTA established a new Office of Cannabis Management governed by a Cannabis Control Board to comprehensively regulate adult-use, medical, and hemp cannabis.

The OCM will issue licenses and is currently promulgating rules and regulations outlining how and when business can participate in the new industry.

Adult-use sales are not expected to begin in 2023.

Licenses and Permits in New York

Our licenses in New York were each awarded to us through merit-based license application processes.

Merit-based license awards require limited investment and thus present high-return opportunities.

We believe that our medical and scientific background has helped the Company develop a competitive advantage in the marketplace with respect to applying and winning some merit-based license awards.

Through our subsidiary Vireo Health of New York, LLC, we hold one of ten vertically integrated medical cannabis licenses.

We currently have a cultivation and processing facility in Johnstown, NY and four dispensaries throughout the State in New York City (Queens County), Binghamton, White Plains and Albany.

We also operate a home-delivery service based out of our Queens dispensary.

Our New York cultivation and processing

facility is approximately 21 acres and compromised of 13,650 square foot of indoor cultivation space, 38,304 square feet of greenhouse

cultivation space, and 7,350 square feet of laboratory and processing space.

The balance of the land (20 acres total) is unimproved

and available to Vireo for future expansion.

The facility has been in continuous production and sale of cannabis since January

Our New York cultivation and processing facility is approximately 21 acres and compromised of 13,650 square foot of indoor cultivation space, 38,304 square feet of greenhouse cultivation space, and 7,350 square feet of laboratory and processing space.

TThe facility has been in continuous production and sale of cannabis since January 2016.

New York Licenses and Regulations

In New York, Vireo was one of the original

five registered organizations, placing second in the initial selection process, and is currently one of only ten registered organizations

operators in the state.

While we believe the long-term opportunity in New York is substantial, recent performance has been impacted

by neighboring states transitioning to recreational-use jurisdictions, as well as by increasing competition from other developing

New product introductions and the beginning of wholesale revenue streams may contribute to improving profit margins

in the future.

In New York, we were one of the original five registered organizations, placing second in the initial selection process, and is currently one of only ten registered organizations operators in the state.

While we believe the long-term opportunity in New York is substantial, recent performance has been impacted by neighboring states transitioning to recreational-use jurisdictions, as well as by increasing competition from other developing operators.

New product introductions and the beginning of wholesale revenue streams may contribute to improving profit margins in the future.

We anticipate additional growth of our home delivery service.

New York registered organization licenses

expire 2 years after the date of issuance.

An application to renew any registration must be filed with the Department not more

than six months nor less than four months prior to the expiration thereof.

Registration fees are $200,000 and are refundable if

the applicant is not granted a renewal registration.

Additionally, in respect of the renewal process, provided that the requisite

renewal fees are paid, the renewal application is submitted in a timely manner, and there are no material violations noted against

the applicable licenses.

New York registered organization licenses expire 2 years after the date of issuance.

An application to renew any registration must be filed with the Department not more than six months nor less than four months prior to the expiration thereof.

Registration fees are $200,000 and are refundable if the applicant is not granted a renewal registration.

New York Reporting Requirements

as the state’s computerized T&T system used to track commercial cannabis activity and seed-to-sale.

Individual licensees

are required to push data to the state to meet all reporting requirements.

Vireo Compliance Program

Expenditures for compliance with federal,

state, and local environmental laws and regulations are consistent from year to year and are not material to our financial results.

The state of New York uses BIOTRACKTHC © as the state’s computerized T&T system used to track commercial cannabis activity and seed-to-sale.

Individual licensees are required to push data to the state to meet all reporting requirements.

Our Compliance Program

Expenditures for compliance with federal, state, and local environmental laws and regulations are consistent from year to year and are not material to our financial results.

We are compliant with all applicable regulations and properly disposes of the toxic and hazardous substances it uses in our operations.

We are classified as having “direct”

involvement in the U.S.

marijuana industry and are in material compliance with applicable licensing requirements and the regulatory framework

enacted by each state in which it operates.

We are not subject to any material citations or notices of violation with applicable licensing

requirements and the regulatory framework enacted by each applicable state that may have an impact on our licenses, business activities

or operations.

With the oversight of our General Counsel

and Chief Compliance Officer, our compliance team oversees, maintains, and implements Vireo’s compliance program.

to our internal legal department, we have engaged state regulatory compliance counsel in many jurisdictions.

The compliance team oversees training for

cultivation, production and dispensary managers and employees, along with other department leaders and other designated persons

as needed, on compliance with state and local laws and regulations.

Our compliance team also monitors all compliance notifications

from the regulators and inspectors and lead the effort to timely resolve any issues identified.

We keep records of all compliance

notifications received from the state regulators or inspectors and how and when the issue was resolved.

We have created comprehensive standard

operating procedures that include detailed descriptions and instructions for receiving shipments of inventory, inventory tracking,

recordkeeping and record retention practices related to inventory, as well as procedures for performing inventory reconciliation

and ensuring the accuracy of inventory tracking and recordkeeping.

We maintain accurate records of our inventory at all licensed

We conduct audits of our cannabis and cannabis products inventories at least weekly in order to detect any possible

In addition to weekly audits, security and/or compliance staff conduct unscheduled, unannounced audits to prevent complacency

or the perception thereof.

Adherence to our standard operating procedures is mandatory and ensures that our operations are compliant

with the rules set forth by the applicable state and local laws, regulations, ordinances, licenses and other requirements.

verify adherence to standard operating procedures by regularly conducting internal inspections and ensures that any issues identified

are resolved quickly and thoroughly.

In January 2018, United States Attorney

General, Jeff Sessions rescinded the Cole Memorandum and thereby created a vacuum of guidance for enforcement agencies and the

As an industry best practice, despite the recent rescission of the Cole Memorandum, Vireo continues to do the following to

ensure compliance with the guidance provided by the Cole Memorandum:

We are classified as having “direct” involvement in the U.S.

marijuana industry and are in material compliance with applicable licensing requirements and the regulatory framework enacted by each state in which it operates.

We are not subject to any material citations or notices of violation with applicable licensing requirements and the regulatory framework enacted by each applicable state that may have an impact on our licenses, business activities or operations.

With the oversight of our General Counsel and Chief Compliance Officer, our compliance team oversees, maintains, and implements our compliance program.

In addition to our internal legal department, we have engaged state regulatory compliance counsel in many jurisdictions.

The compliance team oversees training for cultivation, production and dispensary managers and employees, along with other department leaders and other designated persons as needed, on compliance with state and local laws and regulations.

Our compliance team also monitors all compliance notifications from the regulators and inspectors and lead the effort to timely resolve any issues identified.

We keep records of all compliance notifications received from the state regulators or inspectors and how and when the issue was resolved.

We have created comprehensive standard operating procedures that include detailed descriptions and instructions for receiving shipments of inventory, inventory tracking, recordkeeping and record retention practices related to inventory, as well as procedures for performing inventory reconciliation and ensuring the accuracy of inventory tracking and recordkeeping.

We maintain accurate records of our inventory at all licensed facilities.

We conduct audits of our cannabis

and cannabis products inventories at least weekly in order to detect any possible diversion.

In addition to weekly audits, security and/or compliance staff conduct unscheduled, unannounced audits to prevent complacency or the perception thereof.

Adherence to our standard operating procedures is mandatory and ensures that our operations are compliant with the rules set forth by the applicable state and local laws, regulations, ordinances, licenses and other requirements.

We also verify adherence to standard operating procedures by regularly conducting internal inspections and ensures that any issues identified are resolved quickly and thoroughly.

In January 2018, United States Attorney General, Jeff Sessions rescinded the Cole Memorandum and thereby created a vacuum of guidance for enforcement agencies and the DOJ.

As an industry best practice, despite the recent rescission of the Cole Memorandum, we continue to do the following to ensure compliance with the guidance provided by the Cole Memorandum:

● Ensure the operations of our subsidiaries and business partners are compliant with all licensing requirements related to cannabis operation by applicable state, county, municipality, town, township, borough, and other political/administrative divisions.

4 unchanged sentences

● We conduct reviews of products and product packaging to ensure that the products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.

We will continue to monitor compliance

on an ongoing basis in accordance with our compliance program and standard operating procedures.

While our operations are in compliance

with all applicable state laws, regulations and licensing requirements in all material respects, such activities remain illegal

under United States federal law.

For the reasons described above and the risks further described in Risk Factors below, there are

significant risks associated with our business.

Readers are strongly encouraged to carefully read all the risk factors contained

We will continue to monitor compliance on an ongoing basis in accordance with our compliance program and standard operating procedures.

While our operations are in compliance with all applicable state laws, regulations and licensing requirements in all material respects, such activities remain illegal under United States federal law.

For the reasons described above and the risks further described in Risk Factors below, there are significant risks associated with our business.

Readers are strongly encouraged to carefully read all the risk factors contained in Item 1A.

Risk Factors, below.

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-K

Item 1. Business