What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-31 compared with 2022-03-15 · 135 added, 208 removed, 409 unchanged (46% of the section changed)

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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.

Goodness Growth is a cannabis company whose mission is to provide safe access, quality products and value to its customers while supporting its local communities through active participation and restorative justice programs.

The Company is evolving with the industry and is in the midst of a transformation to being significantly more customer-centric across its operations, which include cultivation, manufacturing, wholesale and retail business lines.

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.

As of March 27, 2023, Goodness Growth is licensed in seven states and territories, consisting of Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, and Puerto Rico.

As of March 27, 2023, 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 Maryland, Minnesota, and New York.

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

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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.

(“Verano”), pursuant to which Verano was to 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 were to 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 were to 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 Ratio.

In accordance with the terms of Goodness Growth’s outstanding warrants, the terms of each Goodness Growth warrant were to 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.

On October 13, 2022, Goodness Growth received a notice of purported termination of the Arrangement Agreement (the “ Notice ”) from Verano.

The Notice asserted certain breaches of the Arrangement Agreement, including claims the Company’s public filings and communications with respect to its business and ongoing operations were misleading and that the Company breached its representations to Verano under the Arrangement Agreement.

Verano also claimed, as a result of such breaches, it is entitled to payment of the $14,875,000 termination fee and its transaction expenses.

Goodness Growth denies all of Verano’s allegations and affirmatively asserts that it has complied with its obligations under the Arrangement Agreement, and with its disclosure obligations under US and Canadian law, in all material respects at all times.

Goodness Growth believes that Verano has no factual or legal basis to justify or support its purported grounds for termination of the Arrangement Agreement.

On October 21, 2022, Goodness Growth commenced an action in the Supreme Court of British Columbia against Verano arising out of Verano’s repudiation of the Arrangement Agreement, which Goodness Growth believes was wrongful.

Goodness Growth is seeking damages, costs and interest, based on Verano's breach of contract and of its duty of good faith and honest performance.

On November 14, 2022, Verano filed counterclaims against the Company for the termination fee and transaction expenses described above.

Due to uncertainties inherent in litigation, it is not possible for Goodness Growth to predict the timing or final outcome of the legal proceedings against Verano or to determine the amount of damages, if any, that may be awarded.

Description of the Business

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.

Goodness Growth is a United States-based multi-state cannabis company with significant operations in 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.

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We currently serve thousands of customers each month.

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.

New Mexico sales of adult-use products began on April 1, 2022.

In 2021, New York adopted legislation allowing adult-use cannabis and sales began in January, 2023.

Maryland voters approved recreational marijuana legalization in the fourth quarter of 2022, and recreational sales are expected to begin in the next eighteen months.

Minnesota has the potential to enact adult-use legalization in the next 18 months;

as of March 27, 2023, bills are pending in both houses of the Minnesota legislature that, if reconciled to a common text, passed by both houses and signed into law by the Minnesota Governor, would establish an adult-use program in Minnesota.

As of March 27, 2023, four of our 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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Opened or Acquired

Amado, Arizona

Fully operational cultivation facility (1)

Acquired in 2019

Hurlock, Maryland

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Opened in 2016

Barceloneta, Puerto Rico

Cultivation and processing facility lease executed;

construction completed;

awaiting final approval

Pending approval

Vega Baja, Puerto Rico

Cultivation land lease executed;

pre-development

Pre-development

(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.

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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.

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 $61 billion by 2026, including U.S.

sales of $46 billion in 2026.

According to market research projections by cannabis researcher Brightfield Group, U.S.

sales of legal cannabis are expected to reach over $31.8 billion in 2023 and $50.7 billion in 2028.

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

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To date, in the United States, medical cannabis has been legalized in 39 states and the District of Columbia, while 21 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.

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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.

We have rights to operate cultivation facilities in six 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.

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

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

We believe that production at scale is critical to drive down unit cost.

Product Availability :

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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.

Our focuses on quality, potency, strain diversity and production at scale are important because we believe 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 and the cultivation-only facility we operate in Arizona, we operate combined 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 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.

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 complaints from patients and adult-use customers.

We operate the following cultivation and production facilities as of the close of business on March 27, 2023:

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 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.

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

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.

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

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

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

We have a large number of customers;

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 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.

Currently operate approximately 15,600 square feet of cultivation and production and have four operational retail dispensaries.

We have a large number of customers;

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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.

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

Currently operate four retail dispensaries and one cultivation and production facility of approximately 60,000 square feet.

The availability of cannabis products from these suppliers is consistent.

Currently operate one cultivation and production facility of approximately 60,000 square feet.

Additional 120,000 square feet of cultivation and productions space is under construction and intended primarily to support the adult-use market, when and if we are licensed to sell into that market.

We purchase a modest portion of our manufactured products inventory from several of the nine other registered organizations.

Also operate a legal home-delivery business in New York City and certain surrounding areas.

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 substantial investments in retail dispensaries and cultivation by certain of New York’s nine competitive registered organizations (vertically-integrated medical cannabis companies).

We believe that new product introductions, the expansion of wholesale revenue streams and the potential relocation of some of our retail dispensaries to superior sites will contribute to improving profit margins in the future.

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, by substantial investments in retail dispensaries and cultivation by certain of New York’s nine competitive registered organizations (vertically-integrated medical cannabis companies), and by the delayed rollout of the state’s adult-use cannabis program and resultant proliferation of illicit retail cannabis distribution operations in the state.

We believe that new product introductions, the expansion of wholesale revenue streams, our potential participation in the adult-use market, and the potential relocation of some of our retail dispensaries to superior sites will contribute to improving profit margins in the future.

We also anticipate additional growth of our home delivery service.

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balms and topical bars.

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

We have wholesale operations in 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.

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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;

● Vireo Selects™ brand distillate vaporizer pens

● 1937™ brand distillate vaporizer pens and cartridges, flower and trim, and dabbable concentrates (e.g., Hash, Rosin, Temple Balls);

● LiteBud™ pre-roll and flower products;

● Boundary Waters™ pre-roll products;

● Hi-Color™ edibles;

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Principal Products

1937 Pre-Pack Flower;

Bulk Whole Plant Strip;

Bulk Manicured Whole Plant Strip;

1937 Temple Balls;

Kings and Queens™ concentrates;

Elephant Head Farm flower products

1937 Vape Cartridges;

Vireo Spectrum Vape Cartridges;

Vireo Spectrum Syringes/Bulk Oil;

Vireo Spectrum Oral Solution;

Vireo Spectrum Oral Spray;

Vireo Spectrum Balm;

Vireo Spectrum Tablet;

Vireo Selects Vape Cartridges;

1937 Concentrates;

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Kings and Queens™ concentrates;

Vireo Spectrum Vape Cartridges;

Vireo Spectrum Capsules;

Small A$$ Buds bulk flower

Vireo Selects Vape Cartidges, Hi-Color™ edibles, Vireo Spectrum Flower and Pre-Rolls, Boundary Waters Pre-Rolls, Vireo Spectrum Capsules;

Vireo Spectrum Tincture;

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Vireo Spectrum Oral Spray;

Sinergi Oral Spray;

Vireo Spectrum Syringe/Bulk Oil;

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Vireo Spectrum Topical Bar

Vireo Spectrum Vape Cartridges;

Vireo Spectrum Syringes/Bulk Oil;

Red Barn Growers Flower

Vireo Selects Vape Cartridges, Vireo Spectrum Vape Cartridges;

Hi-Color™ edibles, Vireo Spectrum Syringes/Bulk Oil;

Vireo Spectrum Softgel;

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Vireo Spectrum Balm;

Vireo Spectrum Ground Metered Flower

Vireo Spectrum Flower;

Vireo Spectrum Pre-Rolls

Retail Strategy

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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;

continuing growth and expansion in the Minnesota market through flower offerings and edibles;

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;

improving margins in the adult-use New Mexico market, principally through reducing costs;

and increasing wholesale sales in our core markets.

Employees and Human Capital Resources

As of March 1, 2023, we had 519 employees, 409 of whom were full time employees.

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Agreement Expiration

March 31, 2022

October 31, 2024

November 21, 2024

New York (non-drivers)

July 31, 2022

October 31, 2023

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 ”).

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

Our human capital resources objectives include identifying, recruiting, retaining, incenting and integrating our existing and additional employees into our collaborative, results-focused culture.

Our compensation program is designed to attract, motivate and retain highly qualified executives and employees.

We are committed to a culture that values diversity, mutual respect, equity and collaboration that helps achieve our enterprise goals.

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

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

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

We also engaged 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 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.

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

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 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.

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

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.

We face competition from other companies that have greater resources, enhanced access to public equity and debt markets, superior cultivation and manufacturing capabilities, lower operating costs, better-located retail facilities, 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.

Aside from current direct competition, other operators that are sufficiently capitalized to enter the Company’s markets through new licensure or 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.

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

Regulation of Cannabis in the United States Federally

We currently directly derives a substantial portion of our revenues from the cannabis industry in certain U.S.

states, which industry is illegal under U.S.

As of December 31, 2022, the Company is directly involved (through licensed subsidiaries) in both the medical and adult-use cannabis industry in the states of New York, Minnesota, Maryland, and New Mexico, as permitted within such states under applicable state law.

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

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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.”

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

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

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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.

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;

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

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

If the Department of Justice policy were to aggressively pursue debt or equity owners of cannabis-related business and U.S.

Attorneys followed such Department of Justice policies by pursuing prosecutions, then the Company could face, (i) seizure of its cash and other assets used to support or derived from its cannabis subsidiaries and (ii) the arrest of its employees, directors, officers, managers and investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the Controlled Substances Act by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors and/or retailers of cannabis.

Additionally, as has been affirmed by U.S.

Customs and Border Protection, employees, directors, officers, managers and investors of the Company who are not U.S.

citizens face the risk of being barred from entry into the U.S., for life.

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.

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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.

In March 2017, then-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 ”).

Sessions issued a 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.

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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.

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

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:

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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.

Rohrabacher-Farr 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.

Rohrabacher-Farr has been renewed effective through September 30, 2023.

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

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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.

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.

Her lawsuit was rejected in 2012.

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;

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.

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

Arizona state licenses are renewed biennially.

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, 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.

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.

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.

Maryland Regulatory Landscape

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

In November 2022, Maryland voters approved recreational marijuana legalization via ballot initiative.

Under the initiative, listed as Question 4 on the ballot, adults 21 and older in Maryland will be allowed to possess up to 1.5 ounces of marijuana and grow two plants out of the public view beginning July 1, 2023.

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 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 a production facility of 30,000 square feet 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.

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.

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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.

We believe that our medical and scientific background helped Goodness Growth develop a competitive advantage in the marketplace.

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 standing.

Maryland licenses are valid for 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.

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.

The State of Maryland uses Marijuana Enforcement Tracking Regulation and Compliance system (METRC) as the state’s computerized track and trace (“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.

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

Minnesota Regulatory Landscape

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

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 facilities.

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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.

In 2022, edibles and dried cannabis flower for smoking were added to the medical program in Minnesota.

On July 1, 2022, Minnesota Statutes s.

151.72 went into effect, which permits the sale, to anyone age 21 or older in the state, of edible products derived from hemp and containing no more than 5mg of THC per serving and 50mg per package.

On January 5, 2023, H.F.

100 ”) was introduced into the Minnesota House of Representatives.

100, if passed, reconciled with a companion bill in the Minnesota senate, and signed by the Governor, would create an adult-use cannabis program in the State of Minnesota.

The probability and timing of the enactment of an adult-use cannabis program, as well as the Company’s ability to participate in any such program, remain uncertain as of the date of filing of this Annual Report on Form 10-K.

Licenses and Permits in Minnesota

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

Our license in Minnesota was awarded in 2015 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.

We believe that our medical and scientific expertise helped us develop a competitive advantage in the marketplace.

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 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.

Recent changes to the state’s qualifying conditions for medical cannabis patients have contributed to increases in patient enrollment.

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 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.

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

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.

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, and subject to the possible effect of the enactment of H.F.

100 or any other adult-use cannabis legislation in the state, The Company expects 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 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.

The State of Minnesota 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 push data to the state to meet all reporting requirements.

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

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

New Mexico Regulatory Landscape

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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.

Currently, there are 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.

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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.

The Cannabis Regulation Act also created the Cannabis Control Division (“ NMCCD ”) under the New Mexico Regulation and Licensing Department, which now oversees the NMMCP.

The NMMCP was previously subject to the regulatory authority of NMDOH.

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

Licenses in New Mexico

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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.

The OCM has begun to issue licenses and is currently promulgating rules and regulations outlining how and when our business can participate in the adult-use cannabis market.

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.

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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.

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

In addition, we have under construction, on an adjacent parcel to the existing facility, approximately 110,000 square feet of incremental cultivation and processing facility housed inside a building exceeding 300,000 square feet.

New York Licenses and Regulations

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.

In New York, we were one of the original five registered organizations, placing second in the initial selection process, and are currently one of ten registered organizations (vertically integrated medical cannabis licensees) in the state.

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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.

An application to renew 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

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.

Leaf Logix is used as state’s point of sale T&T system.

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

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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.

The Company is 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.

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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.

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

In addition to weekly inventory 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.

We also verify adherence to standard operating procedures by regularly conducting internal inspections and ensure 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.

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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