What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-04 compared with 2024-04-01 · 263 added, 237 removed, 835 unchanged (37% of the section changed)

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To the Shareholders and Directors of

Goodness Growth Holdings, Inc.

Vireo Growth Inc.

(formerly “Goodness Growth Holdings, Inc.”)

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Goodness Growth Holdings Inc.

(the “Company”), as of December 31, 2023 and 2022, and the related consolidated statements of net loss and comprehensive loss, stockholders’ equity (deficiency), and cash flows for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of Goodness Growth Holdings Inc.

We have audited the accompanying consolidated balance sheets of Vireo Growth Inc.

(formerly “Goodness Growth Holdings, Inc.”) (the “Company”), as of December 31, 2024 and 2023, and the related consolidated statements of net loss and comprehensive loss, stockholders’ equity (deficiency), and cash flows for the years ended December 31, 2024 and 2023, and the related notes and schedules (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Vireo Growth Inc.

as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023 in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the financial statements, the Company has concluded that the historical recurring losses from operations, negative cash flows from operations, dependence on debt and other financings and the termination of the Arrangement Agreement gives rise to substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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Chartered Professional Accountants

April 1, 2024

GOODNESS GROWTH HOLDINGS, INC.

March 4, 2025

VIREO GROWTH INC.

Consolidated Balance Sheets (In U.S Dollars)

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Operating lease, right-of-use asset

Notes receivable, long-term

Intangible assets, net

Deferred tax assets

Current liabilities

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285,371 shares issued and outstanding at December 31, 2024 and 331,193 at December 31, 2023)

Super Voting Shares ($- par value;

unlimited shares authorized;

0 shares issued and outstanding at December 31, 2023 and 65,411 at December 31, 2022)

Additional paid in capital

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

GOODNESS GROWTH HOLDINGS, INC.

Consolidated Statements of Net Loss and Comprehensive Loss (In U.S.

VIREO GROWTH INC.

Consolidated Statements of Net Loss and Comprehensive Loss

Dollars, except per share amounts)

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Operating expenses:

Selling, general and administrative

Selling, general and administrative expenses

Transaction related expenses

Stock-based compensation expenses

Total operating expenses

Income (loss) from operations

( 6,939,365 )

Income from operations

Other income (expense):

Impairment of long-lived assets

( 8,596,201 )

Gain (loss) on disposal of assets

( 4,477,738 )

Interest expenses, net

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( 31,260,798 )

Impairment of long-lived assets

Gain (loss) on disposal of assets

( 4,477,738 )

Other income (expenses)

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

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

Consolidated Statements of Stockholders’ Equity (Deficiency)

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Conversion of MVS shares

Options exercised

Conversion of Super Voting Shares

Stock-based compensation

Warrants issued in financing activities

Shares issued in financing activities

( 25,547,089 )

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( 203,428,052 )

( 16,043,649 )

Balance, January 1, 2024

( 203,428,052 )

( 16,043,649 )

Conversion of MVS shares

Conversion of Super Voting Shares

Stock-based compensation

Stock issuance

Net settlement of stock-based compensation

Options exercised

Warrants exercised

Shares issued in financing activities

Warrants issued in financing activities

Shares issued in private placement

Conversion of convertible debt

( 28,007,509 )

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( 231,435,561 )

( 16,043,649 )

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

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

Consolidated Statements of Cash Flows

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Stock-based payments

Warrants receivable

Warrants held

( 1,937,352 )

Interest Expense

Bad debt expense

Impairment of long-lived assets

Deferred income tax

Loss (gain) on sale of property and equipment

Accretion of interest on right-of-use finance lease liabilities

Loss on disposal of Red Barn Growers

Loss (gain) on disposal of assets

Gain on disposal of royalty asset

Change in operating assets and liabilities:

Accounts Receivable

( 1,030,224 )

Prepaid expenses

8 unchanged sentences

Change in assets and liabilities held for sale

( 4,653,454 )

Net cash provided by (used in) operating activities

4 unchanged sentences

( 4,963,107 )

Proceeds from note receivable

Intangible license additions

2 unchanged sentences

Proceeds from sale of property, plant, and equipment

Proceeds from sale of royalty asset

Net cash provided by (used in) investing activities

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Proceeds from convertible debt, net of issuance costs

Proceeds from issuance of shares

Proceeds from warrant exercises

Proceeds from option exercises

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( 1,234,000 )

Lease principal payments

( 2,976,362 )

Lease principal payments

Net cash provided by (used in) financing activities

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Refer to Note 23 for supplemental cash flow information.

GOODNESS GROWTH HOLDINGS, INC.

VIREO GROWTH INC.

Notes to Consolidated Financial Statements

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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 New Mexico.

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

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Recently some federal officials have attempted to distinguish between medical cannabis use as necessary, but adult-use as “still a violation of federal law.” At the present time, the distinction between “medical marijuana” and “adult-use marijuana” does not exist under U.S.

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.

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.

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.

Update on Verano Litigation (Note 18)

On October 21, 2022, Vireo Growth commenced an action in the Supreme Court of British Columbia against Verano Holdings Corp.

(" Verano ") after Verano repudiated the Arrangement Agreement with the Company dated January 31, 2022.

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

On November 14, 2022, Verano filed counterclaims against the Company for the termination fee and transaction expenses described above.

On July 31, 2023, the Company filed a requisition for adjournment of its application filed July 14, 2023, and set for hearing on July 31, 2023 to compel Verano’s compliance with document production.

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.

Merger Agreements with Deep Roots, Proper and Wholesome

On December 18, 2024, we entered into the Merger Agreements with respect the Mergers.

Each Merger is an all-share transaction whereby, at the closing of each applicable transaction, (i) a new wholly-owned subsidiary of the Company would merge with and into Deep Roots, (ii) a new wholly-owned subsidiary of the Company would merge with and into Wholesome, and (ii) the Proper entities would each merge with and into new wholly-owned subsidiaries of the Company.

None of the Deep Roots Merger, the Proper Mergers or the Wholesome Merger is contingent on the completion of any of the other Mergers (Note 3).

Summary of Significant Accounting Policies

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These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due.

We anticipate that we will continue to report losses and negative cash flow for the foreseeable future.

We have concluded that our historical recurring losses from operations and negative cash flows from operations as well as our dependence on debt and other financings and the termination of the Arrangement Agreement gives rise to substantial doubt about the Company’s ability to continue as a going concern.

Company management is working with the Company’s lenders, counsel, and other applicable parties to implement a plan to effectively mitigate the conditions giving rise to substantial doubt.

Elements of this plan may include, but are not limited to, asset sales, debt restructuring, and capital raises.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

However, the Company’s continuance as going concern is dependent on its future profitability and implementation of the aforementioned plan.

The Company may not be successful in these efforts.

These consolidated financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the Company’s financial position and results of operations.

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Place of incorporation

Vireo Health, Inc.

Minnesota, USA

Maryland, USA

Mayflower Botanicals, Inc.

Massachusetts, USA

Vireo Health of Minnesota, LLC

Minnesota, USA

MJ Distributing C201, LLC

MJ Distributing P132, LLC

Resurgent Biosciences, Inc.

Delaware, USA

Verdant Grove, Inc.

Massachusetts, USA

Vireo Health de Puerto Rico, Inc.

Vireo Health of Nevada 1, LLC

Vireo Health of New York, LLC

New York, USA

Minnesota Medical Solutions, LLC

Minnesota, USA

Maryland, USA

Vireo Health of Puerto Rico, LLC

Delaware, USA

Vireo Health, Inc.

Delaware, USA

Vireo of Charm City, LLC

Maryland, USA

1776 Hemp, LLC

Delaware, USA

Vireo Health of Massachusetts, LLC

Vireo DR Merger Sub Inc.

Delaware, USA

Mayflower Botanicals, Inc.

Massachusetts, USA

EHF Cultivation Management, LLC

Vireo Health of New Mexico, LLC

Vireo WH Merger Sub Inc.

Delaware, USA

Red Barn Growers, Inc.

New Mexico, USA

Resurgent Biosciences, Inc.

Vireo PR Merger Sub Inc.

Delaware, USA

Vireo Health of Puerto Rico, LLC

Vireo PR Merger Sub II Inc.

Delaware, USA

Vireo Health de Puerto Rico, Inc.

XAAS Agro, Inc.

Vireo Health of Nevada 1, LLC

Verdant Grove, Inc.

Massachusetts, USA

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

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Recently adopted accounting pronouncements

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

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

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

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

ASU 2023-07 In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, Improvements to Reportable Segment Disclosures (Topic 280) .

This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss.

This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted the standard on January 1, 2024.

This ASU resulted in additional required disclosures (Note 21).

Use of estimates and significant judgments

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The estimates are considered for each new grant of stock options or warrants.

Uncertain tax positions - The evaluation of the Company’s uncertain tax positions involves significant judgment in the interpretation and application of GAAP.

Although management believes the Company’s reserves are reasonable, no assurance can be given that the final outcome of these uncertainties will not be different from that which is reflected in the Company’s reserves.

Reserves are adjusted considering changing facts and circumstances, such as the closing of a tax examination.

Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.

Uncertain tax positions - The Company records uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than- not recognition threshold, the Company would recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

Asset impairment – Asset impairment tests require the allocation of assets to asset groups, where appropriate, which requires significant judgment and interpretation with respect to the integration between the assets and shared resources.

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Net loss per share

Basic net loss per share is computed by dividing reported net loss by the weighted average number of common shares outstanding for the reported period.

Basic net loss per share is computed by dividing reported net loss by the weighted average number of subordinate voting shares outstanding for the reported period.

Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock of the Company during the reporting period.

Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potential dilutive common share equivalents outstanding during the period.

Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of vested share

options and the incremental shares issuable upon conversion of the convertible notes.

Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of subordinate voting shares and the number of potential dilutive common share equivalents outstanding during the period.

Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of vested share options and the incremental shares issuable upon conversion of the convertible notes.

Potential dilutive common share equivalents consist of stock options, warrants, and convertible debt.

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The Company ceases the capitalization of interest when construction activities are substantially completed and the facility is available for commercial use.

During the years ended December 31, 2024 and 2023, the Company capitalized $ 1,387,750 and $ 320,937 , respectively, of interest expense to construction in progress.

Intangible assets

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Financial assets measured at FVPL include financial assets such as the Company's equity investments in other entities, and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship.

Financial assets measured at FVPL are carried at fair value in the consolidated statement of financial position with changes in fair value recognized in a separate caption in the consolidated statements of loss and comprehensive loss.

Financial assets measured at FVPL are carried at fair value in the consolidated balance sheet with changes in fair value recognized in a separate caption in the consolidated statements of net loss and comprehensive loss.

Derecognition

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The Company's financial assets subject to impairment are cash, accounts receivable and notes receivable.

Accounts receivable and notes receivables are recognized initially at fair value and subsequently measured at amortized cost, less any provisions for impairment.

Accounts receivable and notes receivable are recognized initially at fair value and subsequently measured at amortized cost, less any provisions for impairment.

Impairment provisions are estimated using the ECL impairment model where any expected future credit losses are provided for, irrespective of whether a loss event has occurred at the reporting date.

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New accounting pronouncements not yet adopted

ASU 2023-07 In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, Improvements to Reportable Segment Disclosures (Topic 280) .

The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is also permitted.

This ASU will result in additional required disclosures when adopted, where applicable.

ASU 2023-09 In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740) .

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Once adopted, this ASU will result in additional disclosures.

Assets Held for Sale and Dispositions

Acquisitions, Assets Held for Sale, and Dispositions

On December 18, 2024, Vireo Growth Inc.

(the “Company”), entered into Merger Agreements (as defined herein) with respect to a business combination with each of (i) Deep Roots Holdings, Inc., a Nevada corporation (“Deep Roots”) (the “Deep Roots Merger”);

(ii) Proper Holdings Management, Inc.

and NGH Investments, Inc., both Missouri corporations (together, “Proper”) (the “Proper Mergers”);

and (iii) WholesomeCo, Inc., a Delaware corporation (“Wholesome”) (the “Wholesome Merger” and, collectively with the Deep Roots Merger and the Proper Mergers, the “Mergers”).

None of the Deep Roots Merger, the Proper Mergers or the Wholesome Merger is contingent on the completion of any of the other Mergers.

As of December 31, 2024, none of the Merger Transactions have closed, and as such, no financial results of the single-state operators have been presented or consolidated herein.

The consideration to be paid to acquire each of Deep Roots, Proper and Wholesome is based, in each case, in part on an estimated multiple of a 2024 “Reference EBITDA”, which is pro-forma for pending acquisitions as well as planned new retail openings and expansion projects, and a US $ 0.52 share reference price for the Company’s subordinate voting shares.

Pursuant to the Merger Agreements, former stockholders of each of Deep Roots, Proper and Wholesome may qualify for earnout payments made with the Company’s subordinate voting shares following December 31, 2026, based on each target’s Adjusted EBITDA (as defined in the applicable Merger Agreement) growth compared to such target’s Reference EBITDA (at a 4 x multiple), adjusted for incremental debt and certain other matters, respectively, and paid out using a share price for the Company’s subordinate voting shares of the higher of US $ 1.05 or the 20 -day volume weighted average price of the Company’s subordinate voting shares on the Canadian Securities Exchange, converted to United States Dollars based on the average exchange rate posted by the Bank of Canada as of the end of each trading day during such 20 -day period, as reported by Bloomberg Finance L.P.

(“VWAP”) as of December 31, 2026.

Reference EBITDA for Deep Roots, Proper and Wholesome are US $ 31.0 million, US $ 31.0 million, and US $ 16.0 million, respectively.

EBITDA growth is defined as the increase between Reference EBITDA and the higher of 2026 Adjusted EBITDA or trailing nine-month annualized Adjusted EBITDA as of December 31, 2026.

In no event shall the number of earnout shares issued under each Merger Agreement exceed the number of shares issued as closing merger consideration in each Merger Agreement.

Each of the Merger Agreements provides for the clawback of up to 50 % of the upfront merger consideration (excluding, in the case of Proper and Wholesome, the amounts attributable to Arches, as defined below) on December 31, 2026, if, in each case, (a) 2026 Adjusted EBITDA underperforms 96.5 % of the Reference EBITDA, and (b) retail revenue market share or EBITDA margin for 2026 is less (or lower) than 2024 and (c) the 20 -day VWAP as of December 31, 2026 is greater than US $ 1.05 per share.

The amount of shares subject to a clawback would be equal to the Acquisition Multiple (as defined in each Merger Agreement) for each of Deep Roots, Proper and Wholesome, respectively, multiplied by the EBITDA shortfall, and subject to certain other adjustments set forth in the applicable Merger Agreement, divided by US $ 0.52 per share, not to exceed 50 % of the upfront consideration.

In connection with the Wholesome Merger Agreement (as defined herein) and Proper Merger Agreement (as defined herein), the Company will include in the stock merger consideration calculation an amount equal to (i) US $ 11,860,800 for the stockholders of Wholesome and (ii) US $ 2,139,200 for the stockholders of Proper for all of the outstanding equity interests in Arches IP, Inc.

(“Arches”) owned by Wholesome and Proper, respectively.

Subject to the terms and conditions of the Wholesome Merger Agreement and the Proper Merger Agreement, each of Wholesome, Proper and Arches option holders are collectively entitled to earnout payments based on performance of Arches, based on the greater of US $ 37.5 million or 5 x certain revenue percentages of Arches, with such revenue percentage amounts measured at the higher of trailing-twelve-month or nine-month annualized amounts as of December 31, 2026, paid out using a share price for the Company’s subordinate voting shares at the higher of US $ 1.05 or 20 -day VWAP as of December 31, 2026.

In connection with each of the Merger Agreements, the Company will enter into an Investor Rights Agreement with the persons receiving the Company’s subordinate voting shares in the Mergers.

Each Investor Rights Agreement will require the Company in certain circumstances to prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement covering the resale of the Company’s subordinate voting shares issued pursuant to the Merger Agreements, in each case following the expiration of the initial 12 month lock-up period following the closing of the transactions under each Merger Agreement.

Each Investor Rights Agreement will also provide such persons with certain piggyback registration rights in certain circumstances.

The closing of each of the Mergers is subject to closing conditions and contained in the Merger Agreements.

Pursuant to rules adopted by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), a Schedule 14C information statement will be prepared by the Company and filed with the SEC and mailed to the stockholders of the Company relating to stockholder approval of the issuance of the Company’s subordinate voting shares in the Mergers and any other approvals required under the rules of the Canadian Stock Exchange, which is expected to be obtained by written consent of the stockholders.

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

1 unchanged sentence

The Company received $ 250,000 in December of 2023.

Consideration received was less than the net book value of the transferred assets and liabilities of $ 3,909,757 , resulting in a loss of $ 2,909,757 which was recorded in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2023.

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

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

Consideration received was less than the net book value of the transferred assets and liabilities of $ 3,909,757 , resulting in a loss of $ 2,909,757 which was recorded in the consolidated statement of net loss and comprehensive loss for the year ended December 31, 2023.

Assets Held for Sale

As of December 31, 2023, 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 December 31, 2024, the Company has 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.

As such, these assets and liabilities have been classified as “held for sale.” Management does not believe these divestitures represent a strategic shift that has or will have a major effect on an entity’s operations and financial results, and as such, none of these divestitures are considered a discontinued operation.

The carrying value of New York and Nevada net assets exceeded fair value less expected cost to sell, and as such, the Company recorded no impairment loss.

The carrying value of the Massachusetts net assets was less than fair value less costs to sell, and as such, the Company recorded an impairment loss of $ 399,999 for the year ended December 31, 2023.

Additionally, the Company disposed of certain held for sale property, equipment, and leased assets for which proceeds received of $ 253,288 were less than carrying value resulting in a loss on disposal of $ 1,567,981 in the statement of loss and comprehensive loss.

The fair value less expected cost to sell of net assets exceededthe carrying value, and as such, the Company recorded no impairment loss.

For the year ended December 31, 2023, the Company recorded an impairment loss of $ 399,999 and disposed of certain held for sale property, equipment, and leased assets for which proceeds received of $ 253,288 were less than carrying value resulting in a loss on disposal of $ 1,567,981 in the statement of net loss and comprehensive loss.

Assets and liabilities held for sale are as follows:

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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 $ 13,670,439 for the year ended December 31, 2023.

Pre-tax operating losses attributable to the New York business were $ 16,358,796 and $ 13,670,439 for the years ended December 31, 2024 and 2023, respectively.

Fair Value Measurements

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Items measured at fair value on a non-recurring basis

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

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.

In connection with an evaluation of such non-financial assets during the year ended December 31, 2024, the carrying values of property and equipment included in assets held for sale and an intangible license no longer in use were concluded to exceed their fair values.

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The Company used Level 2 fair value inputs when a buyer quote was received, or similar assets had been sold recently in the market.

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, convertible debt, and long-term debt approximates fair value as they bear a market rate of interest.

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 convertible debt, and long-term debt approximates fair value as they bear a market rate of interest.

The carrying value of the Company’s warrants held utilize Level 3 inputs given there is no market activity for the asset.

The inputs used are further described in Note 19.

Accounts Receivable

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Included in the trade receivables balance at December 31, 2024, and 2023, are credit losses of $ 84,989 and $ 95,686 , respectively.

Included in the tax withholding receivable, net balance at December 31, 2023 and 2022, are credit losses of $ 159,275 and $ 284,161 respectively.

Included in the tax withholding receivable, net balance at December 31, 2024 and 2023, are credit losses of $ 159,275 .

Notes Receivable

As of December 31, 2023, and 2022, the Company had a total of $ 3,750,000 in notes receivable.

The balance is comprised of a $ 3,750,000 four-year note due on August 10, 2024, with an 8 % coupon rate payable quarterly obtained as part of a 2020 disposition.

As of December 31, 2024, and 2023, the Company had a total of $ 0 and $ 3,750,000 in notes receivable, respectively.

During the year ended December 31, 2024, the Company received $ 3,600,000 in proceeds related to the repayment of the $ 3,750,000 note receivable, which was consideration received in connection with the divestiture of the Company’s Pennsylvania operations in 2020.

The Company considers the note receivable to be fully paid.

The $ 150,000 difference between the face value of the note and proceeds received is included in other expense on the consolidated statements of net loss and comprehensive loss as a result of the Company writing off interest receivable.

Inventory is comprised of the following items:

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Finished goods

During the years ended December 31, 2023 and 2022, the Company recorded write downs to net realizable value in its New York, Maryland, and Arizona subsidiaries.

Based on the market sales price relative to the cost to produce certain inventories, these costs could not be recovered, and as a consequence net realizable value was less than carrying value of inventory.

Additionally, the Company recorded inventory reserves related to expected future spoilage of inventory.

During the years ended December 31, 2024 and 2023, the Company assessed inventory for write downs to net realizable value in its New York, Maryland, and Minnesota subsidiaries.

Based on the market sales price relative to the cost to produce certain inventories it was determined that net realizable value exceeded the carrying value of inventory, and therefore no write downs were recorded for the years ended December 31, 2024 and 2023.

However, the Company recorded inventory reserves related to expected future spoilage of inventory.

Accordingly, inventory valuation adjustments amounting to $ 294,000 and $ 1,289,345 were recorded in 2024 and 2023 respectively.

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Finance lease cost

Amortization of ROU assets

Depreciation of ROU assets

Interest on lease liabilities

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

On February 22, 2024, the Company executed a lease for cannabis cultivation and manufacturing facilities.

Rent commences on January 1, 2025, at which time monthly base rent will be $ 82,500 .

Base rent escalates at a rate of 4 % per annum.

Per the terms of the lease the Company has the option to draw up to $ 2,000,000 of tenant improvement allowances.

As of December 31, 2024, no draws have been taken.

Starting January 1, 2025, the Company has the option to purchase the property.

The initial purchase price is $ 13,000,000 increasing by 3 % at the start of each calendar year until the option expires on December 31, 2028.

The lease expires on December 31, 2034, with an option to renew for two additional five-year terms.

On November 1, 2023, the Company notified its landlord in Puerto Rico that it was surrendering the premises.

As such, the Company disposed of the held for sale assets affiliated with the Puerto Rico lease and recorded a loss on disposal of assets of $ 1,632,372 in the statement of loss and comprehensive loss for the year ended December 31, 2023.

As such, the Company disposed of the held for sale assets affiliated with the Puerto Rico lease and recorded a loss on disposal of assets of $ 1,632,372 in the statement of net loss and comprehensive loss for the year ended December 31, 2023.

On October 27, 2023, the Company executed a fifth amendment to its lease with its landlord on its cannabis cultivation and manufacturing facilities located in Johnstown, New York.

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

The amendment also allows the Company to terminate the lease for a fee of $ 14,000,000 if written notice is provided on or before January 15, 2024, and subsequently amended to April 30, 2024.

On February 24, 2023, the Company signed the fourth amendment to the existing lease agreements for the cultivation and processing facilities in New York.

The amendment provides for additional tenant improvements of $ 4,000,000 and increases base rent by $ 50,000 a month.

On October 1, 2022, the Company terminated the existing lease agreements for the cultivation and processing facilities in Arizona.

The right of use liability exceeded the right of use asset at the time of termination resulting in a gain on disposal of $ 184,641 .

This gain is included in other income on the consolidated statement of net loss and comprehensive loss for the year ended December 31, 2022.

Supplemental cash flow information related to leases

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

Goodwill - December 31, 2021 and 2022

Divestitures (Note 3)

Goodwill - December 31, 2022

Divestitures (Note 3)

Goodwill - December 31, 2023 and December 31, 2024

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

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Licenses & Trademarks

Royalty Asset

Balance, December 31, 2022

Transfer to held for sale (Note 3)

Balance, December 31, 2023

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During the year ended December 31, 2023, the Company wrote off $ 11,630 relating to a trademark no longer in use.

No further indicators of impairment existed, and no additional impairment of intangible assets was recorded for the year ended December 31, 2023.

further indicators of impairment existed, and no additional impairment of intangible assets was recorded for the year ended December 31, 2024.

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

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

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

The Company repaid the note in full subsequent to year end (Note 25).

The Company paid the note off in full during the year ended December 31, 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.

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Per the terms of the amendment, the interest rate was modified to 15 %, and the Company paid off $ 1,000,000 of principal.

The remaining principal balance of $ 1,000,000 is due on November 19, 2024 , and the note is secured by 25 % of the membership interests in Vireo Health of Charm City, LLC.

On November 27, 2024, the Company and lender executed the second amendment to the note.

Per the terms of the amendment, the maturity date was extended, the interest rate was increased to 18 %, and the Company repaid $ 100,000 in principal.

The remaining principal balance of $ 900,000 is due on February 28, 2025 , and the note is secured by 25 % of the membership interests in Vireo Health of Charm City, LLC.

On February 28, 2025 the note was repaid in full.

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

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prime rate plus 10.375 %, payable monthly in cash, and (b) 2.75 % per annum paid in kind 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 th years ended December 31, 2023 and 2022.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.

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 net loss and comprehensive loss for the years ended December 31, 2024 and 2023.

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 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.

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On March 31, 2023, the Company executed a fifth amendment to its Credit Facility with its senior secured lender, Chicago Atlantic Admin, LLC (the " Agent "), an affiliate of Green Ivy Capital, and a group of lenders.

The amended credit facility extends the maturity date on its Delayed Draw Loans to April 30, 2024, through the issuance of 15,000,000 Subordinate Voting Shares in lieu of a cash extension fee.

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

Voting Shares in lieu of a cash extension fee.

These 15,000,000 shares were valued at $ 1,407,903 using a fair value per share of $ 0.094 and considered a deferred financing cost.

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The amendment also provides the Company with reduced cash outlays by eliminating required amortization of the loan, and requires the Company to divest certain assets to improve its liquidity position and financial performance.

The Company has the

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

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 April 30, 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 20, 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.

On July 31, 2024, the Company executed a ninth amendment to the Company’s Credit Facility.

The ninth amendment to the Company’s Credit Facility extends the maturity date on the Credit Facility loans to January 29, 2027, and amends certain financial measure definitions and covenants within the agreement.

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

These 12,500,000 shares were valued at $ 5,387,500 using a fair value per share of $ 0.431 and considered a deferred financing cost.

On December 27, 2024, Vireo Health of Minnesota, LLC (“Vireo Minnesota”), a wholly-owned subsidiary of the Company entered into a secured credit agreement among Vireo Minnesota as Borrower, the Company and various affiliated entities as Guarantors (as defined therein), Chicago Atlantic Lincoln, LLC, the lender party thereto and Chicago Atlantic Admin, LLC, as Administrative Agent and Collateral Agent.

The executed secured credit agreement with the Agent allows for the issuance of certain loans of up to an aggregate principal amount of $ 11,500,000 .

These loans are intended to assist with the financing of a new indoor cultivation facility.

These loans bears an interest rate of 10.5 % and are due on June 26, 2026.

As of December 31, 2024, the Company has drawn $ 5,500,000 in aggregate principal, and incurred financing costs of $ 1,549,773 .

On December 31, 2024, Vireo Minnesota closed on a $ 15,000,000 principal amount loan with Stearns Bank National Association (the “Commercial Loan”), with the Company and Vireo Health, Inc., a wholly-owned subsidiary of the Company, as guarantors.

The Commercial Loan has a term of 24 months and carries a fixed annual interest rate of 9.25 %, payable monthly with interest-only payments through the initial 12 months , followed by monthly principal and interest payments based on a 240-month amortization schedule for the remaining term of the Commercial Loan.

The Commercial Loan has no prepayment penalty and is collateralized by a leasehold construction mortgage associated with the buildout of a new cultivation facility for Vireo Minnesota in an existing industrial building in Elk River, Minnesota.

As of December 31, 2024, there was no principal amount outstanding as funding has not yet commenced.

However, the Company incurred financing costs of $ 412,897 .

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.

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( 1,234,000 )

( 2,976,362 )

Deferred financing costs

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Amortization of deferred financing costs

End of period

current portion

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The value of these warrants and other legal and administrative expenses amounting to $ 1,346,793 are treated as deferred financing costs.

On July 31, 2024, the holders voluntarily converted all outstanding convertible notes into 73,016,061 Subordinate Voting Shares of the Company.

On November 1, 2024, the Company entered into a Joinder and Tenth Amendment to Credit Agreement.

The Tenth Amendment provides a convertible note facility (the “New Convertible Notes”) with a maximum principal amount of $ 10,000,000 .

The New Convertible Notes mature November 1, 2027, have a cash interest rate of 12.0 percent per year, are convertible into that number of the Company’s subordinate voting shares determined by dividing the outstanding principal

amount plus all accrued but unpaid interest on the Convertible Notes on the date of such conversion by a conversion price of $ 0.625 .

The Company incurred $ 145,717 in financing costs in connection with the signing of the Tenth Amendment.

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.

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Amortization of deferred financing costs

( 9,774,557 )

current portion

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100 votes for each share

Super Voting Share

1,000 votes for each share

Subordinate Voting Shares

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Multiple Voting Shares each have the restricted right to convert to one hundred Subordinate Voting Shares subject to adjustments for certain customary corporate changes.

Super Voting Shares

Holders of Super Voting Shares will be entitled to ten votes in respect of each Subordinate Voting Share into which such Super Voting Share could ultimately then be converted, which for greater certainty, shall initially equal one thousand votes per Super Voting Share.

Each Super Voting share shall be convertible into one hundred Subordinate Voting Shares.

Shares Issued

During the year ended December 31, 2024, 45,822 Multiple Voting Shares were converted into 4,582,200 Subordinate Voting Shares for no additional consideration.

During the year ended December 31, 2024, 129,536,875 Subordinate Voting Shares were issued in connection with the execution of definitive subscription agreements with certain investors.

Net of financing costs the Company received proceeds of $ 80,128,687 .

During the year ended December 31, 2024, 12,500,000 Subordinate Voting Shares with a fair value of $ 5,387,500 were issued to the Company’s senior secured lender in connection with the ninth amendment to the Company’s credit agreement (Note 14).

During the year ended December 31, 2024, 6,400,000 shares were issued to executives as compensation.

The fair value of these awards, $ 1,600,000 , calculated using the closing price from December 17, 2024 of $ 0.25 , is included in stock-based compensation expense in the statement of net loss and comprehensive loss for the year ended December 31, 2024.

Of these 6,400,000 shares, 360,000 shares were net settled to pay payroll taxes associated with the issuance, resulting in the final issuance of 6,040,000 shares.

During the year ended December 31, 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 year ended December 31, 2024, the holders of the Company’s Convertible Notes voluntarily converted all outstanding Convertible Notes into 73,016,061 Subordinate Voting Shares of the Company.

During the year ended December 31, 2024, employee stock options were exercised for 50,000 Subordinate Voting Shares.

Proceeds from this transaction were $ 16,500 .

During the year ended December 31, 2024, stock warrants were exercised for 480,437 Subordinate Voting Shares.

Proceeds from these transactions were $ 69,663 .

During the year ended December 31, 2023, the Company issued the 15,000,000 Subordinate Voting Shares to its senior secured lender, Chicago Atlantic Admin, LLC, an affiliate of Green Ivy Capital, and a group of lenders in connection with the fifth amendment to its Credit Facility signed on March 31, 2023 (Note 14).

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During the year ended December 31, 2023, 17,449 Multiple Voting Shares were redeemed for 1,744,900 Subordinate Voting Shares.

During the year ended December 31, 2022, 54,078 Multiple Voting Shares were converted into 5,407,800 Subordinate Voting Shares.

During the year ended December 31, 2022, employee stock options were exercised for 15,002 Subordinate Voting Shares.

Proceeds from these transactions were $ 7,201 .

Stock-Based Compensation

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As of December 31, 2024, the total unrecognized compensation costs related to unvested stock options awards granted was $ 790,130 .

In addition, the weighted average period over which the

unrecognized compensation expense is expected to be recognized is approximately 1.8 years.

In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 2.1 years.

The total intrinsic value of stock options outstanding and exercisable as of December 31, 2024, was $ 7,240,087 and $ 6,572,692 , respectively.

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Warrants exercisable at December 31, 2024

Weighted Average

Exercise Price

Remaining Life

Warrants outstanding at December 31, 2021

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

Warrants exercisable at December 31, 2023

In connection with the closing of the convertible debt facility (Note 15), the Company issued 6,250,000 warrants to purchase Subordinate Voting Shares of the Company to the lenders.

During the year ended December 31, 2023, in connection with the closing of the convertible debt facility (Note 15), the Company issued 6,250,000 warrants to purchase Subordinate Voting Shares of the Company to the lenders.

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

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

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

As part of this strategic agreement the Company issued 10,000,000 warrants to purchase subordinate voting shares of Goodness Growth to Grown Rogue, with a strike price equal to $ 0.233 .

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

As part of this strategic agreement the Company issued 10,000,000 warrants to purchase subordinate voting shares of Vireo to Grown Rogue, with a strike price equal to $ 0.233 .

During the year ended December 31, 2024, $ 0 (2023 - $ 1,233,560 ) in stock-based compensation was recorded in connection with the issuance of these SVS warrants.

As of December 31, 2021, there were 150,000 SVS compensation warrants earned in connection with ongoing corporate advisory and financing services rendered, but not yet issued.

The Company recorded $ 191,026 in stock-based compensation expense and accounts payable and accrued liabilities in connection with these warrants as of December 31, 2021.

These warrants were granted during the year ended December 31, 2022 and marked to their fair value of $ 2,034 on the date of grant.

The difference between the fair value of these warrants at December 31, 2021 and the grant date of $ 188,992 was recorded as contra-stock based compensation expense in the consolidated statement of loss and comprehensive loss for the year ended December 31, 2022.

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

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Balance, December 31, 2022

Granted on March 15, 2022

Granted on December 15, 2022

Balance, December 31, 2023

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Legal proceedings

On February 25, 2019, Dr.

Mark Schneyer (“ Schneyer ”) filed a lawsuit in Minnesota District Court, Fourth District (the “ Court ”), on his own behalf and, derivatively, on behalf of Dorchester Capital, LLC, naming Vireo Health, Inc.

(“ Vireo U.S.

”), Dorchester Management, LLC (“ Dorchester Management ”), and Dorchester Capital, LLC (“ Capital ”), as defendants.

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.

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

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

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

and was previously used as a management company over Dorchester Capital, LLC.

It no longer has active operations following Vireo Health, Inc.’s acquisition of MaryMed, LLC in 2018.

It is owned and controlled by Kyle E.

Kingsley and Amber H.

Shimpa, executive officers and directors of Vireo U.S.

and the Company.

While Vireo U.S.

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

Entering into this settlement in no way 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.

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 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.

On June 19, 2024, Verano filed a Notice of Application (the “ Preliminary Suitability Application ”) seeking orders dismissing the Summary Trial Application on the basis that certain issues in the action are not suitable for summary determination.

The Preliminary Suitability Application is currently set for hearing on June 15 and 16, 2025.

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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During the year ended December 31, 2024, the Company recorded $ 815,422 (2023 - $ 5,855,076 ) related to the CARES Employee Retention credit in other income on the consolidated statement of net loss and comprehensive loss for the year ended December 31, 2024.

The Company has collected $ 5,855,076 of this credit.

On May 25, 2023, the Company and Grown Rogue entered into a strategic agreement whereby Grown Rogue will support Goodness 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 to Goodness Growth on October 5, 2023.

These warrants were recorded as other income in the consolidated statement of net loss and comprehensive loss at a fair value of $ 1,937,532 on December 31, 2023.

On May 25, 2023, the Company and Grown Rogue entered into a strategic agreement whereby Grown Rogue will support the Company 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.

Subsequently, on October 9, 2024, the Company and Grown Rogue mutually agreed to terminate the advisory agreement.

As part of the termination agreement, the Company forfeited 4,500,000 of the previously granted 8,500,000 warrants.

On December 31, 2024, these 4,000,000 warrants were revalued at a fair value of $ 2,270,964 (2023 $ 1,937,532 ).

The fair value was derived from a black-scholes valuation using a stock price of $ 0.65 , an exercise price of $ 0.156 , an expected life of 3.76 years, an annual risk free rate of 4.38 %, and volatility of 100 %.

The change in valuation from December 31, 2023, to December 31, 2024, of $ 333,612 was recorded as other income in the statement of net loss and comprehensive loss for the year ended December 31, 2024.

General and Administrative Expenses

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Other expenses

Segment Reporting

The Company utilized the guidance in ASC 280 to determine how many reportable segments the Company has.

We considered various attributes of the overall Company including but not limited to the nature of products and services, the nature of production processes, the types of customers, the regulatory environment, business geography, and the level at which the Chief Operating Decision Maker evaluates the performance and allocates resources.

Given the similarities in the types of products, cannabis products in various form factors, the types of customers, retail and wholesale customers, the geography and regulatory environment in which sales are made, the United States, and the Chief Operating Decision Maker, the Chief Executive Officer, assesses performance and allocates resources at the consolidated level, the Company has determined that it only has one reportable segment, cannabis.

The Company’s Chief Executive Officer is the Company’s chief operating decision maker.

The chief operating decision maker assesses performance for the cannabis segment and decides how to allocate resources based on operating profit and net income that also is reported on the income statement as consolidated net income.

The measure of segment assets is reported on the balance sheet total as consolidated assets.

The chief operating decision maker uses net income to evaluate income generated from segment assets in deciding the appropriate capital allocation strategy.

A comparison of budgeted results to actual results is also used by the chief operating decision maker to assess business performance.

The Company’s cannabis segment cultivates, processes and distributes medical and adult-use cannabis products in a variety of formats, as well as related accessories in the United States.

Revenue is derived from the sale of these products in the United States, and the assets used to produce these products are also held in the United States.

The accounting policy for recording revenue, and all other accounting policies, are the same as those described in the summary of significant accounting policies footnote (Note 2).

The financial statements of the cannabis segment are presented in Item 8 of this form 10-K.

For financial reporting purposes, loss before income taxes includes the following components:

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The (recoveries) expenses for income taxes consists of:

Year ended December 31,

( 2,171,000 )

Year ended December 31,

Years ended December 31,

Loss before income taxes:

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( 1,510,248 )

( 1,061,542 )

Non-deductible expenses

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( 2,450,194 )

( 14,388,074 )

State true up

1 unchanged sentence

Rate true up and other

( 3,751,473 )

Income tax expense, net

4 unchanged sentences

Inventory reserve

Financing leases

Financing lease liability

Intangible assets

2 unchanged sentences

Excess business interest expense

Accrued Vacation

Employee Retention Tax Credit

Share based compensation

5 unchanged sentences

Deferred tax liabilities

Related party management fee receivables

Finance lease asset

Installment sale

2 unchanged sentences

Net deferred tax asset/(tax liabilities)

At December 31, 2023, the Company had United States federal net operating loss carryforwards of approximately $ 25,400,000 that can be carried forward indefinitely and are limited in annual use to 80 % of current year taxable income,

and state net operating loss carryforwards of approximately $ 29,500,000 that can be carried forward fifteen years .

At December 31, 2024, the Company had United States federal net operating loss carryforwards of approximately $ 28,100,000 that can be carried forward indefinitely and are limited in annual use to 80 % of current year taxable income, and state net operating loss carryforwards of approximately $ 39,000,000 that can be carried forward fifteen years .

State net operating loss carryforwards begin to expire on December 31, 2034.

4 unchanged sentences

As of both December 31, 2024 and 2023, the Company had a cumulative balance of accrued interest and penalties on unrecognized tax positions of $ 2,178,000 and $ 635,000 , respectively on the consolidated balance sheet.

The Company’s federal and state income tax returns are subject to examination by income taxing authorities, generally for three years after the returns are filed.

The Company’s federal and state income tax returns are subject to examination by income taxing authorities, generally for three years after the returns are filed and six years where a taxpayer has omitted reporting 25% or more of their gross income on their tax return.

The Company is not currently under examination in any jurisdiction for any period.

4 unchanged sentences

The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.

The measurement of the uncertain tax position is based on the largest benefit amount to be realized upon settlement of the matter.

The measurement of the uncertain tax position is based on the largest

benefit amount to be realized upon settlement of the matter.

If payment ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary.

If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to income tax expense may result.

As of December 31, 2023, the Company recorded an uncertain tax liability for uncertain tax positions primarily related to the treatment of certain transactions and deductions under IRC Section 280E based on legal interpretations that challenge the Company’s tax liability under IRC Section 280E.

The Company and its subsidiaries are filing amended tax returns for periods ending 2020 through 2022 to reflect this position.

As of December 31, 2024 and 2023, the Company recorded an uncertain tax liability for uncertain tax positions primarily related to the treatment of certain transactions and deductions under IRC Section 280E based on legal interpretations that challenge the Company’s tax liability under IRC Section 280E.

The Company and its subsidiaries filed the 2023 tax return and amended tax returns for periods ending 2020 through 2022, to reflect this position.

The Company does not expect any resolution to this uncertain tax position in the next 12 months.

9 unchanged sentences

Change in construction accrued expenses

Warrants issued in connection with financing activities

Stock issued in connection with financing activities

Conversion of convertible debt

(1) For supplemental cash flow information related to leases, refer to Note 10.

1 unchanged sentence

Credit risk is the risk of loss associated with counterparty’s inability to fulfill its payment obligations.

The Company’s credit risk is primarily attributable to cash, accounts receivable, deposits, and notes receivable.

The Company’s credit risk is primarily attributable to cash, accounts receivable, and deposits.

A small portion of cash is held on hand, from which management believes the risk of loss is remote.

2 unchanged sentences

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

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

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

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

21 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 year ended December 31, 2023, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $ 836,226 .

A change of 100 basis points in interest rates during the year ended December 31, 2024, would have resulted in a corresponding change in the statement of net loss and comprehensive loss of $ 603,535 .

Related Parties Transactions

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

Details surrounding the lending relationships between the Company and Chicago Atlantic, are described in Notes 14 and 15.

During the years ended December 31, 2024 and 2023, the Company paid Chicago Atlantic $ 712,720 and $ 0 , respectively, for services rendered in connection with the Mergers (Note 3), which is included in transaction related expenses in the consolidated statement of net loss and comprehensive loss for the year ended December 31, 2024.

For the years ended December 31, 2024, and 2023, the Company paid a related party (Bengal Impact Partners, of which Joshua Rosen, who is the Company’s Chief Executive Officer, Interim Chief Financial Officer, and a member of the Company’s Board of Directors, is a managing partner) $ 0 and $ 1,613 , respectively, for ongoing corporate advisory services.

In 2022 the Company granted 150,000 compensation warrants to Bengal Impact Partners for ongoing corporate advisory services (Note 16).

Subsequent Events

On February 22, 2024, the Company executed a lease with its landlord on a site for cannabis cultivation and manufacturing facilities.

Per the terms of the lease the landlord agreed to provide the Company with $ 2,000,000 of tenant improvement allowances.

Rent payments will not commence until January 1, 2025, at which time monthly base rent will be $ 82,500 .

Starting January 1, 2025, the Company has the option to purchase the property.

The initial purchase price is $ 13,000,000 increasing by 3 % at the start of each calendar year until the option expires on December 31, 2028.

The lease expires on December 31, 2034.

On March 25, 2024, the Company paid off $ 1,050,000 in principal of it’s outstanding notes payable (Note 14).

This note was due on December 31, 2023, and has no remaining outstanding balance.

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 it’s 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 January 23, 2025, the Company entered into a letter agreement (the “ Letter Agreement ”) with Bill’s Nursery, Inc., whereby the parties agreed to extend the Exclusivity Period, as defined in that certain Memorandum of Understanding (“ MOU ”) effective as of December 18, 2024 between the parties, from January 24, 2025 to February 23, 2025.

Except as so modified, the parties’ obligations under the MOU remain otherwise unchanged.

On February 21, 2025, the Company entered into a letter agreement (the “ Second Letter Agreement ”) with Bill’s Nursery, Inc., whereby the parties confirmed that they have paused negotiations concerning the Definitive Agreement, as defined in the MOU effective as of December 18, 2024 between the parties.

The parties also agreed in the Second Letter Agreement to amend the provision in Section 4 of the MOU providing that, in the case the parties do not execute and deliver a Definitive Agreement, that Bill’s Nursery, Inc.

shall pay to the Company US$ 1.25 million within two business days.

The Second Letter Agreement amends Section 4 to provide that such payment shall be in the amount of US$ 1 million to be paid within 45 calendar days.

Except as so modified, the parties’ obligations under the MOU remain otherwise unchanged.

In January of 2025, the Company granted 3,989,414 RSUs and 159,156 employee stock options under the 2019 Equity Incentive Plan.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data