What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 127 added, 308 removed, 471 unchanged (48% of the section changed)

3 unchanged sentences

(In U.S Dollars, unaudited and condensed)

September 30,

Current assets:

18 unchanged sentences

Commitments and contingencies (refer to Note 16)

Stockholders’ equity

Stockholders’ equity (deficiency)

Subordinate Voting Shares ($- par value, unlimited shares authorized;

9 unchanged sentences

( 177,880,963 )

Total stockholders' equity

Total liabilities and stockholders' equity

Total stockholders' equity (deficiency)

( 2,067,655 )

Total liabilities and stockholders' equity (deficiency)

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

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cost of sales

7 unchanged sentences

( 7,760,160 )

( 7,641,130 )

( 12,223,196 )

Other income (expense):

1 unchanged sentence

( 5,313,176 )

( 7,476,618 )

Loss on sale of property and equipment

Gain on disposal of assets

2 unchanged sentences

( 4,601,799 )

( 15,472,885 )

( 6,037,057 )

Other income (expenses)

2 unchanged sentences

( 8,546,622 )

( 21,587,516 )

( 5,566,319 )

Loss before income taxes

1 unchanged sentence

( 16,306,782 )

( 29,228,646 )

( 17,789,515 )

Current income tax expenses

1 unchanged sentence

( 1,375,000 )

( 3,150,000 )

Deferred income tax recoveries

2 unchanged sentences

( 14,566,782 )

( 29,173,646 )

( 20,759,515 )

Net loss per share - basic and diluted

2 unchanged sentences

GOODNESS GROWTH HOLDINGS, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

Dollars, unaudited and condensed)

2 unchanged sentences

Stockholders'

Equity (deficiency)

Balance, January 1, 2022

1 unchanged sentence

Conversion of MVS shares

Shares issued in Nevada acquisition

Options exercised

Warrants exercised

Warrants issued in financing activities

Stock-based compensation

1 unchanged sentence

( 14,566,782 )

Balance at September 30, 2021

Balance at March 31, 2022

( 149,990,301 )

1 unchanged sentence

( 177,880,963 )

Conversion of MVS shares

Options exercised

Stock-based compensation

Obligation to issue shares

( 8,405,970 )

Balance at September 30, 2022

Balance at March 31, 2023

( 186,286,933 )

( 2,067,655 )

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

2 unchanged sentences

Dollars, except for per share data, unaudited and condensed)

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

11 unchanged sentences

( 3,115,000 )

Loss on Sale of Property and Equipment

Gain on disposal of OMS

Gain on disposal of royalty asset

6 unchanged sentences

( 1,255,162 )

( 7,765,288 )

Accounts payable and accrued liabilities

( 2,555,634 )

Change in assets and liabilities held for sale

5 unchanged sentences

( 2,173,430 )

( 14,637,331 )

Proceeds from sale of property, plant, and equipment

Proceeds from sale of royalty asset

Acquisition of MJ Distributing

( 1,592,500 )

Proceeds from sale of OMS net of cash

Net cash provided by (used in) investing activities

( 2,213,479 )

( 15,011,990 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt, net of issuance costs

Convertible debt payment

Proceeds from option exercises

Lease principal payments

( 1,437,346 )

Net cash provided by (used in) financing activities

Net change in cash

( 4,803,734 )

Net cash provided by financing activities

Net change in cash and restricted cash

( 6,554,062 )

Cash and restricted cash, beginning of period

Cash and restricted cash, end of period

Cash, beginning of year

Cash, end of year

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

3 unchanged sentences

Goodness Growth Holdings, Inc.

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

The Company was 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.

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

Vireo Health, Inc., (“ VHI ”) was incorporated under the laws of the State of Delaware on December 28, 2017, with an effective date of January 1, 2018.

Through a series of transactions known, colloquially, as a “reverse-triangular merger,” on March 18, 2019, VHI was acquired by a subsidiary of the Company, with the result that the former shareholder of VHI comprised over 99% of the shareholders of the Company.

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 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.

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

states (with vastly differing restrictions), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug.

2 unchanged sentences

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.

(“ Verano ”), pursuant to which Verano was to have acquired 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 were to receive 0.22652 of a subordinate voting share of Verano (each a “ Verano Subordinate Voting Share ”), subject to adjustment as described in the Arrangement Agreement (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 states that it has complied with its obligations under the Arrangement Agreement, and will its disclosure obligations under US and Canadian law, in all material respects at all times.

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.

Verano also claimed, as a result of such breaches, it is entitled to payment of a $ 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 had no factual or legal basis to justify or support purported termination of the Arrangement Agreement, which the Company determined to treat as a repudiation 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.

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.

Summary of Significant Accounting Policies

12 unchanged sentences

Actual results could differ from these estimates.

Revision of Previously Issued Financial Statements

During the year ended December 31, 2021, management identified an error related to the accounting treatment of warrants with a Canadian dollar exercise price issued in connection with the Credit Facility.

The Company initially recorded these Canadian denominated warrants as a derivative liability subject to revaluation at each period end, when they should have received equity treatment.

Additionally, the Company identified errors related to the valuation of stock issued in the acquisition of MJ Distributing, and stock issued to our former Executive Chairman, Bruce Linton.

In both instances the stock issued carried certain lock up provisions.

The Company initially recorded the equity value of the stock issued at market value on the date of issuance, rather than applying a discount for lack of marketability to account for the lock up provisions.

To correct the immaterial misstatements for the three and nine month periods ended September 30, 2021, the Company elected to revise its previously issued interim unaudited condensed consolidated statements of net loss and comprehensive loss, stockholders’ equity, and cash flows.

The Company will present the revision of its previously issued interim unaudited condensed consolidated financial statements in connection with the future filing of its Quarterly Reports on Form 10-Q.

The impact of the revisions on the Company’s interim unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2021 is reflected in the following table:

Statement of Net Loss and Comprehensive Loss for the nine months ended September 30, 2021 (unaudited)

As Previously Reported

Operating expenses:

Stock-based compensation expenses

Total operating expenses

Loss from operations

( 12,491,153 )

( 12,223,196 )

Other income (expense):

Derivative gain (loss)

( 2,317,065 )

Other income (expenses), net

( 3,249,254 )

( 2,317,065 )

( 5,566,319 )

Loss before income taxes

( 15,740,407 )

( 2,049,108 )

( 17,789,515 )

Net income (loss) and comprehensive income (loss)

( 18,710,407 )

( 2,049,108 )

( 20,759,515 )

Statement of Net Loss and Comprehensive Loss for the three months ended September 30, 2021 (unaudited)

As Previously Reported

Other income (expense):

Derivative gain (loss)

Other income (expenses), net

( 1,552,370 )

( 2,179,535 )

Loss before income taxes

( 5,683,231 )

( 6,310,396 )

Net income (loss) and comprehensive income (loss)

( 6,243,231 )

( 6,870,396 )

Consolidated Statement of Changes in Stockholders' Equity as of September 30, 2021 (unaudited)

As Previously Reported

Shares issued in Nevada acquisition

Stock-based compensation

Warrants issued in financing activities

( 18,710,407 )

( 2,049,108 )

( 20,759,515 )

Balance at September 30, 2021

Consolidated Statement of Cash Flows for the nine months ended September 30, 2021 (unaudited)

As Previously Reported

CASH FLOWS FROM OPERATING ACTIVITIES

( 18,710,407 )

( 2,049,108 )

( 20,759,515 )

Derivative gain

( 2,317,065 )

Share-based payments

Basis of consolidation

These unaudited condensed consolidated financial statements include the accounts of the following entities wholly owned, or effectively controlled by the Company during the period ended September 30, 2022:

Name of entity

34 unchanged sentences

Recently adopted accounting pronouncements

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

Disclosures by Business Entities about Government Assistance.

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

The Company adopted Topic 832 on January 1, 2022.

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

In October of 2021 FASB issued ASU 2021-08 Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The update is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

The adoption of the standard on January 1, 2023, did not have a material impact on the Company's results of operations or cash flows.

Net loss per share

5 unchanged sentences

In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive.

The Company recorded a net loss for the three and nine month periods ended September 30, 2022 and 2021, presented in these financial statements, and as such there is no difference between the Company’s basic and diluted net loss per share for these periods.

The anti-dilutive shares outstanding for the nine month period ending September 30, 2022 and 2021 were as follows:

September 30,

The Company recorded a net loss for the three month periods ended March 31, 2023 and 2022, presented in these financial statements, and as such there is no difference between the Company’s basic and diluted net loss per share for these periods.

The anti-dilutive shares outstanding for the three month period ending March 31, 2023 and 2022 were as follows:

Stock options

3 unchanged sentences

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

Nine Months Ended

September 30,

Three Months Ended

September 30,

New accounting pronouncements not yet adopted

In October of 2021 FASB issued ASU 2021-08 Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

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

Business Combinations and Dispositions

On March 31, 2021, the Company sold all of the assets and liabilities of its affiliated company, Ohio Medical Solutions, Inc.

(“ OMS ”) to Ayr Strategies Inc.

(“ Ayr ”) for consideration of $ 1,150,000 .

As part of this transaction, the Company transferred assets and liabilities with a net book value of $ 712,894 .

Consideration received exceeded OMS’s net assets at the time of sale, resulting in a gain of $ 437,107 which was recorded in the unaudited condensed consolidated statement of loss and comprehensive loss for the nine months ended September 30, 2021.

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

The carrying value of the intangible royalty asset prior to disposition was $ 68,276 , resulting in a gain of $ 168,359 which was recorded in the unaudited condensed consolidated statement of loss and comprehensive loss for the nine months ended September 30, 2022.

Asset Acquisitions

Acquisition of MJ Distributing C201, LLC and MJ Distributing P132, LLC

On April 10, 2019, the Company entered into a definitive agreement to acquire 100 % of the membership interests in MJ Distributing C201, LLC and MJ Distributing P132, LLC (“ MJ Distributing ”) which currently hold licenses to cultivate and distribute, respectively, medical and adult-use cannabis in the state of Nevada.

The purpose of this acquisition was to acquire a medical marijuana license in the state of Nevada.

The acquisition was financed with cash on hand and stock.

The acquisition of MJ Distributing was completed on January 5, 2021.

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

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

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

Assets Held for Sale

As of September 30, 2022 the Company identified property, equipment, and lease assets and liabilities associated with the businesses in Maryland, Arizona, Nevada, and Massachusetts with carrying amounts that are expected to be recovered principally through sale or disposal rather than through continuing use.

As of March 31, 2023 the Company identified property, equipment, and lease assets and liabilities associated with the businesses in New York, Nevada, Puerto Rico, and Massachusetts with carrying amounts that are expected to be recovered principally through sale or disposal rather than through continuing use such that the Company can better manage working capital and generate more favorable future cash flows.

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 $ 2,108,703 for the three months ended September 30, 2022, and $ 7,476,618 for the nine months ended September 30, 2022.

Assets and liabilities held for sale are as follows:

As such, these assets and liabilities have been classified as “held for sale.” Assets and liabilities held for sale are as follows:

Assets held for sale

2 unchanged sentences

Operating lease, right-of-use asset

Deferred Tax Assets

Total assets held for sale

7 unchanged sentences

Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of September 30, 2022, and December 31, 2021, indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

Quoted prices in

active markets for

identical assets

September 30, 2022

December 31, 2021

Items measured at fair value on a non-recurring basis

The Company’s non-financial assets, such as prepayments and other current assets, long lived assets, including property and equipment, goodwill, and intangible assets, are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.

In connection with an evaluation of such non-financial assets during the nine months ended September 30, 2022, the carrying values of property and equipment were concluded to exceed their fair values.

As a result, the Company recorded impairment charges that incorporates fair value measurements based on Level 2 inputs (Note 8).

No indicators of impairment existed as of March 31, 2023, and therefore no impairment charges were recorded.

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.

1 unchanged sentence

Trade receivables are comprised of the following items:

September 30,

Trade receivable

Tax withholding receivable

Included in the trade receivables, net balance at September 30, 2022 and December 31, 2021, is an allowance for doubtful accounts of $ 124,505 and $ 215,606 , respectively.

Included in the tax withholding receivable, net balance at September 30, 2022 and December 31, 2021 is an allowance for doubtful accounts of $ 356,474 .

Other receivables, as of September 30, 2022, primarily consists of deferred financing costs paid in connection with the Credit Facility (Note 13), but subject to reimbursement by Verano per the terms of the Arrangement Agreement.

Included in the trade receivables, net balance at March 31, 2023 and December 31, 2022, is an allowance for doubtful accounts of $ 189,695 and $ 169,699 respectively.

Included in the tax withholding receivable, net balance at March 31, 2023 and December 31, 2022 is an allowance for doubtful accounts of $ 284,161 .

Inventory is comprised of the following items:

September 30,

Work-in-progress

2 unchanged sentences

Inventory valuation adjustments included in cost of sales on the statements of net loss and comprehensive loss is comprised of the following:

Three Months Ended September 30,

Nine Months Ended September 30,

Work-in-progress

2 unchanged sentences

Prepayments and other current assets are comprised of the following items:

September 30,

Prepaid Insurance

2 unchanged sentences

Property and equipment, net consisted of the following:

September 30,

Buildings and leasehold improvements

5 unchanged sentences

( 10,088,649 )

For the nine months ended September 30, 2022 and 2021, total depreciation on property and equipment was $ 2,446,700 and $ 2,194,465 , respectively.

For the nine months ended September 30, 2022 and 2021, accumulated amortization of the right of use asset under finance lease amounted to $ 3,121,441 and $ 2,258,732 , respectively.

The right of use asset under

finance lease of $ 69,892,379 consists of leased processing and cultivation premises.

The Company capitalized into inventory $ 1,959,536 and $ 1,678,558 relating to depreciation associated with manufacturing equipment and production facilities for the nine months ended September 30, 2022 and 2021, respectively.

For the three months ended March 31, 2023 and 2022, total depreciation on property and equipment was $ 893,598 and $ 856,289 , respectively.

For the three months ended March 31, 2023 and 2022, accumulated amortization of the right of use asset under finance lease amounted to $ 1,934,235 and $ 2,736,162 , respectively.

The right of use asset under finance lease of $ 7,938,137 consists of leased processing and cultivation premises.

The Company capitalized into inventory $ 734,087 and $ 700,193 relating to depreciation associated with manufacturing equipment and production facilities for the three months ended March 31, 2023 and 2022, respectively.

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

As of September 30, 2022, in conjunction with the Company’s held for sale assessment and disposal of certain long-lived 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 were below book value.

As of March 31, 2023, in conjunction with the Company’s held for sale assessment and disposal of certain long-lived 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 above book value.

As a result, the Company recorded an impairment charge of $ 0 (2022 - $ 5,313,176 ) on property and equipment, net.

Components of lease expenses are listed below:

September 30,

Finance lease cost

1 unchanged sentence

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:

1 unchanged sentence

Finance Leases

September 30, 2022

March 31, 2023

Total minimum lease payments

6 unchanged sentences

( 70,998,097 )

( 75,525,255 )

Present value of lease liability

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

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.

Supplemental cash flow information related to leases:

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

3 unchanged sentences

Other information about lease amounts recognized in the financial statements:

September 30,

Weighted-average remaining lease term (years) – operating leases

4 unchanged sentences

Goodwill - January 1, 2022

( 2,948,655 )

Goodwill - December 31, 2021 and September 30, 2022

Goodwill - December 31, 2022 and March 31, 2023

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

1 unchanged sentence

On this date the Company performed a Step 1 goodwill impairment analysis.

No indicators of impairment exists as of September 30, 2022.

No indicators of impairment exists as of March 31, 2023.

Intangible assets are comprised of the following items:

1 unchanged sentence

Balance December 31, 2021

( 5,492,890 )

( 2,105,483 )

Balance, December 31, 2021

Divestitures (Note 3)

Transfer to held for sale (Note 3)

Balance, September 30, 2022

Amortization expense for intangibles was $ 172,267 and $ 516,800 during the three and nine months ended September 30, 2022, respectively, and $ 206,442 and $ 619,327 during the three and nine months ending September 30, 2021, respectively.

Balance, December 31, 2022

Balance, March 31, 2023

Amortization expense for intangibles was $ 159,766 and $ 172,267 during the three months ended March 31, 2023 and 2022, respectively.

Amortization expense is recorded in operating expenses on the unaudited condensed consolidated statements of net loss and comprehensive loss.

2 unchanged sentences

Accounts payable and accrued liabilities are comprised of the following items:

September 30,

Accounts payable – trade

4 unchanged sentences

Long-Term Debt

During the year ended December 31, 2017, the Company signed a promissory note payable in the amount of $ 1,010,000 .

During 2017 the Company signed a promissory note payable in the amount of $ 1,010,000 .

The note bears interest at a rate of 15 % per annum with interest payments required on a monthly basis.

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

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

In 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 .

The Company has paid off 60,000 in principal, and the remaining $ 1,050,000 principal balance is due on December 31, 2023.

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.

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

Net of fees and closing costs of $ 1,971,705 , the Company received $ 24,028,295 of the first tranche on March 25, 2021.

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

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

The 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.

On March 25, 2021, in connection with closing the Credit Facility, Goodness Growth issued (a) five year warrants to the agent and each lender to purchase an aggregate of 2,803,984 subordinate voting shares at an exercise price of C$ 3.50 per share, and (b) a five year warrant to the broker to purchase 233,665 subordinate voting shares at an exercise price of C$ 3.50 per share.

Each warrant provides customary anti-dilution provisions.

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

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

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

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

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

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

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

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

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

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

During the nine months ended September 30, 2022, the Company drew $ 27,075,000 in principal debt from the Delayed Draw Loans.

Proceeds received, net of deferred financing fees of $ 2,206,857 were $ 24,868,143 .

The Company is to be reimbursed by Verano for $ 1,190,863 of these deferred financing fees pursuant to the Arrangement Agreement, and still

expects to collect despite the purported termination of the Arrangement Agreement (Note 1).

These fees are included as other income in the unaudited statement of loss and comprehensive loss for the nine months ended September 30, 2022, and to the extent these fees have not been reimbursed, they are included in our other receivables balance (Note 5).

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.

These 13,017,624 shares were valued at $ 1,221,837 on March 31, 2023, and considered a deferred financing cost.

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.

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

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

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

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

The following table shows a summary of the Company’s long-term debt:

September 30,

Beginning of year

Note payable issued in Charm City acquisition

Deferred financing costs

2 unchanged sentences

Amortization of deferred financing costs

Principal payments

End of period

1 unchanged sentence

Total long-term debt

As of March 31, 2023, 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 September 30, 2022.

The Company’s certificate of incorporation authorized the Company to issue the following classes of shares with the following par value and voting rights as of March 31, 2023.

The liquidation and dividend rights are identical among shares equally in the Company’s earnings and losses on an as converted basis.

15 unchanged sentences

Shares Issued

During the nine months ended September 30, 2022, 47,336 Multiple Voting Shares were redeemed for 4,733,600 Subordinate Voting Shares.

During the nine months ended September 30, 2021, 151,408 Multiple Voting Shares were redeemed for 15,140,700 Subordinate Voting Shares.

During the nine months ended September 30, 2022, employee stock options were redeemed for 15,002 Subordinate Voting Shares.

Proceeds from these transactions were $ 7,201 .

During the nine months ended September 30, 2021, employee stock options were redeemed for 3,989,344 Subordinate Voting Shares.

Proceeds from these transactions were $ 1,152,596 .

On June 4, 2021, the Company issued 295,774 shares with a fair value of $ 604,876 to a third party for ongoing corporate advisory services.

The fair value of the issued shares was recorded to stock-based compensation expense in the unaudited condensed consolidated statements of net loss and comprehensive loss for the nine month period ended September 30, 2021.

On March 31, 2021, as part of a settlement and release of claims regarding a dispute over certain post-termination terms under his employment agreement, the Company issued 7,110,481 subordinate voting shares to its former Executive Chairman, Bruce Linton, upon a cashless exercise of 10 million warrants that had an exercise price of $ 1.02 per share and issued him 889,519 subordinate voting shares with a fair value of $ 1,441,183 pursuant to an exemption from registration under the Securities Act.

The fair value of the 889,519 subordinate voting shares issued of $ 1,441,183 was recorded as stock-based compensation expense in the unaudited condensed consolidated statements of net loss and comprehensive loss for the nine months ended September 30, 2021.

The Company did not receive any proceeds in connection with the warrant exercise or issuance of shares.

The shares issued pursuant to the warrant exercise are free of trading restrictions;

the additional 889,519 shares were subject to a holding period which expired on August 1, 2021.

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

During the three months ended March 31, 2022, 28,134 Multiple Voting Shares were redeemed for 2,813,400 Subordinate Voting Shares.

Stock-Based Compensation

2 unchanged sentences

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

The exercise price for incentive stock options issued under the plan will be set by the committee but will not be less 100 % of the fair market value of the Company’s shares on the date of grant.

The exercise price for incentive stock options issued under the plan will be set by

the committee but will not be less 100 % of the fair market value of the Company’s shares on the date of grant.

Incentive stock options have a maximum term of 10 years from the date of grant.

1 unchanged sentence

Options granted under the equity incentive plan were valued using the Black-Scholes option pricing model with the following weighted average assumptions:

September 30,

Risk-Free Interest Rate

4 unchanged sentences

Expected Dividend Yield

Stock option activity for the nine months ended September 30, 2022 and for the year ended December 31, 2021 is presented below:

Stock option activity for the three months ended March 31, 2023 and for the year ended December 31, 2022 is presented below:

Weighted Average

6 unchanged sentences

Balance, December 31, 2022

Options Outstanding at September 30, 2022

Options Exercisable at September 30, 2022

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 1,993,908 and $ 2,243,761 in stock-based compensation relating to stock options, respectively.

During the three months ended September 30, 2022 and 2021, the Company recognized $ 600,191 and $ 835,122 in stock-based compensation relating to stock options, respectively.

As of September 30, 2022, the total unrecognized compensation costs related to unvested stock options awards granted was $ 2,444,354 .

( 2,442,385 )

Options Outstanding at March 31, 2023

Options Exercisable at March 31, 2023

During the three months ended March 31, 2023 and 2022, the Company recognized $ 1,399,258 and $ 590,600 in stock-based compensation relating to stock options, respectively.

As of March 31, 2023, the total unrecognized compensation costs related to unvested stock options awards granted was $ 1,189,326 .

In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 2.3 years.

The total intrinsic value of stock options outstanding and exercisable as of September 30, 2022, was $ 10,554,188 and $ 10,282,418 , respectively.

The total intrinsic value of stock options outstanding and exercisable as of March 31, 2023, was $ 0 .

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

2 unchanged sentences

Multiple Voting Share (MVS) warrants entitle the holder to purchase one multiple voting share of the Company.

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

September 30,

SVS Warrants Denominated in C$

Risk-Free Interest Rate

Expected Life of Options (years)

Expected Annualized Volatility

Expected Forfeiture Rate

Expected Dividend Yield

A summary of the warrants outstanding is as follows:

4 unchanged sentences

Warrants outstanding at December 31, 2021

( 7,110,481 )

( 7,889,519 )

Warrants outstanding at December 31, 2021 and September 30, 2022

Warrants exercisable at December 31, 2021 and September 30, 2022

Warrants outstanding at December 31, 2022

Warrants outstanding at March 31, 2023

Warrants exercisable at March 31, 2023

Weighted Average

5 unchanged sentences

Warrants outstanding at December 31, 2022

Warrants outstanding at September 30, 2022

Warrants exercisable at September 30, 2022

Warrants outstanding at March 31, 2023

Warrants exercisable at March 31, 2023

Weighted Average

3 unchanged sentences

Warrants outstanding at December 31, 2021

Warrants outstanding at September 30, 2022

Warrants exercisable at September 30, 2022

During the three and nine months ended September 30, 2022 and 2021, $ 0 in stock-based compensation expense was recorded in connection with the SVS compensation warrants and $ 0 in stock-based compensation was recorded in connection with the MVS warrants.

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

Warrants outstanding at December 31, 2022 and March 31, 2023

Warrants exercisable at March 31, 2023

During the three months ended March 31, 2023 and 2022, $ 0 in stock-based compensation expense was recorded in connection with the SVS compensation warrants and $ 0 in stock-based compensation was recorded in connection with the MVS warrants.

The expense associated with RSUs is based on closing share 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 three and nine months ended September 30, 2022 the Company recognized $ 295,890 and $ 642,686 , respectively, in stock-based compensation expense related to RSUs.

During the three months ended March 31, 2023 and 2022 the Company recognized $ 276,336 and $ 51,906 , respectively, in stock-based compensation expense related to RSUs.

A summary of RSUs is as follows:

Weighted Avg.

Number of Shares

Balance, December 31, 2021

Balance, September 30, 2022

Granted on March 15, 2022

Granted on December 15, 2022

Balance, December 31, 2022

Balance, March 31, 2023

Vested at March 31, 2023

Commitments and Contingencies

7 unchanged sentences

– was distributed inappropriately by Capital at the direction of Dorchester Management (the managing member of Capital).

Schneyer, who is a Class B member of Capital, is seeking unspecified damages in excess of $ 50,000 and other relief.

Schneyer, who is a Class B member of Capital, sought unspecified damages in excess of $ 50,000 and other relief.

Dorchester Management, LLC is an affiliated entity to Vireo U.S.

20 unchanged sentences

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.

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

Following this order, the litigation was permitted to 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.

However, should Vireo U.S.

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

While Vireo U.S.

continues to believe that Schneyer’s claims lack merit, it agreed to settle the litigation in April 2023 to avoid the expense, distraction and risk of the pre-trial and trial processes.

Entering into this settlement in no way changes the defendants’ position that they did nothing wrong and that the claims were baseless.

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.

2 unchanged sentences

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.

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

Verano also claimed, as a result of such breaches, it is entitled to payment of a $ 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 termination of the Arrangement Agreement, which the Company determined to treat as a repudiation 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.

Selling, General and Administrative Expenses

1 unchanged sentence

Three Months Ended

September 30,

Nine Months Ended

September 30,

Salaries and benefits

3 unchanged sentences

Supplemental Cash Flow Information (1)

Nine Months Ended

September 30,

Cash paid for interest

Cash paid for income taxes

Change in construction accrued expenses

( 1,418,281 )

Non-cash investing

Acquisition of Nevada through issuance of SVS

Acquisition of Nevada through restricted cash and deferred acquisition costs

(1) For supplemental cash flow information related to leases, refer to Note 9 .

11 unchanged sentences

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due.

As of September 30, 2022, the Company’s financial liabilities consist of accounts payable and accrued liabilities, and debt.

As of March 31, 2023, the Company’s financial liabilities consist of accounts payable and accrued liabilities, and debt.

The Company manages liquidity risk by reviewing its capital requirements on an ongoing basis.

16 unchanged sentences

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 nine months ended September 30, 2022, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 301,548 .

A change of 100 basis points in interest rates during the three months ended March 31, 2023, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 137,825 .

Related Party Transactions

As of September 30, 2022, and December 31, 2021, there were $ 10,000 and $ 98,750 due to related parties, respectively.

For the nine months ended September 30, 2022, and 2021, the Company paid a related party (Bengal Impact Partners, of which a member of the Company’s Board of Directors is a managing partner) $ 90,000 and $ 20,000 , respectively, for ongoing corporate advisory services.

Certain directors and officers of the Company (Kyle Kingsley, Amber Shimpa, and Stephen Dahmer) owned OMS, which was sold on March 31, 2021 (Note 3).

None of the proceeds received from this transaction were paid to the aforementioned directors and officers, rather, they were owed and paid to the Company.

As of March 31, 2023, and December 31, 2022, there were $ 0 and $ 1,613 due to related parties, respectively.

For the three months ended March 31, 2023, and 2022, the Company paid a related party (Bengal Impact Partners, of which Joshua Rosen, who is the Company’s interim Chief Executive Officer and a member of the Company’s Board of Directors, is a managing partner) $ 1,613 and $ 20,000 , respectively, for corporate advisory services.

Subsequent Events

In October of 2022, the Company drew an additional $ 925,000 in net proceeds from the Delayed Draw Loans.

On October 13, 2022, Verano delivered notice to the Company purporting to terminate the Arrangement Agreement.

The Company believes that Verano has no legal basis to terminate the Arrangement Agreement, and that Verano has committed various material breaches of the Arrangement Agreement.

On October 21, 2022, the Company commenced an action in the Supreme Court of British Columbia against Verano, seeking damages for the wrongful termination.

Verano’s repudiation of the Arrangement Agreement has been acknowledged by Goodness, and the Transaction will not proceed (Note 1).

On April 18, 2023, the Schneyer litigation (Note 16) was settled.

On April 28, 2023 the Company closed on a $ 2.0 million tranche of a new convertible debt facility which enables the Company to access up to $ 10.0 million in aggregate principal amount of convertible notes (the “Convertible Notes”).

The convertible facility has a term of three years , with an interest rate of 12.0 percent, including 6.0 percent cash and 6.0 percent paid-in-kind.

The initial tranche's principal amount of Convertible Notes outstanding, plus all paid-in-kind interest and all other accrued but unpaid interest thereunder, is convertible into Subordinate Voting Shares of the Company at the option of the holders at any time by written notice to the Company, at a conversion price equal to U.S.

For each future tranche advanced, the principal amount of Convertible Notes outstanding, plus all paid-in-kind interest and all other accrued but unpaid interest thereunder, is convertible into Subordinate Voting Shares of the Company at the option of the holders at any time by written notice to the Company, at a conversion price equal to the lesser of U.S.

$ 0.145 or a 20.0 percent premium over the 30-day volume weighted average price of the Company’s Subordinate Voting Shares calculated on the day prior to the date on which each tranche is advanced, if permitted by the Canadian Securities Exchange.

The lenders also have the right to advance any remaining undrawn funds on the convertible loan facility to the Company at any time.

Finally, in connection with this financing, the Company issued 6,250,000 Warrants (the “Warrants”) to purchase Subordinate Voting Shares of the Company to the lenders.

The Warrants have a term of five years with a strike price equal to U.S.

The Company does not expect to issue any additional warrants related to this convertible loan facility.

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-Q

Item 1. Financial Statements