Vireo Growth Inc. 10-Q

Item 1. Financial Statements GOODNESS GROWTH HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In U.S Dollars, unaudited and condensed) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2022 ​ 2021 Assets ​ ​ Current assets: ​ ​ Cash ​ $ 8,601,217 ​ $ 15,155,279 Accounts receivable, net of allowance for doubtful accounts of $ 482,038 and $ 572,080 , respectively ​ 6,267,347 ​ 4,502,469 Inventory ​ 18,259,329 ​ 20,422,061 Prepayments and other current assets ​ 3,437,124 ​ 1,560,113 Assets Held for Sale ​ 2,185,523 ​ — Total current assets ​ 38,750,540 ​ 41,639,922 Property and equipment, net ​ 93,307,000 ​ 99,488,559 Operating lease, right-of-use asset ​ 8,187,410 ​ 8,510,499 Notes receivable, long-term ​ 3,750,000 ​ 3,750,000 Intangible assets, net ​ 9,943,746 ​ 10,184,289 Goodwill ​ 183,836 ​ 183,836 Deposits ​ 1,994,890 ​ 1,718,206 Deferred tax assets ​ 4,610,000 ​ 1,495,000 Total assets ​ $ 160,727,422 ​ $ 166,970,311 Liabilities ​ ​ Current liabilities ​ ​ Accounts Payable and Accrued liabilities ​ $ 17,685,524 ​ $ 14,805,473 Right of use liability ​ 1,702,825 ​ 1,600,931 Liabilities held for sale ​ 1,129,249 ​ — Total current liabilities ​ 20,517,598 ​ 16,406,404 Right-of-use liability ​ 79,917,552 ​ 80,228,097 Long-Term debt ​ 31,210,645 ​ 27,329,907 Total liabilities ​ $ 131,645,795 ​ $ 123,964,408 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (refer to Note 16) ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ Subordinate Voting Shares ($- par value, unlimited shares authorized; 84,111,628 shares issued and outstanding) ​ — ​ — Multiple Voting Shares ($- par value, unlimited shares authorized; 374,586 shares issued and outstanding) ​ — ​ — Super Voting Shares ($- par value; unlimited shares authorized; 65,411 shares issued and outstanding, respectively) ​ — ​ — Additional Paid in Capital ​ 179,071,928 ​ 178,429,422 Accumulated deficit ​ ( 149,990,301 ) ​ ( 135,423,519 ) Total stockholders' equity ​ $ 29,081,627 ​ $ 43,005,903 Total liabilities and stockholders' equity ​ $ 160,727,422 ​ $ 166,970,311 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements ​ 2 GOODNESS GROWTH HOLDINGS, INC. CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS (In U.S. Dollars, unaudited and condensed) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Revenue ​ $ 15,638,572 ​ $ 13,189,889 Cost of sales ​ ​ ​ ​ Product costs ​ 9,682,977 ​ 7,506,048 Inventory valuation adjustments ​ 3,466,917 ​ 68,000 Gross profit ​ 2,488,678 ​ 5,615,841 Operating expenses: ​ ​ ​ ​ Selling, general and administrative ​ 9,277,969 ​ 8,035,991 Stock-based compensation expenses ​ 642,506 ​ 2,046,618 Depreciation ​ 156,096 ​ 171,562 Amortization ​ 172,267 ​ 206,443 Total operating expenses ​ 10,248,838 ​ 10,460,614 ​ ​ ​ ​ ​ ​ ​ Loss from operations ​ ( 7,760,160 ) ​ ( 4,844,773 ) ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ ​ Impairment of long-lived assets ​ ( 5,313,176 ) ​ — Gain on disposal of assets ​ 168,359 ​ 437,107 Interest expenses, net ​ ( 4,601,799 ) ​ ( 1,026,146 ) Other income (expenses) ​ 1,199,994 ​ 56,668 Other income (expenses), net ​ ( 8,546,622 ) ​ ( 532,371 ) ​ ​ ​ ​ ​ ​ ​ Loss before income taxes ​ ( 16,306,782 ) ​ ( 5,377,144 ) ​ ​ ​ ​ ​ ​ ​ Current income tax expenses ​ ( 1,375,000 ) ​ ( 1,735,000 ) Deferred income tax recoveries ​ 3,115,000 ​ 235,000 Net loss and comprehensive loss ​ ( 14,566,782 ) ​ ( 6,877,144 ) Net loss per share - basic and diluted ​ $ ( 0.11 ) ​ $ ( 0.06 ) Weighted average shares used in computation of net loss per share - basic & diluted ​ ​ 128,111,328 ​ ​ 116,103,635 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements ​ ​ 3 GOODNESS GROWTH HOLDINGS, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In U.S. Dollars, unaudited and condensed) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SVS ​ MVS ​ Super Voting Shares ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional Paid- ​ Accumulated ​ Stockholders' ​ Shares Amount Shares Amount Shares Amount in Capital Deficit Equity Balance, January 1, 2021 51,062,559 ​ $ — 554,127 ​ $ — 65,411 ​ ​ — ​ $ 164,079,614 ​ $ ( 101,733,044 ) ​ $ 62,346,570 Conversion of MVS shares 9,417,700 ​ — ( 94,177 ) ​ — — ​ — ​ — ​ — ​ — Shares issued in Nevada acquisition 1,050,000 ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 1,385,239 ​ ​ — ​ 1,385,239 Options exercised 3,130,343 ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 966,156 ​ ​ — ​ 966,156 Warrants exercised 7,110,481 ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ — Warrants issued in financing activities — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 5,395,759 ​ ​ — ​ 5,395,759 Stock-based compensation 889,519 ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 2,046,618 ​ ​ — ​ 2,046,618 Net Loss — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 6,877,144 ) ​ ( 6,877,144 ) Balance at March 31, 2021 72,660,602 ​ $ — 459,950 ​ $ — 65,411 ​ $ — ​ $ 173,873,386 ​ $ ( 108,610,188 ) ​ $ 65,263,198 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, January 1, 2022 ​ 81,298,228 ​ $ — 402,720 ​ $ — 65,411 ​ $ — ​ $ 178,429,422 ​ $ ( 135,423,519 ) ​ $ 43,005,903 Conversion of MVS shares ​ 2,813,400 ​ ​ — ​ ( 28,134 ) ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation — ​ — — ​ — — ​ — ​ 642,506 ​ — ​ 642,506 Net Loss — ​ — — ​ — — ​ — ​ — ​ ( 14,566,782 ) ​ ( 14,566,782 ) Balance at March 31, 2022 84,111,628 ​ $ — 374,586 ​ $ — 65,411 ​ $ — ​ $ 179,071,928 ​ $ ( 149,990,301 ) ​ $ 29,081,627 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements ​ 4 GOODNESS GROWTH HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In U.S. Dollars, except for per share data, unaudited and condensed) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ Net loss ​ $ ( 14,566,782 ) ​ $ ( 6,877,144 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ Inventory valuation adjustments ​ 3,466,917 ​ 68,000 Depreciation ​ 156,096 ​ 171,562 Depreciation capitalized into inventory ​ 700,193 ​ 508,358 Non-cash operating lease expense ​ 274,067 ​ 286,296 Amortization of intangible assets ​ 172,267 ​ 206,443 Stock-based payments ​ 642,506 ​ 2,046,618 Interest Expense ​ 996,157 ​ — Impairment of long-lived assets ​ 5,313,176 ​ — Deferred income tax ​ ( 3,115,000 ) ​ ( 235,000 ) Accretion ​ 1,384,812 ​ 91,507 Gain on disposal of OMS ​ — ​ ( 437,107 ) Gain on disposal of royalty asset ​ ​ ( 168,359 ) ​ ​ — Change in operating assets and liabilities: ​ ​ ​ ​ Accounts Receivable ​ ( 1,764,878 ) ​ ( 52,521 ) Prepaid expenses ​ ( 1,877,011 ) ​ ( 886,714 ) Inventory ​ ( 1,255,162 ) ​ ( 1,875,784 ) Accounts payable and accrued liabilities ​ 2,880,051 ​ 1,885,815 Change in assets and liabilities held for sale ​ — ​ 124,843 Net cash used in operating activities ​ $ ( 6,760,950 ) ​ $ ( 4,974,828 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ PP&E Additions ​ $ ( 2,173,430 ) ​ $ ( 4,922,251 ) Proceeds from sale of royalty asset ​ 236,635 ​ — Acquisition of MJ Distributing ​ ​ — ​ ​ ( 1,592,500 ) Proceeds from sale of OMS net of cash ​ — ​ 1,150,000 Deposits ​ ( 276,684 ) ​ ( 1,595 ) Net cash provided by (used in) investing activities ​ $ ( 2,213,479 ) ​ $ ( 5,366,346 ) ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ Proceeds from long-term debt, net of issuance costs ​ 2,884,581 ​ 23,162,526 Proceeds from option exercises ​ — ​ 966,156 Lease principal payments ​ ( 464,214 ) ​ ( 332,137 ) Net cash provided by financing activities ​ $ 2,420,367 ​ $ 23,796,545 ​ ​ ​ ​ ​ ​ ​ Net change in cash and restricted cash ​ $ ( 6,554,062 ) ​ $ 13,455,371 ​ ​ ​ ​ ​ ​ ​ Cash and restricted cash, beginning of period ​ $ 15,155,279 ​ $ 27,105,680 ​ ​ ​ ​ ​ ​ ​ Cash and restricted cash, end of period ​ $ 8,601,217 ​ $ 40,561,051 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements ​ 5 GOODNESS GROWTH HOLDINGS, INC. Notes to Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary Goodness Growth Holdings, Inc. (“ Goodness Growth ” or the “ Company ”) (formerly, Vireo Health International, Inc.) was incorporated under the Alberta Business Corporations Act on November 23, 2004. The Company was listed on the Canadian Securities Exchange (the “ CSE ”) under ticker symbol “VREO”. On June 9, 2021, the Company changed its name to Goodness Growth Holdings, Inc. and its ticker symbol on the CSE to “GDNS.” Goodness Growth is a physician-led, science-focused organization that cultivates and/or manufactures pharmaceutical-grade cannabis and cannabis extracts. Goodness Growth operates cannabis cultivation, production, and dispensary facilities in Arizona, Maryland, Minnesota, New Mexico, and New York, and formerly in Ohio, which was disposed of on March 31, 2021, through its subsidiaries. While marijuana and CBD-infused products are legal under the laws of several U.S. states (with vastly differing restrictions), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision. Recently some federal officials have attempted to distinguish between medical cannabis use as necessary, but recreational use as “still a violation of federal law.” At the present time, the distinction between “medical marijuana” and “recreational marijuana” does not exist under U.S. federal law. ​ On January 31, 2022, we entered into an Arrangement Agreement (the “Arrangement Agreement”) with Verano Holdings Corp. (“Verano”), pursuant to which Verano will acquire all of the issued and outstanding 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 Arrangement is subject to the approvals of the Supreme Court of British Columbia; receipt of U.S. regulatory approvals, including pursuant to the Hart–Scott–Rodino Antitrust Improvements Act and New York State regulatory requirements: and other customary conditions of closing ​ Since being declared a global pandemic in March 2020, the spread of COVID-19 has severely impacted virtually all areas of the globe. In many countries, including the United States, businesses were forced to cease or limit operations for long or indefinite periods of time. Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services triggered significant disruptions to businesses worldwide, resulting in an economic slowdown. Global stock markets have also experienced great volatility. Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions. ​ The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time. During 2021, the Company’s revenue, gross profit and operating income were not negatively impacted by COVID-19 and the Company generally maintained the consistency of its operations. However, the uncertain nature of the spread of COVID-19 may impact its business operations for reasons including the potential quarantine of Goodness Growth employees or those of its supply chain partners. ​ ​ 2. Summary of Significant Accounting Policies Significant Accounting Policies The Company’s significant accounting policies are described in Note 2 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with this Securities and 6 Exchange Commission, or SEC, on March 15, 2022 (the " Annual Financial Statements "). There have been no material changes to the Company’s significant accounting policies. Basis of presentation The accompanying unaudited condensed consolidated financial statements reflect the accounts of the Company. The information included in these statements should be read in conjunction with the Annual Financial Statements. The unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“ U.S. GAAP ”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“ SEC ”). In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Results of interim periods should not be considered indicative of the results for the full year. These unaudited interim condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ from these estimates. Revision of Previously Issued Financial Statements During the year ended December 31, 2021, management identified an error related to the accounting treatment of warrants with a Canadian dollar exercise price issued in connection with the Credit Facility. The Company initially recorded these Canadian denominated warrants as a derivative liability subject to revaluation at each period end, when they should have received equity treatment. Additionally, the Company identified errors related to the valuation of stock issued in the acquisition of MJ Distributing, and stock issued to our former Executive Chairman, Bruce Linton. In both instances the stock issued carried certain lock up provisions. The Company initially recorded the equity value of the stock issued at market value on the date of issuance, rather than applying a discount for lack of marketability to account for the lock up provisions. To correct the immaterial misstatements for the three months ended March 31, 2021, the Company elected to revise its previously issued interim unaudited condensed consolidated statements of net loss and comprehensive loss, stockholders’ equity, and cash flows. The Company will present the revision of its previously issued interim unaudited condensed consolidated financial statements in connection with the future filing of its Quarterly Reports on Form 10-Q. The impact of the revisions on the Company’s interim unaudited condensed consolidated financial statements for the three months ended March 31, 2021 is reflected in the following table: ​ 7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Statement of Net Loss and Comprehensive Loss for the three months ended March 31, 2021 (unaudited) As Previously Reported Adjustment ​ As Revised Operating expenses: ​ ​ ​ ​ ​ ​ Stock-based compensation expenses ​ $ 2,314,575 ​ $ ( 267,957 ) ​ $ 2,046,618 Total operating expenses ​ 10,728,571 ​ ( 267,957 ) ​ 10,460,614 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from operations ​ ( 5,112,730 ) ​ 267,957 ​ ( 4,844,773 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ ​ ​ ​ Derivative gain (loss) ​ 158,529 ​ ( 158,529 ) ​ — Other income (expenses), net ​ ( 373,842 ) ​ ( 158,529 ) ​ ( 532,371 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss before income taxes ​ ( 5,486,572 ) ​ 109,428 ​ ( 5,377,144 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) and comprehensive income (loss) ​ $ ( 6,986,572 ) ​ $ 109,428 ​ $ ( 6,877,144 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated Statement of Changes in Stockholders' Equity as of March 31, 2021 ​ As Previously Reported Adjustment ​ As Revised Shares issued in Nevada acquisition ​ $ 1,564,500 ​ $ ( 179,261 ) ​ $ 1,385,239 Stock-based compensation ​ ​ 2,314,575 ​ ​ ( 267,957 ) ​ ​ 2,046,618 Warrants issued in financing activities ​ ​ — ​ ​ 5,395,759 ​ ​ 5,395,759 Net Loss ​ ​ ( 6,986,572 ) ​ ​ 109,428 ​ ​ ( 6,877,144 ) Balance at March 31, 2021 ​ $ 60,205,229 ​ $ 5,057,969 ​ $ 65,263,198 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated Statement of Cash Flows for the three months ended March 31, 2021 (unaudited) ​ As Previously Reported Adjustment ​ As Revised CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 6,986,572 ) ​ $ 109,428 ​ $ ( 6,877,144 ) Derivative gain ​ ​ ( 158,529 ) ​ ​ 158,529 ​ ​ — Share-based payments ​ ​ 2,314,575 ​ ​ ( 267,957 ) ​ ​ 2,046,618 ​ Basis of consolidation These unaudited condensed consolidated financial statements include the accounts of the following entities wholly owned, or effectively controlled by the Company during the period ended March 31, 2022: ​ ​ ​ ​ Name of entity Place of incorporation Vireo Health, Inc. Delaware, USA Vireo Health of New York, LLC New York, USA Minnesota Medical Solutions, LLC Minnesota, USA MaryMed, LLC Maryland, USA Vireo of Charm City, LLC ​ Maryland, USA 1776 Hemp, LLC Delaware, USA Vireo Health of Massachusetts, LLC Delaware, USA Mayflower Botanicals, Inc. Massachusetts, USA Elephant Head Farm, LLC Arizona, USA EHF Cultivation Management, LLC ​ Arizona, USA Retail Management Associates, LLC Arizona, USA Arizona Natural Remedies, Inc. Arizona, USA Vireo Health of New Mexico, LLC Delaware, USA Red Barn Growers, Inc. New Mexico, USA Resurgent Biosciences, Inc. Delaware, USA Vireo Health of Puerto Rico, LLC Delaware, USA Vireo Health de Puerto Rico, Inc. Puerto Rico XAAS Agro, Inc. Puerto Rico Vireo Health of Nevada 1, LLC Nevada, USA Verdant Grove, Inc. Massachusetts, USA ​ The entities listed above are wholly owned or effectively controlled by the Company and have been formed or acquired to support the intended operations of the Company, and all intercompany transactions and balances have been eliminated in the Company's unaudited condensed consolidated financial statements. 8 Recently adopted accounting pronouncements In November of 2021 FASB issued ASU 2021 -10 - Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The update is intended to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. The Company adopted Topic 832 on January 1, 2022. The adoption of the standard did not have a material impact on the Company's results of operations or cash flows. Net loss per share Basic net loss per share is computed by dividing reported net loss by the weighted average number of common shares outstanding for the reported period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock of the Company during the reporting period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potential dilutive common share equivalents outstanding during the period. Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of vested share options and the incremental shares issuable upon conversion of the convertible notes. Potential dilutive common share equivalents consist of stock options, warrants, and convertible notes. In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive. The Company recorded a net loss for the three month periods ended March 31, 2022 and 2021, presented in these financial statements, and as such there is no difference between the Company’s basic and diluted net loss per share for these periods. The anti-dilutive shares outstanding for the three month periods ending March 31, 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ 2022 2021 Stock options ​ 26,261,054 23,772,642 Warrants ​ 4,226,449 4,395,949 RSUs ​ 1,094,200 ​ — Convertible notes ​ — 211,765 Total ​ 31,581,703 28,380,356 ​ Revenue Recognition The Company’s primary source of revenue is from wholesale of cannabis products to dispensary locations and direct retail sales to eligible customers at the Company-owned dispensaries. Substantially all of the Company’s retail revenue is from the direct sale of cannabis products to medical customers. The following table represents the Company’s disaggregated revenue by source: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2022 2021 Retail ​ $ 12,412,223 ​ $ 10,373,630 Wholesale ​ 3,226,349 ​ 2,816,259 Total ​ $ 15,638,572 ​ $ 13,189,889 ​ New accounting pronouncements not yet adopted In October of 2021 FASB issued ASU 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The update is intended to improve the accounting for acquired revenue 9 contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. The required date of adoption is January 1, 2023, and the Company is evaluating potential future impacts on the Company’s financial statements. ​ ​ ​ 3. Business Combinations and Dispositions Dispositions On March 31, 2021, the Company sold all of the assets and liabilities of its affiliated company, Ohio Medical Solutions, Inc. (“ OMS ”) to Ayr Strategies Inc. (“ Ayr ”). As part of this transaction, the Company transferred assets and liabilities with a net book value of $ 712,894 . Consideration received exceeded OMS’s net assets at the time of sale, resulting in a gain of $ 437,106 which was recorded in the unaudited condensed consolidated statement of loss and comprehensive loss for the three months ended March 31, 2021. On March 31, 2022, the Company sold the rights to a 10 % royalty on future net revenues generated by High Gardens, Inc., a former subsidiary of the Company that was divested in 2020, for cash consideration of $ 236,635 . The carrying value of the intangible royalty asset prior to disposition was $ 68,276 , resulting in a gain of $ 168,359 which was recorded in the unaudited condensed consolidated statement of loss and comprehensive loss for the three months ended March 31, 2022. Asset Acquisitions Acquisition of MJ Distributing C201, LLC and MJ Distributing P132, LLC On April 10, 2019, the Company entered into a definitive agreement to acquire 100 % of the membership interests in MJ Distributing C201, LLC and MJ Distributing P132, LLC (“ MJ Distributing ”) which currently hold licenses to cultivate and distribute, respectively, medical and adult-use cannabis in the state of Nevada. The purpose of this acquisition was to acquire a medical marijuana license in the state of Nevada. The acquisition was financed with cash on hand and stock. ​ The acquisition of MJ Distributing was completed on January 5, 2021. As part of the closing of the acquisition the restricted cash of $ 1,592,500 was transferred to the sellers, the convertible notes in escrow were cancelled, and the Company issued 1,050,000 subordinate voting shares to the sellers. Management determined the total consideration paid of $ 1,592,500 in restricted cash, $ 1,385,239 associated with the fair value of the subordinate voting shares issued, and $ 28,136 of deferred acquisition costs, was equal to the fair value of the intangible asset acquired, or $ 3,005,875 . The related operating results are included in the accompanying consolidated statements of operations, changes in shareholders’ equity, and statement of cash flows commencing from the date of acquisition. ​ Assets Held for Sale ​ As of March 31, 2022 the Company identified property, equipment, and lease assets and liabilities associated with the businesses in Maryland and Arizona with carrying amounts that are expected to be recovered principally through sale rather than through continuing use. The sale of these assets and liabilities is highly probable, they can be sold in their immediate condition, and the sales are expected to occur within the next twelve motnhs. As such, these assets and liabilities have been classified as “held for sale.” The carrying value of these net assets exceeded fair value less expected cost to sell, 10 and as such, the Company recorded an impairment loss of $ 5,313,176 , which is included in the statement of loss and comprehensive loss for the three months ended March 31, 2022. Assets and liabilities held for sale are as follows: ​ ​ ​ ​ ​ Assets held for sale ​ Property and equipment ​ $ 2,185,523 Total assets held for sale ​ $ 2,185,523 ​ ​ ​ ​ Liabilities held for sale ​ Right of Use Liability ​ $ 1,129,249 Total liabilities held for sale ​ $ 1,129,249 ​ ​ ​ ​ 4. Fair Value Measurements The Company complies with ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability. The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2022, and December 31, 2021, indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quoted prices in ​ Other ​ Significant ​ ​ ​ ​ ​ active markets for ​ observable ​ unobservable ​ ​ ​ ​ ​ identical assets ​ inputs ​ inputs ​ ​ ​ ​ (Level 1) (Level 2) (Level 3) Total March 31, 2022 ​ ​ ​ ​ Cash ​ $ 8,601,217 ​ $ — ​ $ — ​ $ 8,601,217 Total assets ​ $ 8,601,217 ​ $ — ​ $ — ​ $ 8,601,217 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash ​ 15,155,279 ​ — ​ — ​ 15,155,279 Total assets ​ $ 15,155,279 ​ $ — ​ $ — ​ $ 15,155,279 ​ Items measured at fair value on a non-recurring basis The Company’s non-financial assets, such as prepayments and other current assets, long lived assets, including property and equipment, goodwill, and intangible assets, are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized. In connection with an evaluation of such non-financial assets during the three months ended March 31, 2022, the carrying values of property and equipment were concluded to exceed their fair values. As a result, the Company recorded impairment charges that incorporates fair value measurements based on Level 3 inputs (Note 8). The carrying value of the Company’s accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature, and the carrying value of notes receivable and long-term debt approximates fair value as they bear a market rate of interest. ​ ​ 11 5. Accounts Receivable Trade receivables are comprised of the following items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Trade receivable ​ $ 1,597,328 ​ $ 1,251,699 Tax withholding receivable ​ ​ 3,208,270 ​ ​ 3,208,270 Other ​ 1,461,749 ​ 42,500 Total ​ $ 6,267,347 ​ $ 4,502,469 ​ Included in the trade receivables, net balance at March 31, 2022 and December 31, 2021, is an allowance for doubtful accounts of $ 125,564 and $ 215,606 , respectively. Included in the tax withholding receivable, net balance at March 31, 2022 and December 31, 2021 is an allowance for doubtful accounts of $ 356,474 . Other receivables, as of March 31, 2022, primarily consists of interest paid in connection with the Credit Facility (Note 13), but subject to reimbursement by Verano per the terms of the Arrangement Agreement. ​ ​ 6. Inventory Inventory is comprised of the following items: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Work-in-progress ​ $ 12,806,429 ​ $ 15,167,522 Finished goods ​ 4,661,524 ​ 4,580,158 Other ​ 791,376 ​ 674,381 Total ​ $ 18,259,329 ​ $ 20,422,061 ​ Inventory is written down for any obsolescence, spoilage and excess inventory or when the net realizable value of inventory is less than the carrying value. Inventory valuation adjustments included in cost of sales on the statements of net loss and comprehensive loss is comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ 2022 2021 Work-in-progress ​ $ 3,280,291 ​ $ — Finished goods ​ 151,248 ​ 68,000 Other ​ 35,378 ​ — Total ​ $ 3,466,917 ​ $ 68,000 ​ ​ ​ 7. Prepayments and other current assets Prepayments and other current assets are comprised of the following items: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Prepaid Insurance ​ $ 2,488,991 ​ $ 838,612 Other Prepaid Expenses ​ 948,133 ​ 721,501 Total ​ $ 3,437,124 ​ $ 1,560,113 ​ ​ ​ ​ 12 8. Property and Equipment, Net Property and equipment, net consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Land ​ $ 1,366,650 ​ $ 1,366,650 Buildings and leasehold improvements ​ 12,963,147 ​ 15,529,928 Furniture and equipment ​ 7,831,327 ​ 7,962,363 Software ​ 221,540 ​ 221,540 Vehicles ​ 513,135 ​ 513,135 Construction-in-progress ​ 8,053,370 ​ 10,510,166 Right of use asset under finance lease ​ 70,048,971 ​ 71,078,655 ​ ​ 100,998,140 ​ 107,182,437 Less: accumulated depreciation ​ ( 7,691,140 ) ​ ( 7,693,878 ) Total ​ $ 93,307,000 ​ $ 99,488,559 ​ For the three months ended March 31, 2022 and 2021, total depreciation on property and equipment was $ 856,289 and $ 679,920 , respectively. For the three months ended March 31, 2022 and 2021, accumulated amortization of the right of use asset under finance lease amounted to $ 2,736,162 and $ 1,802,458 , respectively. The right of use asset under finance lease of $ 70,713,084 consists of leased processing and cultivation premises. The Company capitalized into inventory $ 700,193 and $ 508,359 relating to depreciation associated with manufacturing equipment and production facilities for the three months ended March 31, 2022 and 2021, respectively. The capitalized depreciation costs associated are added to inventory and expensed through Cost of Sales Product Cost on the unaudited condensed consolidated statements of net loss and comprehensive loss. ​ As of March 31, 2022, in conjunction with the Company’s held for sale assessment, the Company evaluated whether property and equipment showed any indicators of impairment, and it was determined that the recoverable amount of certain net assets were below book value. As a result, the Company recorded an impairment charge of $ 5,313,176 (2021 - $ 0 ) on property and equipment, net. ​ ​ 9. Leases Components of lease expenses are listed below: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ 2022 ​ 2021 Finance lease cost ​ ​ ​ ​ ​ Amortization of ROU assets ​ $ 274,800 ​ $ 236,412 Interest on lease liabilities ​ 2,627,559 ​ 937,122 Operating lease expense ​ 647,217 ​ 681,673 Total lease expenses ​ $ 3,549,576 ​ $ 1,855,207 ​ 13 Future minimum lease payments (principal and interest) on the leases are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Leases Finance Leases ​ ​ ​ March 31, 2022 March 31, 2022 Total 2022 ​ $ 1,900,915 ​ $ 5,796,195 ​ $ 7,697,110 2023 ​ 2,470,614 ​ 10,492,227 ​ 12,962,841 2024 ​ 2,194,068 ​ 10,597,822 ​ 12,791,890 2025 ​ 1,979,678 ​ 10,683,979 ​ 12,663,657 2026 ​ 1,557,311 ​ 11,001,044 ​ 12,558,355 Thereafter ​ 2,625,449 ​ 206,379,022 ​ 209,004,471 Total minimum lease payments ​ $ 12,728,035 ​ $ 254,950,289 ​ $ 267,678,324 Less discount to net present value ​ ​ ( 4,300,836 ) ​ ( 180,627,862 ) ​ ( 184,928,698 ) Less liabilities held for sale ​ ​ — ​ ​ ( 1,129,249 ) ​ ​ ( 1,129,249 ) Present value of lease liability ​ $ 8,427,199 ​ $ 73,193,178 ​ $ 81,620,377 ​ The Company has entered into various lease agreements for the use of buildings used in production and retail sales of cannabis products. Supplemental cash flow information related to leases: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ Lease principal payments ​ $ 464,214 ​ $ 332,137 Non-cash additions to ROU assets ​ — ​ 1,758,281 Amortization of operating leases ​ 323,090 ​ 340,853 ​ Other information about lease amounts recognized in the financial statements: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ 2022 2021 ​ Weighted-average remaining lease term (years) – operating leases ​ 5.42 6.31 ​ ​ Weighted-average remaining lease term (years) – finance leases ​ 19.25 18.70 ​ ​ Weighted-average discount rate – operating leases ​ 15.00 % 15.00 % ​ Weighted-average discount rate – finance leases ​ 15.29 % 23.13 % ​ ​ ​ ​ 10. Goodwill The following table shows the change in carrying amount of goodwill: ​ ​ ​ ​ ​ Goodwill - January 1, 2021 $ 3,132,491 Dispositions ​ ( 2,948,655 ) Goodwill - December 31, 2021 and March 31, 2022 ​ $ 183,836 ​ Goodwill is tested for impairment annually or more frequently if indicators of impairment exist or if a decision is made to dispose of business. The valuation date for the Company’s annual impairment testing is December 31. On this date the Company performed a Step 1 goodwill impairment analysis. No indicators of impairment exists as of March 31, 2022. ​ 14 11. Intangibles Intangible assets are comprised of the following items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Licenses Royalty Asset Total Balance December 31, 2020 ​ $ 8,341,143 ​ $ 68,276 $ 8,409,419 Additions ​ 10,190,458 ​ — 10,190,458 Divestitures ​ ( 5,492,890 ) ​ — ( 5,492,890 ) Amortization ​ ( 817,215 ) ​ — ( 817,215 ) Impairment ​ ​ ( 2,105,483 ) ​ ​ ​ ​ ​ ( 2,105,483 ) Balance, December 31, 2021 ​ $ 10,116,013 ​ $ 68,276 $ 10,184,289 Divestitures (Note 3) ​ — ​ ( 68,276 ) ( 68,276 ) Amortization ​ ( 172,267 ) ​ — ( 172,267 ) Balance, March 31, 2022 ​ $ 9,943,746 ​ $ — $ 9,943,746 ​ Amortization expense for intangibles was $ 172,267 and $ 206,443 during the three months ended March 31, 2022 and 2021, respectively. Amortization expense is recorded in operating expenses on the unaudited condensed consolidated statements of net loss and comprehensive loss. The Company estimates that amortization expense will be $ 689,066 per year for the next five fiscal years. ​ 12. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities are comprised of the following items: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Accounts payable – trade ​ $ 3,013,439 ​ $ 1,490,286 Accrued Expenses ​ 7,622,475 ​ 7,708,883 Taxes payable ​ 6,599,276 ​ 5,196,677 Contract liability ​ 450,334 ​ 409,627 Total accounts payable and accrued liabilities ​ $ 17,685,524 ​ $ 14,805,473 ​ ​ ​ 13. Long-Term Debt During the year ended December 31, 2017, the Company signed a promissory note payable in the amount of $ 1,010,000 . The note bears interest at a rate of 15 % per annum with interest payments required on a monthly basis. Effective November 13, 2019, the Company’s promissory note payable in the amount of $ 1,010,000 was modified to increase the amount payable to $ 1,110,000 and extend the maturity date to December 31, 2021 . On December 28, 2021, the Company’s promissory note payable in the amount of $ 1,110,000 was modified to extend the maturity date to December 31, 2023 , and the Company paid off $ 60,000 in principal. On March 25, 2021, the Company entered into a credit agreement for a senior secured delayed draw term loan with an aggregate principal amount of up to $ 46,000,000 (the “ Credit Facility ”), and executed a draw of $ 26,000,000 in principal. Net of fees and closing costs of $ 1,971,705 , the Company received $ 24,028,295 of the first tranche on March 25, 2021. Additionally, the Company incurred fees and closing costs of $ 1,083,422 which were paid in cash. 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 paid in kind interest payable monthly. The Credit Facility matures on March 31, 2024. ​ On March 25, 2021, in connection with closing the Credit Facility, Goodness Growth issued (a) five year warrants to the agent and each lender to purchase an aggregate of 2,803,984 subordinate voting shares at an exercise price of C$ 3.50 per share, and (b) a five year warrant to the broker to purchase 233,665 subordinate voting shares at an exercise price of C$ 3.50 per share. Each warrant provides customary anti-dilution provisions. The fair value of these warrants at the time of issuance was $ 5,395,759 which is treated as a deferred financing cost. 15 ​ On November 18, 2021, the Company and lenders amended the Credit Facility to provide for an additional loan of $ 4,200,000 with a cash interest rate of 15 % per annum and PIK interest of 2 % per annum and no warrants were issued in connection with this loan. Cash received net of $ 156,900 in financing costs was $ 4,043,100 . Obligations under the Credit Facility are secured by substantially all the assets of the Company. ​ On January 31, 2022, Goodness Growth and certain of its subsidiaries, as borrowers (collectively, “Borrowers”), entered into a Third Amendment to the Credit Facility (the “Third Amendment”) providing for additional delayed draw term loans of up to $ 55 million (the “Delayed Draw Loans”). Subject to certain conditions to be satisfied prior to the initial funding thereunder, Goodness Growth may borrow a portion of the $ 55 million for working capital and other general corporate purposes and may borrow the remainder for other specific purposes, including relating to its ongoing expansion in New York. The Delayed Draw Loans have a maturity date of April 30, 2023 with an option to extend another 12 months for an additional fee of $ 1,375,000 . The cash interest rate on the Delayed Draw Loans under the Third Amendment is equal to the U.S. prime rate plus 10.375 %, with a minimum required rate of 13.375 % per annum, in addition to paid-in-kind interest of 2.75 % per annum. Pursuant to the Arrangement Agreement, Verano will reimburse Goodness Growth for all interest expenses related to the Third Amendment in excess of 10 % per annum until the earlier of either the closing of the transaction under the Arrangement Agreement, or termination of the Arrangement Agreement. ​ On March 3, 2022, the Company drew $ 4,075,000 in principal debt from the Delayed Draw Loans. Proceeds received, net of deferred financing fees of $ 1,074,556 , were $ 3,000,444 . Additionally, the Company incurred $ 115,863 of third party legal fees related to the draw. The Company expects to be reimbursed by Verano for the $ 1,190,863 in deferred financing pursuant to the Arrangement Agreement. These fees are included in our other receivables balance (Note 5), and included as other income in the unaudited statement of loss and comprehensive loss for the three months ended March 31, 2022. ​ Unless otherwise specified, all deferred financing costs are treated as a contra-liability, to be netted against the outstanding loan balance and amortized over the remaining life of the loan. ​ On November 19, 2021, the Company signed a promissory note payable in the amount of $ 2,000,000 in connection with the acquisition of Charm City Medicus, LLC. The note bears an interest rate of 8 % per annum with interest payments due on the last day of each calendar quarter . The maturity date of the note is November 19, 2023 , and the note is secured by 25 % of the membership interests in Vireo Health of Charm City, LLC. The following table shows a summary of the Company’s long-term debt: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Beginning of year ​ $ 27,329,907 ​ $ 1,110,000 Proceeds ​ 4,075,000 ​ 30,200,000 Note payable issued in Charm City acquisition ​ ​ — ​ ​ 2,000,000 Deferred financing costs ​ ​ ( 1,190,419 ) ​ ​ ( 8,607,786 ) PIK interest ​ ​ 211,352 ​ ​ 564,151 Amortization of deferred financing costs ​ ​ 784,805 ​ ​ 2,123,542 Principal payments ​ ​ — ​ ​ ( 60,000 ) End of period ​ 31,210,645 ​ 27,329,907 Less: Current portion ​ — ​ — Total long-term debt ​ $ 31,210,645 ​ $ 27,329,907 ​ ​ ​ ​ ​ 16 14. Stockholders’ Equity Shares The Company’s certificate of incorporation authorized the Company to issue the following classes of shares with the following par value and voting rights as of March 31, 2022. The liquidation and dividend rights are identical among shares equally in the Company’s earnings and losses on an as converted basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ Par Value Authorized Voting Rights Subordinate Voting Share (“SVS”) — Unlimited 1 vote for each share Multiple Voting Share (“MVS”) — Unlimited 100 votes for each share Super Voting Share — Unlimited 1,000 votes for each share ​ ​ Subordinate Voting Shares Holders of Subordinate Voting Shares are entitled to one vote in respect of each Subordinate Voting Share held. Multiple Voting Shares Holders of Multiple Voting Shares are entitled to one hundred votes for each Multiple Voting Share held. Multiple Voting Shares each have the restricted right to convert to one hundred Subordinate Voting Shares subject to adjustments for certain customary corporate changes. Super Voting Shares Holders of Super Voting Shares are entitled to one thousand votes per Super Voting Share. Each Super Voting share is convertible into one Multiple Voting Share. Shares Issued During the three months ended March 31, 2022, 28,134 Multiple Voting Shares were redeemed for 2,813,400 Subordinate Voting Shares. During the three months ended March 31, 2021, 94,177 Multiple Voting Shares were redeemed for 9,417,700 Subordinate Voting Shares. During the three months ended March 31, 2021, employee stock options were redeemed for 3,130,343 Subordinate Voting Shares. Proceeds from these transactions were $ 966,156 . On March 31, 2021, as part of a settlement and release of claims regarding a dispute over certain post-termination terms under his employment agreement, the Company issued 7,110,481 subordinate voting shares to its former Executive Chairman, Bruce Linton, upon a cashless exercise of 10 million warrants that had an exercise price of $ 1.02 per share and issued him 889,519 subordinate voting shares with a fair value of $ 1,441,183 pursuant to an exemption from registration under the Securities Act. The fair value of the 889,519 subordinate voting shares issued of $ 1,441,183 was recorded as stock-based compensation expense in the unaudited condensed consolidated statements of net loss and comprehensive loss for the three months ended March 31, 2021. The Company did not receive any proceeds in connection with the warrant exercise or issuance of shares. The shares issued pursuant to the warrant exercise are free of trading restrictions; the additional 889,519 shares are subject to a holding period expiring on August 1, 2021. He was previously issued 15,000,000 warrants under his employment agreement and as part of the settlement, he surrendered all right, title, and interest in the remaining 5,000,000 warrants for cancellation. ​ 17 15. Stock-Based Compensation Stock Options In January 2019, the Company adopted the 2019 Equity Incentive Plan under which the Company may grant incentive stock option, restricted shares, restricted share units, or other awards. Under the terms of the plan, a total of ten percent of the number of shares outstanding assuming conversion of all super voting shares and multiple voting shares to subordinate voting shares are permitted to be issued. The exercise price for incentive stock options issued under the plan will be set by the committee but will not be less 100 % of the fair market value of the Company’s shares on the date of grant. Incentive stock options have a maximum term of 10 years from the date of grant. The incentive stock options vest at the discretion of the Board. Options granted under the equity incentive plan were valued using the Black-Scholes option pricing model with the following weighted average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ 2022 2021 Risk-Free Interest Rate ​ 2.04 % N/A ​ Weighted Average Exercise Price $ 1.77 ​ N/A ​ Expected Life of Options (years) ​ 2.50 ​ N/A ​ Expected Annualized Volatility ​ 55.00 % N/A ​ Expected Forfeiture Rate ​ N/A N/A ​ Expected Dividend Yield ​ N/A N/A ​ ​ ​ Stock option activity for the three months ended March 31, 2022 and for the year ended December 31, 2021 is presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Weighted Avg. ​ ​ Number of Shares ​ Exercise Price ​ Remaining Life Balance, December 31, 2020 26,924,858 ​ $ 0.47 7.00 Forfeitures ( 106,934 ) ​ 1.23 — Exercised ​ ( 4,289,392 ) ​ 0.28 — Granted 697,806 ​ 2.32 — Balance, December 31, 2021 23,226,338 ​ $ 0.56 6.02 Forfeitures ( 189,403 ) ​ 0.31 — Exercised — ​ — — Granted 3,224,119 ​ 1.77 — Options Outstanding at March 31, 2022 26,261,054 ​ $ 0.71 6.29 ​ ​ ​ ​ ​ ​ ​ ​ Options Exercisable at March 31, 2022 18,257,693 ​ $ 0.41 5.09 ​ ​ During the three months ended March 31, 2022 and 2021, the Company recognized $ 591,600 and $ 686,755 in stock-based compensation expense relating to stock options, respectively. As of March 31, 2022, the total unrecognized compensation costs related to unvested stock options awards granted was $ 3,913,312 . In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 2.3 years. The total intrinsic value of stock options outstanding and exercisable as of March 31, 2022, was $ 36,075,647 and $ 30,434,024 , respectively. The Company does not estimate forfeiture rates when calculating compensation expense. The Company records forfeitures as they occur. Warrants Subordinate Voting Share (SVS) warrants entitle the holder to purchase one subordinate voting share of the Company. Multiple Voting Share (MVS) warrants entitle the holder to purchase one multiple voting share of the Company. 18 Warrants issued were valued using the Black-Scholes option pricing model with the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ March 31, ​ SVS Warrants Denominated in C$ 2022 2021 ​ Risk-Free Interest Rate ​ N/A ​ 0.92 % Expected Life of Options (years) ​ N/A ​ 4.99 Expected Annualized Volatility ​ N/A ​ 100.00 % Expected Forfeiture Rate ​ N/A N/A ​ Expected Dividend Yield ​ N/A N/A ​ ​ ​ ​ A summary of the warrants outstanding is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted Average Weighted Average SVS Warrants ​ Warrants ​ Exercise Price ​ Remaining Life Warrants outstanding at December 31, 2020 15,763,111 ​ $ 2.39 0.42 Exercised ( 7,110,481 ) ​ 1.02 0.19 Expired ( 763,111 ) ​ 4.25 — Forfeited ( 7,889,519 ) ​ ​ 3.44 0.19 Warrants outstanding at December 31, 2021 and March 31, 2022 ​ — ​ $ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ Warrants exercisable at December 31, 2021 and March 31, 2022 — ​ $ — — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted Average Weighted Average SVS Warrants Denominated in C$ ​ Warrants ​ Exercise Price ​ Remaining Life Warrants outstanding at December 31, 2020 — ​ $ — — Granted 3,037,649 ​ 3.50 — Warrants outstanding at December 31, 2021 3,037,649 ​ $ 3.50 4.23 Granted ​ — ​ ​ — ​ — Warrants outstanding at March 31, 2022 ​ 3,037,649 ​ $ 3.50 ​ 3.98 ​ ​ ​ ​ ​ ​ ​ ​ Warrants exercisable at March 31, 2022 3,037,649 ​ $ 3.50 3.98 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted Average Weighted Average MVS Warrants ​ Warrants ​ Exercise Price ​ Remaining Life Warrants outstanding at December 31, 2020 13,583 ​ $ 194.66 1.64 Issued — ​ — — Warrants outstanding at December 31, 2021 13,583 ​ $ 194.66 0.64 Forfeitures ​ ( 1,695 ) ​ ​ 297.50 ​ — Issued — ​ — — Warrants outstanding at March 31, 2022 11,888 ​ $ 180.00 0.45 ​ ​ ​ ​ ​ ​ ​ ​ Warrants exercisable at March 31, 2022 11,888 ​ $ 180.00 0.45 ​ ​ During the three months ended March 31, 2022 and 2021, $ 0 in stock-based compensation expense was recorded in connection with the SVS compensation warrants and $ 0 in stock-based compensation was recorded in connection with the MVS warrants. ​ RSUs ​ The expense associated with RSUs is based on closing share price of the Company’s common stock on the business day immediately preceding the grant date, adjusted for the absence of future dividends and is amortized on a straight-line basis over the periods during which the restrictions lapse. The Company currently has RSUs that vest over a three year period. The awards are generally subject to forfeiture in the event of termination of employment. During the three months ended March 31, 2022 the Company recognized $ 51,906 in stock-based compensation expense related to RSUs. 19 ​ ​ A summary of RSUs is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Grant Date ​ ​ Number of Shares ​ Fair Value Balance, December 31, 2021 — ​ $ — Granted 1,094,200 ​ 1.77 Balance, March 31, 2022 1,094,200 ​ $ 1.77 ​ ​ ​ 16. Commitments and Contingencies Legal proceedings On February 25, 2019, Dr. Mark Schneyer (“ Schneyer ”) filed a lawsuit in Minnesota District Court, Fourth District (the “ Court ”), on his own behalf and, derivatively, on behalf of Dorchester Capital, LLC, naming Vireo U.S., Dorchester Management, LLC (“ Dorchester Management ”), and Dorchester Capital, LLC (“ Capital ”), as defendants. The essence of the claims made by Schneyer is Vireo U.S. paid an inadequate price for MaryMed, LLC (“ MaryMed ”), which it purchased it from Capital in 2018, and that the consideration given – shares of preferred stock in Vireo U.S. – was distributed inappropriately by Capital at the direction of Dorchester Management (the managing member of Capital). Schneyer, who is a Class B member of Capital, is seeking unspecified damages in excess of $ 50,000 and other relief. Dorchester Management, LLC is an affiliated entity to Vireo U.S. and was previously used as a management company over Dorchester Capital, LLC. It no longer has active operations following Vireo Health, Inc.’s acquisition of MaryMed, LLC in 2017. It is owned and controlled by Kyle E. Kingsley and Amber H. Shimpa, executive officers and directors of Vireo U.S. Simultaneously with the complaint, Schneyer filed a motion seeking a temporary restraining order (“ TRO ”) to prevent the “further transfer” of MaryMed which would, Schneyer claimed, occur if Vireo U.S.’s RTO transactions were allowed to occur. The Court held a hearing on the motion for TRO on March 5, 2019 and denied the motion on the same day. Weeks prior to commencement of the litigation, Dorchester Management had appointed a special litigation committee (“ SLC ”) on behalf of Capital to investigate the consideration provided by Vireo U.S. for the purchase of MaryMed and assess any potential claims Capital may have as a result of the transaction. The SLC, a retired judge who engaged another retired judge as legal counsel to the SLC, was appointed in accordance with Minnesota law, issued a report on May 1, 2021, recommending, among other things, that certain claims be permitted to proceed (the “ Remaining Derivative Claims ”) and other claims not be permitted to proceed by the Court (the “ Rejected Derivative Claims ”). On July 7, 2021, Schneyer filed a Second Amended Complaint asserting direct claims on behalf of himself and the Remaining Derivative Claims on behalf of Capital and some Rejected Derivative Claims on behalf of Capital. Under Delaware law, Capital has a right to control the litigation of the Remaining Derivative Claims, the Rejected Derivative Claims, and any other derivative allegations that may be asserted on behalf of Capital. On August 17, 2021, Management exercised this right for Capital and appointed a second independent special litigation committee (the “ Second SLC ”), a partner at an international law firm, to manage the litigation of the claims raised in Schneyer’s Second Amended Complaint. On August 31, 2021, Capital filed a complaint at the Second SLC’s direction alleging the Remaining Derivative Claims and the Rejected Derivative Claims. Schneyer opposed the appointment of the Second SLC and the Court will rule on whether the Second SLC can pursue Second Amended Complaint. ​ On December 9, 2021, the Court dismissed Schneyer’s claim for rescissory damages and the Remaining Derivative Claim alleging fraud. The Court also ruled that the Remaining Derivative Claims should be pursued by the Second SLC. Finally, the Court also denied Schneyer’s request to seek punitive damages. ​ On February 22, 2022, the Minnesota Court of Appeals denied the immediate review of the December 9, 2021 order. Following this denial, the litigation will proceed with Schneyer’s three contract claims and a direct fraud claim 20 against Management and Vireo U.S., as well as the Remaining Derivative Claims brought by Capital. Vireo U.S. filed a motion to dismiss the Remaining Derivative Claims brought by Capital that remains pending before the Court. Vireo U.S. believes that Schneyer’s claims lack merit and expects to be vindicated in the SLC process or, in the alternative, prevail in the litigation, if and when it proceeds. However, should Vireo U.S. not ultimately prevail, it is not possible to estimate the amount or range of potential loss, if any. Lease commitments The Company leases various facilities, under non-cancelable finance and operating leases, which expire at various dates through June 2085. ​ 17. General and Administrative Expenses General and administrative expenses are comprised of the following items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2022 2021 Salaries and benefits ​ $ 4,312,246 ​ $ 3,536,774 Professional fees ​ 1,879,751 ​ 1,115,691 Insurance expenses ​ 779,997 ​ 598,164 Marketing ​ ​ 358,760 ​ ​ 562,151 Other expenses ​ 1,947,215 ​ 2,223,211 Total ​ $ 9,277,969 ​ $ 8,035,991 ​ ​ ​ 18. Supplemental Cash Flow Information (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ 2022 2021 Cash paid for interest ​ $ 3,059,277 ​ $ 1,350,659 Cash paid for income taxes ​ — ​ — Change in construction accrued expenses ​ — ​ 290,054 Non-cash investing ​ ​ Acquisition of Nevada through issuance of SVS ​ — ​ 1,385,239 Acquisition of Nevada through restricted cash and deferred acquisition costs ​ — ​ 1,620,636 (1) For supplemental cash flow information related to leases, refer to Note 9 . ​ ​ 19. Financial Instruments Credit risk Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations. The Company’s credit risk is primarily attributable to cash, accounts receivable, and notes receivable. A small portion of cash is held on hand, from which management believes the risk of loss is remote. Receivables relate primarily to wholesale sales. The Company does not have significant credit risk with respect to customers. The Company’s maximum credit risk exposure is equivalent to the carrying value of these instruments. The Company has been granted licenses pursuant to the laws of the states of Arizona, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, and Puerto Rico with respect to cultivating, processing, and/or distributing marijuana. Presently, this industry is illegal under United States federal law. The Company has adhered, and intends to continue to adhere, strictly to the applicable state statutes in its operations. 21 Liquidity risk The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As of March 31, 2022, the Company’s financial liabilities consist of accounts payable and accrued liabilities, and debt. The Company manages liquidity risk by reviewing its capital requirements on an ongoing basis. Historically, the Company’s main source of funding has been additional funding from shareholders and debt financing. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity or debt financing. Legal Risk Goodness Growth operates in the United States. The U.S. federal government regulates drugs through the Controlled Substances Act (21 U.S.C. § 811), which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the U.S., and a lack of accepted safety for the use of the drug under medical supervision. The U.S. Food and Drug Administration has not approved marijuana as a safe and effective drug for any indication. In the U.S. marijuana is largely regulated at the state level. State laws regulating cannabis are in direct conflict with the federal Controlled Substances Act, which makes cannabis use and possession federally illegal. Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates. Interest rate risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company currently does not carry variable interest-bearing debt. Management believes that the Company is not exposed to significant interest rate risk. ​ 20. Related Party Transactions As of March 31, 2022, and December 31, 2021, there were $ 10,000 and $ 98,750 due to related parties, respectively. For the three months ended March 31, 2022, and 2021, the Company paid a related party (Bengal Impact Partners, of which a member of the Company’s Board of Directors is a managing partner) $ 20,000 and $ 0 , respectively, for ongoing corporate advisory services. Certain directors and officers of the Company (Kyle Kingsley, Amber Shimpa, and Stephen Dahmer) owned OMS, which was sold on March 31, 2021 (Note 3). None of the proceeds received from this transaction were paid to the aforementioned directors and officers, rather, they were owed and paid to the Company. ​ 21. Subsequent Events On April 1, 2022, the Company drew an additional $ 8,000,000 in principal debt from the Delayed Draw Loans. ​ ​ 22 ​