What changed in this filing

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Item 1. Business

2024-04-01 compared with 2023-03-31 · 137 added, 188 removed, 356 unchanged (48% of the section changed)

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With our core operations strategically located in four limited-license medical and adult-use markets, Goodness Growth cultivates and manufactures cannabis products in environmentally friendly greenhouses and other facilities and distributes these products through our growing network of Green Goods™ and other Goodness Growth branded retail dispensaries, as well as third-party dispensaries in the markets in which our subsidiaries hold operating licenses.

As of March 27, 2023, Goodness Growth is licensed in seven states and territories, consisting of Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, and Puerto Rico.

As of March 27, 2023, we retail cannabis products in 18 dispensaries located in Maryland (2), Minnesota (8), New Mexico (4), and New York (4) and wholesales cannabis products, through third-party companies, in Maryland, Minnesota, and New York.

As of March 27, 2024, Goodness Growth has licenses and operates in three states, consisting of Maryland, Minnesota, and New York.

Additionally, the Company has non-operating assets and liabilities in Nevada, Puerto Rico, and Massachusetts.

As of March 27, 2024, we retail cannabis products in 14 dispensaries located in Maryland (2), Minnesota (8), and New York (4) and wholesales cannabis products, through third-party companies, in Maryland, Minnesota, and New York.

Our registered office is located at 1500 Royal Centre, 1055 West Georgia Street, P.O.

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The Company was incorporated under the Business Corporations Act (Alberta) on November 23, 2004 under the name “Initial Capital Inc.” On May 8, 2007, the Company changed its name to “Digifonica International Inc.” following the completion of a qualifying transaction.

On December 9, 2013, the Company continued into British Columbia under the name of “Dominion Energy Inc.” The Company had several name changes before ultimately changing its name to “Darien Business Development Corp.” on March 13, 2017.

Vireo Health, Inc.

On December 9, 2013, the Company continued into British Columbia under the name of “Dominion Energy Inc.”, subsequently changed its name to "Dynamic Oil & Gas Exploration Inc." on June 30, 2014, and to "Darien Business Development Corp." on March 13, 2017.

On March 18, 2019, the Company changed its name to "Vireo Health International, Inc." following the completion of a reverse takeover transaction (the " RTO ") with Vireo Health, Inc.

(" Vireo U.S.

”) was organized as a limited liability company under Minnesota law on February 4, 2015 and converted to a Delaware corporation on January 1, 2018.

acquired all the equity of Minnesota Medical Solutions, LLC, and Empire State Health Solutions, LLC, in an equity interest swap transaction on January 1, 2018.

On March 18, 2019, Vireo U.S.

completed the reverse takeover transaction of Goodness Growth (formerly Vireo Health International Inc., which was formerly Darien Business Development Corp.

or “ Darien ”) (the “ RTO ”) whereby Darien acquired all the issued and outstanding shares of Vireo U.S.

Following the completion of the reverse takeover, the former shareholders of Vireo U.S.

acquired control of the Company as they owned a majority of the outstanding shares of the Company upon completion of the RTO.

Concurrently with the completion of the RTO, the Company changed our name to “Vireo Health International, Inc.” In June 2021, we changed our name to “Goodness Growth Holdings, Inc.”

had previously acquired all the equity of Minnesota Medical Solutions, LLC, and Empire State Health Solutions, LLC, in an equity interest swap transaction on January 1, 2018.

Pursuant to the RTO, on March 18, 2019, the Company acquired all the issued and outstanding shares of Vireo U.S.

and, as a result, the former shareholders of Vireo U.S.

acquired control of the Company, as they owned a majority of the outstanding shares of the Company, and continued on with our business.

On June 9, 2021, we changed our name to “Goodness Growth Holdings, Inc.”

Arrangement Agreement

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

(“Verano”), pursuant to which Verano was to acquire all of the issued and outstanding common 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 below (the “Exchange Ratio”), for each Subordinate Voting Share held, and 22.652 Verano Subordinate Voting Shares for each Multiple Voting Share and Super Voting Share held, immediately prior to the effective time of the Arrangement (the “Effective Time”).

At the Effective Time, in accordance with the terms of Goodness Growth’s 2019 Company Equity Incentive Plan, the terms of each

Goodness Growth option and RSU were to be adjusted to entitle the holder to receive, upon exercise, in substitution for the number of Goodness Growth Shares subject to such option or RSU, that number of Verano Shares based on the Exchange Ratio.

In accordance with the terms of Goodness Growth’s outstanding warrants, the terms of each Goodness Growth warrant were to be adjusted to entitle the holder to receive, upon exercise, in substitution for the number of Goodness Growth Shares subject to such warrant, that number of Verano Shares based on the Exchange Ratio.

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

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

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

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

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

On October 21, 2022, Goodness Growth commenced an action in the Supreme Court of British Columbia against Verano arising out of Verano’s repudiation of the Arrangement Agreement, which Goodness Growth believes was wrongful.

Goodness Growth 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.

We and Verano Holdings Inc.

(" Verano ") entered into an Arrangement Agreement dated January 31, 2022, later amended on June 22, 2022 (combined, the " Arrangement Agreement ").

Pursuant to the Arrangement Agreement, Verano agreed, among other things, to acquire all of the outstanding shares of Goodness Growth.

We received notice from Verano on October 13, 2022, of Verano's purported termination of the Arrangement Agreement.

We believe that Verano has no factual or legal basis to justify or support its purported grounds for termination of the Arrangement Agreement, and on October 13, 2022 commenced an action in the Supreme Court of British Columbia against

See " Item 3.

Legal Proceedings – Verano " and " Item 1A.

Risk Factors – We are involved in litigation with Verano, the outcome of which is uncertain ".

Description of the Business

Overview of the Company

Goodness Growth is a United States-based multi-state cannabis company with significant operations in four core markets of Maryland, Minnesota, New Mexico, and New York.

Goodness Growth is a United States-based multi-state cannabis company with significant operations in three core markets of Maryland, Minnesota, and New York.

We also previously operated in the New Mexico market, but, in June 2023, we sold our business operations in New Mexico.

We are science-focused and dedicated to providing patients and adult-use customers with high quality cannabis-based products.

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We currently serve thousands of customers each month.

New Mexico sales of adult-use products began on April 1, 2022.

In 2021, New York adopted legislation allowing adult-use cannabis and sales began in January, 2023.

Maryland voters approved recreational marijuana legalization in the fourth quarter of 2022, and recreational sales are expected to begin in the next eighteen months.

Minnesota has the potential to enact adult-use legalization in the next 18 months;

as of March 27, 2023, bills are pending in both houses of the Minnesota legislature that, if reconciled to a common text, passed by both houses and signed into law by the Minnesota Governor, would establish an adult-use program in Minnesota.

As of March 27, 2023, four of our markets are operational, with 18 of our total retail dispensary licenses open for business.

Maryland voters approved adult-use marijuana legalization in the fourth quarter of 2022, and adult-use sales began on July 1, 2023.

On May 30, 2023, Minnesota Governor Tim Walz signed a bill to legalize marijuana into law.

Adult-use sales are expected to commence in Minnesota in 2025.

As of March 27, 2024, three of our markets are operational, 14 of our total retail dispensary licenses open for business.

Our principal locations and type of operation are listed below:

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Acquired in 2021

Gallup, New Mexico

Fully operational dispensary facility

Acquired in 2019

Gallup, New Mexico

Fully operational cultivation facility

Acquired in 2019

Gallup, New Mexico

Fully operational cultivation facility

Opened in 2021

Santa Fe, New Mexico

Fully operational dispensary facility

Acquired in 2019

Las Cruces, New Mexico

Fully operational dispensary facility

Opened in 2021

Albuquerque, New Mexico

Fully operational dispensary facility

Opened in 2021

Johnstown, New York

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Because the cultivation, processing, possession, transport and sale of cannabis and cannabis-related products remain illegal under the Controlled Substances Act (as defined below) we are not able to fully protect our intellectual property at the federal level.

As a result, we have

sought and continue to seek federal registrations in limited classes of goods and services and have obtained several state registrations.

As a result, we have sought and continue to seek federal registrations in limited classes of goods and services and have obtained several state registrations.

The Cannabis Industry and Business Lines of the Company

According to market research projections by cannabis researcher Brightfield Group, U.S.

sales of legal cannabis are expected to reach over $31.8 billion in 2023 and $50.7 billion in 2028.

As described further below, United States federal law now bifurcates the legality of “hemp” from “marihuana” (also commonly known as “marijuana”).

sales of legal cannabis are expected to reach over $50 billion by 2026.

As described further below, United States federal law now bifurcates the legality of “hemp” (defined as any part of the Cannabis sativa L plant, including any seeds, derivatives, extracts, cannabinoids, isomers, acids, salts and salts of isomers thereof, whether growing or not, with a tetrahydrocannabinol (“THC”) concentration of less than 0.3% on a dry weight basis) from “marihuana” (also commonly known as “marijuana”).

For purposes of this filing, the term “cannabis” means “marihuana” as set forth in the Controlled Substances Act (21 U.S.C.

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We have rights to operate cultivation facilities in six states and Puerto Rico.

Although pricing pressure for dried flower in several mature cannabis markets has led some operators to eschew cultivation, in certain markets the transition from medical-only to adult-use cannabis has increased wholesale market prices significantly.

Although pricing pressure for dried flower in several mature cannabis markets has led some operators to eschew cultivation, in certain markets the transition from

medical-only to adult-use cannabis has increased wholesale market prices significantly.

We believe that our cultivation operations provide certain other benefits, including:

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Our focuses on quality, potency, strain diversity and production at scale are important because we believe that the wholesale market for cannabis plant material will become increasingly price competitive over time.

More companies are

entering, and will likely continue to enter, this segment of the industry.

More companies are entering, and will likely continue to enter, this segment of the industry.

We believe that manufacturers and retailers that source high-quality, low-cost plant material will have a significant advantage in the medium and long term.

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The methods used in our facilities result in several key benefits, including consistent production of high-quality product and the minimization of product recalls and complaints from patients and adult-use customers.

Our cultivation business line operates year-round.

Operations and sales trends in select markets where we operate do follow seasonal trends with various times of the year providing an opportunity for outdoor cultivation, seasonal impacts on sales in summer and winter months in market in the southwest and northeast and promotional activity increases around

specific industry and holiday events, including April 20, July 10 and Green Wednesday (the Wednesday before Thanksgiving).

We operate the following cultivation and production facilities as of the close of business on March 27, 2024:

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The production operation remains at the original combined cultivation and processing facility.

Our wholesale business is continuing to experience growth in this medical market.

Investments in proprietary edible formulations and the introduction of new brands have the potential for improved financial results.

We have a number of customers;

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our results of operations and financial results in Minnesota are not dependent upon sales to one or a few major customers.

Currently operate approximately 15,600 square feet of cultivation and production and have four operational retail dispensaries.

We have a large number of customers;

our results of operations and financial results in New Mexico are not dependent upon sales to one or a few major customers.

Current cultivation capacity in New Mexico is insufficient to supply our dispensaries adequately and, therefore, we must purchase a portion of our flower inventory, as well as most manufactured cannabis products, from licensed, third-party suppliers.

The availability of cannabis products from these suppliers is consistent.

Currently operate one cultivation and production facility of approximately 60,000 square feet.

Additional 120,000 square feet of cultivation and productions space is under construction and intended primarily to support the adult-use market, when and if we are licensed to sell into that market.

We purchase a modest portion of our manufactured products inventory from several of the nine other registered organizations.

While we believe the long-term opportunity in New York is substantial, recent performance has been impacted by neighboring states transitioning to recreational-use jurisdictions, by substantial investments in retail dispensaries and cultivation by certain of New York’s nine competitive registered organizations (vertically-integrated medical cannabis companies), and by the delayed rollout of the state’s adult-use cannabis program and resultant proliferation of illicit retail cannabis distribution operations in the state.

We believe that new product introductions, the expansion of wholesale revenue streams, our potential participation in the adult-use market, and the potential relocation of some of our retail dispensaries to superior sites will contribute to improving profit margins in the future.

We also anticipate additional growth of our home delivery service.

We purchase a modest portion of our manufactured products inventory from several other registered organizations.

We have a large number of customers;

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Manufactured products are sold to third parties, where allowed, and are also distributed to Company-owned and operated retail dispensaries.

We have vertically integrated in the markets in which we operate.

In the normal course of our business, we purchase input materials and components that we utilize in the cultivation, processing, manufacture and distribution of our products.

No individual supplier represents a significant portion of our purchases or represent a material risk to our operations.

Principal Products or Services

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● Vireo Spectrum™ brand pre-filled distillate vaporizer pens and cartridges, syringes, bulk oil, softgels, tablets, oral solutions, oral spray, topical bars, and topical balms;

● Vireo Selects™ brand distillate vaporizer pens

● Vireo Selects™ brand distillate vaporizer pens and syringes

● 1937™ brand distillate vaporizer pens and cartridges, flower and trim, and dabbable concentrates (e.g., Hash, Rosin, Temple Balls);

● LiteBud™ pre-roll and flower products;

● Boundary Waters™ pre-roll products;

● Boundary Waters™ pre-roll products, RSO Gummies, Half Gram Vapes

● Hi-Color™ edibles;

● Kings and Queens™ concentrates, including live and cured resin badder, budder, sugar, and sauce;

and Infused Pre-rolls and Live Resin Pre-filled Vaporizer Cartridges

● Simple™ brand distillate vaporizer cartridges and 14g/28g Flower

Westwater™ Topical Balms

● Small A$$ Bud™ 14g flower

● Hi*AF™ distillate vaporizer disposable pens and pre-filled cartridges

● Various other flower and trim brands.

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1937 Pre-Rolls;

Litebud Pre-Rolls;

1937 Pre-Pack Flower;

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Hi-Color™ edibles;

Kings and Queens™ concentrates;

Small A$$ Buds bulk flower

Vireo Selects Vape Cartidges, Hi-Color™ edibles, Vireo Spectrum Flower and Pre-Rolls, Boundary Waters Pre-Rolls, Vireo Spectrum Capsules;

Kings and Queens™ concentrates, infused pre-rolls, and vape cartridges;

Small A$$ Buds bulk flower, Hi*AF™ distillate vaporizer disposable pens and pre-filled cartridges

Vireo Selects Vape Cartridges and Syringes, , Vireo Spectrum Flower and Pre-Rolls, Boundary Waters Pre-Rolls, Vireo Spectrum Capsules;

Vireo Spectrum Tincture;

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Vireo Spectrum Topical Balm;

Vireo Spectrum Topical Bar

Red Barn Growers Flower

Vireo Spectrum Topical Bar, Simple Vape Cartridges and Bulk Flower, Dr.

Westwater Topical Balms, Boundary Waters RSO Gummies, Boundary Waters Pre-Rolls, Boundary Waters Vapes

Vireo Selects Vape Cartridges, Vireo Spectrum Vape Cartridges;

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Vireo Spectrum Flower;

Vireo Spectrum Pre-Rolls

Vireo Spectrum Pre-Rolls, Simple Vape Cartridges, Simple 14g/28g Small Bud Flower.

Retail Strategy

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Principal Business Objectives

Our principal business objectives over the next 12-month period include achieving positive operating cash flow;

continuing growth and expansion in the Minnesota market through flower offerings and edibles;

planning and execution in New York for impending adult use program through expanding our facilities and product offerings, subject to regulatory approval;

improving margins in the adult-use New Mexico market, principally through reducing costs;

and increasing wholesale sales in our core markets.

Our principal business objectives over the next 12-month period include achieving positive operating cash flow through cost discipline, operational excellence, and product quality;

improving the quality and efficiency of flower production in Maryland and Minnesota;

pursuing non-core asset divestitures;

managing the balance sheet with capital partners to grow into being a strong credit.

Employees and Human Capital Resources

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November 21, 2024

New York (Security)

January 31, 2024

New York (non-drivers)

October 31, 2023

In addition, our home delivery drivers in New York are represented by the Warehouse Production Sales & Allied Service Employees Union, AFL-CIO Local 811 (“ Local 811 ”).

Our collective bargaining agreement with Local 811 expires July 31, 2023.

Our collective bargaining agreements in New York are expired.

Negotiations are in process, and a resolution is expected.

We consider our relations with our employees, with UFCW and with Local 811 to be good overall.

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regulatory regimes in those jurisdictions where we operate through our subsidiaries.

We currently operate facilities in Maryland, Minnesota, New Mexico, and New York.

We currently operate facilities in Maryland, Minnesota, and New York.

Regulation of Cannabis in the United States Federally

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states, which industry is illegal under U.S.

As of December 31, 2022, the Company is directly involved (through licensed subsidiaries) in both the medical and adult-use cannabis industry in the states of New York, Minnesota, Maryland, and New Mexico, as permitted within such states under applicable state law.

As of December 31, 2023, the Company is directly involved (through

licensed subsidiaries) in both the medical and adult-use cannabis industry in the states of New York, Minnesota, and Maryland

as permitted within such states under applicable state law.

Supreme Court has ruled that Congress has the constitutional authority to enact the existing federal prohibition on cannabis.

As described further below, U.S.

federal law now bifurcates the legality of “hemp” from “marihuana” (also commonly known as marijuana).

For purposes of this filing, the term “cannabis” means “marihuana” as set forth in the Controlled Substances Act (21 U.S.C.

§ 811) (the “ Controlled Substances Act ”) and is used interchangeably with the term “marijuana.” The U.S.

federal government regulates drugs through the Controlled Substances Act, which places controlled substances, including marijuana, on a schedule.

federal government regulates drugs through the Controlled Substances Act, which places controlled substances, including marijuana, in specific schedules of control.

Marijuana is classified as a Schedule I drug.

The Department of Justice defines Schedule I drugs, substances or chemicals as “drugs with no currently accepted medical use and a high potential for abuse.” With the limited exceptions of Epidiolex, a pharmaceutical derived from the cannabis extract cannabidiol (“ CBD ”), and certain drugs that incorporate synthetically derived cannabinoids (i.e., Marinol, Syndros, and Cesamet), the U.S.

Food and Drug Administration has not approved marijuana as a safe and effective drug for any indication.

Moreover, under the Agriculture Improvement Act of 2018 (commonly referred to as the 2018 Farm Bill), marijuana remains a Schedule I controlled substance under the Controlled Substances Act, with the exception of hemp and extracts derived from hemp (such as CBD) with a tetrahydrocannabinol (“ THC ”) concentration of less than 0.3%.

The Controlled Substances Act defines a Schedule I drug, substance or chemical as a substance which has a high potential for abuse, no currently accepted medical use in treatment in the U.S., and a lack of accepted safety for use under medical supervision.

With the limited exceptions of Epidiolex, a pharmaceutical derived from the cannabis extract cannabidiol (“ CBD ”), and certain drugs that incorporate synthetically derived cannabinoids (i.e., Marinol, Syndros, and Cesamet), the U.S.

Food and Drug Administration (“ FDA ”) has not approved marijuana as a safe and effective drug for any indication.

State laws regulating cannabis are in direct conflict with the Controlled Substances Act.

Although certain states and territories of the U.S.

authorize medical or recreational cannabis production and distribution by licensed or registered

entities, under U.S.

authorize medical or adult-use cannabis production and distribution by licensed or registered entities, under U.S.

federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal;

any such acts are criminal acts under federal law under the Controlled Substances Act.

Although our activities are compliant with applicable state and local laws, strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S.

federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company.

There is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions.

Although our activities are compliant with applicable state and local laws, strict compliance with state and local laws with respect to cannabis will neither absolve the Company of liability under U.S.

federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company.

Unless and until the U.S.

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While our operations are in material compliance with all applicable state laws, regulations and licensing requirements, such activities remain illegal under United States federal law.

If the Department of Justice policy were to aggressively pursue debt or equity owners of cannabis-related business and U.S.

Attorneys followed such Department of Justice policies by pursuing prosecutions, then the Company could face, (i) seizure of its cash and other assets used to support or derived from its cannabis subsidiaries and (ii) the arrest of its employees, directors, officers, managers and investors, who could face charges of ancillary criminal violations of the CSA for aiding and abetting and conspiring to violate the Controlled Substances Act by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors and/or retailers of cannabis.

If the Department of Justice (the “ DOJ ”) policy were to aggressively pursue debt or equity owners of cannabis-related business and U.S.

Attorneys followed such DOJ policies by pursuing prosecutions, then the Company could face:

(i) seizure of its cash and other assets used to support, or derived from, its cannabis subsidiaries;

and (ii) the arrest of its employees, directors, officers, managers and investors, who could face charges of ancillary criminal violations of the Controlled Substances Act for aiding, abetting, and conspiring to violate the Controlled Substances Act by virtue of providing financial support to state-licensed or permitted cultivators, processors, distributors and/or retailers of cannabis.

Additionally, as has been affirmed by U.S.

Customs and Border Protection, employees, directors, officers, managers, and investors of the Company who are not U.S.

citizens face the risk of being barred from entry into the U.S., for life.

citizens face the risk of being barred from entry into the U.S.

Department of Justice and Attorney General Memorandums

In August 2013, then-Deputy Attorney General James Cole authored a memorandum (the “ Cole Memorandum ”) addressed to all United States district attorneys acknowledging that, notwithstanding the designation of cannabis as a controlled substance at the federal level in the United States, several states had enacted laws relating to cannabis for medical purposes.

The Cole Memorandum outlined the priorities for the Department of Justice (the “ DOJ ”) relating to the prosecution of cannabis offenses.

In particular, the Cole Memorandum noted that in jurisdictions that have enacted laws legalizing cannabis in some form and that have also implemented strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale, and possession of cannabis, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level.

The Cole Memorandum outlined the priorities for the DOJ relating to the prosecution of cannabis offenses.

Notably, however, the DOJ never provided specific guidelines for what regulatory and enforcement systems it deemed sufficient under the Cole Memorandum standard.

In light of limited investigative and prosecutorial resources, the Cole Memorandum concluded that the DOG should be focused on addressing only the most significant threats related to cannabis.

States where medical cannabis had been legalized were not characterized as a high priority.

Rather, DOJ provided eight enforcement priorities which, if implicated, justified federal

intervention in state-legal cannabis activities.

In light of limited investigative and prosecutorial resources, the Cole Memorandum concluded that the DOJ should be focused on addressing only the most significant priorities related to cannabis (for example, preventing the distribution of cannabis to minors, and preventing revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels).

In March 2017, then-Attorney General Jeff Sessions again noted limited federal resources and acknowledged that much of the Cole Memorandum had merit.

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Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities.

The inconsistency between federal and state laws and regulations is a major risk factor.

As a result of the Sessions Memorandum, federal prosecutors were free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities despite the existence of state-level laws that may be inconsistent with federal prohibitions.

No direction was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities, and resultantly it is uncertain how active federal prosecutors will be in relation to such activities.

Furthermore, the Sessions Memorandum did not discuss the treatment of medical cannabis by federal

The continued inconsistency between federal and state laws represents a major risk factor for the Company.

As a result of the Sessions Memorandum, federal prosecutors are free to utilize their prosecutorial discretion to decide whether to prosecute cannabis activities, despite the existence of state-level laws that may be inconsistent with federal prohibitions.

No direction was given to federal prosecutors in the Sessions Memorandum as to the priority they should ascribe to such cannabis activities, and resultantly, it remains uncertain how active federal prosecutors will be in relation to such activities.

Furthermore, the Sessions Memorandum did not discuss the treatment of medical cannabis by federal prosecutors.

As an industry best practice, despite the rescission of the Cole Memorandum, we continue to do the following to ensure compliance with the guidance provided by the Cole Memorandum:

● Ensure the operations of our subsidiaries and business partners are compliant with all licensing requirements that are set forth with regards to cannabis operation by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions.

● Ensure the operations of our subsidiaries and business partners are compliant with all licensing requirements that are set forth with regards to cannabis operations by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions.

To this end, we retain appropriately experienced legal counsel to conduct the necessary due diligence to ensure compliance of our operations with all applicable regulations.

● The activities relating to cannabis business adhere to the scope of the licensing obtained for example, in the states where only medical cannabis is permitted, the products are only sold to patients who hold the necessary documentation to permit the possession of the cannabis.

● The activities relating to cannabis businesses adhere to the scope of the licensing obtained for such businesses.

For example, in the states where only medical cannabis is permitted, the products are only sold to patients who hold the necessary documentation to permit the possession of cannabis.

● We only work through licensed operators, which must pass a range of requirements, adhere to strict business practice standards, and be subjected to strict regulatory oversight whereby sufficient checks and balances ensure that no revenue is distributed to criminal enterprises, gangs, and cartels.

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however, during his confirmation hearings he stated that federal prosecution of state-licensed cannabis operators is not a “useful use” of limited prosecutorial resources.

Moreover, there is no guarantee that state laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state laws within their respective jurisdictions.

Unless and until the U.S.

Congress amends the Controlled Substances Act with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance), there is a risk that Federal authorities may enforce current U.S.

We will continue to monitor compliance on an ongoing basis in accordance with our compliance program and standard operating agreement procedures.

While our operations are in material compliance with all applicable state laws, regulations and licensing requirements, such activities remain illegal under United States federal law.

For the reasons described above and the risks further described in the Risk Factors section below, there are significant risks associated with our business.

Although the Cole Memorandum has been rescinded, Congress has passed a so-called “rider” provision in the FY 2015, 2016, 2017, 2018, and 2019 Consolidated Appropriations Acts to prevent the DOJ from using congressionally appropriated funds to prevent any state or jurisdiction from implementing a law that authorizes the use, distribution, possession, or cultivation of medical marijuana.

Although the Cole Memorandum has been rescinded, Congress has passed a so-called “appropriations rider” provision in Congressional spending legislation since 2015 to prevent the DOJ from using congressionally appropriated funds to enforce federal cannabis laws against any state or jurisdiction that has implemented a system that authorizes the use, distribution, possession, or cultivation of medical marijuana.

The rider is known as the “Rohrabacher-Farr” Amendment after its original lead sponsors (it is also sometimes referred to as the “Rohrabacher-Blumenauer” or, in its Senate Form, the “Leahy” Amendment, but it is referred to in this report as “ Rohrabacher-Farr ”).

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Rohrabacher-Farr prevents the DOJ from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law.

Rohrabacher-Farr has been renewed effective through September 30, 2023.

The risk of federal enforcement and other risks associated with the Company’s business are described in Item 1A.—"Risk Factors.”

As of January 19, 2024, the Rohrabacher–Farr amendment was effective through March 8, 2024.

The risk of federal enforcement and other risks associated with the Company’s business are described in Item 1A.—"Risk Factors.”

Regulation of the Cannabis Market at State and Local Levels

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Maryland Regulatory Landscape

In 2012, a state law was enacted in Maryland to establish a state-regulated medical cannabis program.

Legislation was signed in May 2013 and the program became operational on December 1, 2017.

Maryland first enacted legal protections for medical cannabis patients in 2003, creating an affirmative defense for patients charged with possession of less than one ounce of cannabis.

In 2013, lawmakers expanded the affirmative defense to protect cannabis caregivers, authorized the use of marijuana for investigational medical purposes, and established the Natalie M.

LaPrade Medical Marijuana Commission to develop, approve and monitor cannabis academic study programs.

Then, in 2014, legislation was enacted to establish a state-regulated medical cannabis program and expand the Commission’s regulatory authority.

The law was signed in April 2014, and the program became operational on December 1, 2017.

The Natalie M.

LaPrade Maryland Medical Cannabis Commission (the “ MMCC ”) regulates the state program and awarded operational licenses in a highly competitive application process.

LaPrade Maryland Medical Cannabis Commission (now known as the Maryland Cannabis Administration (the “ MCA ”)) regulates the state program and awards operational licenses in a highly competitive application process.

The market is divided into three primary classes of licenses:

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Permitted products for sale and consumption include oil-based formulations, dry flower and edibles and other concentrates.

In November 2022, Maryland voters approved recreational marijuana legalization via ballot initiative.

Under the initiative, listed as Question 4 on the ballot, adults 21 and older in Maryland will be allowed to possess up to 1.5 ounces of marijuana and grow two plants out of the public view beginning July 1, 2023.

In November 2022, Maryland voters approved adult-use marijuana legalization via ballot initiative.

Under the initiative, listed as Question 4 on the ballot, adults 21 and older in Maryland will be allowed to possess up to 1.5 ounces of marijuana flower and grow two plants out of the public view beginning July 1, 2023.

Licenses in Maryland

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We also operate a production facility of 30,000 square feet and a 110,000 square-foot cultivation facility.

We hold phase 2 licenses for cultivation, processing, and dispensing.

Wholesale revenues have grown, driven in part by new product offerings and increased market penetration.

On July 1, 2023, the Company converted its existing medical licenses into new standard

cannabis licenses which allow the Company to cultivate, process, and dispense cannabis to patients and consumers age 21 years or older.

Revenues have grown principally by the commencement of adult-use sales on July 1, 2023.

Our cultivation and production licenses, as well as the license for our Frederick, Maryland dispensary, were awarded to our affiliate MaryMed, LLC through merit-based license application processes.

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Our dispensary license for our Baltimore, Maryland location was acquired from Charm City Medicus, LLC on November 19, 2021.

We believe that our medical and scientific background helped Goodness Growth develop a competitive advantage in the marketplace.

Maryland Licenses and Regulations

Maryland licenses are valid for six years and are subject to four-year renewals after required fees are paid and provided that the business remains in good standing.

Renewal requests are typically communicated through email from the MMCC and include a renewal form.

Maryland licenses are valid for five years after required fees are paid and provided that the business remains in good standing.

Renewal requests are typically communicated through email from the MCA and include a renewal form.

Maryland Reporting Requirements

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Minnesota now allows a manufacturer to operate eight distribution facilities, which may include the manufacturer’s single location for cultivation, harvesting, manufacturing, packaging, and processing but is not required to include that location.

Medical cannabis is provided to patients as a dried raw cannabis, liquid, pill, topical (lotions, balms, and patches), vaporized delivery method that does not require the use of dried leaves or plant form, water-soluble cannabinoid multi-particulates (for example, granules, powders, and sprinkles) and orally dissolvable products such as lozenges, gums, mints, buccal tablets, and sublingual tablets.

Medical cannabis was initially provided to patients as a dried raw cannabis liquid, pill, topical (lotions, balms, and patches), and through vaporized delivery methods that did not require the use of dried leaves or plant form, water-soluble cannabinoid multi-particulates (for example, granules, powders, and sprinkles) or orally dissolvable products such as lozenges, gums, mints, buccal tablets, and sublingual tablets.

In terms of safety and security, there are several precautions built into the program.

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Minnesota has also implemented a process for monitoring and evaluating the health impacts of medical cannabis on patients which will be used to help patients and health professionals grow their understanding of the benefits, risks, and side effects of medical cannabis.

In 2022, edibles and dried cannabis flower for smoking were added to the medical program in Minnesota.

On July 1, 2022, Minnesota Statutes s.

151.72 went into effect, which permits the sale, to anyone age 21 or older in the state, of edible products derived from hemp and containing no more than 5mg of THC per serving and 50mg per package.

On January 5, 2023, H.F.

100 ”) was introduced into the Minnesota House of Representatives.

100, if passed, reconciled with a companion bill in the Minnesota senate, and signed by the Governor, would create an adult-use cannabis program in the State of Minnesota.

The probability and timing of the enactment of an adult-use cannabis program, as well as the Company’s ability to participate in any such program, remain uncertain as of the date of filing of this Annual Report on Form 10-K.

On May 30, 2023, the Governor of Minnesota signed into law House File No.

100 ") of the 2022 Session, Chapter 63, a bill of an act relating to adult-use cannabis.

As a result, many marijuana reform laws went into effect August 1, 2023, including adult use legalization, rescheduling under Minnesota's Controlled Substance Act, allowing 21 years of age or older to possess or transport two ounces or less of adult-use cannabis, or eight grams or less of adult-use cannabis concentrate, edible cannabis products or lower-potency hemp edibles infused with a combined total of 800 milligrams or less of tetrahydrocannabinol, and legalizing home grow of up to four mature plants per residence.

100 established the Office of Cannabis Management and transferred the powers and duties with respect to the medical cannabis program under Minnesota Statutes 2022 previously held by the Department of Health.

Licenses and Permits in Minnesota

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We believe that our medical and scientific expertise helped us develop a competitive advantage in the marketplace.

medical cannabis dispensaries in the state of Minnesota, located in Blaine, Bloomington, Burnsville, Hermantown, Rochester, Minneapolis, Moorhead, and Woodbury.

Vireo Health of Minnesota, LLC (“ Vireo Minnesota ”), which is a subsidiary of Goodness Growth, holds one vertically-integrated medical cannabis license to operate one cultivation and production facility in Otsego, MN and eight retail medical cannabis dispensaries in the state of Minnesota, located in Blaine, Bloomington, Burnsville, Hermantown, Rochester, Minneapolis, Moorhead, and Woodbury.

Minnesota Licenses and Regulations

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Recent changes to the state’s qualifying conditions for medical cannabis patients have contributed to increases in patient enrollment.

The March 2022 addition of dried raw cannabis to the list of allowed delivery methods, give our management team optimism that the Minnesota market remains a growth opportunity for the Company.

Minnesota state licenses are renewed every two years.

Every two years, licensees are required to submit a renewal application with the commissioner at least six months before its registration term expires.

The most recent manufacturer annual fee paid in 2021 was $189,220 and is non-refundable.

Additionally, provided that the requisite renewal fees are paid, the renewal application is submitted in a timely manner, and there are no material violations noted against the applicable licenses, and subject to the possible effect of the enactment of H.F.

100 or any other adult-use cannabis legislation in the state, The Company expects to receive the applicable renewed license in the ordinary course of business.

Additionally, provided that the requisite renewal fees are paid, the renewal application is submitted in a timely manner, and there are no material violations noted against the applicable licenses, the Company expects to receive the applicable renewed license in the ordinary course of business.

While the Company’s compliance controls have been developed to mitigate the risk of any material violations of a license arising, there is no assurance that the Company’s license will be renewed in the future in a timely manner.

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We use a third-party application for our computerized seed to sale software, which integrates with the state’s Metrc program and captures the required data points for cultivation, manufacturing and retail as required.

New Mexico Regulatory Landscape

The Lynn and Erin Compassionate Use Act (“ Compassionate Use Act ”) was signed into law in 2007 and became effective July 1, 2007.

The Compassionate Use Act established the regulatory framework for use of medical cannabis by New Mexico residents and created the New Mexico Medical Cannabis Program (“ NMMCP ”).

It allows practitioners to prescribe medical cannabis to patients with a debilitating medical condition (as defined in the Compassionate Use Act).

Currently, there are 23 qualifying conditions under the Compassionate Use Act.

When a practitioner determines that the patient has a debilitating medical condition and provides written certification so stating and that the potential health benefits of the cannabis use would likely outweigh the health risks for the patient, the patient can apply with the New Mexico Department of Health (“ NMDOH ”) for a registry identification card.

A qualified patient is allowed to possess cannabis in an amount that is reasonably necessary to ensure uninterrupted availability of cannabis for a period of three months.

In 2019, New Mexico announced it would begin permitting non-residents of the state to obtain cannabis under the Compassionate Use Act and as of July 1, 2020, the state now extends reciprocity to residents of all other medical cannabis states, allowing visiting medical marijuana patients to use their home-state credentials to purchase at licensed New Mexico medical marijuana dispensaries.

The Cannabis Regulation Act (“ Cannabis Regulation Act ”) was signed into law on April 12, 2021.

The Cannabis Regulation Act established the regulatory framework for use of recreational cannabis within the State of New Mexico to allow for the sale, possession, and consumption of recreational marijuana in the state for adults 21 and older.

The Cannabis Regulation Act also created the Cannabis Control Division (“ NMCCD ”) under the New Mexico Regulation and Licensing Department, which now oversees the NMMCP.

The NMMCP was previously subject to the regulatory authority of NMDOH.

The first dispensaries providing adult-use cannabis began sales in April 2022.

Licenses in New Mexico

Pursuant to a management agreement with our affiliate Red Barn Growers, Inc.

(“ Red Barn ”), a New Mexico non-profit corporation and NMCCD licensee, Vireo Health of New Mexico, LLC (“ VHNM ”), a wholly-owned subsidiary of Goodness Growth, currently operates four dispensaries located in Albuquerque, Las Cruces, Santa Fe and Gallup and a cultivation and processing facility located in Gallup.

New Mexico Licenses and Regulations

In New Mexico, we currently operate an approximately 15,600 square feet of cultivation and production and have four operational retail dispensaries.

The NMCCD has established the following types of cannabis licenses:

manufacturers;

microbusinesses;

cannabis consumption lounges;

vertically integrated establishments;

and integrated microbusinesses.

Red Barn operates pursuant to a vertically integrated establishment license issued by NMCCD.

Red Barn’s vertically integrated establishment licenses allows it to cultivate, process, and distribute cannabis..

Each vertically integrated licensee can operate an unlimited number of dispensaries.

New Mexico Reporting Requirements

The state of New Mexico uses BIOTRACKTHC © as the state’s computerized T&T system used to track commercial cannabis activity and seed-to-sale.

Individual licensees are required to push data to the state to meet all reporting requirements.

New York Regulatory Landscape

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The Marihuana Regulation & Taxation Act was signed into law on March 31, 2021, legalizing adult-use cannabis in New York State.

MRTA established a new Office of Cannabis Management governed by a Cannabis Control Board to comprehensively regulate adult-use, medical, and hemp cannabis.

The OCM has begun to issue licenses and is currently promulgating rules and regulations outlining how and when our business can participate in the adult-use cannabis market.

MRTA established a new Office of Cannabis Management (the “ OCM ”) governed by a Cannabis Control Board to comprehensively regulate adult-use, medical, and hemp cannabis.

The OCM released its final rules and regulations governing the adult-use industry in September 2023, and has begun to issue licenses.

Licenses and Permits in New York

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In New York, we were one of the original five registered organizations, placing second in the initial selection process, and are currently one of ten registered organizations (vertically integrated medical cannabis licensees) in the state.

While we believe the long-term opportunity in New York is substantial, recent performance has been impacted by neighboring states transitioning to adult-use jurisdictions, as well as by increasing competition from other developing operators.

New product introductions and the beginning of wholesale revenue streams may contribute to improving profit margins in the future.

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We are not subject to any material citations or notices of violation with applicable licensing requirements and the regulatory framework enacted by each applicable state that may have an impact on our licenses, business activities or operations.

With the oversight of our General Counsel and Chief Compliance Officer, our compliance team oversees, maintains, and implements our compliance program.

In addition to our internal legal department, we have engaged state regulatory compliance counsel in many jurisdictions.

With the oversight of our Outside General Counsel, our compliance team oversees, maintains, and implements our compliance program.

In addition to an Outside General Counsel, we engage state-specific regulatory compliance counsel in jurisdictions, as appropriate, as well as legal specialists where needs arise.

The compliance team oversees training for cultivation, production and dispensary managers and employees, along with other department leaders and other designated persons as needed, on compliance with state and local laws and regulations.

Our compliance team also monitors all compliance notifications from the regulators and inspectors and lead the effort to timely resolve any issues identified.

Our compliance team also monitors all compliance notifications from the regulators and inspectors and leads the effort to timely resolve any issues identified.

We keep records of all compliance notifications received from the state regulators or inspectors and how and when the issue was resolved.

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We also verify adherence to standard operating procedures by regularly conducting internal inspections and ensure that any issues identified are resolved quickly and thoroughly.

In January 2018, United States Attorney General, Jeff Sessions rescinded the Cole Memorandum and thereby created a vacuum of guidance for enforcement agencies and the DOJ.

As an industry best practice, despite the recent rescission of the Cole Memorandum, we continue to do the following to ensure compliance with the guidance provided by the Cole Memorandum:

● Ensure the operations of our subsidiaries and business partners are compliant with all licensing requirements related to cannabis operation by applicable state, county, municipality, town, township, borough, and other political/administrative divisions.

See " Item 1.

Business – Regulation on Cannabis in the United States – U.S.

Department of Justice and Attorney General Memorandums " for discussion on guidance for enforcement agencies and the DOJ with respect to cannabis.

As an industry best practice, to ensure compliance with prior guidance, we continue to:

● Ensure the operations of our subsidiaries and business partners are compliant with all licensing requirements related to cannabis operations by applicable state, county, municipality, town, township, borough, and other political/administrative divisions.

To this end, we retain appropriately experienced legal counsel to conduct the necessary due diligence to ensure compliance of such operations with all applicable regulations;

● The activities relating to cannabis business adhere to the scope of the licensing obtained.

For example, in the states where only medical cannabis is permitted, cannabis products are only sold to patients who hold the necessary documentation whereas, in the states where cannabis is permitted for adult recreational use, in the future, we intend to sell our cannabis products only to individuals who meet the requisite age requirements;

● We adhere to compliant business practices and has implemented strict regulatory oversight to ensure that no revenue is distributed to criminal enterprises, gangs or cartels;

● The activities relating to cannabis business adhere to the scope of the licensing obtained for such businesses.

For example, in the states where only medical cannabis is permitted, cannabis products are only sold to patients who hold the necessary documentation whereas, in the states where cannabis is permitted for adult adult use, in the future, we intend to sell our cannabis products only to individuals who meet the requisite age requirements;

● We adhere to compliant business practices and have implemented strict regulatory oversight to ensure that no revenue is distributed to criminal enterprises, gangs or cartels;

● We conduct reviews of products and product packaging to ensure that the products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.

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Risk Factors, below.

To this end, we retain appropriately experienced legal counsel to conduct the necessary due diligence to ensure compliance of such operations with all applicable regulations;

● The activities relating to cannabis business adhere to the scope of the licensing obtained for such businesses.

For example, in the states where only medical cannabis is permitted, cannabis products are only sold to patients who hold the necessary documentation whereas, in the states where cannabis is permitted for adult adult-use, in the future, we intend to sell our cannabis products only to individuals who meet the requisite age requirements;

● We adhere to compliant business practices and have implemented strict regulatory oversight to ensure that no revenue is distributed to criminal enterprises, gangs or cartels;

We will continue to monitor compliance on an ongoing basis in accordance with our compliance program and standard operating procedures.

While our operations are in compliance with all applicable state laws, regulations and licensing requirements in all material respects, such activities remain illegal under United States federal law.

For the reasons described above and the risks further described in Risk Factors below, there are significant risks associated with our business.

Readers are strongly encouraged to carefully read all the risk factors contained in Item 1A.

Risk Factors, below.

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What changed 10-K

Item 1. Business