What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-15 · 215 added, 235 removed, 812 unchanged (36% of the section changed)

3 unchanged sentences

Goodness Growth Holdings, Inc.

(formerly Vireo Health International, Inc.)

Opinion on the Consolidated Financial Statements

1 unchanged sentence

(the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of net loss and comprehensive loss, changes in stockholders’ equity, and cash flows for the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements present fairly, in all material respects, the financial position of Goodness Growth Holdings, Inc.

as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company has concluded that the historical recurring losses from operations, negative cash flows from operations, dependence on debt and other financings and the termination of the Arrangement Agreement gives rise to substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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Current assets:

Restricted cash

Accounts receivable, net of allowance for doubtful accounts of $ 453,860 and $ 572,080 , respectively

Prepayments and other current assets

Notes receivable

Deferred acquisition costs

Assets Held for Sale

Deferred financing costs

Total current assets

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Accounts Payable and Accrued liabilities

Right of use liability

Convertible notes, net of issuance costs

Long-Term debt, current portion

Right of use liability

Liabilities held for sale

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Right-of-use liability

Long-Term debt

Long-Term debt, net

Total liabilities

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Total operating expenses

Loss from operations

Income (loss) from operations

( 6,939,365 )

3 unchanged sentences

( 8,596,201 )

Loss on sale of property and equipment

Gain on disposal of assets

Derivative gain (loss)

( 5,169,951 )

Gain on disposal of assets

Interest expenses, net

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( 29,625,079 )

( 9,086,911 )

Loss before income taxes

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Deferred income tax recoveries

( 1,363,000 )

Net income (loss) and comprehensive income (loss)

Net loss and comprehensive loss

( 42,457,444 )

( 33,690,475 )

Net income (loss) per share - basic and diluted

Weighted average shares used in computation of net income (loss) per share - basic & diluted

Net loss per share - basic and diluted

Weighted average shares used in computation of net loss per share - basic & diluted

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

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( 101,733,044 )

Shares issued in private placement

Warrants exercised

Options exercised

Conversion of MVS shares

Shares issued in Nevada acquisition

Shares issued in Charm City acquisition

Options exercised

Warrants exercised

Warrants issued in financing activities

Stock-based compensation

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Conversion of MVS shares

Shares issued in Nevada acquisition

Shares issued in Charm City acquisition

Options exercised

Warrants exercised

Warrants issued in financing activities

Stock-based compensation

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( 1,338,000 )

Deferred Gain/Loss Sale Leaseback

Loss on Sale of Property and Equipment

Derivative (Gain) Loss

Gain on Sale of Property and Equipment

Gain on disposal of AZ Dispensary

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Gain on disposal of OMS

Gain on disposal of PDS

( 3,402,794 )

Gain on disposal of business MWH

Gain on disposal of business PAMS

( 17,116,068 )

Loss on disposal of business HG

Gain on disposal of royalty asset

Change in operating assets and liabilities:

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Proceeds from sale of AZ Dispensary net of cash

Proceeds from sale of PAMS net of cash

Proceeds from sale of PDS net of cash

Proceeds from sale of HG net of cash

Proceeds from sale of property, plant, and equipment

Proceeds from sale of royalty asset

Acquisition of Charm City

5 unchanged sentences

( 5,616,518 )

( 7,211,348 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of shares

Deferred financing costs

Proceeds from long-term debt, net of issuance costs

7 unchanged sentences

Net cash provided by financing activities

Net change in cash and restricted cash

Net change in cash

( 11,950,401 )

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Cash and restricted cash, beginning of year

Cash and restricted cash, end of year

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

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(“ Goodness Growth ” or the “ Company ”) (formerly, Vireo Health International, Inc.) was incorporated under the Alberta Business Corporations Act on November 23, 2004.

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

The Company was previously listed on the Canadian Securities Exchange (the “ CSE ”) under ticker symbol “VREO”.

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

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

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

Goodness Growth operates cannabis cultivation, production, and dispensary facilities in Arizona, Maryland, Minnesota, New Mexico, and New York, and formerly in Ohio, which was disposed of on March 31, 2021, through its subsidiaries.

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

Goodness Growth operates cannabis cultivation, production, and dispensary facilities in Maryland, Minnesota, New Mexico, and New York, and formerly in Arizona and Ohio.

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

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Recently some federal officials have attempted to distinguish between medical cannabis use as necessary, but recreational use as “still a violation of federal law.” At the present time, the distinction between “medical marijuana” and “recreational marijuana” does not exist under U.S.

Since being declared a global pandemic in March 2020, the spread of COVID-19 has severely impacted virtually all areas of the globe.

In many countries, including the United States, businesses were forced to cease or limit operations for long or indefinite periods of time.

Measures taken to contain the spread of the virus, including travel bans, quarantines, social distancing, and closures of non-essential services triggered significant disruptions to businesses worldwide, resulting in an economic slowdown.

Global stock markets have also experienced great volatility.

Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions.

The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses, remains unclear at this time.

During 2021, the Company’s revenue, gross profit and operating income were not negatively impacted by COVID-19 and the Company generally maintained the consistency of its operations.

However, the uncertain nature of the spread of COVID-19 may impact its business operations for reasons including the potential quarantine of Goodness Growth employees or those of its supply chain partners.

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

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

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

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

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

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

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

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

On October 21, 2022, Goodness Growth commenced an action in the Supreme Court of British Columbia against Verano after Verano repudiated the Arrangement Agreement.

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.

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

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

Summary of Significant Accounting Policies

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

For the year ended December 31, 2021, the Company reported a net loss of $ 33,690,475 and a net loss of $ 22,942,194 for the year ended December 31, 2020.

For the years ended December 31, 2021 and 2020, the Company had negative cash flows used in operating activities of $ 30,517,197 and $ 10,932,383 , respectively.

As of December 31, 2021 and 2020, the Company had working capital of $ 25,233,518 and $ 27,098,496 respectively, reflecting a decrease in working capital of $ 1,864,978 for the year ended December 31, 2021.

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

These management forecasts and assumptions support the Company’s ability to meet its contractual obligations such as payments of principal and interest on the outstanding notes payable and the Company’s lease commitments.

We anticipate that we will continue to report losses and negative cash flow for the foreseeable future.

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 and the termination of the Arrangement Agreement gives rise to substantial doubt about the Company’s ability to meet its obligations over the next twelve months.

Company management is working with the Company’s lenders, counsel, and other applicable parties to implement a plan to effectively mitigate the conditions giving rise to substantial doubt.

Elements of this plan may include, but are not limited to, asset sales, debt restructuring, and capital raises.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

However, the Company’s continuance as going concern is dependent on its future profitability and implementation of the aforementioned plan.

The Company may not be successful in these efforts.

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

9 unchanged sentences

Minnesota, USA

Ohio Medical Solutions, Inc.

Delaware, USA

Maryland, USA

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Recently adopted accounting pronouncements

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

In November of 2021 FASB issued ASU 2021 -10 - Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.

The update is intended to increase the transparency of government assistance including the disclosure of the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements.

The Company adopted Topic 832 on January 1, 2022.

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

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A component of the Company comprises an operation and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company.

During the year ended December 31, 2021, the Company completed two divestitures, further described in Note 3.

During the years ended December 31, 2022 and 2021, the Company completed various divestitures, further described in Note 3.

Management considered the quantitative results of the divested entities as well as qualitative strategic considerations to judge whether the two divestitures constitute a discontinued operation.

Management does not believe either of these divestitures represent a strategic shift that has or will have a major effect on an entity’s operations and financial results, and as such, none of these divestitures are considered a discontinued operation.

Management does not believe these divestitures

represent a strategic shift that has or will have a major effect on an entity’s operations and financial results, and as such, none of these divestitures are considered a discontinued operation.

Definition of a business – Determination of what constitutes a business for purposes of acquisition accounting requires significant judgement.

ASC 805 notes that if substantially all of the fair value of the gross assets acquired is concentrated

in a single identifiable asset or group of similar identifiable assets, the set is not considered a business.

ASC 805 notes that if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business.

However, the exact quantitative threshold is not explicitly defined.

During the year ended December 31, 2022, no acquisition activity occurred.

During the year ended December 31, 2021, the Company completed two acquisitions, further described in Note 3.

24 unchanged sentences

Stock options

Convertible notes

Segment Information

5 unchanged sentences

Cash and cash equivalents

Cash and cash equivalents is comprised of cash and highly liquid investments that are readily convertible into known amounts of cash with original maturities of three months or less.

Cash and cash equivalents are comprised of cash and highly liquid investments that are readily convertible into known amounts of cash with original maturities of three months or less.

The Company has no cash equivalents for the years presented.

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The following table represents the Company’s disaggregated revenue by source:

Years Ended December 31,

Revenue is recognized when control of the promised goods or services, through performance obligations by the Company, is transferred to the customer in an amount that reflects the consideration it expects to be entitled to in exchange for the performance obligations.

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The Company may receive short-term advances from its customers.

Using the practical expedient in ASC 606, the Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised good to a customer and when the customer pays for that good or service will be one year or less.

customer and when the customer pays for that good or service will be one year or less.

The Company has not, nor expects to receive long-term advances from customers.

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Stock-based compensation

The Company measures and recognizes compensation expense for stock options to employees and non-employees on a straight-line basis over the vesting period based on their grant date fair values.

The Company measures and recognizes compensation expense for stock options and restricted stock units (RSUs) to employees and non-employees on a straight-line basis over the vesting period based on their grant date fair values.

Prior to the adoption of ASU 2018-07 on January 1, 2019, the fair value of stock options to non-employees were re-measured at each reporting date until one of either of the counterparty’s commitment to perform is established or until the performance is complete.

2 unchanged sentences

The volatility rate is based on historical volatilities of public companies operating in a similar industry to the Company, as well as the Company’s historical volatility.

The Company estimates the fair value of RSUs to be the closing market price of the Company’s stock on the business day immediately preceding the grant date.

For stock options granted, the fair value of common stock at the date of grant was determined by the Board of Directors with assistance from management.

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

The Company does not estimate forfeiture rates when calculating compensation expense for stock options or RSUs.

The Company records forfeitures as they occur.

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The Company recognizes uncertain income tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority.

An uncertain income tax position will not be recognized if it has less than a

50% likelihood of being sustained.

An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

Changes in recognition or measurement are reflected in the period in which judgment occurs.

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The required date of adoption is January 1, 2023, and the Company is evaluating potential future impacts on the Company’s financial statements.

In November of 2021 FASB issued ASU 2021 -10 - Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance.

The required date of adoption is January 1, 2022, and the Company is evaluating potential future impacts on the Company’s financial statements.

Business Combinations and Dispositions

On March 31, 2022, the Company sold the rights to a 10 % royalty on future net revenues generated by High Gardens, Inc., a former subsidiary of the Company that was divested in 2020, for cash consideration of $ 236,635 .

The carrying value of the intangible royalty asset prior to disposition was $ 68,276 , resulting in a gain of $ 168,359 which was recorded in the unaudited condensed consolidated statement of loss and comprehensive loss for the year ended December 31, 2022.

On October 1, 2020, the Company reached a definitive agreement with Ayr Strategies Inc.

8 unchanged sentences

Cash consideration received of $ 15,125,010 exceeded net assets transferred of $ 8,659,077 resulting in a gain of $ 6,465,933 which was recorded in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2021.

On June 22, 2020, the Company reached a definitive agreement with Jushi Inc, a subsidiary of Jushi Holdings, Inc.

(“ Jushi ”), to divest all the equity in its subsidiary company, Pennsylvania Medical Solutions, LLC (“ PAMS ”).

On August 11, 2020, the Company completed the sale of its equity in PAMS to Jushi, for consideration of $ 20,320,936 including a $ 3,750,000 four-year note with an 8 percent coupon rate payable quarterly.

As part of this transaction, the Company transferred assets and liabilities with a net book value of 3,204,868 .

Consideration received exceeded PAMS net assets at the time of sale, resulting in a gain of $ 17,116,068 which was recorded in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2020.

In July of 2020, the Company divested all the equity in its subsidiary company, Midwest Hemp Research, LLC, to the CEO of the Company.

Prior to the disposition, the Company had $ 50,000 in outstanding convertible notes associated with the initial acquisition of Midwest Hemp, and had recorded an intangible asset of $ 50,000 on the balance sheet.

Upon divestiture these outstanding convertible notes and accrued interest with a balance of $ 52,038 were cancelled, and the intangible asset with a net book value of $ 45,000 was disposed of, resulting in a gain of $ 7,038 .

On September 11, 2020, the Company divested all the equity in its subsidiary company, High Gardens, Inc., in exchange for a 10 % royalty on all future net revenues generated by High Gardens, Inc.

The fair value of this royalty consideration

was $ 68,276 and is classified as an intangible asset with an indefinite life on the balance sheet.

This consideration received was less than High Gardens, Inc.

net assets of $ 340,999 at the time of sale, resulting in a loss of $ 272,723 which was recorded in the statement of loss and comprehensive loss for the year ended December 31, 2020.

As described above, this asset was subsequently disposed in September 2020.

On December 17, 2020, the Company divested all the equity in its subsidiary company, Pennsylvania Dispensary Solutions, LLC, to Jushi in exchange for consideration of $ 5,726,848 cash.

Consideration received exceeded PAMS net assets of $ 2,324,054 at the time of sale, resulting in a gain of $ 3,402,794 which was recorded in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2020.

Asset Acquisitions

5 unchanged sentences

As part of the closing of the acquisition the restricted cash of $ 1,592,500 was transferred to the sellers, the convertible notes in escrow were cancelled, and the Company issued 1,050,000 subordinate voting shares to the sellers.

Management determined the total consideration paid of $ 1,592,500 in restricted cash, $ 1,385,239 associated with the fair value of the subordinate voting shares issued, and $ 28,136 of deferred acquisition costs, was equal to the fair value of the intangible asset acquired, or $ 3,005,875 .

Management determined the total consideration paid of $ 1,592,500 in restricted cash, $ 1,385,239 associated with the fair value of the subordinate voting shares issued, and

$ 28,136 of deferred acquisition costs, was equal to the fair value of the intangible asset acquired, or $ 3,005,875 .

The related operating results are included in the accompanying consolidated statements of operations, changes in shareholders’ equity, and statement of cash flows commencing from the date of acquisition.

5 unchanged sentences

Assets Held for Sale

As of December 31, 2022 the Company identified property, equipment, and lease assets and liabilities associated with the businesses in Maryland, Nevada, Massachusetts, and Puerto Rico with carrying amounts that are expected to be recovered principally through sale or disposal rather than through continuing use.

The sale of these assets and liabilities is highly probable, they can be sold in their immediate condition, and the sales are expected to occur within the next twelve months.

As such, these assets and liabilities have been classified as “held for sale.” The carrying value of these net assets exceeded fair value less expected cost to sell, and as such, the Company recorded an impairment loss of $ 8,596,201 for the year ended December 31, 2022.

Assets and liabilities held for sale are as follows:

Assets held for sale

Property and equipment

Intangible assets

Operating lease, right-of-use asset

Total assets held for sale

Liabilities held for sale

Right of Use Liability

Total liabilities held for sale

Fair Value Measurements

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December 31, 2021

Restricted cash

Items measured at fair value on a non-recurring basis

1 unchanged sentence

In connection with an evaluation of such non-financial assets during the year ended December 31, 2022, the carrying values of property and equipment and intangible assets and were concluded to exceed their fair values.

As a result, the Company recorded impairment charges that incorporates fair value measurements based on Level 3 inputs (refer to Notes 10 & 13).

No impairment was determined necessary for the year ended December 31, 2020.

As a result, the Company recorded impairment charges that incorporates fair value measurements.

The Company used Level 2 fair value inputs when a buyer quote was received, or similar assets had been sold recently in the market.

To the extent a market for the asset didn’t exist, or was illiquid, the Company used Level 3 fair value inputs (refer to Notes 9 & 12).

The carrying value of the Company’s accounts receivable, accounts payable, and accrued liabilities approximate their fair value due to their short-term nature, and the carrying value of notes receivable and long-term debt approximates fair value as they bear a market rate of interest.

Accounts Receivable

Trade receivables are comprised of the following items:

Accounts receivables are comprised of the following items:

Trade receivable

Tenant improvements receivable

Tax withholding receivable

Included in the trade receivables, net balance at December 31, 2022, and 2021, is an allowance for doubtful accounts of $ 169,699 and $ 215,606 , respectively.

Included in the tax withholding receivable, net balance at December 31, 2021 is an allowance for doubtful accounts of $ 356,474 .

Included in the tax withholding receivable, net balance at December 31, 2022 and 2021, is an allowance for doubtful accounts of $ 284,161 and $ 356,474 respectively.

Notes Receivable

As of December 31, 2021, and 2020, the Company had a total of $ 3,750,000 and $ 4,043,700 , respectively, in notes receivable.

The balances are comprised primarily of the $ 3,750,000 four-year note with an 8 % coupon rate payable quarterly obtained as part of the PAMS disposition further described in Note 3.

As of December 31, 2022, and 2021, the Company had a total of $ 3,750,000 in notes receivable.

The balance is comprised of a $ 3,750,000 four-year note with an 8 % coupon rate payable quarterly obtained as part of a 2020 disposition.

Inventory is comprised of the following items:

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Other Prepaid Expenses

Deferred Acquisition Costs

As of December 31, 2021, and 2020, the Company had a total of $ 0 and $ 28,136 respectively in deferred acquisition costs relating to the acquisition of MJ Distributing (Note 3), which had closed as of December 31, 2020.

Property and Equipment, Net

7 unchanged sentences

( 7,693,878 )

For the year ended December 31, 2021 and 2020, total depreciation on property and equipment was $ 3,029,324 and $ 2,481,083 , respectively.

For the years ended December 31, 2022 and 2021, total depreciation on property and equipment was $ 3,335,895 and $ 3,029,324 , respectively.

For the year ended December 31, 2022 and 2021, accumulated amortization of the right of use asset amounted to $ 3,392,377 and $ 2,513,223 , respectively.

For the year ended December 31, 2021 and 2020, the right of use asset under finance lease of $ 71,078,655 and 12,351,838 , respectively, consists of leased processing and cultivation premises, and leased equipment.

For the years ended December 31, 2022 and 2021, the right of use asset under finance lease of $ 69,892,379 and $ 71,078,655 , respectively, consists of leased processing and cultivation premises, and leased equipment.

During the years ended December 31, 2022 and 2021, total interest expense capitalized to property plant and equipment was $ 573,717 and $ 521,737 , respectively.

The Company capitalized into inventory $ 2,682,818 and $ 2,404,711 relating to depreciation associated with manufacturing equipment and production facilities as of December 31, 2022 and 2021, respectively.

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

As of December 31, 2021, the Company evaluated whether property and equipment showed any indicators of impairment, and it was determined that the recoverable amount of certain net assets was below book value.

As of December 31, 2022, in conjunction with the Company’s held for sale assessment and disposal of certain long-term assets, the Company evaluated whether property and equipment showed any indicators of impairment, and it was determined that the recoverable amount of certain net assets was below book value.

As a result, the Company recorded an impairment charge of $ 8,596,201 (2021 - $ 3,064,468 ) on property and equipment, net.

Cash proceeds received during the year ended December 31, 2022, for disposed assets was $ 395,458 .

Components of lease expenses are listed below:

2 unchanged sentences

Interest on lease liabilities

Operating lease expense

Total lease expenses

Operating lease costs

Total lease costs

Future minimum lease payments (principal and interest) on the leases are as follows:

8 unchanged sentences

( 156,054,450 )

Less liabilities held for sale

( 1,319,847 )

Present value of lease liability

The Company has entered into various lease agreements for the use of buildings used in production and retail and wholesale sales of cannabis products.

On October 1, 2022, the Company terminated the existing lease agreements for the cultivation and processing facilities in Arizona.

The right of use liability exceeded the right of use asset at the time of termination resulting in a gain on disposal of $ 184,641 .

This gain is included in other income on the consolidated statement of net loss and comprehensive loss for the year ended December 31, 2022.

On September 24, 2021, the Company signed a third amendment to the existing lease agreements for the cultivation and processing facilities in New York.

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This base rent increase will be phased in over the sixteen months following the amendment date.

On April 10, 2020, the Company signed a fourth amendment to the existing lease agreements for the cultivation and processing facilities in Minnesota.

Under the terms of the amendment, the term of the lease was extended to April 9, 2040, and provides for additional expansion and tenant improvements up to $ 6,698,183 .

The amended agreement for the cultivation and processing facility in Minnesota requires regular monthly payments of $ 129,350 .

On April 10, 2020, the Company signed a second amendment to the existing lease agreements for the cultivation and processing facilities in New York.

Under the terms of the amendment, the term of the lease was extended to April 9, 2035, and provides for additional tenant improvements up to $ 3,360,000 .

The amended agreement for the cultivation and processing facility in New York requires regular monthly payments of $ 90,519 .

On January 14, 2020, the Company signed a second amendment to the existing lease agreements for the cultivation and processing facilities in Pennsylvania.

Under the terms of the second amendment, the term of the lease was extended to December 7, 2038, and provides for additional tenant improvements of up to $ 8,336,670 .

The amended agreement for the cultivation and processing facility in Pennsylvania requires regular monthly payments of $ 182,419 .

On April 10, 2020, the Company signed a third amendment to the existing lease agreements for the cultivation and processing facilities in Pennsylvania.

Under the terms of the amendment, tenant improvements were reduced to $ 8,036,670 .

The amended agreement for the cultivation and processing facility in Pennsylvania requires regular monthly payments of $ 184,786 .

This lease was transferred on the disposition of PAMS (Note 3).

Supplemental cash flow information related to leases

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The following table shows the change in carrying amount of goodwill:

Goodwill - December 31, 2019 and 2020

Goodwill - January 1, 2021

( 2,948,655 )

Goodwill - December 31, 2021

Goodwill - December 31, 2021 and 2022

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

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As such, the first and second steps of the goodwill impairment test are unnecessary, and no impairment charge was taken.

During the year ended December 31, 2021, the Company acquired cannabis licenses in Nevada and Maryland.

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

Intangible assets are comprised of the following items:

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Balance December 31, 2020

Additions (Note 3)

Balance, December 31, 2020

Additions (Note 3)

Divestitures (Note 3)

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Balance, December 31, 2021

Divestitures (Note 3)

Transfer to held for sale (Note 3)

Balance, December 31, 2022

Amortization expense for intangibles was $ 676,566 and $ 817,215 during the years ending December 31, 2022 and 2021, respectively and is recorded in operating expenses on the Consolidated Statements of Net Loss and Comprehensive Loss.

As of December 31, 2021, the Company evaluated whether intangible assets showed any indicators of impairment, and it was determined that the recoverable amount of the Company’s Nevada license was below book value.

The Company reviewed valuations of similar licenses held by peer companies, noting these valuations were substantially lower than the Company’s book value of the Nevada licenses.

The Company arrived at a valuation of the Nevada licenses that is in line with comparable licenses held be peer companies, and as a result, the Nevada licenses were impaired by $ 2,105,483 .

As of December 31, 2022, the Company evaluated whether intangible assets showed any indicators of impairment, and it was determined that none exist.

As such, no impairment of intangible assets was recorded for the year ended December 31, 2022.

The Company estimates that amortization expense will be $ 639,065 per year , for the next five years.

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Effective November 13, 2019, the Company’s promissory note payable in the amount of $ 1,010,000 was modified to increase the amount payable to $ 1,110,000 and extend the maturity date to December 31, 2021 .

On December 28, 2021, the Company’s promissory note payable in the amount of $ 1,110,000 was modified to extend the maturity date to December 31, 2023 , and the Company paid off $ 60,000 in principal.

On December 28, 2021, the Company’s

promissory note payable in the amount of $ 1,110,000 was modified to extend the maturity date to December 31, 2023 , and the Company paid off $ 60,000 in principal.

On March 25, 2021, the Company entered into a credit agreement for a senior secured delayed draw term loan with an aggregate principal amount of up to $ 46,000,000 (the “ Credit Facility ”), and executed a draw of $ 26,000,000 in principal.

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Additionally, the Company incurred fees and closing costs of $ 1,083,422 which were paid in cash.

The unpaid principal amounts outstanding under the Credit Facility bear interest at a rate of (a) 13.625 % per annum payable monthly in cash, and (b) 2.75 % per annum paid in kind interest payable monthly.

The unpaid principal amounts outstanding under the Credit Facility bear interest at a rate of (a) the U.S.

prime rate plus 10.375 %, payable monthly in cash, and (b) 2.75 % per annum paid in kind interest payable monthly.

The Credit Facility matures on March 31, 2024.

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Each warrant provides customary anti-dilution provisions.

The fair value of these warrants at the time of issuance was $ 5,395,759 (Note 16) which is treated as a deferred financing cost.

On November 18, 2021, the Company and lender amended the Credit Facility to provide for an additional loan of $ 4,200,000 with a cash interest rate of 15 % per annum and PIK interest of 2 % and no warrants were issued in connection with this loan.

The fair value of these warrants at the time of issuance was $ 5,395,759 which is treated as a deferred financing cost.

On November 18, 2021, the Company and lenders amended the Credit Facility to provide for an additional loan of $ 4,200,000 with a cash interest rate of 15 % per annum and PIK interest of 2 % per annum and no warrants were issued in connection with this loan.

Cash received net of $ 156,900 in financing costs was $ 4,043,100 .

Obligations under the Credit Facility are secured by substantially all the assets of the Company.

All deferred financing costs are treated as a contra-liability, to be netted against the outstanding loan balance and amortized over the remaining life of the loan.

On November 19, 2021, the Company signed a promissory note payable in the amount of $ 2,000,000 in connection with the acquisition of Charm City Medicus, LLC (Note 3).

The note bears an interest rate of 8 % per annum with interest payments required due on the last day of each calendar quarter .

On January 31, 2022, Goodness Growth and certain of its subsidiaries, as borrowers (collectively, “Borrowers”), entered into a Third Amendment to the Credit Facility (the “Third Amendment”) providing for additional delayed draw term loans of up to $ 55 million (the “Delayed Draw Loans”).

Subject to certain conditions to be satisfied prior to the initial funding thereunder, Goodness Growth may borrow a portion of the $ 55 million for working capital and other general corporate purposes and may borrow the remainder for other specific purposes, including relating to its ongoing expansion in New York.

The Delayed Draw Loans have a maturity date of April 30, 2023 with an option to extend another 12 months for an additional fee of $ 1,375,000 .

The cash interest rate on the Delayed Draw Loans under the Third Amendment is equal to the U.S.

prime rate plus 10.375 %, with a minimum required rate of 13.375 % per annum, in addition to paid-in-kind interest of 2.75 % per annum.

Pursuant to the Arrangement Agreement, Verano reimbursed Goodness Growth for all interest expenses related to the Third Amendment in excess of 10 % per annum through the purported termination of the Arrangement Agreement on October 13, 2022.

During the year ended December 31, 2022, the Company drew $ 28,000,000 in principal debt from the Delayed Draw Loans.

Proceeds received, net of deferred financing fees of $ 2,236,919 were $ 25,763,081 .

The Company was reimbursed by Verano for $ 1,190,863 of these deferred financing fees pursuant to the Arrangement Agreement.

These fees are included as other income in the statement of loss and comprehensive loss for the year ended December 31, 2022.

Unless otherwise specified, all deferred financing costs are treated as a contra-liability, to be netted against the outstanding loan balance and amortized over the remaining life of the loan.

On November 19, 2021, the Company signed a promissory note payable in the amount of $ 2,000,000 in connection with the acquisition of Charm City Medicus, LLC.

The note bears an interest rate of 8 % per annum with interest payments due on the last day of each calendar quarter.

The maturity date of the note is November 19, 2023 , and the note is secured by 25 % of the membership interests in Vireo Health of Charm City, LLC.

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Beginning of year

Note payable issued in Charm City acquisition (Note 3)

Note payable issued in Charm City acquisition

Deferred financing costs

( 2,236,919 )

( 8,607,786 )

Amortization of deferred financing costs

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Current portion

( 1,110,000 )

Total long-term debt

Derivative Liability

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

Each Unit is comprised of one subordinate voting share of the Company and one subordinate voting share purchase warrant.

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

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

Exercise Price:

Expected Life:

Annualized Volatility:

Dividend yield:

Discount Rate:

C$ Exchange Rate:

On November 16, 2020, the Company announced the forced exercise of the warrants.

The warrants were subsequently revalued prior to settlement using the Black Scholes options pricing model at $ 9,815,510 using the following assumptions:

Exercise Price:

Expected Life:

Annualized Volatility:

Dividend yield:

Discount Rate:

0.13 % - 0.18 %;

C$ Exchange Rate:

1.29 – 1.31 .

The resulting loss upon revaluation of $ 6,260,480 for the year ended December 31, 2020, is reflected in the statement of loss and comprehensive loss.

Upon settlement of the warrants, the Company received $ 9,857,498 million in cash, and extinguished the derivative liability of $ 9,815,510 .

Both the proceeds from the warrants, and the extinguishment of the derivative liability are included in Additional Paid in Capital on the balance sheet.

Convertible notes

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

This note was repaid in full during the year ended December 31, 2021.

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

December 31, 2021

December 31, 2020

5.00 % convertible notes

Net carrying amount

As of December 31, 2022, stated maturities of long-term debt were as follows:

Stockholders’ Equity

The Company’s certificate of incorporation authorized the Company to issue the following classes of shares with the following par value and voting rights as of December 31, 2021.

The liquidation and dividend rights are identical among Shares equally in our earnings and losses on an as converted basis.

Thef liquidation and dividend rights are identical among Shares equally in our earnings and losses on an as converted basis.

Voting Rights

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Shares Issued

During the year ended December 31, 2021, employee stock options were redeemed for 4,289,392 Subordinate Voting Shares.

During the year ended December 31, 2022, 54,078 Multiple Voting Shares were converted into 5,407,800 Subordinate Voting Shares.

During the year ended December 31, 2022, employee stock options were exercised for 15,002 Subordinate Voting Shares.

Proceeds from these transactions were $ 7,201 .

During the year ended December 31, 2021, employee stock options were exercised for 4,289,392 Subordinate Voting Shares.

Proceeds from these transactions were $ 1,209,605 .

During the year ended December 31, 2021, 151,407 Multiple Voting Shares were converted into 15,140,700 Subordinate Voting Shares.

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

On December 30, 2020, employee stock options were redeemed for 75,000 Subordinate Voting Shares.

Proceeds from this transaction were $ 14,250 in cash.

On December 29, 2020, employee stock options were redeemed for 4,200 Multiple Voting Shares.

Proceeds from this transaction were $ 79,800 in cash.

On November 16, 2020, the Company announced the forced exercise of the warrants issued in the March 9, 2020, non-brokered private placement transaction.

Proceeds from this transaction were $ 9,857,498 in cash.

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

Each Unit is comprised of one Subordinate Voting Share of the Company and one subordinate voting share purchase warrant.

Each warrant entitles the holder to purchase one Subordinate Voting Share for a period of three years from the date of issuance at an exercise price of C$ 0.96 per Subordinate Voting Share.

The Company has the right to force the holders of the Warrants to exercise the Warrants into Shares if, prior to the maturity date, the five-trading-day volume weighted-average price of the Shares equals or exceeds C$ 1.44 .

Proceeds from this transaction were $ 7,613,490 net of share issuance costs of $ 104,173 .

The Company also recognized a derivative liability of $ 3,555,030 on the transaction which is included in additional paid-in capital (Note 16).

Stock-Based Compensation

Stock Options

In January 2019, the Company adopted the 2019 Equity Incentive Plan under which the Company may grant incentive stock option, restricted shares, restricted share units, or other awards.

In January 2019, the Company adopted the 2019 Equity Incentive Plan under which the Company may grant incentive stock option, restricted shares, restricted share units (“RSUs”), or other awards.

Under the terms of the plan, a total of ten percent of the number of shares outstanding assuming conversion of all super voting and multiple voting shares to subordinate voting shares are permitted to be issued.

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In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 1.5 years.

The total intrinsic value of stock options outstanding and exercisable as of December 31, 2021, was $ 27,203,021 and $ 23,167,294 , respectively.

The total intrinsic value of stock options outstanding and exercisable as of December 31, 2022, was $ 0 .

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

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Warrants issued were valued using the Black-Scholes option pricing model with the following assumptions:

Risk-Free Interest Rate

Expected Life (years)

Expected Annualized Volatility

Expected Forfeiture Rate

Expected Dividend Yield

SVS Warrants Denominated in C$

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Warrants outstanding at December 31, 2020

( 7,110,481 )

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Warrants outstanding at December 31, 2021

Warrants outstanding at December 31, 2022

Warrants exercisable at December 31, 2022

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Warrants outstanding at December 31, 2021

Warrants outstanding at December 31, 2022

Warrants exercisable at December 31, 2022

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Warrants exercisable at December 31, 2022

During the year ended December 31, 2021, $ 0 (2020 - $ 10,981,157 ) in share-based compensation expense was recorded in connection with the SVS compensation warrants and $ 0 (2020 - $ 121,511 ) in share-based compensation was recorded in connection with the MVS warrants.

During the years ended December 31, 2022 and 2021, $ 0 in share-based compensation was recorded in connection with the MVS warrants.

As of December 31, 2021, there were 150,000 SVS compensation warrants earned in connection with ongoing corporate advisory and financing services rendered, but not yet issued.

The Company recorded $ 191,026 in share-based compensation expense and accounts payable and accrued liabilities in connection with these warrants as of December 31, 2021.

These warrants were granted during the year ended December 31, 2022 and marked to their fair value of $ 2,034 on the date of grant.

The difference between the fair value of these warrants at December 31, 2021 and the grant date of $ 188,992 was recorded as contra-stock based compensation expense in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2022.

The expense associated with RSUs is based on closing price of the Company’s Subordinate Voting Shares on the business day immediately preceding the grant date, adjusted for the absence of future dividends and is amortized on a straight-line basis over the periods during which the restrictions lapse.

The Company currently has RSUs that vest over a three year period.

The awards are generally subject to forfeiture in the event of termination of employment.

During the year ended December 31, 2022 the Company recognized $ 731,217 in stock-based compensation expense related to RSUs.

A summary of RSUs is as follows:

Weighted Avg.

Number of Shares

Balance, December 31, 2021

Granted on March 15, 2022

Granted on December 15, 2022

Balance, December 31, 2022

Commitments and Contingencies

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On February 25, 2019, Dr.

Mark Schneyer (“ Schneyer ”) filed a lawsuit in Minnesota District Court, Fourth District (the “ Court ”), on his own behalf and, derivatively, on behalf of Dorchester Capital, LLC, naming Vireo U.S., Dorchester Management, LLC (“ Dorchester Management ”), and Dorchester Capital, LLC (“ Capital ”), as defendants.

(“ Vireo U.S.

”), Dorchester Management, LLC (“ Dorchester Management ”), and Dorchester Capital, LLC (“ Capital ”), as defendants.

The essence of the claims made by Schneyer is Vireo U.S.

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and was previously used as a management company over Dorchester Capital, LLC.

It no longer has active operations following Vireo Health, Inc.’s acquisition of MaryMed,

It no longer has active operations following Vireo Health, Inc.’s acquisition of MaryMed, LLC in 2018.

It is owned and controlled by Kyle E.

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Shimpa, executive officers and directors of Vireo U.S.

and the Company.

Simultaneously with the complaint, Schneyer filed a motion seeking a temporary restraining order (“ TRO ”) to prevent the “further transfer” of MaryMed which would, Schneyer claimed, occur if Vireo U.S.’s RTO transactions were allowed to occur.

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On August 31, 2021, Capital filed a complaint at the Second SLC’s direction alleging the Remaining Derivative Claims and the Rejected Derivative Claims.

Schneyer opposed the appointment of the Second SLC and the Court will rule on whether the Second SLC can pursue Second Amended Complaint.

Schneyer opposed the appointment of the Second SLC.

On December 9, 2021, the Court dismissed Schneyer’s claim for rescissory damages and the Remaining Derivative Claim alleging fraud.

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On February 22, 2022, the Minnesota Court of Appeals denied the immediate review of the December 9, 2021 order.

Following this denial, the litigation will proceed with Schneyer’s three contract claims and a direct fraud claim against Management and Vireo U.S., as well as the Remaining Derivative Claims brought by Capital.

filed a motion to discuss the Remaining Derivative Claims brought by Capital that remains pending before the Court.

On June 20,2022 the Court issued an order amending and realigning the complaint brought by Capital for the Remaining Derivative Claims.

The order also denied Vireo U.S.’ and Dorchester Management’s motion to dismiss the Remaining Derivative Claims brought by Capital.

Following this order, the litigation will proceed with Schneyer’s three direct contract claims against Vireo U.S and a direct fraud claim against Management and Vireo U.S.

on an individual basis, as well as the Remaining Derivative Claims brought by Capital.

believes that Schneyer’s claims lack merit and expects to be vindicated in the SLC process or, in the alternative, prevail in the litigation, if and when it proceeds.

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

On January 31, 2022, the Company entered into the Arrangement Agreement with Verano, pursuant to which Verano was to acquire all of the issued and outstanding shares of Goodness Growth pursuant to a Plan of Arrangement.

Subject to the terms and conditions set forth in the Arrangement Agreement and the Plan of Arrangement, holders of Goodness Growth Shares would receive 0.22652 of a Verano Subordinate Voting Share, subject to adjustment as described below, for each Subordinate Voting Share held, and 22.652 Verano Subordinate Voting Shares for each Multiple Voting Share and Super Voting Share held, immediately prior to the effective time of the Arrangement.

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

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.

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

On October 21, 2022, Goodness Growth commenced an action in the Supreme Court of British Columbia against Verano after Verano wrongfully repudiated the Arrangement Agreement.

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.

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

Lease commitments

The Company leases various facilities, under non-cancelable finance and operating leases, which expire at various dates through June 2085.

The Company leases various facilities, under non-cancelable finance and operating leases, which expire at various dates through September 2041.

General and Administrative Expenses

General and administrative expenses are comprised of the following items:

Years Ended December 31,

Salaries and benefits

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( 1,490,000 )

( 1,338,000 )

Year ended December 31,

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( 2,400,960 )

( 1,426,834 )

Non-deductible expenses

Stock based and other compensation

Change in valuation allowance

( 3,751,473 )

Income tax expense, net

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Allowance for doubtful accounts

Accrued loyalty expense

Inventory reserve

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( 6,638,000 )

( 1,535,000 )

Net deferred tax assets

Deferred tax liabilities

Property and equipment

Related party management fee receivables

Note Receivable

Deferred loss sale leaseback

Total deferred tax liabilities

Net deferred asset/(tax liabilities)

At December 31, 2021, the Company had United States federal net operating loss carryforwards of approximately $ 480,000 that can be carried forward indefinitely, and state net operating loss carryforwards of approximately $ 18,270,000 that can be carried forward fifteen years and limited in annual use to 100 % of the current year taxable income.

At December 31, 2022, the Company had United States federal net operating loss carryforwards of approximately $ 740,000 that can be carried forward indefinitely and are limited in annual use to 80 % of current year taxable income, and state net operating loss carryforwards of approximately $ 39,835,000 that can be carried forward fifteen years .

State net operating loss carryforwards begin to expire on December 31, 2034.

The Company recognizes the financial statement impact of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit.

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The Company believes it is no longer subject to income tax examinations for fiscal periods ended prior to 2019.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law in response to the COVID-19 pandemic.

The CARES Act provides numerous tax provisions and stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property.

The Company has evaluated the provisions of the CARES Act relating to income taxes which will not result in material impact on its financial statements.

Supplemental Cash Flow Information (1)

Year End December 31,

Cash paid for interest

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Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company currently does not carry variable interest-bearing debt.

It is management’s opinion that the Company is not exposed to significant interest rate risk.

The Company currently carries variable interest-bearing debt subject to fluctuations in the United States Prime rate.

A change of 100 basis points in interest rates during the year ended December 31, 2022, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 265,993 .

Related Parties Transactions

1 unchanged sentence

For the years ended December 31, 2022, and 2021, the Company paid a related party (Bengal Impact Partners, of which a member of the Board of Directors is a managing partner) $ 120,000 and $ 30,000 , respectively, for ongoing corporate advisory services.

The Company recorded $ 191,026 in share-based compensation expense related to warrants earned by Bengal Impact Partners for ongoing corporate advisory services, but not yet issued.

For the years ended December 2021, and 2020, the Company paid a related party (Salo LLC, owned by a former member of the Board of Directors) for contract staffing expenses in the amount of $ 0 and $ 126,896 , respectively.

The Company granted 150,000 compensation warrants to Bengal Impact Partners for ongoing corporate advisory services (Note 16).

Certain directors and officers of the Company (Kyle Kingsley, Amber Shimpa, and Stephen Dahmer) owned OMS which was controlled by the Company through a management agreement.

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Subsequent Events

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

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

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

The Arrangement is subject to the approvals of the Supreme Court of British Columbia;

receipt of U.S.

regulatory approvals, including pursuant to the Hart–Scott–Rodino Antitrust Improvements Act and New York State regulatory requirements:

and other customary conditions of closing.

In connection with the Arrangement Agreement, on January 31, 2022, Goodness Growth and certain of its subsidiaries, as borrowers (collectively, “Borrowers”), entered into a Third Amendment to their existing Credit Agreement with Chicago Atlantic Admin, LLC and the lenders party thereto (the “Third Amendment”) providing for delayed draw term loans of up to $ 55 million (the “Delayed Draw Loans”).

The Delayed Draw Loans have a maturity date of April 30, 2023 with an option to extend another 12 month s for an additional fee of $ 1,375,000 .

The cash interest rate on the Delayed Draw Loans under the Third Amendment is equal to the U.S.

prime rate plus 10.375 % , with a minimum required rate of 13.375 % per annum, in addition to paid-in-kind interest of 2.75 % per annum.

Pursuant to the Arrangement Agreement, Verano will reimburse Goodness Growth for all interest expenses related to the Third Amendment in excess of 10 % per annum until the earlier of either the Effective Date or termination of the Arrangement Agreement (the “Interest Funding”).

On March 3, 2022, the Company drew $ 4,075,000 in principal debt from the Delayed Draw Loans.

Proceeds received, net of deferred financing fees of $ 1,075,000 , were $ 3,000,000 .

On March 3, 2022, there was a fourth amendment to the Credit Facility.

This amendment provides that the Company will cause Verano to guarantee the Credit Facility if the Arrangement closes.

In January of 2023 the Company granted 7,461,109 stock options to employees with a weighted average exercise price of $ 0.16 .

On February 24, 2023, the Company signed the fourth amendment to the existing lease agreements for the cultivation and processing facilities in New York.

The amendment provides for additional tenant improvements of $ 4,000,000 and increases base rent by $ 50,000 a month.

On March 31, 2023, the Company executed a fifth amendment to its credit facility with its senior secured lender, Chicago Atlantic Admin, LLC (the "Agent"), an affiliate of Green Ivy Capital, and a group of lenders.

The amended credit facility extends the maturity date on its Delayed Draw Loans to April 30, 2024, through the issuance of 13,017,624 Subordinate Voting Shares in lieu of a cash extension fee.

An additional 1,982,376 Subordinate Voting Shares are issuable at the discretion of the Agent.

It also provides the Company with reduced cash outlays by eliminating required amortization of the loan, and requires the Company to divest certain assets to improve its liquidity position and financial performance.

The Company has the potential to extend the maturity date on its Delayed Draw Loans up to January 31, 2026 with the satisfaction of certain financial performance-related conditions, and the commitment to enter into a $ 10,000,000 convertible note by April 30, 2023.

As conditions of the financing activities described above, the Company also agreed to make certain corporate governance changes.

Chelsea Grayson and Amber Shimpa agreed to resign from the Company’s Board of Directors, effective immediately.

The resignations of Ms.

Grayson and Ms.

Shimpa resulted in a reduction in the number of current members of the Company’s Board to five .

Furthermore, Executive Chairman Dr.

Kyle Kingsley has agreed to convert his 65,411 Super Voting Shares of Goodness Growth into 6,541,100 Subordinate Voting Shares of Goodness Growth.

Following the conversions, there will be no Goodness Growth Super Voting Shares issued and outstanding, which will have the effect of retiring the enhanced voting rights of the Company’s class of Super Voting Shares.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data