Vireo Growth Inc

Previous wording

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. The Company is evolving with the industry and is in the midst of a transformation to being significantly more customer-centric across its operations, which include cultivation, manufacturing, wholesale and retail business lines. With our core operations strategically located in three limited-license markets through our state-licensed subsidiaries, we cultivate and manufacture cannabis products and distribute these products through our growing network of Green Goods® and other retail dispensaries we own or operate as well as to third-party dispensaries in the markets in which our subsidiaries hold operating licenses.

Current wording

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. The Company is evolving with the industry and is in the midst of a transformation to being significantly more customer-centric across its operations, which include cultivation, manufacturing, wholesale and retail business lines. With our core operations strategically located in three limited-license markets through our state-licensed subsidiaries, we cultivate and manufacture cannabis products and distribute these products through our growing network of Green Goods® and other retail dispensaries we own or operate as well as to third-party dispensaries in the markets in which our subsidiaries hold operating licenses.

Previous wording

For the three months ended March 31, 2024, Minnesota operations contributed approximately 46% of revenues, New York contributed 12%, and Maryland contributed 42%. For the three months ended March 31, 2023, Minnesota operations contributed approximately 56% of revenues, New York contributed 18%, New Mexico contributed 6%, and Maryland contributed 20%.

Current wording

For the three months ended June 30, 2024, Minnesota operations contributed approximately 49% of revenues, New York contributed 10%, and Maryland contributed 41%. For the three months ended June 30, 2023, Minnesota operations contributed approximately 57% of revenues, New York contributed 17%, New Mexico contributed 5%, and Maryland contributed 21%.

Previous wording

Revenue for the three-months ended March 31, 2024, was $24,087,315, an increase of $4,998,892 or 26% compared to revenue of $19,088,423 for the three-months ended March 31, 2023. The increase is primarily attributable to increased revenue contributions from the Maryland business driven by the commencement of adult-use sales on July 1, 2023, partially offset by the decrease in New Mexico revenues, which was divested in June of 2023.

Current wording

Revenue for the three months ended June 30, 2024, was $25,108,247, an increase of $4,911,691 or 24% compared to revenue of $20,196,556 for the three-months ended June 30, 2023. The increase is primarily attributable to increased revenue contributions from the Maryland business driven by the commencement of adult-use sales on July 1, 2023, partially offset by the decrease in New Mexico revenues, which was divested in June of 2023.

Previous wording

Retail revenue for the three months ended March 31, 2024, was $19,599,440 an increase of $3,127,641 or 19% compared to retail revenue of $16,471,799 for the three months ended March 31, 2023, primarily due to increased revenue contributions from the Maryland business driven by the commencement of adult-use sales on July 1, 2023, partially offset by the decrease in New Mexico revenues, which was divested in June of 2023.

Current wording

Retail revenue for the three months ended June 30, 2024, was $20,819,019 an increase of $3,675,920 or 21% compared to retail revenue of $17,143,099 for the three months ended June 30, 2023, primarily due to increased revenue contributions from the Maryland business driven by the commencement of adult-use sales on July 1, 2023, partially offset by the decrease in New Mexico revenues, which was divested in June of 2023.

Previous wording

Wholesale revenue for the three months ended March 31, 2024, was $4,487,875, an increase of $1,871,251 compared to wholesale revenue of $2,616,624 for the three months ended March 31, 2023. The increase was primarily due to increased revenue contributions from the Maryland business driven by the commencement of adult-use sales on July 1, 2023.

Current wording

Wholesale revenue for the three months ended June 30, 2024, was $4,289,228, an increase of $1,235,771 compared to wholesale revenue of $3,053,457 for the three months ended June 30, 2023. The increase was primarily due to increased revenue contributions from the Maryland business driven by the commencement of adult-use sales on July 1, 2023.

Previous wording

depreciation, insurance and utilities. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.

Current wording

Gross profit reflects total net revenue less cost of sales. Cost of sales represents the costs attributable to producing bulk materials and finished goods, which includes direct materials, labor, and certain indirect costs such as depreciation, insurance, utilities and valuation adjustments. Cannabis costs are affected by various state regulations that limit the sourcing and procurement of cannabis product, which may create fluctuations in gross profit over comparative periods as the regulatory environment changes.

Previous wording

Cost of goods sold are determined from costs related to the cultivation and processing of cannabis and cannabis-derived products as well as the cost of finished goods inventory purchased from third parties.

Current wording

Cost of sales are determined from costs related to the cultivation and processing of cannabis and cannabis-derived products as well as the cost of finished goods inventory purchased from third parties and valuation adjustments.

Previous wording

Cost of goods sold for the three months ended March 31, 2024, was $11,842,888, an increase of $2,274,677 compared to the three months ended March 31, 2023, of $9,568,211.

Current wording

Cost of sales for the three months ended June 30, 2024, was $11,557,604, an increase of $692,344 compared to the three months ended June 30, 2023, of $10,865,260.

Previous wording

Gross profit for the three months ended March 31, 2024, was $12,244,427, representing a gross margin of 51%. This is compared to gross profit for the three months ended March 31, 2023, of $9,520,212 or a 50% gross margin. The increase was primarily attributable to increased profit and margin contributions in Maryland driven by the commencement of Maryland adult-use sales on July 1, 2023.

Current wording

Gross profit for the three months ended June 30, 2024, was $13,550,643, representing a gross margin of 54%. This is compared to gross profit for the three months ended June 30, 2023, of $9,331,296 or a 46% gross margin. The increase was primarily attributable to increased profit and margin contributions in Maryland driven by the commencement of Maryland adult-use sales on July 1, 2023.

Previous wording

We believe our current production capacity has not been fully realized and we expect future gross profits to increase with revenue growth reflective of higher demand, increased product output and new product development. However, we expect gradual price compression as markets mature, which could place downward pressure on our retail and wholesale gross margins.

Current wording

We believe our current production capacity has not been fully realized and we expect future operations to benefit from increased revenue growth reflective of higher demand, increased product output and new product development. However, we expect gradual price compression as markets mature, which could place downward pressure on our retail and wholesale gross margins.

Previous wording

Total expenses other than the cost of goods sold consist of selling costs to support customer relationships, marketing, and branding activities. It also includes a significant investment in the corporate infrastructure required to support ongoing business.

Current wording

Total expenses other than the cost of sales consist of selling costs to support customer relationships, marketing, and branding activities. It also includes a significant investment in the corporate infrastructure required to support ongoing business.

Previous wording

Selling costs generally correlate to revenue. In the short-term as a percentage of sales, we expect selling costs to remain relatively flat. However, as positive regulatory developments in our core markets occur, we expect selling costs as a percentage of sales to decrease via growth in our retail and wholesale channels.

Current wording

Selling costs generally correlate to revenue. In the short-term as a percentage of sales, we expect selling costs to remain relatively flat. However, as anticipated positive regulatory developments in our core markets occur, we expect selling costs as a percentage of sales to decrease via growth in our retail and wholesale channels.

Previous wording

General and administrative expenses also include costs incurred at the corporate offices, primarily related to personnel costs, including salaries, benefits, and other professional service costs, as well as corporate insurance, legal and professional fees associated with being a publicly traded company. We expect general and administrative expenses as a percentage of sales to decrease as we realize revenue growth organically and through positive regulatory developments in our core markets.

Current wording

General and administrative expenses also include costs incurred at the corporate offices, primarily related to personnel costs, including salaries, benefits, and other professional service costs, as well as corporate insurance, legal and professional fees associated with being a publicly traded company. We expect general and administrative expenses as a percentage of sales to decrease as we realize revenue growth organically and through anticipated positive regulatory developments in our core markets.

Previous wording

Operating income before other income (expense) and provision for income taxes for the three months ended March 31, 2024, was $4,759,444 an increase of $4,390,938 compared to operating income of $368,506 for the three months ended March 31, 2023.

Current wording

Operating income before other income (expense) and provision for income taxes for the three months ended June 30, 2024, was $5,794,022 an increase of $6,836,066 compared to operating loss of $1,042,044 for the three months ended June 30, 2023.

Previous wording

Total other expense for the three months ended March 31, 2024, was $7,525,904, an increase of $413,428 compared to other expense of $7,112,476 for the three months ended March 31, 2023. This change is primarily attributable to an increased interest expenses partially offset by the gain on warrants held of$1,327,879.

Current wording

Total other expense for the three months ended June 30, 2024, was $6,022,433, an increase of $1,328,093 compared to other expense of $4,694,340 for the three months ended June 30, 2023. This change is primarily attributable to an increased interest expenses partially offset by the gain on warrants held of$1,602,412.

Previous wording

Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the three months ended March 31, 2024, tax expense totaled $3,945,000 compared to tax expense of $1,662,000 for the three months ended March 31, 2023.

Current wording

Income tax expense is recognized based on the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year-end. For the three months ended June 30, 2024, tax expense totaled $440,000 compared to tax expense of $1,592,871 for the three months ended June 30, 2023.

Previous wording

We derived our revenue from cultivating, processing, and distributing cannabis products through our eighteen dispensaries in four states and our wholesale sales to third parties in two states. For the three months ended March 31, 2024, 81% of our revenue was generated from retail dispensaries and 19% from the wholesale business. For the three months ended March 31, 2023, 86% of our revenue was generated from retail business and 14% from wholesale business.

Current wording

We derived our revenue from cultivating, processing, and distributing cannabis products through our fourteen dispensaries in three states and our wholesale sales to third parties in three states. For the six months ended June 30, 2024, 82% of our revenue was generated from retail dispensaries and 18% from the wholesale business. For the six months ended June 30, 2023, 86% of our revenue was generated from retail business and 14% from wholesale business.

Previous wording

Total expenses for the three months ended March 31, 2024, were $7,484,983 a decrease of $1,666,723 compared to total expenses of $9,151,706 for the three months ended March 31, 2023. The decrease in total expenses is primarily attributable to a decrease in salaries and wages and stock-based compensation expense.

Current wording

Total expenses for the six months ended June 30, 2024, were $15,241,603 a decrease of $4,283,442 compared to total expenses of $19,525,045 for the six months ended June 30, 2023. The decrease in total expenses is primarily attributable to a decrease in salaries and wages and stock-based compensation expense.

Previous wording

During 2017 the Company signed a promissory note payable in the amount of $1,010,000. The note bears interest at a rate of 15% per annum with interest payments required on a monthly basis. 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.

Current wording

During 2017 the Company signed a promissory note payable in the amount of $1,010,000. The note bears interest at a rate of 15% per annum with interest payments required on a monthly basis. 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 six months ended June 30, 2024.

Previous wording

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

Current wording

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

Previous wording

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. The unpaid principal amounts outstanding under the Credit Facility bear interest at a rate of (a) the U.S. 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.

Current wording

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. The unpaid principal amounts outstanding under the Credit Facility bear interest at a rate of (a) the U.S. 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 six months ended June 30, 2024 and 2023.

Previous wording

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”). The cash interest rate on the Delayed Draw Loans under the Third Amendment is equal to the U.S. prime rate plus 10.375%, with a minimum required rate of 13.375% per annum, in addition to PIK interest of 2.75% per annum.

Current wording

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. prime rate plus 10.375%, with a minimum required rate of 13.375% per annum, in addition to PIK interest of 2.75% per annum.

Previous wording

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.

Current wording

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

Previous wording

On April 28, 2023, the Company closed on a new convertible debt facility which enables the Company to access up to $10,000,000 in aggregate principal amount of convertible notes (the “Convertible Notes”). The convertible facility has a term of three years, with an annual interest rate of 12.0%, comprised of 6.0% cash and 6.0% PIK. 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. The lenders also have the right to advance any remaining undrawn funds on the convertible loan facility to the Company at any time. If the notes are not converted, the outstanding principal amount and unpaid PIK interest is due on April 30, 2026.

Current wording

On April 28, 2023, the Company closed on a new convertible debt facility which enables the Company to access up to $10,000,000 in aggregate principal amount of convertible notes (the “Convertible Notes”). The convertible facility has a term of three years, with an annual interest rate of 12.0%, comprised of 6.0% cash and 6.0% PIK. 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 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 CSE. The lenders also have the right to advance any remaining undrawn funds on the convertible loan facility to the Company at any time. If the notes are not converted, the outstanding principal amount and unpaid PIK interest is due on April 30, 2026.

Previous wording

In connection with this financing, the Company issued 6,250,000 warrants to purchase Subordinate Voting Shares of the Company to the lenders. These warrants have a five year term, a strike price of $0.145, and were valued at $497,055. The value of these warrants and other legal and administrative expenses amounting to $1,346,793 are treated as deferred financing costs. All deferred financing costs are treated as a contra-liability, to be netted against the outstanding loan balance and amortized over the remaining life of the loan. As of March 31, 2024 $967,587 (December 31, 2023 - $1,083,697) of deferred financing costs remain unamortized.

Current wording

In connection with this financing, the Company issued 6,250,000 warrants to purchase Subordinate Voting Shares of the Company to the lenders. These warrants have a five year term, a strike price of $0.145, and were valued at $497,055. The value of these warrants and other legal and administrative expenses amounting to $1,346,793 are treated as deferred financing costs. All deferred financing costs are treated as a contra-liability, to be netted against the outstanding loan balance and amortized over the remaining life of the loan. As of June 30, 2024 $851,477 (December 31, 2023 - $1,083,697) of deferred financing costs remain unamortized.

Previous wording

Net cash used in operating activities was $1.2 million for the three months ended March 31, 2024, a decrease of $2.6 million as compared to $3.8 million for the three months ended March 31, 2023. The decrease is primarily attributed to increased gross profit.

Current wording

Net cash used in operating activities was $1.2 million for the six months ended June 30, 2024, a decrease of $1.0 million as compared to $2.2 million for the six months ended June 30, 2023. The decrease is primarily attributed to increased gross profit.

Previous wording

Net cash used in investing activities was $1.0 million for the three months ended March 31, 2024, an increase of $0.3 million compared to net cash used in investing activities of $0.7 million for the three months ended March 31, 2023. The increase is primarily attributable to increased property, plant, and equipment additions relative to the prior year quarter.

Current wording

Net cash used in investing activities was $4.2 million for the six months ended June 30, 2024, an increase of $2.0 million compared to net cash used in investing activities of $2.2 million for the six months ended June 30, 2023. The increase is primarily attributable to increased property, plant, and equipment additions relative to the prior year quarter.

Previous wording

Net cash used in financing activities was $1.1 million for the three months ended March 31, 2024, a change of $0.8 million as compared to $0.3 million used in financing activities in the three months ended March 31, 2023. The change was principally due to repayment of a $1.0 million promissory note during the three months ended March 31, 2024.

Current wording

Net cash provided by financing activities was $0.7 million for the six months ended June 30, 2024, a change of $0.2 million as compared to $0.5 million provided by financing activities in the six months ended June 30, 2023. The change was principally due to the issuance of shares during the six months ended June 30, 2024.

Previous wording

As of May 3, 2024, we had 111,362,081 shares issued and outstanding, consisting of the following:

Current wording

As of July 31, 2024, we had 114,905,722 shares issued and outstanding, consisting of the following:

Previous wording

111,041,230 shares issued and outstanding. The holders of subordinate voting shares are entitled to receive dividends which may be declared from time to time and are entitled to one vote per share at all shareholder meetings. All subordinate voting shares are ranked equally with regards to the Company’s residual assets. The Company is authorized to issue an unlimited number of no-par value subordinate voting shares.

Current wording

114,605,008 shares issued and outstanding. The holders of subordinate voting shares are entitled to receive dividends which may be declared from time to time and are entitled to one vote per share at all shareholder meetings. All subordinate voting shares are ranked equally with regards to the Company’s residual assets. The Company is authorized to issue an unlimited number of no-par value subordinate voting shares.

Previous wording

320,851 shares issued and outstanding. The holders of multiple voting shares are entitled to one hundred votes per share at all shareholder meetings. Each multiple voting share is exchangeable for one hundred subordinate voting shares. The Company is authorized to issue an unlimited number of multiple voting shares.

Current wording

300,714 shares issued and outstanding. The holders of multiple voting shares are entitled to one hundred votes per share at all shareholder meetings. Each multiple voting share is exchangeable for one hundred subordinate voting shares. The Company is authorized to issue an unlimited number of multiple voting shares.

Previous wording

As of March 31, 2024, we had 29,945,511 employee stock options outstanding, 2,543,011 RSUs outstanding, 3,037,649 Subordinate Voting Share compensation warrants denominated in C$ related to financing activities, and 16,400,000 Subordinate Voting Share compensation warrants outstanding.

Current wording

As of June 30, 2024, we had 29,843,198 employee stock options outstanding, 2,500,916 RSUs outstanding, 3,037,649 Subordinate Voting Share compensation warrants denominated in C$ related to financing activities, and 16,200,000 Subordinate Voting Share compensation warrants outstanding.