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Set forth below is a summary of the principal risks we face:
−Removed: ● There are various risks associated with the proposed arrangement with Verano that could impact our business operations, financial results, and share price, including the failure to complete or delays in completing the arrangement, termination of the arrangement, payment of termination amounts in certain circumstances, and the fixed nature of the consideration.
● Marijuana remains illegal under U.S.
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state and local regulation of cannabis is uncertain and changing.
−Removed: ● State regulatory agencies may require us to post bonds or significant fees.
+Added: ● State regulatory agencies may require us to post bonds or pay significant fees.
● We may be subject to heightened scrutiny by U.S.
and Canadian authorities, which could ultimately lead to the market for Subordinate Voting Shares becoming highly illiquid and our shareholders having no ability effect trades in Subordinate Voting Shares in Canada.
+Added: ● We are involved in litigation with Verano, the outcome of which is uncertain.
● We may face state limitations on ownership of cannabis licenses.
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● As a cannabis business, we are subject to unfavorable tax treatment under the Code.
−Removed: ● If our operations are found to be in violation of applicable money laundering legislation and our revenues are viewed as proceeds of crime, we may be unable to effect distributions or repatriate funds to Canada.
+Added: ● We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to its ability to continue as a going concern in their audit report for the years ended December 31, 2022.
● We incurred net losses in fiscal years 2022, 2021, and 2020, with net cash used in operating activities, and cannot provide assurance as to when or if we will become profitable and generate cash in our operating activities.
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● We are a holding company, and our earnings are dependent on the earnings and distributions of our subsidiaries.
−Removed: ● Our subsidiaries may not be able to obtain necessary permits and authorizations.
● Disparate state-by-state regulatory landscapes and the constraints related to holding cannabis licenses in various states results in operational and legal structures for realizing the benefit from cannabis licenses that could result in materially detrimental consequences to us.
−Removed: ● The success of our business depends, in part, on our ability to successfully integrate recently acquired businesses and to retain key employees of acquired businesses.
−Removed: ● We may invest in pre-revenue companies which may not be able to meet anticipated revenue targets in the future.
+Added: ● The success of our business depends, in part, on our ability to retain key employees.
● Our senior secured credit facility contains covenant restrictions that may limit our ability to operate our business.
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Accordingly, rising or volatile energy costs may adversely affect our business and our ability operate profitably.
−Removed: ● Our inability to attract and retain key personnel could materially, adversely affect our business.
+Added: ● We may be unable to attract and retain key personnel.
● Our sales are difficult to forecast due to limited and unreliable market data.
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● A return on our securities is not guaranteed.
−Removed: ● Our voting control is concentrated given 36.7% of our voting power is held by our Chief Executive Officer.
+Added: ● Our voting control is concentrated;
+Added: approximately 35.0% of our voting power is held by our Executive Chairman.
● Our capital structure and voting control may cause unpredictability.
−Removed: ● Additional issuances of Subordinate Voting Shares, or securities convertible into Subordinate Voting Shares, may result in dilution.
−Removed: ● Sales of substantial numbers of Subordinate Voting Shares may have an adverse effect on their market price.
−Removed: ● The market price for the Subordinate Voting Shares may be volatile.
+Added: ● Additional issuances of Subordinate Voting Shares, or securities convertible into Subordinate Voting Shares, may result in dilution and have an adverse effect on the market price of Subordinate Voting Shares.
+Added: ● The market price for the Subordinate Voting Shares has been and may be volatile.
● A decline in the price or trading volume of the Subordinate Voting Shares could affect our ability to raise further capital and adversely impact our ability to continue operations.
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● We do not intend to pay dividends on our Shares and, consequently, the ability of investors to achieve a return on their investment will depend entirely on appreciation in the price of our Subordinate Voting Shares.
−Removed: ● We are eligible to be treated as an “emerging growth company” as defined in the JOBS Act and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our financial statements not being comparable to those of some other public companies.
+Added: ● We are an “emerging growth company” as defined in the JOBS Act and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our financial statements not being comparable to those of some other public companies.
As a result of this and other reduced disclosure requirements applicable to emerging growth companies, the Subordinate Voting Shares may be less attractive to investors.
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● Although we do not intend to pay dividends on any of our Subordinate Voting Shares, any such dividends would be subject to Canadian and/or United States withholding tax.
−Removed: ● Transfers of Subordinate Voting Shares may be subject to United States estate and generation-skipping transfer taxes.
● Taxation of Non-U.S.
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Our shareholders should carefully evaluate the following risk factors associated with the Subordinate Voting Shares.
−Removed: Risks Related to the Arrangement
−Removed: Failure to complete, or delays in completing, the Arrangement could materially and adversely affect our results of operations and our stock price.
−Removed: The completion of the Arrangement is subject to a number of conditions precedent, some of which are outside Verano’s and our control, including receipt of shareholder and regulatory approvals.
−Removed: To complete the Arrangement, each of Goodness Growth and Verano must make certain filings with and obtain certain consents and approvals from various governmental and regulatory authorities, including the 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, approval under New York State regulatory requirements, and approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
−Removed: Goodness Growth and Verano have not yet obtained all of the regulatory approvals which are required to complete the Arrangement.
−Removed: The regulatory approval processes may take a lengthy period of time to complete, which could delay completion of the Arrangement.
−Removed: There can be no assurance as to the outcome of the approval processes, including the undertakings and conditions that may be required for approval, or whether the regulatory approvals will be obtained at all.
−Removed: In addition, the completion of the Arrangement by Goodness Growth and Verano is conditional on, among other things, no action or circumstance occurring that would result in a material adverse effect on Goodness Growth’s or Verano’s business operations, financial results, and share price.
−Removed: There can be no certainty, nor can Goodness Growth or Verano provide any assurance, that all conditions precedent to the Arrangement will be satisfied or waived, or, if satisfied or waived, when they will be satisfied or waived and, accordingly, the Arrangement may not be completed or may be delayed.
−Removed: If, for any reason, the Arrangement is not completed, its completion is materially delayed and/or the Arrangement Agreement is terminated, the market price of our Shares may be materially adversely affected.
−Removed: Our business, financial condition, or results of operations could also be subject to various material adverse consequences, including that we would remain liable for costs relating to the Arrangement.
−Removed: In addition, if the Arrangement is not completed for any reason, there are risks that the announcement of the Arrangement and the dedication of our resources to the completion thereof could have a negative impact on our relationships with our stakeholders and could have a material adverse effect on our current and future operations, financial condition, and prospects.
−Removed: In addition, we may incur significant transaction expenses in connection with the Arrangement, regardless of whether the Arrangement is completed.
−Removed: We are subject to customary non-solicitation provisions under the Arrangement Agreement.
−Removed: The Arrangement Agreement also restricts us from taking specified actions until the Arrangement is completed without the consent of Verano.
−Removed: These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement.
−Removed: There can be no assurance that the Arrangement will not be terminated by Goodness Growth or Verano in certain circumstances.
−Removed: Each of Goodness Growth and Verano has the right, in certain circumstances, in addition to termination rights relating to the failure to satisfy the conditions of closing, to terminate the Arrangement.
−Removed: Accordingly, there can be no certainty, nor can Goodness Growth provide any assurance that the Arrangement will not be terminated by either of Goodness Growth or Verano prior to the completion of the Arrangement.
−Removed: In addition, if the Arrangement is not completed by December 31, 2022 (subject to the right of either party to extend by up to an additional 120 days if the required regulatory approvals have not been obtained or the final order of the court in British Columbia has not been obtained as a result of the COVID-19 pandemic, in each case, by such date as further described in the Arrangement Agreement), either Goodness Growth or Verano may choose to terminate the Arrangement Agreement.
−Removed: The Arrangement Agreement also includes termination amounts payable if the Arrangement Agreement is terminated in certain circumstances.
−Removed: Additionally, any termination will result in the failure to realize the expected benefits of the Arrangement in respect of the operations and business of Goodness Growth and Verano.
−Removed: The termination amounts provided under the Arrangement Agreement may discourage other parties from attempting to acquire Goodness Growth or Verano.
−Removed: Under the Arrangement Agreement, Goodness Growth is required to pay to Verano a termination amount of $14,875,000 in the event the Arrangement Agreement is terminated in connection with entry into a superior proposal.
−Removed: This termination amount may discourage other parties from attempting to acquire our Shares or otherwise make an acquisition proposal to Goodness Growth, even if those parties, would otherwise be willing to offer greater value to our shareholders than that offered by Verano under the Arrangement.
−Removed: There can be no assurance that the value of the Verano Shares received by the Shareholders will equal or exceed the value of the Goodness Growth Shares prior to the Effective Date.
−Removed: The Exchange Ratio is fixed and will not increase or decrease due to fluctuations in the market price of Subordinate Voting Shares or Verano Shares.
−Removed: The market price of Subordinate Voting Shares or Verano Shares could each fluctuate significantly prior to the Effective Date in response to various factors and events, including, without limitation, as a result of the differences between Goodness Growth’s and Verano’s actual financial or operating results and those expected by investors and analysts, changes in analysts’ projections or recommendations, changes in general economic or market conditions, and broad market fluctuations.
−Removed: As a result of such fluctuations, historical market prices are not indicative of future market prices or the market value of the Verano Shares that holders of Goodness Growth Shares will receive on the Effective Date.
−Removed: There can be no assurance that the market value of the Verano Shares that the holders of Goodness Shares will receive on the Effective Date will equal or exceed the market value of the Goodness Growth Shares held by such Shareholders prior to the Effective Date.
−Removed: Similarly, there can be no assurance that the trading price of Verano Shares will not decline following the completion of the Arrangement.
−Removed: The foregoing risks or other risks arising in connection with the failure of the Arrangement, including the diversion of management attention from conducting the business of Goodness Growth, may have a material adverse effect on Goodness Growth’s business operations, financial results and share price.
+Added: Going Concern Risk
+Added: We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to its ability to continue as a going concern in their audit report for the year ended December 31, 2022.
+Added: We are focused on cultivating, processing and supplying cannabis and cannabis-derived products in our four core markets.
+Added: We have negative operating cash flow.
+Added: In addition, for the year ended December 31, 2022, we had a loss of $42,457,444, and an accumulated deficit of $177,880,963.
+Added: The costs for cultivating and manufacturing cannabis and cannabis products,
+Added: purchasing cannabis products on the wholesale marketplace, marketing and selling expenses, and general and administrative expenses, are the principal causes of our losses.
+Added: Our financing costs, which include both debt service and rent payments on the leases of our New York and Minnesota cultivation and processing facilities, are also important contributors to our losses.
+Added: We may never become profitable and if we do not become profitable your investment could be lost completely.
+Added: We anticipate that we will continue to report losses and negative cash flow for the foreseeable future.
+Added: We have concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on debt and other financings raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the year ended December 31, 2022.
+Added: The consolidated financial statements of the Company do not include any adjustments that might result from the outcome of this uncertainty.
+Added: These adjustments would likely include substantial impairment of the carrying amount of our assets and potential contingent liabilities that may arise if we are unable to fulfill various operational commitments.
+Added: In addition, the value of our securities, including common stock issued in this offering, would be greatly impaired.
+Added: Our ability to continue as a going concern is dependent upon generating sufficient cash flow from operations and obtaining additional capital and financing.
+Added: If our ability to generate cash flow from operations is delayed or reduced and we are unable to raise additional funding from other sources, we may be unable to continue in business.
+Added: For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Going Concern.”
Risks Related to the Regulatory System and Business Environment for Cannabis
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There are significant legal restrictions and regulations that govern the cannabis industry in the United States.
−Removed: Marijuana remains a Schedule I drug under the Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute, or possess cannabis in the United States.
−Removed: In those states in which the use of marijuana has been legalized, its use remains a violation of federal law pursuant to the Controlled Substances Act.
−Removed: The Controlled Substances Act classifies marijuana as a Schedule I controlled substance, and as such, medical and adult-use cannabis use is illegal under U.S.
+Added: Marijuana remains a Schedule I drug under the Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute, use or possess cannabis in the United States.
+Added: In those states in which the cultivation, production, extraction, distribution, transportation, possession or use of marijuana has been legalized, these actions continue to be a violation of federal law pursuant to the Controlled Substances Act.
+Added: The Controlled Substances Act classifies marijuana as a Schedule I controlled substance and, as such, medical and adult-use cannabis use are illegal under U.S.
Unless and until the U.S.
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Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable U.S.
−Removed: federal money laundering legislation.
+Added: federal money-laundering laws.
While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis regulatory programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve Goodness Growth of liability under U.S.
−Removed: federal law, nor will it provide a defense to any federal proceeding which may be brought against Goodness Growth.
−Removed: Since federal law criminalizing the use of marijuana pre-empts state laws that legalize its use, enforcement of federal law regarding marijuana is a significant risk and would greatly harm our business, prospects, revenue, results of operation and financial condition.
+Added: federal law, nor will it provide a defense to any federal proceeding that may be brought against Goodness Growth.
+Added: Since federal law criminalizing the cultivation, production, extraction, distribution, transportation, possession or use of marijuana pre-empts state laws that legalize such actions, enforcement of federal law regarding marijuana is a significant risk and would greatly harm our business, prospects, revenue, results of operation and financial condition.
Any proceedings brought against Goodness Growth under federal law may materially, adversely affect our operations and financial performance.
Our activities are, and will continue to be, subject to evolving regulation by governmental authorities.
−Removed: We are either currently, or in the future expect to be, directly or indirectly engaged in the medical and adult-use cannabis industry in the United States where state law permits such activities.
−Removed: The legality of the production, cultivation, extraction, distribution, retail sales, transportation and use of cannabis differs among states in the United States.
+Added: We are directly and indirectly engaged in the medical and adult-use cannabis industry in the United States, where state law permits such activities.
+Added: The legality of the production, cultivation, extraction, distribution, transportation and use of cannabis differs
+Added: among states in the United States.
Due to the current regulatory environment in the United States, new risks may emerge;
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On March 11, 2021, Merrick Garland was sworn in as the 86 th Attorney General of the United States.
+Added: Garland has not yet taken a public position on the appropriate prosecutorial posture regarding cannabis.
Most states that have legalized cannabis continue to craft their regulations pursuant to the Cole Memorandum.
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Despite the currently implemented laws and regulations in the U.S.
−Removed: and its territories to legalize and regulate the cultivation, production, processing, sale, possession and use of cannabis, and additional states that have pending legislation regarding the same, the risk remains that a shift in the regulatory or political realm could occur and have a drastic impact on the industry as a whole, adversely impacting our ability to successfully invest and/or participate in the selected business opportunities.
+Added: and its territories to legalize and regulate the cultivation, production, processing, sale, possession and use of cannabis, and additional states that have pending legislation regarding the same, the risk remains that a shift in the regulatory or political realm could occur and have a drastic impact
+Added: on the industry as a whole, adversely impacting our ability to successfully invest and/or participate in the selected business opportunities.
Further, there is no guarantee that at some future date, voters and/or the applicable legislative bodies will not repeal, overturn or limit any such legislation legalizing the sale, disbursement and consumption of medical or adult-use cannabis.
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federal government through various government agencies for participation in the cannabis industry.
−Removed: Because the cultivation, processing, production, distribution, and sale of cannabis for any purpose, medical, adult use or otherwise, remain illegal under U.S.
+Added: Because the cultivation, processing, production, distribution, possession and sale of cannabis for any purpose, medical, adult use or otherwise, remain illegal under U.S.
federal law, it is possible that we may be forced to cease any such activities.
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Since federal law criminalizing the use of cannabis pre-empts state laws that legalize its use, the federal government can assert criminal violations of federal law despite state laws permitting the use of cannabis.
−Removed: It does not appear that federal
−Removed: law enforcement and regulatory agencies are focusing resources on licensed marijuana-related businesses that are operating in compliance with state law.
+Added: It does not appear that federal law enforcement and regulatory agencies are focusing resources on licensed marijuana-related businesses that are operating in compliance with state law.
As the rescission of the Cole Memorandum and the implementation of the Sessions Memorandum demonstrate, the DOJ may at any time issue additional guidance that directs federal prosecutors to devote more resources to prosecuting marijuana related businesses.
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Federal actions against any individual or entity engaged in the cannabis industry or a substantial repeal of cannabis related legislation could materially adversely affect the Company, our business and our assets or investments.
+Added: State and local laws permitting the cultivation, production, extraction, distribution, transportation, possession or use of cannabis may also be modified in a manner that is contrary to our interests.
+Added: For example, states could authorize the issuance of licenses to cultivate, produce, transport or distribute cannabis to additional parties;
+Added: the maximum number of such licenses could be unlimited, as is the case under the current adult-use legislation in New Mexico.
+Added: States currently permitting only medical-use cannabis could implement adult-use cannabis laws that give preferences to applicants and/or participants that compete with us, or even prohibit us to participate in portions or the entirety of the adult-use marketplace.
+Added: Any such change in New York or Minnesota would have a material, adverse effect on our business, financial position or results of operations.
The rulemaking process at the state level that applies to cannabis operators in any state will be ongoing and result in frequent changes.
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Notwithstanding our efforts and diligence, regulatory compliance, and the process of obtaining regulatory approvals can be costly and time-consuming.
−Removed: No assurance can be given that we will receive and
−Removed: maintain the necessary licenses, permits or cards to continue operating our business.
+Added: No assurance can be given that we will receive and maintain the necessary licenses, permits or cards to continue operating our business.
A state implementing an adult-use cannabis program may prohibit participation by the Company in one or more aspects of that program, or require the Company to pay fees to participate, which fees may be material or prohibitive.
−Removed: States in which we are licensed to cultivate, process and/or dispense medical cannabis may add a legal adult-use program, either by legislation or ballot initiative.
−Removed: There can be no assurance that we will be permitted to participate in adult-use cannabis cultivation, processing or dispensing simply because we hold medical cannabis licenses.
Local laws and ordinances could also restrict our business activity.
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Land use, zoning, local ordinances, and similar laws could be adopted or changed and have a material, adverse effect on our business.
−Removed: Multiple states where medical and/or adult use cannabis is legal have or are considering special taxes or fees on businesses in the marijuana industry.
+Added: Multiple states where medical and/or adult use cannabis is legal have imposed or are considering special taxes or fees on businesses in the marijuana industry.
It is uncertain at this time whether other states are in the process of reviewing such additional taxes and fees.
The implementation of special taxes or fees could have a material, adverse effect upon our business, prospects, revenue, results of operation and financial condition.
−Removed: We currently operate cannabis dispensaries in Arizona, Maryland, Minnesota, New Mexico, and New York.
+Added: We currently operate cannabis businesses in Maryland, Minnesota, New Mexico, and New York.
State regulatory agencies may require us to post bonds or significant fees.
There is a risk that a greater number of state regulatory agencies will begin requiring entities engaged in certain aspects of the business or industry of legal marijuana to post a bond or significant fees when applying, for example, for a dispensary license or renewal, as a guarantee of payment of sales and franchise taxes.
−Removed: We are not able to quantify at this time the potential scope of such bonds or fees in the states in which we currently operate or may in the future operate, but they may be materially negative to our results of operations, financial condition and ultimate business success, individually or in the aggregate.
+Added: We are not able to quantify at this time the potential scope of such bonds or fees in the states in which we currently operate or may in the future operate, but they may be materially adverse to our results of operations, financial condition and ultimate business success, individually or in the aggregate.
We may be subject to heightened scrutiny by United States and Canadian authorities, which could ultimately lead to the market for Subordinate Voting Shares becoming highly illiquid and our shareholders having no ability to effect trades in Subordinate Voting Shares in Canada.
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In particular, the market for Subordinate Voting Shares would become highly illiquid until an alternative (if available) was implemented, and investors would have no ability to effect a trade of Subordinate Voting Shares through the facilities of the applicable Canadian stock exchange.
+Added: We are involved in litigation with Verano, the outcome of which is uncertain.
+Added: On October 13, 2022, the Company received a notice of purported termination of the Arrangement Agreement, which asserted certain breaches of the Arrangement Agreement, including claims the Company’s public filings and
+Added: communications with respect to its business and ongoing operations were misleading and that the Company breached its representations to Verano under the Arrangement Agreement.
+Added: 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.
+Added: The Company 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.
+Added: The Company believes that Verano had no factual or legal basis to justify or support its purported grounds for termination of the Arrangement Agreement.
+Added: On October 21, 2022, the Company 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.
+Added: The Company is seeking damages, costs and interest, based on Verano's breach of contract and of its duty of good faith and honest performance.
+Added: On November 14, 2022, Verano filed counterclaims against the Company for the termination fee and transaction expenses described above.
+Added: 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 to either party.
+Added: In addition, the costs of prosecuting the Company’s claims and defending against the claims made by Verano could be material.
We may face state limitations on ownership of cannabis licenses.
−Removed: Certain jurisdictions in which we operate or expect to operate limit the number of cannabis licenses and certain economic or commercial interests in the entity that holds the license that can be held by one entity within that state.
+Added: Certain jurisdictions in which we operate limit the number of cannabis licenses and certain economic or commercial interests in the entity that holds the license that can be held by one entity within that state.
As a result of the completion of certain acquisition transactions that we have entered into or may enter into in the future, we may potentially hold more than the prescribed number of licenses or economic or commercial interests in a licensed entity in certain states, and accordingly may be required to divest certain licenses or entities that hold such license in order to comply with applicable regulations.
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however, the FDA has enforced the FDCA with regard to industrial hemp-derived products, especially CBD derived from industrial hemp sold outside of state-regulated cannabis businesses.
−Removed: The FDA has recently affirmed its authority to regulate CBD derived from both marijuana and industrial hemp, and its intention to develop a framework for regulating the production and sale of CBD derived from industrial hemp.
+Added: The FDA had asserted its authority to regulate CBD derived from both marijuana and industrial hemp, and its intention to develop a framework for regulating the production and sale of CBD derived from industrial hemp.
+Added: On January 26, 2023, the FDA announced that it would not seek to regulate CBD as a dietary supplement.
Additionally, the FDA may issue rules and regulations, including good manufacturing practices related to the growth, cultivation, harvesting, processing, and production of cannabis.
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Bureau of Alcohol, Tobacco, Firearms and Explosives (“ ATF ”).
−Removed: The ATF may issue rules and regulations related to the use, transporting, sale and advertising of cannabis or cannabis products.
+Added: The ATF may issue rules and regulations related to the use, transport, sale and advertising of cannabis or cannabis products.
Cannabis businesses are subject to applicable anti-money laundering laws and regulations and have restricted access to banking and other financial services.
+Added: Recent events in the banking industry may further restrict our ability to access financial services.
Banks and other depository institutions are currently hindered by federal law from providing financial services to marijuana businesses, even in states where those businesses are regulated.
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Shortly after the Sessions Memorandum was issued, FinCEN did state that it would review the FinCEN Memorandum, but FinCEN has not yet issued further guidance.
−Removed: Although the FinCEN Memorandum remains intact, it is unclear whether the current administration will continue to follow its guidelines.
+Added: Although the FinCEN Memorandum remains in effect, it is unclear whether the Biden administration will continue to follow its guidelines.
The DOJ continues to have the right and power to prosecute crimes committed by banks and financial institutions, such as money laundering and violations of the Bank Secrecy Act that occur in any state, including states that have in some form legalized the sale of cannabis.
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The FinCEN Memorandum does not provide any safe harbors or legal defenses from examination or regulatory or criminal enforcement actions by the DOJ, FinCEN or other federal regulators.
−Removed: Thus, most banks and other financial institutions in the United States do not appear comfortable providing banking services to cannabis-related businesses or relying on this guidance given that it has the potential to be amended or revoked by the current administration.
+Added: Thus, most banks and other financial institutions in the United States do not appear willing to provide banking services to cannabis-related businesses or to rely on this guidance.
In addition to the foregoing, banks may refuse to process debit card payments and credit card companies generally refuse to process credit card payments for cannabis-related businesses.
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In addition, federal money laundering statutes and Bank Secrecy Act regulations discourage financial institutions from working with any organization that sells a controlled substance, regardless of whether the state it operates in permits cannabis sales.
−Removed: The inability or limitation of our ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for us to operate and conduct our business as planned or to operate efficiently.
+Added: The inability or limitation of our ability to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for us to operate and conduct our business as planned or to operate efficiently and could subject our
+Added: businesses to robbery, embezzlement or other crimes related to our possession or transport of cash, sometimes in substantial quantities.
+Added: In March 2023, Federal banking regulators closed Silicon Valley Bank and Signature Bank to prevent the banks from failing.
+Added: The closures have prompted broader inquiries into the financial health of banks and other financial institutions in the United States and other countries.
+Added: While none of the banks with which the Company maintains financial relationships has been identified as a target of such an inquiry or as at risk of closure by regulators, there remains the possibility that one or more of the banks could fail, which would further limit the Company’s access to financial services, which could lead to the need to maintain more cash at some or all of the Company’s locations, increasing the risk of theft or other loss.
+Added: Such events could lead to the smaller number of banks that continue to provide financial services to the Company imposing further restrictions, higher fees, or both on the Company’s accounts.
We operate in a highly regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business.
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The effect of relevant governmental authorities’ administration, application and enforcement of their respective regulatory regimes and delays in obtaining, or failure to obtain, applicable regulatory approvals that may be required may significantly delay or impact the development of markets, products and sales initiatives and could have a material, adverse effect on our business, prospects, revenue, results of operation and financial condition.
−Removed: While endeavor to comply with all applicable laws, regulations and guidelines and, to our knowledge, we are in compliance with, or are in the process of being assessed for compliance with all such laws, regulations and guidelines, any failure to comply with the regulatory requirements applicable to our operations may lead to possible sanctions including the revocation or imposition of additional conditions on licenses to operate our business;
−Removed: the suspension or expulsion from a particular market or jurisdiction or of our key personnel;
+Added: While we endeavor to comply with all applicable laws, regulations and guidelines and, to our knowledge, we are in compliance with, or are in the process of being assessed for compliance with all such laws, regulations and guidelines, any failure to comply with the regulatory requirements applicable to our operations may lead to possible sanctions including the revocation or imposition of additional conditions on licenses to operate our business;
+Added: the suspension or expulsion from a particular market or jurisdiction of our key personnel;
the imposition of additional or more stringent inspection, testing and reporting requirements;
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bankruptcy protections in the event of our bankruptcy or a bankruptcy in an entity in which we invest.
−Removed: Many courts have denied cannabis businesses bankruptcy protections because the use of cannabis is illegal under federal law.
−Removed: In the event of a bankruptcy, it would be very difficult for lenders to recoup their investments in the cannabis industry.
+Added: Many courts have denied cannabis businesses federal bankruptcy protections because the use of cannabis is illegal under federal law.
+Added: In the event one or more of our businesses were to become unable to pay its liabilities, federal bankruptcy laws sometimes enable businesses to reorganize, reduce debt and continue to operate, or to wind down in an orderly manner so that creditors and sometimes equity holder realize some return of the funds they have provided to the bankrupt business.
+Added: If federal bankruptcy laws do not apply to cannabis businesses, it would be very difficult for lenders or other creditors and the owners of Subordinate Voting Shares or other equity to recoup their investments in us.
If we were to experience a bankruptcy, there is no guarantee that U.S.
−Removed: federal bankruptcy protections would be available to us, which would have a material, adverse effect on the Company.
+Added: federal bankruptcy protections would be available to us, which would have a material, adverse effect on the Company, including the potential to disable our ability to conduct our businesses at all.
Additionally, there is no guarantee that we will be able to effectively enforce any interests we may have in our other subsidiaries and investments.
16 unchanged sentences
We may be subject to constraints on and differences in marketing our products under varying state laws.
−Removed: There may be restrictions on sales and marketing activities imposed by government regulatory bodies that could hinder the development of our business and operating results.
+Added: There are and may continue to be restrictions on sales and marketing activities imposed by government regulatory bodies that could hinder the development of our business and operating results.
Restrictions may include regulations that specify what, where and to whom product information and descriptions may appear and/or be advertised.
5 unchanged sentences
The cannabis industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of the cannabis produced.
−Removed: Consumer perception can be significantly influenced by scientific research or findings regarding the consumption of cannabis products.
+Added: Consumer perception can be significantly influenced by scientific research or findings regarding the
+Added: consumption of cannabis products.
There can be no assurance that future scientific research or findings will be favorable to the cannabis market or any particular product, or consistent with earlier research or findings.
6 unchanged sentences
Public opinion and support for medical and adult-use cannabis has traditionally been inconsistent and varies from jurisdiction to jurisdiction.
−Removed: While public opinion and support appears to be rising generally for legalizing medical and
−Removed: adult-use cannabis, it remains a controversial issue subject to differing opinions surrounding the level of legalization (for example, medical cannabis as opposed to legalization in general).
+Added: While public opinion and support appears to be rising generally for legalizing medical and adult-use cannabis, it remains a controversial issue subject to differing opinions surrounding the level of legalization (for example, medical cannabis as opposed to legalization in general).
Inconsistent public opinion and perception of the medical and adult-use cannabis may hinder growth and state adoption, which could have a material, adverse effect on our business, financial condition, or results of operations.
1 unchanged sentence
Our management believes the medical and adult-use cannabis industry is highly dependent upon consumer perception regarding the safety, efficacy and quality of the cannabis produced.
−Removed: Acceptance of our products will depend on several factors, including availability, cost, familiarity of use, perceptions of acceptance by other people, convenience, effectiveness, safety, and reliability.
+Added: Acceptance of our products depends on several factors, including availability, cost, familiarity of use, perceptions of acceptance by other people, convenience, effectiveness, safety, and reliability.
If customers do not accept our products, or if we fail to meet customers’ needs and expectations adequately, our ability to continue generating revenues could be reduced.
3 unchanged sentences
Our dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material, adverse effect on the Company, the demand for our products, and our business, results of operations, financial condition and cash flows.
−Removed: Further, adverse publicity reports or other media attention regarding the safety, efficacy, and quality of cannabis in general, or our products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material, adverse effect.
+Added: Further, adverse publicity reports or other media attention regarding the safety, efficacy, and quality of cannabis in general, or our products specifically, or associating the consumption of cannabis with illness or other negative effects or events, could have such a material, adverse effect or our business, financial position and results of operations.
Such adverse publicity reports or other media attention could arise even if the adverse effects associated with such products resulted from consumers’ failure to consume such products appropriately or as directed.
12 unchanged sentences
border guards to deny entry.
−Removed: On September 21, 2018, CBP released a statement outlining its current position with respect to enforcement of the laws of the United States.
+Added: On September 21, 2018, CBP released a statement outlining its current
+Added: position with respect to enforcement of the laws of the United States.
It stated that Canada’s legalization of cannabis will not change CBP enforcement of U.S.
9 unchanged sentences
Under Section 280E of the U.S.
−Removed: Internal Revenue Code of 1986 (together with the Treasury regulations promulgated and the rulings issued thereunder, the “ Code ”), no deduction or credit is allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if the trade or business (or the activities which comprise the trade or
−Removed: business) consists of trafficking in controlled substances (within the meaning of Schedules I and II of the Controlled Substances Act), which is prohibited by federal law or the law of any state in which that trade or business is conducted.
+Added: Internal Revenue Code of 1986 (together with the Treasury regulations promulgated and the rulings issued thereunder, the “ Code ”), no deduction or credit is allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if the trade or business (or the activities which comprise the trade or business) consists of trafficking in controlled substances (within the meaning of Schedules I and II of the Controlled Substances Act), which is prohibited by federal law or the law of any state in which that trade or business is conducted.
The IRS has applied this provision to cannabis operations, prohibiting them from deducting many expenses associated with cannabis businesses other than certain costs and expenses related to cannabis cultivation and manufacturing operations.
−Removed: Accordingly, Section 280E has a significant impact on the operations of cannabis companies, including the Company, and an otherwise profitable business may operate at a loss, after taking into account its U.S.
+Added: Accordingly, Section 280E has a significantly adverse impact on the operations of cannabis companies, including the Company, and an otherwise profitable business may operate at a loss, after taking into account its U.S.
income tax expenses.
11 unchanged sentences
In addition, we have historically experienced and may prospectively experience fluctuations in our quarterly earnings due to the nature of our business.
−Removed: Our long-term success is dependent upon among other things, achieving positive cash flows from operations and augmenting such cash flows using external resources to satisfy our cash needs, and there is no assurance that we will be able to achieve such cash flows.
+Added: Our long-term success is dependent upon among other things, achieving positive cash flows from operations and
+Added: augmenting such cash flows using external resources to satisfy our cash needs, and there is no assurance that we will be able to achieve such cash flows.
We anticipate requiring additional financing to operate our business and we may face difficulties acquiring additional financing on terms acceptable to us or at all.
−Removed: We may need additional capital to sustain our operations and will likely seek further financing.
+Added: We will need additional capital to sustain our operations and will likely seek further financing.
If we fail to raise additional capital, as needed, our ability to implement our business model and strategy could be compromised.
To date, our operations and expansion of our business have been funded primarily from cash-flow from operations as substantially supplemented by the proceeds of debt and equity financings and the sale of our former Pennsylvania subsidiaries and Arizona dispensary and cannabis licenses.
−Removed: We expect to require substantial additional capital in the future primarily to fund working capital requirements of our business, including operational expenses, operationalizing existing licenses, planned capital expenditures including the focused development and growth of cultivation and dispensary facilities, debt service and acquisitions.
+Added: We expect to require substantial additional capital in the future primarily to fund working capital requirements of our business, including operational expenses, planned capital expenditures including the focused development and growth of cultivation and dispensary facilities, debt service and acquisitions.
Even if we obtain financing for our near-term operations and expansion, we expect that we will require additional capital thereafter.
3 unchanged sentences
(iii) the level of our investment in research and development;
−Removed: amount of our capital expenditures, including acquisitions;
+Added: (iv) the amount of our capital expenditures, including acquisitions;
(v) debt service;
3 unchanged sentences
If we raise additional capital by incurring debt, this will result in increased interest expense.
−Removed: If we raise additional funds through the issuance of equity securities, market fluctuations in the price of our securities could limit our ability to obtain equity financing.
+Added: If we raise additional funds through the issuance of equity securities, market fluctuations in the price of our securities could limit our ability to obtain additional equity financing.
No assurance can be given that any additional financing will be available to us, or if available, will be on terms favorable to us.
31 unchanged sentences
There can be no assurance that we will enter into definitive agreements with respect to any contemplated transaction or that any contemplated transaction will be completed.
−Removed: The investigation of acquisition candidates and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, and others.
+Added: The investigation of acquisition candidates and the negotiation, drafting and execution of relevant agreements,
+Added: disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys, and others.
If we fail to complete any acquisition for any reason, including events beyond our control, the costs incurred up to that point for the proposed acquisition would not be recoverable.
21 unchanged sentences
On March 25, 2021, we entered into the Credit Facility.
−Removed: The Credit Facility contains, and any of our other future debt agreements may contain, covenant restrictions that limit our ability to operate our business, including restrictions on our ability to, among other things, incur additional debt or issue guarantees, create additional liens, pay cash dividends, repurchase stock or make other restricted payments, make certain voluntary prepayments of specified debt, engage in sale-leasebacks involving certain assets, and enter into mergers or acquisitions or dispose of certain assets.
+Added: The Credit Facility contains, and any of our other future debt agreements may contain, covenant restrictions that limit our ability to operate our business, including restrictions on our
+Added: ability to, among other things, incur additional debt or issue guarantees, create additional liens, pay cash dividends, repurchase stock or make other restricted payments, make certain voluntary prepayments of specified debt, engage in sale-leasebacks involving certain assets, and enter into mergers or acquisitions or dispose of certain assets.
The Credit Facility also contains, and any of our other future debt agreements may contain, financial covenants regarding our liquidity, minimum consolidated adjusted EBITDA, and consolidated fixed charge coverage ratio.
3 unchanged sentences
Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
−Removed: As of December 31, 2021, we had $33,250,000 in aggregate principal indebtedness (refer to Note 15) to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K) and we entered into the Credit Facility on March 25, 2021, which provides for delayed draw term loans of up to $46 million, $26 million of which we borrowed on March 25, 2021.
−Removed: On November 19, 2021, we amended the Credit Facility to borrow an additional $4.2 million and we also executed a promissory note for $2 million in favor of the seller of the Baltimore, Maryland dispensary assets.
+Added: As of December 31, 2021, we had $61,250,000 in aggregate principal indebtedness (refer to Note 14) to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).
Our substantial consolidated indebtedness may increase our vulnerability to any generally adverse economic and industry conditions.
46 unchanged sentences
(iii) federal or state privacy laws and regulations;
−Removed: (iv) laws that require the true, complete, and accurate reporting of financial information or data;
+Added: (iv) laws that require the true, complete,
+Added: and accurate reporting of financial information or data;
or (v) other laws or regulations.
2 unchanged sentences
federal or state or local laws.
−Removed: If any such actions are instituted against us, and we are not successful in defending the Company or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment
−Removed: of our operations, any of which could have a material, adverse effect on our business, financial condition or results of operations.
+Added: If any such actions are instituted against us, and we are not successful in defending the Company or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could have a material, adverse effect on our business, financial condition or results of operations.
We face risks related to the novelty of the cannabis industry, and the resulting lack of information regarding comparable companies, unanticipated expenses, difficulties and delays, and the offering of new products and services in an untested market.
22 unchanged sentences
There are risks inherent in the cultivation business, such as insects, plant diseases, and similar agricultural risks.
−Removed: Although our cultivation is substantially completed indoors under climate-controlled conditions, some cultivation is completed outdoors and there can be no assurance that natural elements will not have a material, adverse effect on the production of our products and, consequentially, on our business, financial condition, or results of operations.
+Added: Although our cultivation is substantially completed indoors under climate-controlled conditions, some cultivation is completed outdoors and there can be no assurance that extreme weather and other natural events and conditions will not have a material, adverse effect on the production of our products and, consequentially, on our business, financial condition, or results of operations.
We may encounter increasingly strict environmental regulation in connection with our operations and the associated permitting, which may increase the expenses for cannabis production or subject us to enforcement actions by regulatory authorities.
20 unchanged sentences
It is our responsibility to protect that information from privacy breaches that may occur through procedural or process failure, information technology malfunction or deliberate, unauthorized intrusions.
−Removed: Any such theft or privacy breach could have a material, adverse effect on our business, prospects, revenue, results of operation and financial condition.
+Added: Any such theft or privacy
+Added: breach could have a material, adverse effect on our business, prospects, revenue, results of operation and financial condition.
Additionally, our ability to execute transactions and to possess and use personal information and data in conducting our business subjects us to legislative and regulatory burdens that may require us to notify regulators and customers, employees, and other individuals of a data security breach.
28 unchanged sentences
Any significant interruption or negative change in the availability or economics of the supply chain for key inputs, such as the raw material cost of cannabis, could materially impact our business, financial condition, results of operations or prospects.
−Removed: Some of these inputs may only be available from a single supplier or a limited group of suppliers.
+Added: Some of these inputs may only be available from a single supplier or a limited group of
If a sole source supplier were to go out of business, we might be unable to find a replacement for such source in a timely manner, or at all.
26 unchanged sentences
We face an inherent risk of product liability claims as a manufacturer, processor and producer of products that are intended to be ingested by people.
−Removed: As a cultivator, manufacturer, processor, and distributor of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action, and litigation if our products are alleged to have caused significant loss or injury.
+Added: As a cultivator, manufacturer, processor, and distributor of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action, and litigation if our products are alleged to have
+Added: caused significant loss or injury.
In addition, the manufacture and sale of our products involves the risk of injury to consumers due to tampering by unauthorized third parties or product contamination.
1 unchanged sentence
Although we will continue to have quality control procedures in place, we may be subject to various product liability claims, including, among others, that the products produced by us, or the products that are purchased by us from third-party licensed producers, caused injury, illness, or death, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances.
−Removed: A product liability claim or regulatory action against us could result in increased costs, could adversely affect our reputation with our customers and consumers
−Removed: generally and could have a material, adverse effect on our business, results of operations and financial condition.
+Added: A product liability claim or regulatory action against us could result in increased costs, could adversely affect our reputation with our customers and consumers generally and could have a material, adverse effect on our business, results of operations and financial condition.
There can be no assurances that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities.
22 unchanged sentences
We are subject to additional risks if entities licensing intellectual property to us do not have adequate rights to the licensed materials.
−Removed: If third parties assert copyright or patent infringement or violation of other intellectual property rights against Goodness Growth, we will be required to defend ourselves in litigation or administrative proceedings, which can be both costly and time consuming and may significantly divert the efforts and resources of management personnel.
+Added: If third parties assert copyright or patent infringement or violation
+Added: of other intellectual property rights against Goodness Growth, we will be required to defend ourselves in litigation or administrative proceedings, which can be both costly and time consuming and may significantly divert the efforts and resources of management personnel.
An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties, require us to pay ongoing royalties or subject us to injunctions that may prohibit the development and operation of our applications, any of which could have a material, adverse effect on our business, results of operations and financial condition.
24 unchanged sentences
If the number of consumers of cannabis in the states in which we operate increases, the demand for products will increase and we expect that competition will become more intense as current and future competitors begin to offer an increasing number of diversified products.
−Removed: To remain competitive, we will require a continued high level of investment in research and
−Removed: development, facilities, marketing, and sales support.
+Added: To remain competitive, we will require a continued high level of investment in research and development, facilities, marketing, and sales support.
We may not have sufficient resources to maintain research and development, facilities, marketing, and sales support efforts on a competitive basis, which could materially, adversely affect the business, financial condition, and results of our operations.
14 unchanged sentences
reporting and other regulatory requirements.
−Removed: We will incur expenses and, to a lesser extent, diversion of our management’s time in our efforts to comply with the Sarbanes-Oxley Act and applicable Canadian securities laws regarding internal controls over financial reporting.
+Added: We incur expenses and, to a lesser extent, diversion of our management’s time in our efforts to comply with the Sarbanes-Oxley Act and applicable Canadian securities laws regarding internal controls over financial reporting.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.
−Removed: In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act and applicable Canadian securities laws, or the subsequent testing by our independent registered public accounting firm when required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retrospective changes to our consolidated financial statements or identify other areas for further attention or improvement.
+Added: In addition, any testing by us
+Added: conducted in connection with Section 404 of the Sarbanes-Oxley Act and applicable Canadian securities laws, or the subsequent testing by our independent registered public accounting firm if required, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retrospective changes to our consolidated financial statements or identify other areas for further attention or improvement.
Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Subordinate Voting Shares.
The existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weakness or significant deficiency and management may not be able to remediate any such material weakness or significant deficiency in a timely manner.
−Removed: The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial
−Removed: statements, cause us to fail to meet our reporting obligations, and cause shareholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and share price.
−Removed: We identified a significant deficiency in our internal control over financial reporting as of December 31, 2020, which has been remediated as of December 31, 2021.
−Removed: A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting, that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of our financial reporting.
−Removed: The significant deficiency was primarily attributable to inappropriate accruals on contractor invoices received subsequent to December 31, 2020.
−Removed: We identified a material weakness in our internal control over financial reporting as of December 31, 2021, which has not been remediated ( see Item 9A to this Form 10-K for more information ).
+Added: The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, and cause shareholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and share price.
+Added: We identified a material weakness in our internal control over financial reporting as of December 31, 2021, which has been remediated as of December 31, 2022 ( see Item 9A to this Form 10-K for more information ).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness was primarily attributable to the misapplication of GAAP accounting guidance surrounding the treatment of warrants issued with a Canadian dollar denominated exercise price.
−Removed: Management has implemented a remediation plan as of the date of this report, and expects the material weakness will be remediated for the year ended December 31, 2022.
−Removed: If we fail to remediate this material weakness or experience additional material weaknesses in the future or to otherwise maintain effective financial reporting systems and processes, we may be unable to accurately and timely report our financial results or comply with the requirements of being a public company, which could cause the price of our Subordinate Voting Shares to decline and harm our business.
+Added: Management updated it’s control procedures over the accounting for infrequent and unusual transactions during the year ended December 31, 2022.
+Added: More specifically, management added a process step to consult with external GAAP accounting experts when a new significant, infrequent, or unusual transaction occurs.
We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to avoid potential future material weaknesses.
1 unchanged sentence
In addition, the processes and systems we have developed to date may not be adequate.
−Removed: Accordingly, there could continue to be a reasonable possibility that the significant deficiency we have identified or other material weaknesses or deficiencies could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, or cause us to fail to meet our obligations to file periodic financial reports on a timely basis.
+Added: There could continue to be a reasonable possibility that significant deficiencies, other material weaknesses or deficiencies could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our financial statements that would not be prevented or detected on a timely basis, or cause us to fail to meet our obligations to file periodic financial reports on a timely basis.
Any of these failures could result in adverse consequences that could materially and adversely affect our business, including an adverse impact on the market price of our Subordinate Voting Shares, potential action by the SEC against us, possible defaults under our debt agreements, shareholder lawsuits, delisting of our Shares, general damage to our reputation and the diversion of significant management and financial resources.
8 unchanged sentences
All of the assets of these entities are located outside of Canada and certain of the experts that will be retained by us or our affiliates are residents of countries other than Canada.
−Removed: As a result, it may be difficult or impossible for our shareholders to effect service within Canada upon such persons, or to
−Removed: realize against them in Canada upon judgments of courts of Canada predicated upon the civil liability provisions of applicable Canadian provincial securities laws or otherwise.
+Added: As a result, it may be difficult or impossible for our shareholders to effect service within Canada upon such persons, or to realize against them in Canada upon judgments of courts of Canada predicated upon the civil liability provisions of applicable Canadian provincial securities laws or otherwise.
There is some doubt as to the enforceability in the U.S.
24 unchanged sentences
Any general or market-specific economic downturn could have a material, adverse effect on our business, financial condition, results of operations, and cashflow.
−Removed: Epidemics and pandemics, including the current COVID-19 pandemic, may have a significant negative effect on our business and financial results.
−Removed: In December 2019, there was an outbreak of COVID-19 in China that has since spread to most or all other regions of the world.
−Removed: The outbreak was subsequently labeled as a global pandemic by the World Health Organization in March 2020.
−Removed: Although the Company’s financial condition and results of operations have not been materially affected by the COVID-19 pandemic thus far, the Company may be affected by business interruptions resulting from pandemics and public health emergencies, including those related to COVID-19, in the future.
−Removed: An outbreak of infectious disease, a pandemic, or a similar public health threat, such as the COVID-19 pandemic, or a fear of any of the foregoing, could adversely affect the Company by causing operating, manufacturing, supply chain, and project development delays and disruptions, labor shortages, travel, and shipping disruption and shutdowns (including as a result of government regulation and prevention measures).
−Removed: It is unknown whether and how the Company may be affected if such a pandemic persists for an extended period of time, including as a result of the waiver of regulatory requirements or the implementation of emergency regulations to which we are subject.
−Removed: Although our business has been deemed essential and/or we have been permitted to continue operating our facilities in the states in which we cultivate, process, manufacture, and sell cannabis during the
−Removed: pendency of the COVID-19 pandemic, there is no assurance that our operations will continue to be deemed essential and/or will continue to be permitted to operate.
−Removed: We may incur expenses or delays relating to such events outside of our control, which could have a material, adverse effect on our business, operating results, financial condition, and the trading price of our Subordinate Voting Shares.
−Removed: Epidemics and pandemics may have adverse impacts on our financial condition and results of operations, including, but not limited to:
−Removed: ● We may experience significant reductions or volatility in demand for our products as customers may not be able to purchase merchandise due to illness, quarantine or government or self-imposed restrictions placed on our stores’ operations.
−Removed: ● We may experience temporary or long-term disruptions in our supply chain.
−Removed: Transportation delays and cost increases, closures or disruptions of businesses and facilities or social, economic, political, or labor instability, may impact our or our suppliers’ operations or our customers.
−Removed: ● Our liquidity may be negatively affected if our dispensaries are unable to maintain their current level of sales and we may be required to pursue additional sources of financing to meet our financial obligations.
−Removed: Obtaining such financing is not guaranteed and is largely dependent upon market conditions and other factors.
−Removed: Further actions may be required to improve our cash position, including but not limited to, monetizing our asset and foregoing capital expenditures and other discretionary expenses.
−Removed: The extent of the impact of the COVID-19 pandemic on our operations and financial results depends on future developments and is highly uncertain due to the unknown duration and severity of the outbreak.
−Removed: The situation continues to change, and future impacts may materialize that are not yet known.
+Added: Diseases and epidemics (such as COVID-19) may adversely impact our business.
+Added: Emerging infectious diseases or the threat of outbreaks of viruses or other contagions or epidemic diseases, including the COVID-19 outbreak, could have a material adverse effect on the Company by causing operational and supply chain delays and disruptions (including as a result of government regulation and prevention measures), labor shortages and shutdowns, social unrest, breach of material contracts and customer agreements, government or regulatory actions or inactions, increased insurance premiums, decreased demand or the inability to sell and deliver the Company’s products, delays in permitting or approvals, governmental disruptions, capital markets volatility, or other unknown but potentially significant impacts.
+Added: In addition, governments may impose strict emergencies measures in response to the threat or existence of an infectious disease.
+Added: The full extent and impact of the COVID-19 pandemic is unknown and to date has included extreme volatility in financial markets, a slowdown in economic activity and has raised the prospect of a global recession.
+Added: The international response to COVID-19 led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in global consumer activity.
+Added: In addition, a significant outbreak of contagious diseases in the human population, such as COVID-19, could result in a widespread health crisis that could
+Added: adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could result in a material adverse effect on input prices, demand for our products, investor confidence, and general financial market liquidity, all of which may materially, adversely affect the Company's business and the market price of the Subordinate Voting Shares.
+Added: Accordingly, any outbreak or threat of an outbreak of an epidemic disease or similar public health emergency, including COVID-19, could have a material adverse effect on the Company's business, financial condition and results of operations.
+Added: It is unknown whether and how the Company may be affected if a pandemic, such as the COVID-19 outbreak, continues to persist for an extended period of time.
Risks Related to Our Securities
12 unchanged sentences
In addition, the holder of Super Voting Shares may make long-term strategic investment decisions and take risks that may not be successful and may seriously harm our business.
−Removed: As a director and Chief Executive Officer of the Company, Dr.
−Removed: Kingsley has control over the day-to-day management and the implementation of major strategic decisions of the Company, subject to authorization and oversight by the Board.
+Added: As a director and Executive Chairman of the Company, Dr.
+Added: Kingsley has significant influence on major strategic decisions of the Company, subject to authorization and oversight by the Board.
As a Board member, Dr.
−Removed: Kingsley owes a fiduciary duty to our shareholders and is obligated to act honestly and in good faith
−Removed: with a view to the best interests of the Company.
+Added: Kingsley owes a fiduciary duty to our shareholders and is obligated to act honestly and in good faith with a view to the best interests of the Company.
As a shareholder, Dr.
17 unchanged sentences
If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities.
−Removed: The market price for the Subordinate Voting Shares may be volatile.
+Added: The market price for the Subordinate Voting Shares may continue to be volatile.
The market prices for securities of cannabis companies generally have been volatile.
−Removed: In addition, the market price for the Subordinate Voting Shares has been and may be subject to wide fluctuations in response to numerous factors beyond our control, including, but not limited to:
+Added: In addition, the market price for the Subordinate Voting Shares has been and may be subject to wide fluctuations in response to numerous factors within and beyond our control including, but not limited to:
● actual or anticipated fluctuations in our results of operations;
4 unchanged sentences
● sales or expected sales of additional Subordinate Voting Shares;
+Added: ● exercise of options or warrants to purchase Subordinate Voting Shares;
● operating and financial performance that deviates from the expectations of management, securities analysts or investors;
5 unchanged sentences
● operating and share price performance of other companies that investors deem comparable to us or from a lack of market comparable companies;
−Removed: ● news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in our industry or target markets.
+Added: ● news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in our industry or markets.
Financial markets have at times historically experienced significant price and volume fluctuations that:
4 unchanged sentences
If increased levels of volatility and market turmoil continue, our operations could be adversely impacted, and the trading price of the Subordinate Voting Shares may be materially, adversely affected.
−Removed: A decline in the price or trading volume of the Subordinate Voting Shares could affect our ability to raise further capital and adversely impact our ability to continue operations.
−Removed: A prolonged decline in the price or trading volume of the Subordinate Voting Shares could result in a reduction in the liquidity of the Subordinate Voting Shares and a reduction in our ability to raise capital.
−Removed: Because a significant portion of our operations have been and may continue to be financed through the sale of equity securities, a decline in the price or trading volume of our Subordinate Voting Shares could be especially detrimental to our liquidity and our operations.
+Added: A further decline in the price or trading volume of the Subordinate Voting Shares could affect our ability to raise further capital and adversely impact our ability to continue operations.
+Added: The market price for the Subordinate Voting Shares has historically been volatile, with relatively few shares traded on most trading days.
+Added: Since the termination of the Arrangement Agreement, the Subordinate Voting Shares have been trading at or near the all-time low price and have had generally low trading volume.
+Added: As a result, our ability to raise equity capital is impaired.
+Added: The market price and trading volume of the Subordinate Voting Shares could decline further.
+Added: A further decline in the price or trading volume of the Subordinate Voting Shares could result in a further reduction in the liquidity of the Subordinate Voting Shares and a further reduction in our ability to raise capital.
+Added: Because a significant portion of our operations have been and may continue to be financed through the sale of equity securities, a further decline in the price or trading volume of our Subordinate Voting Shares could be especially detrimental to our liquidity and our operations.
Such reductions may force us to reallocate funds from other planned uses and may have a material, adverse effect on our business plan and operations, including our ability to operationalize existing licenses and complete planned capital expenditures.
−Removed: If the price or trading volume of our Subordinate Voting Shares declines, there can be no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
−Removed: If we are unable to raise sufficient capital in the future, we may not have the resources to continue our normal operations.
+Added: If the price or trading volume of our Subordinate Voting Shares declines further, there can be no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
+Added: If we are unable to raise sufficient capital in the future, we may not have the resources to continue to operate all of our current businesses, or at all.
If securities or industry analysts do not publish or cease publishing research or reports or publish misleading, inaccurate, or unfavorable research about us, our business or our market, our share price and trading volume could decline.
The trading market for our Subordinate Voting Shares may be influenced by the research and reports that securities or industry analysts publish about us, our business, our market, or our competitors.
−Removed: If no or few securities or industry analysts
−Removed: cover our Company, the trading price and volume of our Subordinate Voting Shares would likely be negatively impacted.
−Removed: If one or more of the analysts who covers us downgrades our Subordinate Voting Shares or publishes inaccurate or unfavorable research about our business, or provides more favorable relative recommendations about our competitors, the price of our Subordinate Voting Shares would likely decline.
−Removed: If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our Subordinate Voting Shares could decrease, which could cause our share price or trading volume to decline.
+Added: If no or few securities or industry analysts cover our Company, as is currently the case, the trading price and volume of our Subordinate Voting Shares is likely negatively impacted and will likely continue to be negatively impacted for so long as analyst coverage is minimal or no analysts cover us.
+Added: If one or more of the analysts who covers us downgrades our Subordinate Voting Shares or publishes unfavorable research about our business, or provides more favorable relative recommendations about our competitors, the price of our Subordinate Voting Shares would likely decline.
+Added: If any analyst ceases coverage of us or fails to publish reports on us regularly, demand for our Subordinate Voting Shares could decrease, which could cause our share price or trading volume, or both, to decline further.
An investor may face liquidity risks with an investment in our Subordinate Voting Shares.
There is a significant liquidity risk associated with an investment in our Subordinate Voting Shares.
−Removed: The Subordinate Voting Shares currently trade on the Canadian Securities Exchange and are quoted on the OTCQX tier of the OTC Markets in the United States.
+Added: The Subordinate Voting Shares currently trade on the Canadian Securities Exchange and are quoted on the OTCQX tier of the OTC Markets
+Added: in the United States.
We cannot predict at what prices the Subordinate Voting Shares will continue to trade, and there is no assurance that an active trading market will be sustained.
11 unchanged sentences
As a public company both in Canada and the United States, we are subject to the reporting requirements, rules and regulations under the applicable Canadian and United States securities laws and rules of stock exchange(s) on which our securities may be listed.
−Removed: There are increased costs associated with legal, accounting, and other expenses related to such regulatory compliance.
−Removed: Securities legislation and the rules and policies of the Canadian Securities Exchange require listed companies to, among other things, adopt corporate governance and related practices, and to continuously prepare and disclose material information, all of which add to a company’s legal and financial compliance costs.
+Added: We incur increased costs associated with legal, accounting, and other expenses related to such regulatory compliance.
+Added: Securities legislation and the rules and policies of the Canadian Securities Exchange require listed companies to, among other things, adopt corporate governance and related practices, and to continuously prepare and disclose material information, all of which add to our legal and financial compliance costs.
We may also elect to devote greater resources than we otherwise would have on communication and other activities typically considered important by publicly traded companies.
−Removed: We do not intend to pay dividends on our Shares and, consequently, the ability of investors to achieve a return on their investment will depend entirely on appreciation in the price of our Subordinate Voting Shares.
−Removed: We have never declared or paid any cash dividend on our Shares and do not currently intend to do so in the foreseeable future.
+Added: We do not intend to pay dividends on our Subordinate Voting Shares and, consequently, the ability of investors to achieve a return on their investment will depend entirely on appreciation in the price of our Subordinate Voting Shares.
+Added: We have never declared or paid any cash dividend on our Subordinate Voting Shares and do not currently intend to do so in the foreseeable future.
We currently anticipate that we will retain future earnings, if any, for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future.
1 unchanged sentence
There is no guarantee that our Subordinate Voting Shares will appreciate in value or even maintain the price at which they were purchased.
−Removed: We are eligible to be treated as an “emerging growth company” as defined in the JOBS Act and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our financial statements not being comparable to those of some other public companies.
+Added: We are an “emerging growth company” as defined in the JOBS Act and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our financial statements not being comparable to those of some other public companies.
As a result of this and other reduced disclosure requirements applicable to emerging growth companies, the Subordinate Voting Shares may be less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act.
−Removed: Under the JOBS Act, emerging growth companies may take advantage of certain reduced disclosures and may, as hawse have, elect to delay adopting new or revised
−Removed: accounting standards until such time as those standards apply to private companies, which may result in our financial statements not being comparable to those of some other public companies.
+Added: Under the JOBS Act, emerging growth companies may take advantage of certain reduced disclosures and may, as hawse have, elect to delay adopting new or revised accounting standards until such time as those standards apply to private companies, which may result in our financial statements not being comparable to those of some other public companies.
For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
−Removed: We could be an emerging growth company for up to five years, although circumstances could cause the Company to lose that status earlier, including if the market value of the Subordinate Voting Shares held by non-affiliates exceeds $700 million as of June 30, 2022, or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which case we would no longer be an emerging growth company as of the following December 31.
−Removed: Additionally, if we issue more than $1.0 billion in non-convertible debt during any three-year period before June 30, 2022, we will cease to be an emerging growth company immediately.
−Removed: We cannot predict if investors will find the Subordinate Voting Shares less attractive because we may rely on these exemptions.
+Added: We could be an emerging growth company for up to five years, although circumstances could cause the Company to lose that status earlier, including if we are deemed to be a large accelerated filer under the rules of the SEC of any fiscal year, if we have total annual gross revenue of $1.235 billion as of the end of a fiscal year, or if we issue more than $1.0 billion in non-convertible debt during any three-year period.
+Added: We cannot predict if investors will find the Subordinate Voting Shares less attractive because we
+Added: may rely on these exemptions.
If some investors find the Subordinate Voting Shares less attractive as a result, there may be a less active trading market for the Subordinate Voting Shares, and the share price may be more volatile.
13 unchanged sentences
THIS REPORT DOES NOT DISCUSS RISKS ASSOCIATED WITH ANY APPLICABLE STATE, PROVINCIAL, LOCAL OR FOREIGN TAX LAWS.
−Removed: THE TAX RELATED INFORMATION IN THIS REPORT DOES NOT CONSTITUTE TAX ADVICE AND IS FOR INFORMATIONAL
−Removed: PURPOSES ONLY.
+Added: THE TAX RELATED INFORMATION IN THIS REPORT DOES NOT CONSTITUTE TAX ADVICE AND IS FOR INFORMATIONAL PURPOSES ONLY.
FOR ADVICE ON TAX LAWS APPLICABLE TO A SHAREHOLDER’S INDIVIDUAL TAX SITUATIONS, SHAREHOLDERS SHOULD SEEK THE ADVICE OF THEIR TAX ADVISORS.
61 unchanged sentences
We have not performed any analysis to determine whether we are currently, or have ever been, a USRPHC.
−Removed: In addition, we have not sought and do not intend to seek formal confirmation of our status as a Non-USRPHC from the IRS.
+Added: In addition, we have not sought and do not intend to seek formal confirmation of our status
+Added: as a Non-USRPHC from the IRS.
If we ultimately are determined by the IRS to constitute a USRPHC, our non-U.S.
15 unchanged sentences
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.