What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 154 added, 95 removed, 582 unchanged (30% of the section changed)

3 unchanged sentences

(In U.S Dollars, unaudited and condensed)

September 30,

Current assets:

1 unchanged sentence

Prepayments and other current assets

Notes receivable, current

Warrants receivable

38 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of sales

7 unchanged sentences

( 7,641,130 )

( 7,451,974 )

Other income (expense):

1 unchanged sentence

( 2,108,703 )

Gain (loss) on disposal of assets

( 7,476,618 )

Gain (loss) on disposal of assets

( 2,798,567 )

20 unchanged sentences

( 7,357,871 )

( 4,130,000 )

Deferred income tax recoveries

17 unchanged sentences

Conversion of MVS shares

Options exercised

Stock-based compensation

1 unchanged sentence

( 29,173,646 )

Balance at June 30, 2022

Balance at September 30, 2022

( 164,597,165 )

1 unchanged sentence

( 177,880,963 )

Conversion of MVS shares

Conversion of Super Voting Shares

Stock-based compensation

Obligation to issue shares

Shares issued in financing activities

Warrants issued in financing activities

1 unchanged sentence

( 20,964,252 )

Balance at June 30, 2023

Balance at September 30, 2023

( 198,845,215 )

( 12,853,399 )

Super Voting Shares

Additional Paid-

Stockholders'

Equity (deficiency)

Balance, July 1, 2022

( 156,173,376 )

Conversion of MVS shares

Options exercised

Stock-based compensation

( 8,423,789 )

Balance at September 30, 2022

( 164,597,165 )

Balance, July 1, 2023

( 193,616,189 )

( 7,924,810 )

Conversion of MVS shares

Conversion of Super Voting Shares

Stock-based compensation

Shares issued in financing activities

( 5,229,026 )

Balance at September 30, 2023

( 198,845,215 )

( 12,853,399 )

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

6 unchanged sentences

Amortization of intangible assets

Amortization of intangible assets capitalized into inventory

Stock-based payments

20 unchanged sentences

( 11,954,222 )

( 9,847,701 )

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

( 4,938,587 )

Intangible license additions

( 1,090,919 )

Proceeds from sale of Red Barn Growers net of cash

7 unchanged sentences

Proceeds from convertible debt, net of issuance costs

Proceeds from option exercises

Debt principal payments

1 unchanged sentence

Lease principal payments

( 1,414,698 )

( 1,437,346 )

Net cash provided by (used in) financing activities

31 unchanged sentences

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 continue as a going concern.

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

13 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 June 30, 2023:

Name of entity

29 unchanged sentences

Massachusetts, USA

The entities listed above are wholly owned or effectively controlled by the Company and have been formed or acquired to support the intended operations of the Company, and all intercompany transactions and balances have been eliminated in the Company's unaudited condensed consolidated financial statements.

The entities listed are wholly owned or effectively controlled by the Company and have been formed or acquired to support the intended operations of the Company, and all intercompany transactions and balances have been eliminated in the Company's unaudited condensed consolidated financial statements.

Recently adopted accounting pronouncements

1 unchanged sentence

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 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:

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

September 30,

Stock options

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

New accounting pronouncements not yet adopted

2 unchanged sentences

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 six months ended June 30, 2022.

Assets Held for Sale

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.

As of September 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.

11 unchanged sentences

The Company complies with ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities.

In general, fair values determined by Level 1 inputs utilize quoted prices

(unadjusted) in active markets for identical assets or liabilities.

Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.

1 unchanged sentence

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 June 30, 2023, and therefore no impairment charges were recorded.

No indicators of impairment existed as of September 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.

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 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 .

Included in the trade receivables, net balance at September 30, 2023, and December 31, 2022, is an allowance for doubtful accounts of $ 60,777 and $ 169,699 respectively.

Included in the tax withholding receivable, net balance at September 30, 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 June 30,

Six Months Ended June 30,

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 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.

For the nine months ended September 30, 2023, and 2022, total depreciation on property and equipment was $ 2,223,540 and $ 2,446,700 , respectively.

For the nine months ended September 30, 2023, and 2022, accumulated amortization of the right of use asset under finance lease amounted to $ 2,221,116 and $ 3,121,441 , 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 $ 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 Company capitalized into inventory $ 1,846,419 and $ 1,959,536 relating to depreciation associated with manufacturing equipment and production facilities for the nine months ended September 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 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 of September 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 - $ 7,476,618 ) on property and equipment, net.

Components of lease expenses are listed below:

September 30,

Finance lease cost

6 unchanged sentences

Finance Leases

June 30, 2023

September 30, 2023

Total minimum lease payments

12 unchanged sentences

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

5 unchanged sentences

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.

Goodwill - September 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 the business.

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

6 unchanged sentences

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.

Balance, September 30, 2023

Amortization expense for intangibles was $ 204,813 and $ 523,607 during the three and nine months ended September 30, 2023, respectively, and $ 172,267 and $ 516,800 during the three and nine months ending September 30, 2022, respectively.

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

During the nine months ended September 30, 2023, the Company paid $ 1,090,919 in conversion fees to obtain licenses to grow, process, and sell recreational cannabis products in Maryland.

These conversion fees were capitalized as intangible asset licenses and will be amortized over a five year useful life.

The Company estimates that amortization expense will be $ 819,655 per year for the next five fiscal years.

1 unchanged sentence

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

September 30,

Accounts payable – trade

28 unchanged sentences

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

September 30,

Beginning of year

8 unchanged sentences

Total long-term debt

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

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

Convertible Notes

5 unchanged sentences

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 .

During the nine months ended September 30, 2023, the Company closed four additional tranche of Convertible Notes, which are convertible into Subordinate Voting Shares at a conversion price of $ 0.145 .

Total proceeds received from these tranches amounted to $ 4,000,000 .

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

3 unchanged sentences

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

September 30,

Beginning of year

Deferred financing costs

( 1,148,915 )

Amortization of deferred financing costs

3 unchanged sentences

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 June 30, 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 September 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 six months ended June 30, 2022, 28,134 Multiple Voting Shares were redeemed for 2,813,400 Subordinate Voting Shares.

During the nine months ended September 30, 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 (Note 13).

During the nine months ended September 30, 2023, 65,411 Super Voting Shares were redeemed for 6,541,100 Subordinate Voting Shares

During the nine months ended September 30, 2023, 702 Multiple Voting Shares were redeemed for 70,200 Subordinate Voting Shares

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, 2022, employee stock options were redeemed for 15,002 Subordinate Voting Shares.

Proceeds from these transactions were $ 7,201 .

Stock-Based Compensation

6 unchanged sentences

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

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

Weighted Average

Weighted Avg.

Number of Shares

Number of Options

Exercise Price

4 unchanged sentences

( 3,618,186 )

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 .

Options Outstanding at September 30, 2023

Options Exercisable at September 30, 2023

During the three and nine months ended September 30, 2023, the Company recognized $ 248,000 and $ 2,247,635 in stock-based compensation relating to stock options, respectively.

During the three and nine months ended September 30, 2022, the Company recognized $ 600,191 and $ 1,993,908 in stock-based compensation relating to stock options, respectively.

As of September 30, 2023, the total unrecognized compensation costs related to unvested stock options awards granted was $ 554,218 .

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 June 30, 2023, was $ 20,503 and $ 11,990 , respectively.

The total intrinsic value of stock options outstanding and exercisable as of September 30, 2023, was $ 25,224 and $ 15,626 , respectively.

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

3 unchanged sentences

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

September 30,

Risk-Free Interest Rate

10 unchanged sentences

Warrants outstanding at December 31, 2022

Warrants outstanding at June 30, 2023

Warrants exercisable at June 30, 2023

Warrants outstanding at September 30, 2023

Warrants exercisable at September 30, 2023

Weighted Average

5 unchanged sentences

Warrants outstanding at December 31, 2022

Warrants outstanding at June 30, 2023

Warrants exercisable at June 30, 2023

Warrants outstanding at September 30, 2023

Warrants exercisable at September 30, 2023

Weighted Average

3 unchanged sentences

Warrants outstanding at December 31, 2021

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.

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

Warrants exercisable at September 30, 2023

During the three and nine months ended September 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.

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 September 30, 2023, but were considered an accrued expense at a valuation $ 1,244,404 and included within stock-based compensation on the unaudited condensed consolidated statement of loss and comprehensive loss for the three and nine month periods ended September 30, 2023.

The expense associated with RSUs is based on the 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 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.

During the three and nine months ended September 30, 2023, the Company recognized $ 52,437 and $ 517,376 , respectively, in stock-based compensation expense related to RSUs.

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.

A summary of RSUs is as follows:

5 unchanged sentences

Balance, December 31, 2022

Balance, June 30, 2023

Vested at June 30, 2023

Balance, September 30, 2023

Vested at September 30, 2023

Commitments and Contingencies

15 unchanged sentences

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.

The Court held a hearing on the motion for TRO on March 5, 2019 and denied the motion on the same day.

Weeks prior to commencement of the litigation, Dorchester Management had appointed a special litigation committee (“ SLC ”) on behalf of Capital to investigate the consideration provided by Vireo U.S.

for the purchase of MaryMed and assess any potential claims Capital may have as a result of the transaction.

The SLC, a retired judge who engaged another retired judge as legal counsel to the SLC, was appointed in accordance with Minnesota law, issued a report on May 1, 2021, recommending, among other things, that certain claims be permitted to proceed (the “ Remaining Derivative Claims ”) and other claims not be permitted to proceed by the Court (the “ Rejected Derivative Claims ”).

On July 7, 2021, Schneyer filed a Second Amended Complaint asserting direct claims on behalf of himself and the Remaining Derivative Claims on behalf of Capital and some Rejected Derivative Claims on behalf of Capital.

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

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.

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

The Court also ruled that the Remaining Derivative Claims should be pursued by the Second SLC.

Finally, the Court also denied Schneyer’s request to seek punitive damages.

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

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.’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.

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.

Entering into this settlement in no way changed 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.

14 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Salaries and benefits

8 unchanged sentences

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.

During the nine months ended September 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 net loss and comprehensive loss for the nine months ended September 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.

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.

These warrants have not been granted as of September 30, 2023, but were considered a warrant receivable at a black-scholes valuation of $ 1,566,445 and included within other income on the unaudited condensed consolidated statement of net loss and comprehensive loss for the nine month period ended September 30, 2023.

An exercise price of $ 0.166 , 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)

September 30,

Cash paid for interest

14 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 June 30, 2023, the Company’s financial liabilities consist of accounts payable and accrued liabilities, and debt.

As of September 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 six months ended June 30, 2023, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 276,169 .

A change of 100 basis points in interest rates during the nine months ended September 30, 2023, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 414,345 .

Related Party Transactions

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.

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

For the nine months ended September 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 $ 90,000 , respectively, for corporate advisory services.

Subsequent Events

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 .

On October 5, 2023, Goodness Growth issued 10,000,000 warrants to purchase subordinate voting shares of Goodness Growth to Grown Rogue, with a strike price equal to C$ 0.317 (US$ 0.233 ), which represented a 25.0 percent premium to the 10 -day volume weighted average price (“VWAP”) of Goodness Growth’s subordinate voting shares on the trading day immediately prior to the effective date of the Agreement.

Similarly, Grown Rogue issued 8,500,000 warrants to purchase shares of Grown Rogue to Goodness Growth, with a strike price equal to C$ 0.225 (US$ 0.166 ), which represented a 25.0 percent premium to the 10 -day VWAP of Grown Rogue’s subordinate voting shares on the trading day immediately prior to the effective date of the Agreement.

The warrants exchanged in the agreement were issued with five-year terms to exercise (provided that the Grown Rogue warrants may terminate earlier on an insolvency event relating to Goodness Growth), may not be registered with the United States Securities & Exchange Commission or qualified by any Canadian provincial securities commission, and are not assignable except as set forth in the warrant certificates, as more particularly described in the May 25, 2023 announcement.

On October 30, 2023, the Company executed a fifth amendment to its lease with its landlord on its cannabis cultivation and manufacturing facilities located in Johnstown, New York.

As part of the fifth amendment to the lease in Johnstown, the Company and its landlord have agreed to increase the tenant improvement allowance on the lease by an additional $ 14.0 million.

The increase in tenant improvement funds will be utilized to support the completion of the construction of the indoor expansion project that was announced in September 2021.

The parties have also agreed to a monthly base rental increase of $ 210,000 beginning November 2023.

In October of 2023, the Company closed on the two additional tranches 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 $ 152,124 , were $ 1,847,876 .

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