What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-07 · 202 added, 124 removed, 513 unchanged (39% of the section changed)

Financial Statements

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

CONSOLIDATED BALANCE SHEETS

21 unchanged sentences

Convertible debt, net

Long-Term debt, net

Total liabilities

2 unchanged sentences

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

111,041,230 shares issued and outstanding at March 31, 2024 and 110,007,030 at December 31, 2023)

114,605,008 shares issued and outstanding at June 30, 2024 and 110,007,030 at December 31, 2023)

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

320,851 shares issued and outstanding at March 31, 2024 and 331,193 at December 31, 2023)

300,714 shares issued and outstanding at June 30, 2024 and 331,193 at December 31, 2023)

Super Voting Shares ($- par value;

unlimited shares authorized;

0 shares issued and outstanding at March 31, 2024 and December 31, 2023)

0 shares issued and outstanding at June 30, 2024 and December 31, 2023)

Additional Paid in Capital

7 unchanged sentences

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

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS

Dollars, except per share amounts, unaudited)

Dollars, except share amounts, unaudited)

Three Months Ended

Six Months Ended

Cost of sales

6 unchanged sentences

Income (loss) from operations

( 1,042,044 )

Other income (expense):

Gain (loss) on disposal of assets

( 2,747,881 )

Interest expenses, net

1 unchanged sentence

( 7,744,794 )

( 16,241,091 )

( 14,879,584 )

Other income (expenses)

2 unchanged sentences

( 4,694,340 )

( 13,548,337 )

( 11,806,817 )

Loss before income taxes

1 unchanged sentence

( 2,994,870 )

( 12,480,353 )

Current income tax expenses

1 unchanged sentence

( 4,385,000 )

( 3,377,871 )

Deferred income tax recoveries

2 unchanged sentences

( 7,379,870 )

( 15,735,224 )

Net loss per share - basic and diluted

1 unchanged sentence

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

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

Dollars, unaudited)

Dollars, except share amounts, unaudited)

Super Voting Shares

5 unchanged sentences

Stock-based compensation

Warrants issued in financing activities

Obligation to issue shares

1 unchanged sentence

( 15,735,224 )

Balance at March 31, 2023

Balance at June 30, 2023

( 193,616,187 )

5 unchanged sentences

Stock-based compensation

Options exercised

Warrants exercised

Shares issued

( 7,379,870 )

Balance at March 31, 2024

Balance at June 30, 2024

( 210,807,922 )

( 22,558,798 )

Super Voting Shares

Additional Paid-

Stockholders'

Equity (deficiency)

Balance, April 1, 2023

( 186,286,932 )

( 2,067,654 )

Stock-based compensation

Obligation to issue shares

Warrants issued in financing activities

( 7,329,255 )

Balance at June 30, 2023

( 193,616,187 )

( 7,924,808 )

Balance, April 1, 2024

( 210,139,511 )

( 22,575,319 )

Conversion of MVS shares

Stock-based compensation

Options exercised

Warrants exercised

Shares issued

Balance at June 30, 2024

( 210,807,922 )

( 22,558,798 )

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

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Dollars, unaudited)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

8 unchanged sentences

Stock-based payments

Warrants receivable

( 1,248,224 )

Warrants held

2 unchanged sentences

Deferred income tax

Loss on disposal of Red Barn Growers

Loss (gain) on disposal of assets

5 unchanged sentences

Accounts payable and accrued liabilities

( 1,141,057 )

Changes in operating lease liabilities

6 unchanged sentences

PP&E Additions

( 4,088,734 )

( 2,478,645 )

Proceeds from sale of Red Barn Growers net of cash

Proceeds from sale of property, plant, and equipment

Net cash provided by (used in) investing activities

( 4,238,834 )

( 2,175,004 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from long-term debt, net of issuance costs

Proceeds from convertible debt, net of issuance costs

Proceeds from issuance of shares

Proceeds from warrant exercises

Proceeds from option exercises

Debt principal payments

( 1,062,000 )

( 1,976,362 )

Lease principal payments

Net cash provided by (used in) financing activities

( 1,121,066 )

Net change in cash

4 unchanged sentences

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

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Description of Business and Summary

Goodness Growth Holdings, Inc.

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

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

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

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

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

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

Vireo Growth Inc.

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

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

On July 8, 2024, the Company changed its name to Vireo Growth Inc., its ticker symbol on the CSE to “VREO” and its ticker symbol on the OTCQX to “VREOF.”

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

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

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

3 unchanged sentences

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

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

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

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

(“ Verano ”), pursuant to which Verano was to acquire all of the issued and outstanding shares of Vireo 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 Vireo Growth Shares would receive 0.22652 of a subordinate voting share of Verano (each a “ Verano Subordinate Voting Share ”), subject to adjustment as described below (the “ Exchange Ratio ”), for each Subordinate Voting Share held, and 22.652 Verano Subordinate Voting Shares for each Multiple Voting Share and Super Voting Share held, immediately prior to the effective time of the Arrangement.

On October 13, 2022, Vireo 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.

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

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

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

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

The Company is seeking damages, costs and interest, based on Verano's breach of contract and of its duty of good faith and honest performance.

2 unchanged sentences

Throughout 2023, the Company served 4 lists of documents, reviewed document production from Verano, and prepared for examinations for discovery.

The Company also prepared materials in anticipation of seeking summary determination of its claim.

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.

On May 2, 2024, the Company filed an application with the Supreme Court of British Columbia for summary determination.

The Company is seeking substantial damages, specifically $ 860.9 million, as well as other costs and legal fees, based on Verano’s breach of contract and of its duty of good faith and honest performance.

Due to uncertainties inherent in litigation, it is not possible for Vireo 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.

18 unchanged sentences

Basis of consolidation

These unaudited condensed consolidated financial statements include the accounts of the following entities wholly owned, or effectively controlled by the Company during the period ended March 31, 2024:

Name of entity

Place of incorporation

Vireo Health, Inc.

Delaware, USA

Vireo Health of New York, LLC

New York, USA

Minnesota Medical Solutions, LLC

EHF Cultivation Management, LLC

Elephant Head Farm, LLC

Minnesota, USA

Maryland, USA

Vireo of Charm City, LLC

Maryland, USA

Vireo Health of Massachusetts, LLC

Delaware, USA

Mayflower Botanicals, Inc.

Massachusetts, USA

Minnesota Medical Solutions, LLC

Minnesota, USA

MJ Distributing C201, LLC

MJ Distributing P132, LLC

Resurgent Biosciences, Inc.

Delaware, USA

Retail Management Associates, LLC

Verdant Grove, Inc.

Massachusetts, USA

Vireo Health de Puerto Rico, Inc.

Vireo Health of Nevada 1, LLC

Vireo Health of New Mexico, LLC

Delaware, USA

Vireo Health of New York, LLC

New York, USA

Vireo Health of Puerto Rico, LLC

Delaware, USA

Vireo Health de Puerto Rico, Inc.

Vireo Health, Inc.

Delaware, USA

Vireo of Charm City, LLC

Maryland, USA

XAAS Agro, Inc.

Vireo Health of Nevada 1, LLC

Verdant Grove, Inc.

Massachusetts, USA

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.

9 unchanged sentences

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

The Company recorded a net loss for the three month periods ended March 31, 2024, and 2023, presented in these financial statements, and as such there is no difference between the Company’s basic and diluted net loss per share for these periods.

The anti-dilutive shares outstanding for the three month period ending March 31, 2024, and 2023 were as follows:

The Company recorded a net loss for the three and six month periods ended June 30, 2024, and 2023, 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 periods ended June 30, 2024, and 2023 were as follows:

Stock options

1 unchanged sentence

Revenue Recognition

The Company’s primary source of revenue is from wholesale of cannabis products to dispensary locations and direct retail sales to eligible customers at the Company-owned dispensaries.

The Company’s primary source of revenue is from wholesale of cannabis products to dispensary locations and direct retail sales to eligible customers at Company-owned dispensaries.

Substantially all of the Company’s retail revenue is from the direct sale of cannabis products to adult-use and medical customers.

1 unchanged sentence

Three Months Ended

Six Months Ended

New accounting pronouncements not yet adopted

12 unchanged sentences

Assets Held for Sale

As of March 31, 2024, the Company identified property and equipment, deposits, and lease assets and liabilities associated with the businesses in New York, Nevada, and Massachusetts with carrying amounts that are expected to be recovered principally through sale or disposal rather than through continuing use.

As of June 30, 2024, the Company identified property and equipment, deposits, and lease assets and liabilities associated with the businesses in New York, Nevada, and Massachusetts with carrying amounts that are expected to be recovered principally through sale or disposal rather than through continuing use.

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

11 unchanged sentences

Current assets and liabilities held by our New York business have not been classified as held for sale.

Pre-tax operating losses attributable to the New York business were $ 3,698,934 for the three months ended March 31, 2024.

Pre-tax operating losses attributable to the New York business were $ 7,757,409 for the six months ended June 30, 2024.

Fair Value Measurements

5 unchanged sentences

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

No indicators of impairment existed as of March 31, 2024, and therefore no impairment charges were recorded.

No indicators of impairment existed as of June 30, 2024, 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.

5 unchanged sentences

Tax withholding receivable

Included in the trade receivables, net balance at March 31, 2024, and December 31, 2023, is an allowance for doubtful accounts of $ 46,619 and $ 95,686 respectively.

Included in the tax withholding receivable, net balance at March 31, 2024, and December 31, 2023, is an allowance for doubtful accounts of $ 159,275 .

Included in the trade receivables, net balance at June 30, 2024, and December 31, 2023, is an allowance for doubtful accounts of $ 71,349 and $ 95,686 , respectively.

Included in the tax withholding receivable, net balance at June 30, 2024, and December 31, 2023, is an allowance for doubtful accounts of $ 159,275 .

Inventory is comprised of the following items:

3 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Work-in-progress

13 unchanged sentences

( 9,096,649 )

For the three months ended March 31, 2024, and 2023, total depreciation on property and equipment was $ 633,728 and $ 893,598 , respectively.

For the three months ended March 31, 2024, and 2023, accumulated amortization of the right of use asset under finance lease amounted to $ 2,507,998 and $ 1,934,235 , respectively.

For the six months ended June 30, 2024, and 2023, total depreciation on property and equipment was $ 1,267,612 and $ 1,571,256 , respectively.

For the six months ended June 30, 2024, and 2023, accumulated amortization of the right of use asset under finance lease amounted to $ 2,651,438 and $ 2,077,675 , respectively.

The right of use asset under finance lease of $ 7,938,138 consists of leased processing and cultivation premises.

The Company capitalized into inventory $ 560,180 and $ 734,087 relating to depreciation associated with manufacturing equipment and production facilities for the three months ended March 31, 2024, and 2023, respectively.

The Company capitalized into inventory $ 1,121,141 and $ 1,294,065 relating to depreciation associated with manufacturing equipment and production facilities for the six months ended June 30, 2024, and 2023, respectively.

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

As of March 31, 2024, in conjunction with the Company’s held for sale assessment and disposal of certain long-lived assets, the Company evaluated whether property and equipment showed any indicators of impairment, and it was determined that the recoverable amount of certain net assets was above book value.

As of June 30, 2024, 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 no impairment charge (2023 - $ 0 ) on property and equipment, net.

8 unchanged sentences

Finance Leases

March 31, 2024

June 30, 2024

Total minimum lease payments

31 unchanged sentences

Divestitures (Note 3)

Goodwill - December 31, 2023 and March 31, 2024

The Company has no goodwill as of March 31, 2024.

Goodwill - December 31, 2023 and June 30, 2024

The Company has no goodwill as of June 30, 2024.

As such, no further impairment testing procedures were performed.

3 unchanged sentences

Balance, December 31, 2023

Balance, March 31, 2024

Amortization expense for intangibles was $ 204,812 and $ 159,766 during the three months ended March 31, 2024 and 2023, respectively.

Balance, June 30, 2024

Amortization expense for intangibles was $ 204,812 and $ 409,624 during the three and six months ended June 30, 2024, respectively, and $ 159,028 and $ 318,794 during the three and six months ended June 30, 2023, respectively.

The Company capitalized into inventory $ 24,779 (2023 - $ 0 ) and $ 49,557 (2023 - $ 0 ) of amortization for the three and six months ended June 30, 2024, respectively.

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

11 unchanged sentences

In 2019, the Company’s promissory note payable in the amount of $ 1,010,000 was modified to increase the amount payable to $ 1,110,000 .

The Company repaid the note in full during the three months ended March 31, 2024.

The Company repaid the note in full during the six months ended June 30, 2024.

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

The note bears an interest rate of 8 % per annum with interest payments due

on the last day of each calendar quarter.

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

On November 19, 2023, the Company and lender amended the note.

4 unchanged sentences

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

In connection with the Credit Facility, the Company also pays a monthly credit monitoring fee in the amount of $ 130,400 which is included in interest expense in the consolidated statements of loss and comprehensive loss for the three months ended March 31, 2024 and 2023.The Credit Facility matures on March 31, 2024.

On November 18, 2021, the Company and lenders amended the Credit Facility to provide for an additional loan of $ 4,200,000 with a cash interest rate of 15 % per annum and PIK interest of 2 % per annum and a maturity date of November 29, 2024.

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

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

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

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

6 unchanged sentences

The Company has the potential to extend the maturity date on its Delayed Draw Loans up to January 31, 2026 with the satisfaction of certain financial performance-related conditions.

On May 1, 2024, The Company executed a short-term extension of the maturity date on the Credit Facility with the Agent.

The Credit Facility was extended until June 14, 2024, matching all other terms of the existing agreement.

On June 14, 2024, another short-term extension was executed which extended the maturity date on the Credit Facility to July 31, 2024, matching all other terms of the existing agreement.

On May 21, 2024 the Company executed a $ 1,200,000 term loan with the Agent to assist with the purchase of a site for a new dispensary location.

The loan bears an interest rate of 12.0 % and is due on May 28, 2027.

Financing costs of $ 68,600 were incurred in connection with the closing of the loan.

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

As of March 31, 2024, $ 201,015 (December 31, 2023 - $ 1,524,531 ) of deferred financing costs remain unamortized.

As of June 30, 2024, $ 66,694 (December 31, 2023 - $ 1,524,531 ) of deferred financing costs remain unamortized.

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

Beginning of year

Beginning of period

Principal repayments

7 unchanged sentences

Total long-term debt

As of March 31, 2024, stated maturities of long-term debt were as follows:

As of June 30, 2024, stated maturities of long-term debt were as follows:

Convertible Notes

2 unchanged sentences

The initial tranche's principal amount of Convertible Notes outstanding in the amount of $ 2,000,000 , plus all PIK and all other accrued but unpaid interest thereunder, is convertible into Subordinate Voting Shares of the Company at the option of the holders at any time by written notice to the Company, at a conversion price equal to $ 0.145 .

For each future tranche advanced, the principal amount of Convertible Notes outstanding, plus all paid-in-kind interest and all other accrued but unpaid interest thereunder, is convertible into Subordinate Voting Shares of the Company at the option of the holders at any time by written notice to the Company, at a conversion price equal to the lesser of $ 0.145 or a 20.0 % premium over the 30-day volume weighted average price of the Company’s Subordinate Voting Shares calculated on the day prior to the date on which each tranche is advanced, if permitted by the Canadian Securities Exchange.

For each future tranche advanced, the principal amount of Convertible Notes outstanding, plus all PIK interest and all other accrued but unpaid interest thereunder, is convertible into Subordinate Voting Shares of the Company at the option of the holders at any time by written notice to the Company, at a conversion price equal to the lesser of $ 0.145 or a 20.0 % premium over the 30-day volume weighted average price of the Company’s Subordinate Voting Shares calculated on the day prior to the date on which each tranche is advanced, if permitted by the Canadian Securities Exchange.

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

6 unchanged sentences

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

As of March 31, 2024 $ 967,587 (December 31, 2023 - $ 1,083,697 ) of deferred financing costs remain unamortized.

As of June 30, 2024, $ 851,477 (December 31, 2023 - $ 1,083,697 ) of deferred financing costs remain unamortized.

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

Beginning of year

Beginning of period

Deferred financing costs

1 unchanged sentence

Amortization of deferred financing costs

End of period

current portion

1 unchanged sentence

Stockholders’ Equity

The Company’s certificate of incorporation authorized the Company to issue the following classes of shares with the following par value and voting rights as of March 31, 2024.

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, 2024.

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

15 unchanged sentences

Shares Issued

During the three months ended March 31, 2024, 10,342 Multiple Voting Shares were redeemed for 1,034,200 Subordinate Voting Shares.

During the six months ended June 30, 2024, 30,479 Multiple Voting Shares were converted into 3,047,900 Subordinate Voting Shares for no additional consideration.

During the six months ended June 30, 2024, 1,300,078 Subordinate Voting Shares were issued to the Company’s senior secured lender, Chicago Atlantic Opportunity Portfolio, LP, for $ 700,000 of proceeds.

During the six months ended June 30, 2024, employee stock options were exercised for 50,000 Subordinate Voting Shares.

Proceeds from this transaction were $ 16,500 .

During the six months ended June 30, 2024, stock warrants were exercised for 200,000 Subordinate Voting Shares.

Proceeds from these transactions were $ 29,000 .

Stock-Based Compensation

Stock Options

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

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

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

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

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

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

9 unchanged sentences

Expected Dividend Yield

Stock option activity for the three months ended March 31, 2024, and for the year ended December 31, 2023, is presented below:

Stock option activity for the six months ended June 30, 2024, and for the year ended December 31, 2023, is presented below:

Weighted Average

6 unchanged sentences

Balance, December 31, 2023

Options Outstanding at March 31, 2024

Options Exercisable at March 31, 2024

During the three month periods ended March 31, 2024 and 2023, the Company recognized $ 86,732 and $ 1,399,258 in stock-based compensation relating to stock options, respectively.

As of March 31, 2024, the total unrecognized compensation costs related to unvested stock options awards granted was $ 416,563 .

Options Outstanding at June 30, 2024

Options Exercisable at June 30, 2024

During the three and six month periods ended June 30, 2024, the Company recognized ($ 60,751 ) and $ 25,981 in stock-based compensation relating to stock options, respectively.

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

As of June 30, 2024, the total unrecognized compensation costs related to unvested stock options awards granted was $ 647,705 .

In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 1.6 years.

The total intrinsic value of stock options outstanding and exercisable as of March 31, 2024, was $ 3,388,310 and $ 2,973,949 , respectively.

The total intrinsic value of stock options outstanding and exercisable as of June 30, 2024, was $ 4,574,605 and $ 4,108,845 , respectively.

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

9 unchanged sentences

Warrants outstanding at December 31, 2023

Warrants outstanding at March 31, 2024

Warrants exercisable at March 31, 2024

Warrants outstanding at June 30, 2024

Warrants exercisable at June 30, 2024

Weighted Average

5 unchanged sentences

Warrants outstanding at December 31, 2023

Warrants outstanding at March 31, 2024

Warrants exercisable at March 31, 2024

During the three months ended March 31, 2024, and 2023, $ 0 in stock-based compensation expense was recorded in connection with outstanding warrants.

Warrants outstanding at June 30, 2024

Warrants exercisable at June 30, 2024

During both the three and six month periods ended June 30, 2024, $ 0 (2023 - $ 1,248,224 ) in stock-based compensation expense was recorded in connection with outstanding warrants.

Restricted Stock Units (“RSUs”)

2 unchanged sentences

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

During the three months ended March 31, 2024, the Company recognized $ 93,057 and $ 276,336 , respectively, in stock-based compensation expense related to RSUs.

During the three and six months ended June 30, 2024, the Company recognized $ 183 and $ 93,240 , respectively, in stock-based compensation expense related to RSUs.

During the three and six month periods ended June 30, 2023, the Company recognized $ 188,603 and $ 464,939 , respectively, in stock-based compensation expense related to RSUs.

A summary of RSUs is as follows:

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Balance, December 31, 2022

Balance, December 31, 2023 and March 31, 2024

Vested at March 31, 2024

Balance, December 31, 2023

Balance, June 30, 2024

Vested at June 30, 2024

Commitments and Contingencies

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

paid an inadequate price for MaryMed, LLC (“ MaryMed ”), which it purchased it from Capital in 2018, and that the consideration given – shares of preferred stock in Vireo U.S.

paid an inadequate price for MaryMed, LLC (“ MaryMed ”), which it purchased from Capital in 2018, and that the consideration given – shares of preferred stock in Vireo U.S.

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

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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.

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

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

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 Vireo Growth pursuant to a Plan of Arrangement.

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

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

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

The Company believes that Verano has no factual or legal basis to justify or support its purported termination of the Arrangement Agreement, which the Company determined to treat as a repudiation of the Arrangement Agreement.

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

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

The Company is seeking damages, costs and interest, based on Verano's breach of contract and of its duty of good faith and honest performance.

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Throughout 2023, the Company served 4 lists of documents, reviewed document production from Verano, and prepared for examinations for discovery.

The Company also prepared materials in anticipation of seeking summary determination of its claim, which it anticipates filing within 30 days .

On May 2, 2024 the Company filed an application with the Supreme Court of British Columbia for summary determination.

The Company is seeking substantial damages, specifically US $ 860.9 million, as well as other costs and legal fees, based on Verano’s breach of contract and of its duty of good faith and honest performance.

The damages sought will be significant and material given that Verano’s breach left the Company in a vulnerable position resulting in the Company being constrained in its ability to fund growth initiatives that were desirable and that its competitors were able to undertake, most notably in Minnesota and New York markets.

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Three Months Ended

Six Months Ended

Salaries and benefits

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Other Income (Expense)

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

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

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

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

The Company applied for and received the tax credit under the CARES Act.

During the three and six months ended June 30, 2024, the Company recorded and received

$ 0 (2023 - $ 4,650,264 ) 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, 2024 and 2023.

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.

(“Grown Rogue”) entered into a strategic agreement whereby Grown Rogue will support Vireo Growth in the optimization of its cannabis flower products.

As part of this strategic agreement Grown Rogue granted the Company 8,500,000 warrants to purchase subordinate voting shares of Grown Rogue on October 5, 2023.

These warrants were valued at $ 3,265,231 on March 31, 2024 using a stock price of $ 0.45 , an exercise price of $ 0.17 , an expected life of 4.52 years, an annual risk free rate of 4.21 % , and volatility of 100 % .

The change in fair value relative to December 31, 2023 of $ 1,327,879 was recorded as other income in the unaudited condensed consolidated statement of loss and comprehensive loss for the three months ended March 31, 2024.

These warrants were valued at $ 4,867,643 on June 30, 2024 using a stock price of $ 0.65 , an exercise price of $ 0.164 , an expected life of 4.27 years, an annual risk free rate of 4.33 % , and volatility of 100 % .

The change in fair value for the three and six months ended June 30, 2024, of $ 1,602,412 and $ 2,930,291 , respectively, was recorded as other income in the unaudited condensed consolidated statement of loss and comprehensive loss for the three and six months ended June 30, 2024.

Supplemental Cash Flow Information (1)

2 unchanged sentences

Change in construction accrued expenses

Warrants issued in connection with financing activities

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

11 unchanged sentences

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

As of March 31, 2024, the Company’s financial liabilities consist of accounts payable, accrued liabilities, debt,

and convertible debt.

As of June 30, 2024, the Company’s financial liabilities consist of accounts payable, accrued liabilities, debt, convertible debt, liabilities held for sale, and uncertain tax liabilities.

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

2 unchanged sentences

There can be no assurance of continued access to significant equity or debt financing.

Goodness Growth operates in the United States.

Vireo Growth operates in the United States.

federal government regulates drugs through the Controlled Substances Act (21 U.S.C.

11 unchanged sentences

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

A change of 100 basis points in interest rates during the three months ended March 31, 2024, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 138,570 .

A change of 100 basis points in interest rates during the three months ended June 30, 2024, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 278,099 .

Related Party Transactions

As of March 31, 2024, and December 31, 2023, there were $ 0 and $ 121,846 due to related parties, respectively.

As of June 30, 2024, and December 31, 2023, there were $ 0 and $ 121,846 due to related parties, respectively.

Subsequent Events

On April 1, 2024, the Company executed a eighth amendment to its lease with its landlord on its cannabis cultivation and manufacturing facilities located in Johnstown, New York.

As part of the eighth amendment to the lease in Johnstown, the Company extended its option to terminate the lease.

Written notice of termination now needs to be provided by June 15, 2024.

Additionally, the Company has a purchase option to buy the premises for $ 81,000,000 .

The purchase option extends through March 27, 2026, and the purchase price increases 3 % every six months.

On April 1, 2024, ACE Ventures, LLC (“Ace”), a minority-owned business partnership in the State of New York, and the Company executed a binding term sheet whereby Ace plans to acquire the Company’s subsidiary, Vireo Health of New York (“VireoNY”), pending the satisfaction of closing conditions, including secured capital commitments and regulatory approval.

Terms of the transaction include a purchase price between $ 3.0 and $ 5.0 million for Vireo Health of New York’s licenses, inventory and assets, as well as either Ace’s assumption of the lease agreement with Innovative Industrial Properties (“IIP”) for the Johnstown, NY cannabis cultivation and manufacturing campus or Ace’s acquisition of this campus.

Ace has agreed to take financial responsibility for VireoNY’s operations, including its operating losses, beginning on April 1, 2024.

These activities are expected to be supported initially by a $ 2.5 million unsecured loan from the Company to VireoNY.

On May 1, 2024, The Company announced that Josh Rosen, who has served as Interim CEO since February of 2023, has been appointed as Chief Executive Officer, effective immediately.

Rosen, retains his Interim Chief Financial Officer title.

On May 1, 2024, The Company announced that it is in ongoing discussions with its senior secured lender, Chicago Atlantic Admin, LLC, an affiliate of Green Ivy Capital, to finalize a longer-term extension of its credit agreement.

While this process remains ongoing, the parties have agreed to a short-term extension of the maturity date on their term loan until June 14, 2024, matching all other terms of the existing agreement.

On May 2, 2024, the Company announced that it has filed an application with the Supreme Court of British Columbia for summary determination in its ongoing litigation with Verano Holdings, Inc.

(“Verano”) related to Verano’s wrongful termination of the share exchange agreement (the “Arrangement Agreement”) between the parties pursuant to which Verano agreed to acquire all of the outstanding capital stock of the Company in a transaction announced on February 1, 2022.

The Company is seeking substantial damages, specifically US $ 869.0 million, as well as other costs and legal fees, based on Verano’s breach of contract and of its duty of good faith and honest performance.

While the Company’s filing of its application for summary determination reflects its belief that Verano’s defense against its claims of unlawful conduct is without merit, the Company can make no assurances regarding the expected timeframe to resolve this litigation, or its ability to recover damages from Verano.

On July 1, 2024, the Company received $ 3,600,000 in proceeds related to the repayment of the outstanding current note receivable of $ 3,750,000 .

The $ 3,750,000 note receivable was consideration received from Jushi Holdings, Inc.

(“Jushi”) in connection with the divestiture of the Company’s Pennsylvania operations in 2020.

The Company has relieved Jushi of any further liability, and considers the note receivable to be fully paid.

On July 31, 2024, the Company executed a ninth amendment to the Company’s Green Ivy credit agreement with Chicago Atlantic and affiliates.

The ninth amendment to the Company’s credit agreement extends the maturity date on the credit facility loans to January 29, 2027, adjusts and extends the designated event of default with respect to the Company’s ongoing disposition of its New York operations through July 31, 2025, and amends certain financial measure definitions and covenants within the agreement.

The Company will issue 12,500,000 Subordinate Voting Shares to the lenders in consideration for the credit facility amendment.

On July 31, 2024, Chicago Atlantic notified the Company of its intent to voluntarily convert all outstanding convertible notes.

The convertible loan carried an interest rate of 12.0 percent, and was convertible into equity shares of the Company at a strike price of US $ 0.145 .

As a result of the conversion, Vireo will issue approximately 73,000,000 million Subordinate Voting Shares to Chicago Atlantic and its affiliates.

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