What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 154 added, 75 removed, 523 unchanged (30% of the section changed)

6 unchanged sentences

Prepayments and other current assets

Warrants receivable

Assets Held for Sale

12 unchanged sentences

Right-of-use liability

Other long-term liabilities

Convertible debt, net

Long-Term debt, net

8 unchanged sentences

unlimited shares authorized;

65,411 shares issued and outstanding, respectively)

65,411 shares issued and outstanding)

Additional Paid in Capital

10 unchanged sentences

Three Months Ended

Six Months Ended

Cost of sales

7 unchanged sentences

( 1,042,044 )

( 7,451,974 )

Other income (expense):

1 unchanged sentence

( 5,367,915 )

Gain on disposal of assets

Gain (loss) on disposal of assets

( 2,747,881 )

Gain (loss) on sale of property and equipment

Interest expenses, net

1 unchanged sentence

( 5,297,823 )

( 14,879,584 )

( 9,899,622 )

Other income (expenses)

2 unchanged sentences

( 5,446,261 )

( 11,806,817 )

( 13,992,884 )

Loss before income taxes

1 unchanged sentence

( 5,138,076 )

( 12,480,353 )

( 21,444,858 )

Current income tax expenses

1 unchanged sentence

( 3,377,871 )

( 2,340,000 )

Deferred income tax recoveries

2 unchanged sentences

( 6,183,076 )

( 15,735,224 )

( 20,749,858 )

Net loss per share - basic and diluted

14 unchanged sentences

( 20,749,858 )

Balance at March 31, 2022

Balance at June 30, 2022

( 156,173,377 )

3 unchanged sentences

Obligation to issue shares

Warrants issued in financing activities

( 15,735,224 )

Balance at March 31, 2023

Balance at June 30, 2023

( 193,616,187 )

13 unchanged sentences

Stock-based payments

Warrants receivable

( 1,248,224 )

Interest Expense

2 unchanged sentences

( 3,035,000 )

Loss (gain) on sale of property and equipment

Loss on disposal of Red Barn Growers

Loss (gain) on disposal of assets

Gain on disposal of royalty asset

14 unchanged sentences

( 2,478,645 )

( 3,917,948 )

Proceeds from sale of Red Barn Growers net of cash

Proceeds from sale of property, plant, and equipment

Proceeds from sale of royalty asset

1 unchanged sentence

( 2,175,004 )

( 3,711,779 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt, net of issuance costs

Proceeds from convertible debt, net of issuance costs

Debt principal payments

( 1,976,362 )

Lease principal payments

2 unchanged sentences

( 3,803,270 )

( 6,554,062 )

Cash, beginning of year

Cash, end of year

Cash, beginning of period

Cash, end of period

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

5 unchanged sentences

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.

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 shareholders 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.

1 unchanged sentence

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.

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

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

29 unchanged sentences

Basis of consolidation

These unaudited condensed consolidated financial statements include the accounts of the following entities wholly owned, or effectively controlled by the Company during the period ended March 31, 2023:

Name of entity

15 unchanged sentences

Massachusetts, USA

Elephant Head Farm, LLC

EHF Cultivation Management, LLC

Retail Management Associates, LLC

Arizona Natural Remedies, Inc.

Vireo Health of New Mexico, LLC

15 unchanged sentences

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 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.

6 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 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:

The Company recorded a net loss for the three and six month periods ended June 30, 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 six month period ending June 30, 2023, and 2022 were as follows:

Stock options

Convertible debt

Revenue Recognition

3 unchanged sentences

Three Months Ended

Six Months Ended

New accounting pronouncements not yet adopted

Business Combinations and Dispositions

On June 23, 2023, the Company divested all the assets and liabilities of Red Barn Growers, Inc., a New Mexico nonprofit organization effectively controlled by the Company’s subsidiary company, Vireo Health of New Mexico, LLC, to 37 Management Group, Inc., a New Mexico corporation (“ 37 Management ”).

As part of this transaction, the Company is to be paid $ 1,000,000 , less cash on hand of $ 60,814 , of which $ 439,186 was paid at closing, and $ 500,000 is to be paid within one year of the close date.

Consideration received was less than the net book value of the transferred assets and liabilities of $ 3,848,943 , resulting in a loss of $ 2,909,757 which was recorded in the consolidated statement of loss and comprehensive loss for the three and six months ended June 30, 2023.

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

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

Assets Held for Sale

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.

As of June 30, 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.

15 unchanged sentences

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.

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.

are recorded at fair value only when an impairment charge is recognized.

No indicators of impairment existed as of June 30, 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, long-term debt, and convertible debt approximates fair value as they bear a market rate of interest.

Accounts Receivable

2 unchanged sentences

Tax withholding receivable

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 .

Included in the trade receivables, net balance at June 30, 2023, and December 31, 2022, is an allowance for doubtful accounts of $ 65,414 and $ 169,699 respectively.

Included in the tax withholding receivable, net balance at June 30, 2023, and December 31, 2022, is an allowance for doubtful accounts of $ 284,161 .

Inventory is comprised of the following items:

3 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 June 30,

Six Months Ended June 30,

Work-in-progress

13 unchanged sentences

( 10,088,649 )

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.

For the six months ended June 30, 2023, and 2022, total depreciation on property and equipment was $ 1,571,256 and $ 1,633,280 , respectively.

For the six months ended June 30, 2023, and 2022, accumulated amortization of the right of use asset under finance lease amounted to $ 2,077,675 and $ 3,007,098 , 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 Company capitalized into inventory $ 1,294,065 and $ 1,314,056 relating to depreciation associated with manufacturing equipment and production facilities for the six months ended June 30, 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 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 of June 30, 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 - $ 5,367,915 ) on property and equipment, net.

8 unchanged sentences

Finance Leases

March 31, 2023

June 30, 2023

Total minimum lease payments

22 unchanged sentences

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

Goodwill - January 1, 2022

Goodwill - December 31, 2022 and March 31, 2023

Goodwill - December 31, 2021 and 2022

Divestitures (Note 3)

Goodwill - June 30, 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.

The valuation date for the Company’s annual impairment testing is December 31.

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

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

Following the divestiture of Red Barn Growers (Note 3), the carrying value of goodwill is $ 0 .

Intangible assets are comprised of the following items:

3 unchanged sentences

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.

Divestitures (Note 3)

Balance, June 30, 2023

Amortization expense for intangibles was $ 159,028 and $ 318,794 during the three and six months ended June 30, 2023, respectively, and $ 172,267 and $ 344,533 during the three and six months ending June 30, 2022, respectively.

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

19 unchanged sentences

The Credit Facility matures on March 31, 2024.

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.

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

5 unchanged sentences

The amended credit facility extends the maturity date on its Delayed Draw Loans to April 30, 2024, through the issuance of 15,000,000 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.

These 15,000,000 shares were valued at $ 1,407,903 and considered a deferred financing cost.

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.

3 unchanged sentences

Beginning of year

Principal repayments

( 1,976,362 )

Deferred financing costs

5 unchanged sentences

Total long-term debt

As of March 31, 2023, stated maturities of long-term debt were as follows:

As of June 30, 2023, stated maturities of long-term debt were as follows:

Convertible Notes

On April 28, 2023, the Company closed on a new convertible debt facility which enables the Company to access up to $ 10,000,000 in aggregate principal amount of convertible notes (the “Convertible Notes”).

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

The initial tranche's principal amount of Convertible Notes outstanding in the amount of $ 2,000,000 , 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 $ 0.145 .

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 $ 0.145 or a 20.0 % 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.

If the notes are not converted, the outstanding principal amount and unpaid paid-in-kind interest is due on April 30, 2026.

During the three months ended June 30, 2023, the Company closed a second and third tranche of Convertible Notes, which are both convertible into Subordinate Voting Shares at a conversion price of $ 0.145 .

Total proceeds received from the second and third tranches amounted to $ 2,000,000 .

In connection with this financing, the Company issued 6,250,000 warrants to purchase Subordinate Voting Shares of the Company to the lenders.

These warrants have a five year term, a strike price of $ 0.145 , and were valued at $ 497,055 (Note 16).

The value of these warrants and other legal and administrative expenses amounting to $ 502,538 are treated as deferred financing costs.

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.

The following table shows a summary of the Company’s convertible debt:

Beginning of year

Deferred financing costs

Amortization of deferred financing costs

End of period

current portion

Total convertible debt

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 March 31, 2023.

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 June 30, 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 three months ended March 31, 2022, 28,134 Multiple Voting Shares were redeemed for 2,813,400 Subordinate Voting Shares.

During the six months ended June 30, 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.

7 unchanged sentences

Expected Dividend Yield

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

Stock option activity for the six months ended June 30, 2023, and for the year ended December 31, 2022, is presented below:

Weighted Average

7 unchanged sentences

( 3,065,793 )

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 .

Options Outstanding at June 30, 2023

Options Exercisable at June 30, 2023

During the three and six months ended June 30, 2023, the Company recognized $ 600,377 and $ 1,999,635 in stock-based compensation relating to stock options, respectively.

During the three and six months ended June 30, 2022, the Company recognized $ 802,118 and $ 1,393,718 in stock-based compensation relating to stock options, respectively.

As of June 30, 2023, the total unrecognized compensation costs related to unvested stock options awards granted was $ 918,598 .

In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 2.0 years.

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

The total intrinsic value of stock options outstanding and exercisable as of June 30, 2023, was $ 20,503 and $ 11,990 , respectively.

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:

Risk-Free Interest Rate

Expected Life (years)

Expected Annualized Volatility

Expected Forfeiture Rate

Expected Dividend Yield

A summary of the warrants outstanding is as follows:

5 unchanged sentences

Warrants outstanding at December 31, 2022

Warrants outstanding at March 31, 2023

Warrants exercisable at March 31, 2023

Warrants outstanding at June 30, 2023

Warrants exercisable at June 30, 2023

Weighted Average

5 unchanged sentences

Warrants outstanding at December 31, 2022

Warrants outstanding at March 31, 2023

Warrants exercisable at March 31, 2023

Warrants outstanding at June 30, 2023

Warrants exercisable at June 30, 2023

Weighted Average

3 unchanged sentences

Warrants outstanding at December 31, 2021

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.

Warrants outstanding at December 31, 2022 and June 30, 2023

Warrants exercisable at June 30, 2023

During the three and six months ended June 30, 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.

On May 25, 2023, the Company and Grown Rogue International, Inc.

(“Grown Rogue”) entered into a strategic agreement whereby Grown Rogue will support Goodness Growth in the optimization of its cannabis flower products, with a particular focus on improving the quality and yield of top-grade “A” cannabis flower across its various operating markets, starting with Maryland and Minnesota.

As part of this strategic agreement the Company is obligated to issue 10,000,000 warrants to purchase subordinate voting shares of Goodness Growth to Grown Rogue, with a strike price equal to a 25.0 percent premium to the 10-day volume weighted average price (“VWAP”) of Goodness Growth’s subordinate voting shares prior to the effective date of the agreement.

These warrants have not been granted as of June 30, 2023, but were considered an accrued expense at a valuation $ 1,248,224 and included within stock-based compensation on the unaudited condensed consolidated statement of loss and comprehensive loss for the three and six month periods ended June 30, 2023.

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.

1 unchanged sentence

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

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.

During the three and six months ended June 30, 2023, the Company recognized $ 188,603 and $ 464,939 , respectively, in stock-based

compensation expense related to RSUs.

During the three and six months ended June 30, 2022 the Company recognized $ 295,890 and $ 346,795 , respectively, in stock-based compensation expense related to RSUs.

A summary of RSUs is as follows:

5 unchanged sentences

Balance, December 31, 2022

Balance, March 31, 2023

Vested at March 31, 2023

Balance, June 30, 2023

Vested at June 30, 2023

Commitments and Contingencies

22 unchanged sentences

Under Delaware law, Capital has a right to control the litigation of the Remaining Derivative Claims, the Rejected Derivative Claims, and any other derivative allegations that may be asserted on behalf of Capital.

On August 17, 2021, Management exercised this right for Capital and appointed a second independent special litigation committee (the “ Second SLC ”), a partner at an international law firm, to manage the litigation of the claims raised in Schneyer’s Second Amended Complaint.

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

27 unchanged sentences

Three Months Ended

Six Months Ended

Salaries and benefits

2 unchanged sentences

Other expenses

Other Income (Expense)

The CARES Act provides an employee retention credit (“CARES Employee Retention credit”), which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers.

The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee through December 31, 2020.

Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through December 31, 2021.

Based on these additional provisions, the tax credit is now equal to 70% of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $10,000 of qualified wages per quarter.

The Company qualifies for the tax credit under the CARES Act.

During the three and six months ended June 30, 2023, the Company recorded and received $ 4,650,264 (2022 - $ 0 ) related to the CARES Employee Retention credit in other income on the unaudited condensed consolidated statement of loss and comprehensive loss for the three and six months ended June 30, 2023.

On May 25, 2023, the Company and Grown Rogue International, Inc.

As part of this strategic agreement the Grown Rogue is obligated to grant the Company 8,500,000 warrants to purchase subordinate voting shares of Grown Rogue to Goodness Growth, with a strike price equal to a 25.0 percent premium to the 10-day VWAP of Grown Rogue’s subordinate voting shares prior to the effective date of the agreement.

These warrants have not been granted as of June 30, 2023, but were considered a warrant recievable at a black-scholes valuation of $ 1,248,224 and included within other income on the unaudited condesned consolidated statement of loss and comprehensive loss for the three and six month periods ended June 30, 2023.

An exercise price of $ 0.25 , an expected life of 5 years, an annual risk-free interest rate of 4.13 %, and volatility of 100 % were the valuation assumptions used in the black-scholes model.

Supplemental Cash Flow Information (1)

1 unchanged sentence

Cash paid for income taxes

Change in construction accrued expenses

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

6 unchanged sentences

The Company’s maximum credit risk exposure is equivalent to the carrying value of these instruments.

The Company has been granted licenses pursuant to the laws of the states of Arizona, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, and Puerto Rico with respect to cultivating, processing, and/or distributing marijuana.

The Company has been granted licenses pursuant to the laws of the states of Maryland, Massachusetts, Minnesota, Nevada, New York, and Puerto Rico with respect to cultivating, processing, and/or distributing marijuana.

Presently, this industry is illegal under United States federal law.

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

As of June 30, 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 three months ended March 31, 2023, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 137,825 .

A change of 100 basis points in interest rates during the six months ended June 30, 2023, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 276,169 .

Related Party Transactions

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.

As of June 30, 2023, and December 31, 2022, there were $ 0 and $ 1,613 due to related parties, respectively.

For the six months ended June 30, 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 $ 60,000 , respectively, for corporate advisory services.

Subsequent Events

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.

$ 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.

On July 11, 2023, the Company issued the 15,000,000 Subordinate Voting Shares to its senior secured lender, Chicago Atlantic Admin, LLC, an affiliate of Green Ivy Capital, and a group of lenders in connection with the fifth amendment to its Credit Facility signed on March 31, 2023.

On July 31, 2023, all 65,411 Super Voting Shares were converted into 6,541,100 Subordinate Voting Shares of the Company.

On July 31, 2023, the Company closed on the fourth tranche of Convertible Notes, which are convertible into Subordinate Voting Shares at a conversion price of $ 0.145 .

Total proceeds received, net of deferred financing costs of $ 20,000 , were $ 980,000 .

On August 14, 2023, the Company entered into consulting, licensing and wholesale agreements with two additional dispensaries in Maryland that are owned and controlled by HA-MD LLC and currently operate under the Ethos brand name.

The agreements will result in the two Ethos dispensaries in Hampden and Rockville being, upon regulatory approval, rebranded to Green Goods® and include an option to acquire the two dispensaries if and when allowed by applicable law and regulations.

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