UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☑ |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2023
OR
☐ |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-56225
GOODNESS GROWTH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
British Columbia, Canada |
| 82-3835655 |
(State or other jurisdiction of | (I.R.S. Employer | |
207 South 9th Street, Minneapolis, MN | 55402 | |
(Address of principal executive offices) | (Zip Code) |
(612) 999-1606 | ||
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
None | None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ◻ |
| Accelerated filer | ◻ |
Non-accelerated filer | þ | Smaller reporting company | ☑ | |
Emerging growth company | ☑ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
As of May 11, 2023, the registrant had the following number of shares of each of its classes of registered securities outstanding: Subordinate Voting Shares – 86,721,030; Multiple Voting Shares – 348,642; and Super Voting Shares – 65,411.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GOODNESS GROWTH HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In U.S Dollars, unaudited and condensed)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
2
GOODNESS GROWTH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS
(In U.S. Dollars, unaudited and condensed)
| Three Months Ended | |||||
March 31, | ||||||
| 2023 |
| 2022 | |||
Revenue | $ | 19,088,423 | $ | 15,638,572 | ||
Cost of sales |
|
| ||||
Product costs |
| 9,578,211 |
| 9,682,977 | ||
Inventory valuation adjustments |
| (10,000) |
| 3,466,917 | ||
Gross profit |
| 9,520,212 |
| 2,488,678 | ||
Operating expenses: |
|
| ||||
Selling, general and administrative |
| 7,156,835 |
| 9,277,969 | ||
Stock-based compensation expenses |
| 1,675,594 |
| 642,506 | ||
Depreciation |
| 159,511 |
| 156,096 | ||
Amortization |
| 159,766 |
| 172,267 | ||
Total operating expenses |
| 9,151,706 |
| 10,248,838 | ||
Income (loss) from operations |
| 368,506 |
| (7,760,160) | ||
Other income (expense): |
|
| ||||
Impairment of long-lived assets |
| — |
| (5,313,176) | ||
Gain on disposal of assets |
| — |
| 168,359 | ||
Interest expenses, net |
| (7,134,789) |
| (4,601,799) | ||
Other income (expenses) |
| 22,313 |
| 1,199,994 | ||
Other income (expenses), net |
| (7,112,476) |
| (8,546,622) | ||
Loss before income taxes |
| (6,743,970) |
| (16,306,782) | ||
Current income tax expenses |
| (1,725,000) |
| (1,375,000) | ||
Deferred income tax recoveries |
| 63,000 |
| 3,115,000 | ||
Net loss and comprehensive loss |
| (8,405,970) |
| (14,566,782) | ||
Net loss per share - basic and diluted | (0.07) | (0.11) | ||||
Weighted average shares used in computation of net loss per share - basic & diluted | 128,126,330 | 128,111,328 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
3
GOODNESS GROWTH HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(In U.S. Dollars, unaudited and condensed)
Common Stock | ||||||||||||||||||||||||
SVS | MVS | Super Voting Shares | Total | |||||||||||||||||||||
Additional Paid- | Accumulated | Stockholders' | ||||||||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Shares |
| Amount |
| in Capital |
| Deficit |
| Equity (deficiency) | |||||||
Balance, January 1, 2022 |
| 81,298,228 | $ | — |
| 402,720 | $ | — |
| 65,411 | — | $ | 178,429,422 | $ | (135,423,519) | $ | 43,005,903 | |||||||
Conversion of MVS shares |
| 2,813,400 |
| — |
| (28,134) |
| — |
| — |
| — |
| — |
| — |
| — | ||||||
Stock-based compensation |
| — | — | — | — | — | — | 642,506 | — |
| 642,506 | |||||||||||||
Net Loss |
| — | — | — | — | — | — | — | (14,566,782) |
| (14,566,782) | |||||||||||||
Balance at March 31, 2022 |
| 84,111,628 | $ | — |
| 374,586 | $ | — |
| 65,411 | $ | — | $ | 179,071,928 | $ | (149,990,301) | $ | 29,081,627 | ||||||
Balance, January 1, 2023 | 86,721,030 | $ | — |
| 348,642 | $ | — |
| 65,411 | $ | — | $ | 181,321,847 | $ | (177,880,963) | $ | 3,440,884 | |||||||
Stock-based compensation |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,675,594 |
| — |
| 1,675,594 | ||||||
Obligation to issue shares | — |
| — |
| — |
| — |
| — |
| — | 1,221,837 | — | 1,221,837 | ||||||||||
Net Loss |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (8,405,970) |
| (8,405,970) | ||||||
Balance at March 31, 2023 |
| 86,721,030 | $ | — |
| 348,642 | $ | — |
| 65,411 | $ | — | $ | 184,219,278 | $ | (186,286,933) | $ | (2,067,655) | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
4
GOODNESS GROWTH HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In U.S. Dollars, except for per share data, unaudited and condensed)
March 31, | ||||||
| 2023 |
| 2022 | |||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
| |||
Net loss | $ | (8,405,970) | $ | (14,566,782) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
| |||
Inventory valuation adjustments |
| (10,000) |
| 3,466,917 | ||
Depreciation |
| 159,511 |
| 156,096 | ||
Depreciation capitalized into inventory |
| 734,087 |
| 700,193 | ||
Non-cash operating lease expense |
| 206,290 |
| 274,067 | ||
Amortization of intangible assets |
| 159,766 |
| 172,267 | ||
Stock-based payments |
| 1,675,594 |
| 642,506 | ||
Interest Expense |
| 1,398,848 |
| 996,157 | ||
Impairment of long-lived assets |
| — |
| 5,313,176 | ||
Deferred income tax |
| (63,000) |
| (3,115,000) | ||
Accretion |
| 394,573 |
| 1,384,812 | ||
Gain on disposal of royalty asset | — | (168,359) | ||||
Change in operating assets and liabilities: |
|
| ||||
Accounts Receivable |
| 24,448 |
| (1,764,878) | ||
Prepaid expenses |
| 513,902 |
| (1,877,011) | ||
Inventory |
| (1,230,547) |
| (1,255,162) | ||
Accounts payable and accrued liabilities |
| 666,307 |
| 2,880,051 | ||
Change in assets and liabilities held for sale |
| (18,767) |
| — | ||
Net cash used in operating activities | $ | (3,794,958) | $ | (6,760,950) | ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
| ||
PP&E Additions | $ | (197,827) | $ | (2,173,430) | ||
Proceeds from sale of royalty asset |
| — |
| 236,635 | ||
Deposits |
| (522,375) |
| (276,684) | ||
Net cash provided by (used in) investing activities | $ | (720,202) | $ | (2,213,479) | ||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| ||
Proceeds from long-term debt, net of issuance costs | $ | — | $ | 2,884,581 | ||
Lease principal payments |
| (288,574) |
| (464,214) | ||
Net cash provided by (used in) financing activities | $ | (288,574) | $ | 2,420,367 | ||
Net change in cash | $ | (4,803,734) | $ | (6,554,062) | ||
| ||||||
Cash, beginning of year | $ | 15,149,333 | $ | 15,155,279 | ||
| ||||||
Cash, end of year | $ | 10,345,599 | $ | 8,601,217 | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
5
GOODNESS GROWTH HOLDINGS, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
1. 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, as Dominion Energy, Inc.. Vireo Health, Inc., (“VHI”) was incorporated under the laws of the State of Delaware on December 28, 2017, with an effective date of January 1, 2018. Through a series of transactions known, colloquially, as a “reverse-triangular merger,” on March 18, 2019, VHI was acquired by a subsidiary of the Company, with the result that the former shareholder of VHI comprised over 99% of the shareholders of the Company. 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, New Mexico, and New York, and formerly in Arizona and Ohio.
While marijuana and CBD-infused products are legal under the laws of many U.S. states (with vastly differing restrictions), the United States Federal Controlled Substances Act classifies all “marijuana” as a Schedule I drug. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the United States, and a lack of safety for the use of the drug under medical supervision. Recently some federal officials have attempted to distinguish between medical cannabis use as necessary, but recreational use as “still a violation of federal law.” At the present time, the distinction between “medical marijuana” and “recreational marijuana” does not exist under U.S. federal law.
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 have acquired 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 were to receive 0.22652 of a subordinate voting share of Verano (each a “Verano Subordinate Voting Share”), subject to adjustment as described in the Arrangement Agreement (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 a $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 had no factual or legal basis to justify or support 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 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. On November 14, 2022, Verano filed counterclaims against the Company for the termination fee and transaction expenses described above. Due to uncertainties inherent in litigation, it is not possible for Goodness Growth to predict the timing or final outcome of the legal proceedings against Verano or to determine the amount of damages, if any, that may be awarded.
6
2. Summary of Significant Accounting Policies
Significant Accounting Policies
The Company’s significant accounting policies are described in Note 2 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2023 (the "Annual Financial Statements"). There have been no material changes to the Company’s significant accounting policies.
Basis of presentation
The accompanying unaudited condensed consolidated financial statements reflect the accounts of the Company. The information included in these statements should be read in conjunction with the Annual Financial Statements. The unaudited condensed consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Results of interim periods should not be considered indicative of the results for the full year. These unaudited interim condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ from these estimates.
Basis of consolidation
These unaudited condensed consolidated financial statements include the accounts of the following entities wholly owned, or effectively controlled by the Company during the period ended March 31, 2023:
The entities listed above are wholly owned or effectively controlled by the Company and have been formed or acquired to support the intended operations of the Company, and all intercompany transactions and balances have been eliminated in the Company's unaudited condensed consolidated financial statements.
7
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.
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. 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. Potential dilutive common share equivalents consist of stock options, warrants, and restricted stock units.
In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive. The Company recorded a net loss for the three month periods ended March 31, 2023 and 2022, presented in these financial statements, and as such there is no difference between the Company’s basic and diluted net loss per share for these periods.
The anti-dilutive shares outstanding for the three month period ending March 31, 2023 and 2022 were as follows:
March 31, | ||||
2023 |
| 2022 | ||
Stock options | 28,566,282 |
| 26,261,054 | |
Warrants | 3,187,649 |
| 4,226,449 | |
RSUs | 3,102,765 | 1,094,200 | ||
Total | 34,856,696 |
| 31,581,703 | |
Revenue Recognition
The Company’s primary source of revenue is from wholesale of cannabis products to dispensary locations and direct retail sales to eligible customers at the Company-owned dispensaries. Substantially all of the Company’s retail revenue is from the direct sale of cannabis products to medical customers.
The following table represents the Company’s disaggregated revenue by source:
Three Months Ended | ||||||
| 2023 |
| 2022 | |||
Retail | $ | 16,471,799 | $ | 12,412,223 | ||
Wholesale |
| 2,616,624 |
| 3,226,349 | ||
Total | $ | 19,088,423 | $ | 15,638,572 | ||
8
New accounting pronouncements not yet adopted
None.
3. Business Combinations and Dispositions
Dispositions
On March 31, 2022, the Company sold the rights to a 10% royalty on future net revenues generated by High Gardens, Inc., a former subsidiary of the Company that was divested in 2020, for cash consideration of $236,635. The carrying value of the intangible royalty asset prior to disposition was $68,276, resulting in a gain of $168,359 which was recorded in the unaudited condensed consolidated statement of loss and comprehensive loss for the three months ended March 31, 2022.
Assets Held for Sale
As of March 31, 2023 the Company identified property, equipment, and lease assets and liabilities associated with the businesses in New York, Nevada, Puerto Rico, and Massachusetts with carrying amounts that are expected to be recovered principally through sale or disposal rather than through continuing use such that the Company can better manage working capital and generate more favorable future cash flows. The sale of these assets and liabilities is highly probable, they can be sold in their immediate condition, and the sales are expected to occur within the next twelve months. As such, these assets and liabilities have been classified as “held for sale.” Assets and liabilities held for sale are as follows:
4. Fair Value Measurements
The Company complies with ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.
Items measured at fair value on a non-recurring basis
The Company’s non-financial assets, such as prepayments and other current assets, long lived assets, including property and equipment, goodwill, and intangible assets, are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized. No indicators of impairment existed as of March 31, 2023, and therefore no impairment charges were recorded.
9
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 and long-term debt approximates fair value as they bear a market rate of interest.
5. Accounts Receivable
Trade receivables are comprised of the following items:
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
Trade receivable | $ | 1,424,499 | $ | 1,421,027 | ||
Tax withholding receivable | 2,755,396 | 2,755,396 | ||||
Other |
| 81,729 |
| 109,649 | ||
Total | $ | 4,261,624 | $ | 4,286,072 | ||
Included in the trade receivables, net balance at March 31, 2023 and December 31, 2022, is an allowance for doubtful accounts of $189,695 and $169,699 respectively. Included in the tax withholding receivable, net balance at March 31, 2023 and December 31, 2022 is an allowance for doubtful accounts of $284,161.
6. Inventory
Inventory is comprised of the following items:
| March 31, | December 31, | ||||
| 2023 |
| 2022 | |||
Work-in-progress | $ | 15,223,386 | $ | 14,209,695 | ||
Finished goods |
| 5,942,832 |
| 5,506,760 | ||
Other |
| 685,809 |
| 791,568 | ||
Total | $ | 21,852,027 | $ | 20,508,023 | ||
Inventory is written down for any obsolescence, spoilage and excess inventory or when the net realizable value of inventory is less than the carrying value. Inventory valuation adjustments included in cost of sales on the statements of net loss and comprehensive loss is comprised of the following:
| March 31, | |||||
| 2023 |
| 2022 | |||
Work-in-progress | $ | 15,072 | $ | 3,280,291 | ||
Finished goods |
| (25,072) |
| 151,248 | ||
Other |
| — |
| 35,378 | ||
Total | $ | (10,000) | $ | 3,466,917 | ||
10
7. Prepayments and other current assets
Prepayments and other current assets are comprised of the following items:
| March 31, | December 31, | ||||
| 2023 |
| 2022 | |||
Prepaid Insurance | $ | 1,396,168 | $ | 1,894,385 | ||
Other Prepaid Expenses |
| 634,462 |
| 650,147 | ||
Total | $ | 2,030,630 | $ | 2,544,532 | ||
8. Property and Equipment, Net
Property and equipment, net consisted of the following:
For the three months ended March 31, 2023 and 2022, total depreciation on property and equipment was $893,598 and $856,289, respectively. For the three months ended March 31, 2023 and 2022, accumulated amortization of the right of use asset under finance lease amounted to $1,934,235 and $2,736,162, respectively. The right of use asset under finance lease of $7,938,137 consists of leased processing and cultivation premises. The Company capitalized into inventory $734,087 and $700,193 relating to depreciation associated with manufacturing equipment and production facilities for the three months ended March 31, 2023 and 2022, respectively. The capitalized depreciation costs associated are added to inventory and expensed through Cost of Sales Product Cost on the unaudited condensed consolidated statements of net loss and comprehensive loss.
As of March 31, 2023, in conjunction with the Company’s held for sale assessment and disposal of certain long-lived assets, the Company evaluated whether property and equipment showed any indicators of impairment, and it was determined that the recoverable amount of certain net assets was above book value. As a result, the Company recorded an impairment charge of $0 (2022 - $5,313,176) on property and equipment, net.
11
9. Leases
Components of lease expenses are listed below:
Future minimum lease payments (principal and interest) on the leases are as follows:
The Company has entered into various lease agreements for the use of buildings used in production and retail sales of cannabis products.
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.
Supplemental cash flow information related to leases:
| March 31, | |||||
| 2023 |
| 2022 | |||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
| |||
Lease principal payments | $ | 288,574 | $ | 464,214 | ||
Non-cash additions to ROU assets |
| 4,054,328 |
| — | ||
Amortization of operating leases |
| 309,747 |
| 323,090 | ||
Other information about lease amounts recognized in the financial statements:
12
10. Goodwill
The following table shows the change in carrying amount of goodwill:
Goodwill - January 1, 2022 |
| $ | 183,836 |
Impairment |
| — | |
Dispositions |
| — | |
Goodwill - December 31, 2022 and March 31, 2023 | $ | 183,836 |
Goodwill is tested for impairment annually or more frequently if indicators of impairment exist or if a decision is made to dispose of business. The valuation date for the Company’s annual impairment testing is December 31. On this date the Company performed a Step 1 goodwill impairment analysis. No indicators of impairment exists as of March 31, 2023.
11. Intangibles
Intangible assets are comprised of the following items:
Amortization expense for intangibles was $159,766 and $172,267 during the three months ended March 31, 2023 and 2022, respectively. Amortization expense is recorded in operating expenses on the unaudited condensed consolidated statements of net loss and comprehensive loss.
The Company estimates that amortization expense will be $639,069 next five fiscal years.
12. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities are comprised of the following items:
13. Long-Term Debt
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 has paid off 60,000 in principal, and the remaining $1,050,000 principal balance is due on December 31, 2023.
13
On November 19, 2021, the Company signed a promissory note payable in the amount of $2,000,000 in connection with the acquisition of Charm City Medicus, LLC. The note bears an interest rate of 8% per annum with interest payments due on the last day of each calendar quarter. The maturity date of the note is November 19, 2023, and the note is secured by 25% of the membership interests in Vireo Health of Charm City, LLC.
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 interest payable monthly. 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. 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”). 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 paid-in-kind interest of 2.75% per annum.
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 13,017,624 Subordinate Voting Shares in lieu of a cash extension fee. These 13,017,624 shares were valued at $1,221,837 on March 31, 2023, and considered a deferred financing cost. An additional 1,982,376 Subordinate Voting Shares are issuable at the discretion of the Agent. It 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.
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.
The following table shows a summary of the Company’s long-term debt:
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As of March 31, 2023, stated maturities of long-term debt were as follows:
2023 | $ | 3,050,000 | |
2024 |
| 55,155,615 | |
Thereafter | — | ||
Total | $ | 58,205,615 |
14. Stockholders’ Equity
Shares
The Company’s certificate of incorporation authorized the Company to issue the following classes of shares with the following par value and voting rights as of March 31, 2023. The liquidation and dividend rights are identical among shares equally in the Company’s earnings and losses on an as converted basis.
| Par Value |
| Authorized |
| Voting Rights | |
Subordinate Voting Share (“SVS”) |
| — |
| Unlimited |
| 1 vote for each share |
Multiple Voting Share (“MVS”) |
| — |
| Unlimited |
| 100 votes for each share |
Super Voting Share |
| — |
| Unlimited |
| 1,000 votes for each share |
Subordinate Voting Shares
Holders of Subordinate Voting Shares are entitled to one vote in respect of each Subordinate Voting Share held.
Multiple Voting Shares
Holders of Multiple Voting Shares are entitled to votes for each Multiple Voting Share held.
Multiple Voting Shares each have the restricted right to convert to Subordinate Voting Shares subject to adjustments for certain customary corporate changes.
Super Voting Shares
Holders of Super Voting Shares are entitled to votes per Super Voting Share. Each Super Voting share is convertible into one Multiple Voting Share.
Shares Issued
During the three months ended March 31, 2022, 28,134 Multiple Voting Shares were redeemed for 2,813,400 Subordinate Voting Shares.
15. Stock-Based Compensation
Stock Options
In January 2019, the Company adopted the 2019 Equity Incentive Plan under which the Company may grant incentive stock option, restricted shares, restricted share units, or other awards. Under the terms of the plan, a total of ten percent of the number of shares outstanding assuming conversion of all super voting shares and multiple voting shares to subordinate voting shares are permitted to be issued. The exercise price for incentive stock options issued under the plan will be set by
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the committee but will not be less 100% of the fair market value of the Company’s shares on the date of grant. Incentive stock options have a maximum term of 10 years from the date of grant. The incentive stock options vest at the discretion of the Board.
Options granted under the equity incentive plan were valued using the Black-Scholes option pricing model with the following weighted average assumptions:
Stock option activity for the three months ended March 31, 2023 and for the year ended December 31, 2022 is presented below:
During the three months ended March 31, 2023 and 2022, the Company recognized $1,399,258 and $590,600 in stock-based compensation relating to stock options, respectively. As of March 31, 2023, the total unrecognized compensation costs related to unvested stock options awards granted was $1,189,326. In addition, the weighted average period over which the unrecognized compensation expense is expected to be recognized is approximately 2.3 years. The total intrinsic value of stock options outstanding and exercisable as of March 31, 2023, was $0.
The Company does not estimate forfeiture rates when calculating compensation expense. The Company records forfeitures as they occur.
Warrants
Subordinate Voting Share (SVS) warrants entitle the holder to purchase one subordinate voting share of the Company. Multiple Voting Share (MVS) warrants entitle the holder to purchase one multiple voting share of the Company.
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A summary of the warrants outstanding is as follows:
| Number of |
| Weighted Average |
| Weighted Average | ||
SVS Warrants | Warrants | Exercise Price | Remaining Life | ||||
Warrants outstanding at December 31, 2021 |
| — | $ | — |
| — | |
Granted |
| 150,000 | 1.49 |
| 2.00 | ||
Warrants outstanding at December 31, 2022 | 150,000 | $ | 1.49 | 2.00 | |||
Granted | — | — | — | ||||
Warrants outstanding at March 31, 2023 |
| 150,000 | $ | 1.49 |
| 1.75 | |
Warrants exercisable at March 31, 2023 |
| 150,000 | $ | 1.49 |
| 1.75 | |
| Number of |
| Weighted Average |
| Weighted Average | ||
SVS Warrants Denominated in C$ | Warrants | Exercise Price | Remaining Life | ||||
Warrants outstanding at December 31, 2021 |
| 3,037,649 | $ | 3.50 |
| 4.23 | |
Granted |
| — |
| - |
| — | |
Warrants outstanding at December 31, 2022 |
| 3,037,649 | $ | 3.50 |
| 3.23 | |
Granted | — | — | — | ||||
Warrants outstanding at March 31, 2023 | 3,037,649 | $ | 3.50 | 2.98 | |||
Warrants exercisable at March 31, 2023 |
| 3,037,649 | $ | 3.50 |
| 2.98 | |
| Number of |
| Weighted Average |
| Weighted Average | ||
MVS Warrants | Warrants | Exercise Price | Remaining Life | ||||
Warrants outstanding at December 31, 2021 |
| 13,583 | $ | 194.66 |
| 0.64 | |
Expired |
| (13,583) | 194.66 | — | |||
Warrants outstanding at December 31, 2022 and March 31, 2023 |
| — | — |
| — | ||
Warrants exercisable at March 31, 2023 |
| — | $ | — |
| — | |
During the three months ended March 31, 2023 and 2022, $0 in stock-based compensation expense was recorded in connection with the SVS compensation warrants and $0 in stock-based compensation was recorded in connection with the MVS warrants.
RSUs
The expense associated with RSUs is based on closing share price of the Company’s subordinate voting shares on the business day immediately preceding the grant date, adjusted for the absence of future dividends and is amortized on a straight-line basis over the periods during which the restrictions lapse. The Company currently has RSUs that vest over a three year period. The awards are generally subject to forfeiture in the event of termination of employment. During the three months ended March 31, 2023 and 2022 the Company recognized $276,336 and $51,906, respectively, in stock-based compensation expense related to RSUs.
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A summary of RSUs is as follows:
16. Commitments and Contingencies
Legal proceedings
Schneyer
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.
Simultaneously with the complaint, Schneyer filed a motion seeking a temporary restraining order (“TRO”) to prevent the “further transfer” of MaryMed which would, Schneyer claimed, occur if Vireo U.S.’s RTO transactions were allowed to occur. The Court held a hearing on the motion for TRO on March 5, 2019 and denied the motion on the same day.
Weeks prior to commencement of the litigation, Dorchester Management had appointed a special litigation committee (“SLC”) on behalf of Capital to investigate the consideration provided by Vireo U.S. for the purchase of MaryMed and assess any potential claims Capital may have as a result of the transaction. The SLC, a retired judge who engaged another retired judge as legal counsel to the SLC, was appointed in accordance with Minnesota law, issued a report on May 1, 2021, recommending, among other things, that certain claims be permitted to proceed (the “Remaining Derivative Claims”) and other claims not be permitted to proceed by the Court (the “Rejected Derivative Claims”).
On July 7, 2021, Schneyer filed a Second Amended Complaint asserting direct claims on behalf of himself and the Remaining Derivative Claims on behalf of Capital and some Rejected Derivative Claims on behalf of Capital. Under Delaware law, Capital has a right to control the litigation of the Remaining Derivative Claims, the Rejected Derivative Claims, and any other derivative allegations that may be asserted on behalf of Capital. On August 17, 2021, Management exercised this right for Capital and appointed a second independent special litigation committee (the “Second SLC”), a partner at an international law firm, to manage the litigation of the claims raised in Schneyer’s Second Amended Complaint. On August 31, 2021, Capital filed a complaint at the Second SLC’s direction alleging the Remaining Derivative Claims and the Rejected Derivative Claims. Schneyer opposed the appointment of the Second SLC.
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On December 9, 2021, the Court dismissed Schneyer’s claim for rescissory damages and the Remaining Derivative Claim alleging fraud. The Court also ruled that the Remaining Derivative Claims should be pursued by the Second SLC. Finally, the Court also denied Schneyer’s request to seek punitive damages.
On February 22, 2022, the Minnesota Court of Appeals denied the immediate review of the December 9, 2021 order.
On June 20,2022 the Court issued an order amending and realigning the complaint brought by Capital for the Remaining Derivative Claims. The order also denied Vireo U.S.’s and Dorchester Management’s motion to dismiss the Remaining Derivative Claims brought by Capital.
Following this order, the litigation was permitted to proceed with Schneyer’s three direct contract claims against Vireo U.S and a direct fraud claim against Management and Vireo U.S. on an individual basis, as well as the Remaining Derivative Claims brought by Capital.
While Vireo U.S. continues to believe that Schneyer’s claims lack merit, it agreed to settle the litigation in April 2023 to avoid the expense, distraction and risk of the pre-trial and trial processes. Entering into this settlement in no way changes the defendants’ position that they did nothing wrong and that the claims were baseless.
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 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. 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 a $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 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. 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. 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.
Lease commitments
The Company leases various facilities, under non-cancelable finance and operating leases, which expire at various dates through September 2041.
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17. Selling, General and Administrative Expenses
Selling, general and administrative expenses are comprised of the following items:
18. Supplemental Cash Flow Information(1)
| March 31, | March 31, | ||||
| 2023 |
| 2022 | |||
Cash paid for interest | $ | 5,731,120 | $ | 3,059,277 | ||
Cash paid for income taxes |
| — |
| — | ||
| (1) | For supplemental cash flow information related to leases, refer to Note 9. |
19. Financial Instruments
Credit risk
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, and notes receivable. A small portion of cash is held on hand, from which management believes the risk of loss is remote. Receivables relate primarily to wholesale sales. The Company does not have significant credit risk with respect to customers. 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 Arizona, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, and Puerto Rico with respect to cultivating, processing, and/or distributing marijuana. Presently, this industry is illegal under United States federal law. The Company has adhered, and intends to continue to adhere, strictly to the applicable state statutes in its operations.
Liquidity risk
The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As of March 31, 2023, the Company’s financial liabilities consist of accounts payable and accrued liabilities, and debt. The Company manages liquidity risk by reviewing its capital requirements on an ongoing basis. Historically, the Company’s main source of funding has been additional funding from shareholders and debt financing. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity or debt financing.
Legal Risk
Goodness Growth operates in the United States. The U.S. federal government regulates drugs through the Controlled Substances Act (21 U.S.C. § 811), which places controlled substances, including cannabis, in a schedule. Cannabis is classified as a Schedule I drug. Under U.S. federal law, a Schedule I drug or substance has a high potential for abuse, no accepted medical use in the U.S., and a lack of accepted safety for the use of the drug under medical supervision. The U.S.
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Food and Drug Administration has not approved marijuana as a safe and effective drug for any indication. In the U.S. marijuana is largely regulated at the state level. State laws regulating cannabis are in direct conflict with the federal Controlled Substances Act, which makes cannabis use and possession federally illegal.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates. Given the Company’s financial transactions are rarely denominated in a foreign currency, there is minimal foreign currency risk exposure.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company currently carries variable interest-bearing debt subject to fluctuations in the United States Prime rate. A change of 100 basis points in interest rates during the three months ended March 31, 2023, would have resulted in a corresponding change in the statement of loss and comprehensive loss of $137,825.
20. Related Party Transactions
As of March 31, 2023, and December 31, 2022, there were $0 and $1,613 due to related parties, respectively.
For the three months ended March 31, 2023, and 2022, the Company paid a related party (Bengal Impact Partners, of which Joshua Rosen, who is the Company’s interim Chief Executive Officer and a member of the Company’s Board of Directors, is a managing partner) $1,613 and $20,000, respectively, for corporate advisory services.
21. Subsequent Events
On April 18, 2023, the Schneyer litigation (Note 16) was settled.
On April 28, 2023 the Company closed on a $2.0 million tranche of a new convertible debt facility which enables the Company to access up to $10.0 million in aggregate principal amount of convertible notes (the “Convertible Notes”). The convertible facility has a term of three years, with an interest rate of 12.0 percent, including 6.0 percent cash and 6.0 percent paid-in-kind. The initial tranche's 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 U.S. $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 U.S. $0.145 or a 20.0 percent 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. Finally, in connection with this financing, the Company issued 6,250,000 Warrants (the “Warrants”) to purchase Subordinate Voting Shares of the Company to the lenders. The Warrants have a term of five years with a strike price equal to U.S. $0.145. The Company does not expect to issue any additional warrants related to this convertible loan facility.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the financial information and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our outlook, plans and strategy for our business and potential financing, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or “forward-looking information” within the meaning of Canadian securities laws. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “remain,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would,” “should,” “potential,” “intention,” “strategy,” “strategic,” “approach,” “subject to,” “possible,” “pending,” “if,” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements and forward-looking information are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements or forward-looking information. Factors that could cause or contribute to such differences include, but are not limited to, those identified in this Quarterly Report on Form 10-Q and those discussed in the section titled “Risk Factors” set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 and in our other SEC and Canadian public filings. Such forward-looking statements reflect our beliefs and opinions on the relevant subject based on information available to us as of the date of this report, and while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. You should not rely upon forward-looking statements or forward-looking information as predictions of future events. Furthermore, such forward-looking statements or forward-looking information speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements or forward-looking information to reflect events or circumstances after the date of such statements.
Amounts are presented in United States dollars, except as otherwise indicated.
Overview of the Company
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 four 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.
The termination of the Arrangement Agreement gives rise to substantial doubt about the Company’s ability to meet its obligations over the next twelve months. 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.
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Three months ended March 31, 2023, Compared to Three months ended March 31, 2022
Revenue
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 four states. For the three months ended March 31, 2023, 86% of our revenue was generated from retail dispensaries and 14% from wholesale business. For the three months ended March 31, 2022, 79% of our revenue was generated from retail business and 21% from wholesale business.
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%. For the three months ended March 31, 2022, Minnesota operations contributed approximately 45% of revenues, New York contributed 22%, Arizona contributed 6%, New Mexico contributed 6%, and Maryland contributed 21%.
Revenue for the three-months ended March 31, 2023 was $19,088,423, an increase of $3,449,851 or 22% compared to revenue of $15,638,572 for the three-months ended March 31, 2022. The increase is primarily attributable to increased revenue contributions from the retail business in Minnesota partially offset by the lack of Arizona wholesale revenue. The key revenue driver is the increased patient demand in Minnesota driven by the addition of cannabis flower to the Minnesota medical program in March of 2022.
Retail revenue for the three months ended March 31, 2023 was $16,471,799 an increase of $4,059,576 or 33% compared to retail revenue of $12,412,223 for the three months ended March 31, 2022 primarily due to increased revenue contributions from Minnesota.
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Wholesale revenue for the three months ended March 31, 2023 was $2,616,624, a decrease of $609,725 compared to wholesale revenue of $3,226,349 for the three months ended March 31, 2022. The decrease was primarily due to the lack of Arizona wholesale revenues.
Cost of Goods Sold and Gross Profit
Gross profit reflects total net revenue less cost of goods sold. Cost of goods sold represents the costs attributable to producing bulk materials and finished goods, which includes direct materials, labor, and certain indirect costs such as 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.
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.
Cost of goods sold for the three months ended March 31, 2023 was $9,568,211, a decrease of $3,581,683 compared to the three months ended March 31, 2022 of $13,149,894.
Gross profit for the three months ended March 31, 2023 was $9,520,212, representing a gross margin of 50%. This is compared to gross profit for the three months ended March 31, 2022 of $2,488,678 or a 16% gross margin. The increase in gross profit and margin was driven primarily by increased retail sales in Minnesota and a $3,476,917 decrease in inventory valuation adjustments. The decrease in inventory valuation adjustments was driven by the lack of Arizona related inventory net realizable value write downs during the three months ended March 31, 2023.
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 that could place downward pressure on our retail and wholesale gross margins.
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Total Expenses
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.
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.
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.
Total expenses for the three months ended March 31, 2023 were $9,151,706 a decrease of $1,097,132 compared to total expenses of $10,248,838 for the three months ended March 31, 2022. The decrease in total expenses is primarily attributable to a decrease in salaries and wages and professional fees partially offset by an increase in share based compensation expense.
Operating Income (Loss) before Income Taxes
Operating income (loss) before other income (expense) and provision for income taxes for the three months ended March 31, 2023 was $368,506 an increase of $8,128,666 compared to an operating loss of ($7,760,160) for the three months ended March 31, 2022.
Total Other Income (Expense)
Total other expense for the three months ended March 31, 2023 was $(7,112,476), a change of $1,434,146 compared to other expense of $(8,546,622) for the three months ended March 31, 2022. This change is primarily attributable to a decrease in impairment charges of $5,313,176 partially offset by an increase in interest expense of $2,532,990 driven by the Credit Facility.
Provision for Income Taxes
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, 2023, tax expense totaled $1,662,000 compared to tax recoveries of $1,740,000 for the three months ended March 31, 2022. The increase in tax expense is primarily attributable to increased gross profit, decreased inventory valuation adjustments, and decreased asset impairments.
NON-GAAP MEASURES
EBITDA is a non-GAAP measure that does not have standardized definition under GAAP. The following information provides reconciliations of the supplemental non-GAAP financial measure presented herein to the most directly comparable financial measures calculated and presented in accordance with GAAP. We have provided the non-GAAP financial measure, which is not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. This supplemental non-GAAP financial measure is presented because management has evaluated the financial results both including and excluding the adjusted items and believes that the supplemental non-GAAP financial measure presented provide additional perspective and insights when analyzing the core operating performance of the business. This supplemental non-GAAP
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financial measure should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.
Liquidity, Financing Activities During the Period, and Capital Resources
We are an early-stage growth company. We are generating cash from sales and deploying our capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term. Capital reserves are for capital expenditures and improvements in existing facilities, product development and marketing, customer, supplier, investor, industry relations, and working capital.
Current management forecasts and related assumptions support the view that we can adequately manage the operational needs of the business.
Credit Facility
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 has paid off 60,000 in principal, and the remaining $1,050,000 principal balance is due on December 31, 2023.
On November 19, 2021, the Company signed a promissory note payable in the amount of $2,000,000 in connection with the acquisition of Charm City Medicus, LLC. The note bears an interest rate of 8% per annum with interest payments due on the last day of each calendar quarter. The maturity date of the note is November 19, 2023, and the note is secured by 25% of the membership interests in Vireo Health of Charm City, LLC.
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 interest payable monthly. 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. 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”). 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 paid-in-kind interest of 2.75% per annum.
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 13,017,624 Subordinate
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Voting Shares in lieu of a cash extension fee. These 13,017,624 shares were valued at $1,221,837 on March 31, 2023, and considered a deferred financing cost. An additional 1,982,376 Subordinate Voting Shares are issuable at the discretion of the Agent. It 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.
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.
Cash Used in Operating Activities
Net cash used in operating activities was $3.8 million for the three months ended March 31, 2023, a decrease of $3.0 million as compared to $6.8 million for the three months ended March 31, 2022. The decrease is primarily attributed to more favorable changes in working capital items, and increased gross profit.
Cash Used in Investing Activities
Net cash used in investing activities was $0.7 million for the three months ended March 31, 2023, a decrease of $1.5 million compared to net cash used in investing activities of $2.2 million for the three months ended March 31, 2022. The decrease is primarily attributable to decreased property, plant, and equipment additions relative to the prior year quarter.
Cash Provided (Used) by Financing Activities
Net cash used in financing activities was $0.3 million for the three months ended March 31, 2023, a change of $2.7 million as compared to $2.4 million provided by financing activities in the three months ended March 31, 2022. The change was principally due to increased proceeds received from the Credit Facility in 2022 as compared to 2023.
Lease Transactions
As of March 31, 2023, we have entered into lease agreements for the use of buildings used in cultivation, production and/or sales of cannabis products in Maryland, Minnesota, Nevada, New Mexico, New York, and Puerto Rico.
The lease agreements for all of the retail space used for our dispensary operations are with third-party landlords and remaining duration ranges from 1 to 6 years. These agreements are short-term facility leases that require us to make monthly rent payments as well as funding common area costs, utilities and maintenance. In some cases, we have received tenant improvement funds to assist in the buildout of the space to meet our operating needs. As of March 31, 2023, we operated 18 retail locations secured under these agreements.
We have also entered into sale and leaseback arrangements for our cultivation and processing facilities in Minnesota and New York with a special-purpose real estate investment trust. These leases are long-term agreements that provide, among other things, funds to make certain improvements to the property that will significantly enhance production capacity and operational efficiency of the facility.
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Excluding any contracts under one year in duration, the future minimum lease payments (principal and interest) on all our leases are as follows:
ADDITIONAL INFORMATION
Outstanding Share Data
As of May 11, 2023, we had 87,135,083 shares issued and outstanding, consisting of the following:
(a) Subordinate voting shares
86,721,030 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.
(b) Multiple voting shares
348,642 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.
(c) Super voting shares
65,411 shares issued and outstanding. The holders of super voting shares are entitled to one thousand votes per share at all shareholder meetings. Each super voting share is exchangeable for one hundred subordinate voting shares. The Company is authorized to issue an unlimited number of super voting shares.
Options, Warrants, and Convertible Promissory Notes
As of March 31, 2023, we had 28,566,282 employee stock options outstanding, 3,102,765 RSUs outstanding, 3,037,649 Subordinate Voting Share compensation warrants denominated in C$ related to financing activities, and 150,000 Subordinate Voting Share compensation warrants outstanding.
Off-Balance Sheet Arrangements
As of the date of this filing, we do not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.
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Critical Accounting Policies
There have been no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2021 Annual Report on Form 10-K for the year ended December 31, 2021.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk have been omitted as permitted under rules applicable to smaller reporting companies.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the appropriate time periods, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervisions of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023 and, based on that evaluation, have concluded that the design and operation of our disclosure controls and procedures were effective as of such date.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various regulatory issues, claims and lawsuits arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material, adverse effect on our results of operations or financial condition.
Schneyer
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.
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Simultaneously with the complaint, Schneyer filed a motion seeking a temporary restraining order (“TRO”) to prevent the “further transfer” of MaryMed which would, Schneyer claimed, occur if Vireo U.S.’s RTO transactions were allowed to occur. The Court held a hearing on the motion for TRO on March 5, 2019 and denied the motion on the same day.
Weeks prior to commencement of the litigation, Dorchester Management had appointed a special litigation committee (“SLC”) on behalf of Capital to investigate the consideration provided by Vireo U.S. for the purchase of MaryMed and assess any potential claims Capital may have as a result of the transaction. The SLC, a retired judge who engaged another retired judge as legal counsel to the SLC, was appointed in accordance with Minnesota law, issued a report on May 1, 2021, recommending, among other things, that certain claims be permitted to proceed (the “Remaining Derivative Claims”) and other claims not be permitted to proceed by the Court (the “Rejected Derivative Claims”).
On July 7, 2021, Schneyer filed a Second Amended Complaint asserting direct claims on behalf of himself and the Remaining Derivative Claims on behalf of Capital and some Rejected Derivative Claims on behalf of Capital. Under Delaware law, Capital has a right to control the litigation of the Remaining Derivative Claims, the Rejected Derivative Claims, and any other derivative allegations that may be asserted on behalf of Capital. On August 17, 2021, Management exercised this right for Capital and appointed a second independent special litigation committee (the “Second SLC”), a partner at an international law firm, to manage the litigation of the claims raised in Schneyer’s Second Amended Complaint. On August 31, 2021, Capital filed a complaint at the Second SLC’s direction alleging the Remaining Derivative Claims and the Rejected Derivative Claims. Schneyer opposed the appointment of the Second SLC.
On December 9, 2021, the Court dismissed Schneyer’s claim for rescissory damages and the Remaining Derivative Claim alleging fraud. The Court also ruled that the Remaining Derivative Claims should be pursued by the Second SLC. Finally, the Court also denied Schneyer’s request to seek punitive damages.
On February 22, 2022, the Minnesota Court of Appeals denied the immediate review of the December 9, 2021 order.
On June 20,2022 the Court issued an order amending and realigning the complaint brought by Capital for the Remaining Derivative Claims. The order also denied Vireo U.S.’s and Dorchester Management’s motion to dismiss the Remaining Derivative Claims brought by Capital.
Following this order, the litigation was permitted to proceed with Schneyer’s three direct contract claims against Vireo U.S and a direct fraud claim against Management and Vireo U.S. on an individual basis, as well as the Remaining Derivative Claims brought by Capital.
While Vireo U.S. continues to believe that Schneyer’s claims lack merit, it agreed to settle the litigation in April 2023 to avoid the expense, distraction and risk of the pre-trial and trial processes. Entering into this settlement in no way changes the defendants’ position that they did nothing wrong and that the claims were baseless.
Verano
On January 31, 2022, the Company entered into the Arrangement Agreement with Verano, pursuant to which Verano was to have acquired 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 were to 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. 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 a $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
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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 has determined to treat as a repudiation.
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. 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. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
No unregistered sales of equity securities occurred during the three months ended March 31, 2023.
Item 6. Exhibits
Exhibit |
| Description of Exhibit |
4.7 | ||
10.45 | ||
31.1 | Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer | |
31.2 | Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer | |
32.1 | Section 1350 certification, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 | Includes the following financial and related information from Goodness Growth’s Quarterly Report on Form 10-Q as of and for the quarter ended March 31, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (1) the Consolidated Balance Sheets, (2) the Consolidated Statements of Income, (3) the Consolidated Statements of Comprehensive Income, (4) the Consolidated Statements of Changes in Stockholders’ Equity, (5) the Consolidated Statements of Cash Flows, and (6) Notes to Consolidated Financial Statements. | |
104 | The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL. |
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SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GOODNESS GROWTH HOLDINGS, INC. (Registrant) | |||
Date: May 15, 2023 | By: | /s/ Joshua Rosen | |
Name: | Joshua Rosen | ||
Title: | Interim Chief Executive Officer | ||
Date: May 15, 2023 | By: | /s/ John A. Heller | |
Name: | John A. Heller | ||
Title: | Chief Financial Officer | ||
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EXHBIT 4.7
UNLESS PERMITTED UNDER APPLICABLE SECURITIES LEGISLATION IN CANADA, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [Insert 4 months and 1 day after the Original Issuance Date].
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS SECURITY, THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER SUCH ACT AND ALL SUCH OTHER APPLICABLE LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Warrant Certificate No.: [2023-[__]]
Original Issue Date: March [ ], 2023
Representing [PORTION OF 6,250,000] Warrants to purchase Subordinate Voting Shares
THIS CERTIFIES THAT, for the purchase price of $[ ], [Insert Name of Holder], a [ ] (the “Holder”), is entitled, at any time prior to the Expiry Time, to purchase, at the Strike Price, one (1) duly authorized, validly issued, fully paid and non-assessable Subordinate Voting Share in the share capital of GOODNESS GROWTH HOLDINGS, INC. (f/k/a Vireo Health International, Inc.) (the “Company”), a company existing under the laws of the Province of British Columbia, for each Warrant, all in the manner and subject to the terms set forth in this Warrant. Certain capitalized terms used herein are defined in Section 1.
This Warrant has been issued pursuant to the terms of that certain Credit Agreement, dated as of March 24, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement), among the Company, as a Borrower, the other Borrowers party thereto on the Closing Date, any other Subsidiaries of the Company that become Borrowers or Guarantors thereunder pursuant to Section 8.09 of the Credit Agreement, the lenders from time to time party thereto (each, a “Lender” and, collectively, the “Lenders”), Chicago Atlantic admin, LLC, a Delaware limited liability company (“Chicago Atlantic”), as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, “Administrative Agent”), and Chicago Atlantic, as collateral agent for the Secured Parties (in such capacity, together with its successors and assigns in such capacity, “Collateral Agent”, and together with Administrative Agent, each, an “Agent” and collectively, “Agents”).
“Applicable Securities Legislation” has the meaning set forth in the Credit Agreement.
“Board” means the board of directors of the Company.
“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of Minneapolis, Minnesota or Vancouver, British Columbia are authorized or obligated by law or executive order to close.
“Capital Reorganization” has the meaning set forth in Section 4(e).
“Company” has the meaning set forth in the Preamble.
“Convertible Securities” means any securities of the Company (other than the Warrant Agreements issuable pursuant to the Credit Agreement), directly or indirectly, convertible into or exchangeable for Subordinate Voting Shares.
“Credit Agreement” has the meaning set forth in the Preamble.
“Current Market Price” means, at any date of determination, the average closing price of the Subordinate Voting Shares on the CSE (and in such case translated into U.S. dollars using the daily average exchange rate reported by the Bank of Canada as of such date) for the 10 consecutive trading days immediately prior to such date of determination or, if the Subordinate Voting Shares are not listed on the CSE, then on such other stock exchange or over-the-counter market on which the Subordinate Voting Shares are then listed; provided that, if there is no market for the Subordinate Voting Shares, then the Current Market Price in respect of a Subordinate Voting Shares shall be determined by a nationally recognized investment banking, accounting or valuation firm jointly selected by the Board and the Holder, with the Company being responsible for all fees and expenses payable to such firm.
“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., Minneapolis, Minnesota time on a Business Day, including the receipt by the Company of the Exercise Form, this Warrant and the Exercise Price.
“Exercise Form” has the meaning set forth in Section 3(a)(i).
“Exercise Price” means at any time, an amount equal to (a) the number of Warrant Shares to be purchased by the Holder as indicated in the Exercise Form multiplied by (b) the Strike Price.
“Exercised Shares” means, upon any exercise of the Holder’s right to purchase Warrant Shares pursuant to this Warrant, the amount of Warrant Shares for which subscription is being made as specified in the Exercise Form.
“Expiry Time” means 5:00 p.m. (Pacific time) on March [ ], 2028.
“Holder” has the meaning set forth in the Preamble.
“Offered Shares” has the meaning set forth in Section 4(b).
“Original Issue Date” has the meaning set forth in the Preamble.
“Permitted Transfer” means with respect to this Warrant any transfer in whole or in part (a) subject to Applicable Securities Legislation, to a successor corporation or other successor entity as a result of a merger or consolidation or sale of all or substantially all of the assets of Holder, or to one or more of its equity holders, or by means of a distribution to such equity holders, (b) to a person that is an “accredited investor” as defined in Rule 501 under the Act, as amended, and is an “accredited investor” for purposes of National Instrument 45-106 – Prospectus Exemptions of the Canadian Securities Administrators, in a transaction exempt from both the registration requirements of such Act and the
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prospectus requirements under Applicable Securities Legislation, or (c) to the extent required by governmental rule, law or regulation, or any directive or order of any governmental authority.
“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.
“Rights Offering” has the meaning set forth in Section 4(b).
“Special Distribution” has the meaning set forth in Section 4(c).
“Strike Price” means US$0.145 per Subordinate Voting Share, unless such price shall have been adjusted in accordance with the provisions of Section 4, in which case it shall mean the adjusted price in effect at such time.
“Subordinate Voting Shares” means the subordinate voting shares in share capital of the Company, as such shares are constituted on the date hereof, as the same may be reorganized, reclassified or redesignated pursuant to any of the events set out in Section 4.
“Subordinate Voting Share Reorganization” has the meaning set forth in Section 4(a).
“Warrant” means this Warrant Certificate and all warrants issued upon division or combination of, or in substitution for, this Warrant.
“Warrant Shares” means the Subordinate Voting Shares then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.
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(any such event being referred to as a “Subordinate Voting Share Reorganization”), the Strike Price shall be adjusted, effective immediately after the effective date or record date at which holders of Subordinate Voting Shares are determined for purposes of the Subordinate Voting Share Reorganization, by multiplying the Strike Price in effect immediately prior to such effective date or record date, by a fraction of which:
To the extent that any adjustment in the Strike Price occurs pursuant to Section 4(a)(iii) as a result of the fixing by the Company of a record date for the distribution of Convertible Securities, the Strike Price shall be readjusted after the expiration of any relevant exchange or conversion right to the number of Subordinate Voting Shares which would then be in effect based upon the number of Subordinate Voting Shares actually issued and remaining issuable after such expiration.
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To the extent that any adjustment in the Strike Price occurs pursuant to this Section 4(b) as a result of the Company fixing a record date for a Rights Offering, the Strike Price shall be readjusted based on the number of Offered Shares (or Convertible Securities that are convertible into Offered Shares) actually issued and delivered upon the exercise of the rights, options or warrants, as the case may be, but subject to any other adjustment required hereunder by reason of any other event arising after such record date. Any Offered Shares owned by or held for the account of the Company shall be deemed not to be outstanding for the purpose of any computation made pursuant to this Section 4(b).
and such issuance or distribution does not constitute a dividend paid in the ordinary course or does not result in an adjustment pursuant to Section 4(a) or 4(b) (any such event being referred to as a “Special Distribution”), the Strike Price shall be adjusted, effective immediately after the record date on which the holders of Subordinate Voting Shares are determined for purposes of the Special Distribution, by multiplying the Strike Price in effect on the record date by a fraction:
To the extent that any adjustment in the Strike Price occurs pursuant to this Section 4(c) as a result of the Company fixing a record date for a Special Distribution, the Strike Price shall be readjusted based on the shares, rights, options, warrants, evidences of indebtedness or other assets actually distributed or the number of Subordinate Voting Shares or Convertible Securities actually delivered upon the exercise of rights, options and warrants, as the case may be, but subject to any other adjustment required hereunder
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by reason of any other event arising after such record date. Any Subordinate Voting Shares owned by or held for the account of the Company shall be deemed not to be outstanding for the purpose of any computation made pursuant to Section 4(c).
(any of such events being herein referred to as “Capital Reorganization”), then, immediately upon the effective time of such Capital Reorganization and at all times thereafter, the Holder shall be entitled to be issued and receive and shall accept for the same aggregate consideration, upon such exercise, in lieu of the number of Warrant Shares to which the Holder was theretofore entitled upon such exercise, the kind and aggregate number of shares or other securities or property of the Company or the Person resulting from such Capital Reorganization that the Holder would have been entitled to be issued and receive upon such Capital Reorganization if, immediately prior to the effective time thereof, the Holder had been the registered holder of the number of Warrant Shares to which the Holder was theretofore entitled upon exercise of such Holder's Warrants. If necessary, as a result of any such Capital Reorganization, appropriate adjustments shall be made in the application of the provisions of this Warrant with respect to the rights and interests thereafter of the Holder to the end that the provisions set forth in this Warrant shall thereafter correspondingly be made applicable, as nearly as may be reasonably possible, with respect to any shares, other securities or property to which the Holder be is entitled on the exercise of the Warrants.
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“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [Insert 4 months and 1 day after the Original Issuance Date].
and the following legend (the “U.S. Legend”):
“THE WARRANT SHARES REPRESENTED BY THIS CERTIFICATE ARE ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND, EXCEPT AS EXPRESSLY PROVIDED HEREIN, HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OR OTHER APPLICABLE SECURITIES LAWS. THESE WARRANTS (AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF) MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, OR OTHERWISE DISPOSED EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER.”
provided that, at any time subsequent to the date which is four months and one day after the Original Issue Date, any certificate representing such Warrant Shares may be exchanged for a certificate bearing no Canadian Legend. The U.S. Legend may only be removed in compliance with Applicable Securities Legislation.
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| |
and: | Troutman Pepper LLP 400 Berwyn Park 899 Cassatt Road Berwyn, PA 19312 Attention: Deborah J. Enea Email: deborah.enea@troutman.com |
If to the Holder: | c/o Chicago Atlantic Admin, LLC 420 N Wabash Ave, Ste 500 Chicago, IL 60611 Attention: Loan Department Email: portfolio@greenivycapital.com |
with a copy to: | Kilpatrick Townsend & Stockton LLP 1100 Peachtree Street NE, Suite 2800 Atlanta, Georgia 30309 Attention: Shannon C. Baxter Email: sbaxter@kilpatricktownsend.com |
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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.
| GOODNESS GROWTH HOLDINGS, INC. |
| By: _____________________ Name: Joshua Rosen Title: Authorized Officer |
Accepted and agreed:
| |
[Insert name of Holder]
| |
By: _____________________ Name: Title: | |
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EXHIBIT A
EXERCISE FORM
Terms which are not otherwise defined herein shall have the meanings ascribed to such terms in the that certain Warrant Certificate dated as of March [___], 2023 (the “Warrant”), held by the undersigned and issued by the Company.
[If proceeding with a cash exercise for the Warrant Shares:
The undersigned irrevocably elects to exercise the accompanying Warrant to purchase [_________] [Subordinate Voting Shares] (the “Subordinate Voting Shares”) of Goodness Growth Holdings, Inc. (the “Company”) by way of a “cash exercise” as contemplated by Section 3(b)(i) of the Warrant and hereby makes payment of $__________ as payment of the Exercise Price, all in accordance with the terms of the Warrant.]
[If proceeding with a cashless exercise for the Warrant Shares, as and if permitted by Section 3(b)(i) of the Warrant:
The undersigned irrevocably elects to exercise the accompanying Warrant to purchase [_________] [Subordinate Voting Shares] (the “Subordinate Voting Shares”) of Goodness Growth Holdings, Inc. (the “Company”) by way of a “cashless exercise” (without any cash payment by the Holder for the Exercise Price) as contemplated by Section 3(b)(ii) of the Warrant, all in accordance with the terms of the Warrant.]
The undersigned represents and warrants to the Company that an exemption from the registration requirements of the Act applies to the exercise of the Warrant and the issuance of the requested Warrant Shares.
The undersigned requests that [certificate(s)] [DRS Advice(s)] for such Subordinate Voting Shares be issued and delivered as follows:
[INSERT REGISTRATION AND/OR DELIVERY INSTRUCTIONS]]
If the number of Subordinate Voting Shares acquired hereby is less than the total potential Warrant Shares covered by the Warrant, the undersigned requests that a new Warrant in like form for the unexercised portion thereof be delivered to the Holder as follows:
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[INSERT DELIVERY INSTRUCTIONS]
Dated:
_____________________________
[Insert name of Holder on line above]
By:
Name:
Title:
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EXHIBIT 10.45
FIFTH AMENDMENT TO CREDIT AGREEMENT AND
FIRST AMENDMENT TO SECURITY AGREEMENT
This FIFTH AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO SECURITY AGREEMENT (this “Amendment”) is made as of March 31, 2023 (the “Effective Date”), among GOODNESS GROWTH HOLDINGS, INC. (formerly known as Vireo Health International, Inc.), a British Columbia corporation (“Parent”), the other Borrowers (as defined in the hereinafter-defined Credit Agreement), the Lenders (as defined in the Credit Agreement) party hereto, and CHICAGO ATLANTIC ADMIN, LLC, a Delaware limited liability company, as administrative agent (in such capacity, together with its successors and assigns in such capacity, “Administrative Agent”) and as collateral agent (in such capacity, together with its successors and assigns in such capacity, “Collateral Agent”, and together with Administrative Agent, collectively, “Agents” and each, an “Agent”).
RECITALS
WHEREAS, reference is made to that certain Credit Agreement dated as of March 25, 2021, as amended by that certain Omnibus First Amendment to Credit Agreement and Security Agreement dated as of November 1, 2021 (the “First Amendment”), that certain Second Amendment to Credit Agreement dated as of November 18, 2021 (the “Second Amendment”), that certain Third Amendment to Credit Agreement dated as of January 31, 2022 (the “Third Amendment”), and that certain Fourth Amendment to Credit Agreement dated as of March 3, 2022 (the “Fourth Amendment”; the Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment, the “Existing Credit Agreement”), and this Amendment (the Existing Credit Agreement, as amended by this Amendment, and as further amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to such terms in the Credit Agreement), among the Borrowers party thereto, the other Credit Parties from time to time party thereto, the Lenders from time to time party thereto and Agents; and
WHEREAS, the Credit Parties have requested that Agents and the Lenders agree to amend certain provisions of the Credit Agreement and the Security Agreement, and, subject to the terms and conditions of this Amendment, Agents and the Lenders have agreed to such request;
NOW, THEREFORE, in consideration of the terms and mutual covenants set forth in this Amendment, the receipt and sufficiency which is hereby acknowledged by the parties, the parties, intending to be legally bound, agree as follows:
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered effective as of the Effective Date.
BORROWERS:
GOODNESS GROWTH HOLDINGS, INC.
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH, INC.
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH OF MINNESOTA, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH OF NEW YORK LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
MARYMED LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
RESURGENT BIOSCIENCES, INC.
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
Fifth Amendment to Credit Agreement and First Amendment to Security Agreement
VIREO HEALTH OF PUERTO RICO, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH DE PUERTO RICO LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
XAAS AGRO, INC.
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH OF NEVADA I, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
MJ DISTRIBUTING C201, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
MJ DISTRIBUTING P132, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH OF ARIZONA, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
Fifth Amendment to Credit Agreement and First Amendment to Security Agreement
ELEPHANT HEAD FARM, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
RETAIL MANAGEMENT ASSOCIATES, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH OF MASSACHUSETTS, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VERDANT GROVE, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
MAYFLOWER BOTANICALS, INC.
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO HEALTH OF NEW MEXICO, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
VIREO OF CHARM CITY, LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
Fifth Amendment to Credit Agreement and First Amendment to Security Agreement
EHF CULTIVATION MANAGEMENT LLC
By:_/Joshua Rosen/___________________
Name: Joshua Rosen
Title: Authorized Officer
Fifth Amendment to Credit Agreement and First Amendment to Security Agreement
ADMINISTRATIVE AGENT AND COLLATERAL AGENT:
CHICAGO ATLANTIC ADMIN, LLC
By: /John Mazarakis/
Name: John Mazarakis
Title: Authorized Person
LENDERS:
CHICAGO ATLANTIC LINCOLN, LLC
By: Chicago Atlantic Real Estate Finance, Inc., its sole member
By: /John Mazarakis/
Name: John Mazarakis
Title: Co-President
CHICAGO ATLANTIC CREDIT COMPANY, LLC
By: /John Mazarakis/
Name: John Mazarakis
Title: Authorized Person
Fifth Amendment to Credit Agreement and First Amendment to Security Agreement
Page
CREDIT AGREEMENT
among
VIREO HEALTH INTERNATIONAL, INC.GOODNESS GROWTH HOLDINGS, INC. (f/k/a Vireo Health International, Inc.)
and CERTAIN OF its subsidiaries party hereto,
as Borrowers,
the Persons from time to time party hereto as Guarantors,
the Lenders from time to time party hereto
and
CHICAGO ATLANTIC ADMIN, LLC,
as Administrative Agent and Collateral Agent
Dated as of March 25, 2021
Green Ivy Capital, LLC,
as Lead Arranger
As amended by that certain Omnibus First Amendment to Credit Agreement and Security Agreement dated November 1, 2021, that certain Second Amendment to Credit Agreement dated as of November 18, 2021, that certain Third Amendment to Credit Agreement dated as of January 31, 2022, and that certain Fourth Amendment to Credit Agreement dated as of March 3, 2022, and that certain Fifth Amendment to Credit Agreement dated as of March 31, 2023.
SCHEDULES
Schedule 1.01Commitments
Schedule 2.01(c)Delayed Draw Term Loans Draw Schedule
Schedule 7.04Litigation, Labor Controversies, Etc.
Schedule 7.11Benefit Plans
Schedule 7.12Subsidiaries
Schedule 7.13Intellectual Property, Licenses, Etc.
Schedule 7.14Environmental Warranties
Schedule 7.15Ownership of Properties
Schedule 7.18Locations of Offices, Records and Collateral
Schedule 7.19Regulatory Licenses
Schedule 7.21Contractual or other Restrictions
Schedule 7.22Collective Bargaining Agreements
Schedule 7.24Evidence of other Indebtedness
Schedule 7.25Deposit Accounts and Securities Accounts
Schedule 7.27Material Contracts and Regulatory Matters
Schedule 7.29Sales Tracking Software
Schedule 9.02Permitted Liens
Schedule 9.05Investments
Schedule 9.10Transactions with Affiliates
Schedule 12.02General (Addresses for Notices)
EXHIBITS
Exhibit AForm of Assignment and Acceptance
Exhibit BForm of Compliance Certificate
Exhibit CForm of Credit Agreement Joinder
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 25, 2021, is among GOODNESS GROWTH HOLDINGS, INC. (f/k/a Vireo Health International, Inc.), a corporation existing under the laws of the Province of British Columbia (“Parent”), VIREO HEALTH, INC., a Delaware corporation (“Vireo Health”), VIREO HEALTH OF MINNESOTA, LLC, a Minnesota limited liability company (“Vireo Minnesota”), VIREO HEALTH OF NEW YORK LLC, a New York limited liability company (“Vireo NY”), MARYMED LLC, a Maryland limited liability company (“MaryMed”), RESURGENT BIOSCIENCES, INC., a Delaware corporation (“Resurgent”), VIREO HEALTH OF PUERTO RICO, LLC, a Delaware limited liability company (“Vireo PR”), VIREO HEALTH DE PUERTO RICO LLC, a Puerto Rico limited liability company (“Vireo de Puerto Rico”), XAAS AGRO, INC., a Puerto Rico limited liability company (“Xaas”), VIREO HEALTH OF NEVADA I, LLC, a Nevada limited liability company (“Vireo Nevada”), MJ DISTRIBUTING C201, LLC, a Nevada limited liability company (“MJ C201”), MJ DISTRIBUTING P132, LLC, a Nevada limited liability company (“MJ P132”), VIREO HEALTH OF ARIZONA, LLC, a Delaware limited liability company (“Vireo Arizona”), ELEPHANT HEAD FARM, LLC, an Arizona limited liability company (“Elephant Head”), RETAIL MANAGEMENT ASSOCIATES, LLC, an Arizona limited liability company (“Retail Management”), Vireo Health of Massachusetts, LLC, a Delaware limited liability company (“Vireo Massachusetts”), Verdant Grove, LLC, a Delaware limited liability company (“Verdant Grove”), Mayflower Botanicals, Inc., a Massachusetts corporation (“Mayflower”), Vireo Health of New Mexico, LLC, a Delaware limited liability company (“Vireo NM;” together with Parent, Vireo Health, Vireo Minnesota, Vireo NY, MaryMed, Resurgent, Vireo PR, Vireo de Puerto Rico, Xaas, Vireo Nevada, MJ C201, MJ P132, Vireo Arizona. Elephant Head, Retail Management, Vireo Massachusetts, Verdant Grove, Mayflower, Vireo NM and each other Subsidiary of Parent that becomes a borrower hereunder pursuant to Section 8.08, each, a “Borrower” and collectively, jointly and severally, “Borrowers”), any Subsidiaries of Parent hereto that are Guarantors or become Guarantors hereunder pursuant to Section 8.08, the lenders from time to time party hereto (each, a “Lender” and, collectively, the “Lenders”), Chicago Atlantic Admin, LLC, a Delaware limited liability company (“Chicago Atlantic”), as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, “Administrative Agent”) and Chicago Atlantic, as collateral agent for the Secured Parties (in such capacity, together with its successors and assigns in such capacity, “Collateral Agent”, and together with Administrative Agent, each, an “Agent” and collectively, “Agents”).
RECITALS
WHEREAS, Borrowers have requested that the Lenders extend to Borrowers certain Loans and Commitments to make Loans in the aggregate principal amount of up to $46,000,000 commencing on the Closing Date; and
WHEREAS, the Lenders have agreed to provide the Loans and the Commitments to make Loans, in each case subject to the terms and conditions contained in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:
“Acquisition” shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person (other than a Person that is a Subsidiary immediately prior to such Acquisition), or of any line of business or division of a Person (other than a Person that is a Subsidiary immediately prior to such Acquisition), (b) the acquisition of in excess of 50.00% of the capital stock, partnership interests, membership interests or equity of any Person (other than a Person that is a Subsidiary), or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary), provided that a Credit Party is the surviving entity.
“Administrative Agent” shall have the meaning set forth in the Preamble.
“Administrative Questionnaire” shall mean a questionnaire completed by each Lender, in a form approved by Administrative Agent, in which such Lender, among other things, (a) designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Credit Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with such Lender’s compliance procedures and Applicable Laws, including federal and state securities laws and (b) designates an address, facsimile number, electronic mail address or telephone number for notices and communications with such Lender.
“Affiliate” shall mean, with respect to any Person, (a) any Person which, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above. For purposes of this definition only, control of a Person shall mean the power, direct or indirect, to (x) vote 30.00% or more of the Capital Stock or other form of ownership interest having ordinary voting power for the election of directors (or the comparable equivalent) of such Person or (y) direct or cause the direction of the management and policies of such Person, in each case whether through the ownership of any Capital Stock, by contract or otherwise. No Agent or Lender shall be an Affiliate of any Consolidated Company for purposes of this Agreement or any other Credit Document.
“Agents” shall have the meaning set forth in the Preamble.
“Agreement” shall mean this Credit Agreement, as it may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Aggregate Commitment” shall mean $85,200,000, as such amount may be increased pursuant to Section 2.01(f)65,200,000.
“ALTA” shall mean the American Land Title Association.
“Amortization Amount” shall mean an amount equal to 1.50% of the aggregate principal amount of all Loans made by the Lenders (but excluding, for the avoidance of doubt, all PIK Interest that is paid in kind and deemed to be a part of the principal amount of the Loans pursuant to Section 2.04(b)).
“Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to any Credit Party or any of its Subsidiaries from time to time concerning or relating to bribery or corruption, including the United States Foreign Corrupt Practices Act of 1977, the Corruption of Foreign Public Officials Act (Canada) and other similar anti-corruption legislation in other jurisdictions.
“Anti-Terrorism Laws” shall have the meaning set forth in Section 7.28.
“Applicable Laws” shall mean, subject to the carve-outs and acknowledgments contained in Section 13.01, as to any Person, any law (including common law), statute, regulation, ordinance, rule, order, policy, decree, judgment, consent decree, writ, injunction, settlement agreement or governmental requirement enacted, promulgated or imposed or entered into or agreed by any Governmental Authority or determination of an arbitrator, in each case applicable to or binding on such Person or any of its property, products, business, assets or operations or to which such Person or any of its property, products, business, assets or operations is subject.
“Applicable Securities Legislation” shall mean all applicable securities laws of each of the Reporting Jurisdictions and the respective rules and regulations under such laws together with applicable published fee schedules, prescribed forms, policy statements, national or multilateral instruments, orders, blanket rulings and other applicable regulatory instruments of the securities regulatory authorities in any of the Reporting Jurisdictions.
“Application Event” shall have the meaning set forth in Section 4.02(d).
“Applicable Fiscal Period” shall mean the period of three consecutive fiscal months ending at the end of each prescribed fiscal month.
“Approved Fund” shall mean any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in commercial loans and similar extensions of credit in the ordinary course and that is administered, advised or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages a Lender.
“Arranger” shall mean Green Ivy Capital, LLC, a Delaware limited liability company, in its capacity as lead arranger hereunder.
“Arizona Natural” shall mean Arizona Natural Remedies, Inc., an Arizona non-profit corporation.
“Assignment and Acceptance” shall mean an assignment and acceptance substantially in the form of Exhibit A.
“Attributable Indebtedness” shall mean, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear as a liability on a balance sheet of such Person prepared as of such date in accordance with GAAP.
“Authorized Officer” shall mean, with respect to any Credit Party, the president, the chief financial officer, the chief operating officer, the secretary, the treasurer or any other senior officer of such Credit Party, but, in any event, with respect to financial matters, the chief financial officer of such Credit Party or such other senior officer of such Credit Party designated as such by the applicable Credit Party in writing.
“Beneficial Ownership Certification” shall mean a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.
“Benefited Lender” shall have the meaning set forth in Section 12.08(a).
“BIA” shall mean the Bankruptcy and Insolvency Act (Canada), as amended from time to time.
“Board” shall mean the Board of Governors of the Federal Reserve System of the United States (or any successor).
“Board of Directors” shall mean the board of directors, board of managers or other equivalent governing body of a Person.
“Borrower” and “Borrowers” shall have the meanings set forth in the Preamble.
“Borrower Representative” shall mean Parent.
“Budget” shall have the meaning set forth in Section 8.01(g).
“Business” shall mean: the business of cultivating, producing, processing, packaging and marketing cannabis products for distribution and sale; all ancillary activities related to the foregoing including conducting or facilitating research regarding the properties or efficacy of cannabis products, data collection or analysis related to the foregoing; and similar activities.
“Business Day” shall mean any day excluding Saturday, Sunday and any day that shall be in Chicago, Illinois a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close.
“Canadian Credit Party” shall mean any Credit Party organized and existing under the federal laws of Canada or any province or territory thereof.
“Canadian Pension Plans” shall mean, with respect to any Canadian Credit Party, all plans or arrangements that are pension plans required to be registered under Canadian federal or provincial law and that are administered or contributed to by such Credit Party for any of its employees or former employees located in Canada or any province or territory thereof, but does not include the Canada Pension Plan or the Quebec Pension Plan as maintained by the Government of Canada or the Province of Quebec, respectively.
“Canadian Security Agreement” shall mean that certain General Security Agreement dated as of the Closing Date, by and among each Canadian Credit Party and Collateral Agent for the benefit of the Secured Parties.
“Capital Expenditures” shall mean, for any specified period, the sum of, without duplication, all expenditures made, directly or indirectly, by the Consolidated Companies during such period, determined on a consolidated basis in accordance with GAAP, that are or should be reflected as additions to property, plant or equipment or similar items reflected in the consolidated statement of cash flows and balance sheet of the Consolidated Companies, or have a useful life of more than one year.
“Capital Stock” shall mean any and all shares, interests, participations, units or other equivalents (however designated) of capital stock of a corporation, membership interests in a limited liability
company, partnership interests of a limited partnership, any and all equivalent ownership interests in a Person and any and all warrants, rights or options to purchase any of the foregoing.
“Capitalized Lease Obligations” shall mean, as applied to any Person, all obligations under Capitalized Leases of such Person or any of its Subsidiaries, in each case taken at the amount thereof accounted for as liabilities on the balance sheet (excluding the footnotes thereto) of such Person in accordance with GAAP.
“Capitalized Leases” shall mean, as applied to any Person, all leases of property that have been or should be, in accordance with GAAP, recorded as capitalized leases on the balance sheet of such Person or any of its Subsidiaries, on a consolidated basis; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability on the balance sheet (excluding the footnotes thereto) of such Person in accordance with GAAP.
“Cash Equivalents” shall mean:
(a)any direct obligation of (or unconditional guarantee by) the United States or, with respect to Parent, Canada (or any agency or political subdivision thereof, to the extent such obligations are supported by the full faith and credit of the United States or Canada, as the case may be) maturing not more than one year after the date of acquisition thereof;
(b)commercial paper maturing not more than one year from the date of issue and issued by (i) a corporation (other than an Affiliate of any Credit Party) organized under the laws of any state of the United States, the District of Columbia or, with respect to Parent, any province of Canada and, at the time of acquisition thereof, rated A-1 or higher by S&P or P-1 or higher by Moody’s, or carrying an equivalent rating by a nationally recognized rating agency if at any time neither S&P or Moody’s shall be rating such obligations, or (ii) any Lender (or its holding company);
(c)any certificate of deposit, time deposit or bankers’ acceptance, maturing not more than one year after its date of issuance, which is issued by either: (i) a bank organized under the laws of the United States or, with respect to Parent, Canada (or any state or province thereof) which has, at the time of acquisition thereof, (A) a credit rating of A-2 or higher from Moody’s or A or higher from S&P and (B) a combined capital and surplus greater than $500,000,000, or (ii) a Lender;
(d)cash and demand deposits maintained with the domestic office of any commercial bank organized under the laws of the United States;
(e)any repurchase agreement having a term of 30 days or less entered into with any Lender or any commercial banking institution satisfying, at the time of acquisition thereof, the criteria set forth in clause (c)(i) which (i) is secured by a fully perfected security interest in any obligation of the type described in clause (a), and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100.00% of the repurchase obligation of such commercial banking institution thereunder; and
(f)mutual funds investing primarily in assets described in clauses (a) through (d) of this definition.
“Cash Interest Rate” shall mean a per annum rate equal to the greater of (a) the Prime Rate plus 10.375% and (b) 13.625%.
“Casualty Event” shall mean the damage, destruction or condemnation, as the case may be, of property of any Person or any of its Subsidiaries.
“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980.
“Charm City Acquisition” shall mean the Acquisition by Vireo Charm City of substantially all of the assets of Charm City Seller pursuant to the Charm City Acquisition Agreement.
“Charm City Acquisition Agreement” shall mean that certain Asset Purchase Agreement, dated as of July 8, 2021, by and among Vireo Charm City, Charm City Seller, Arcarius, LLC, a Maryland limited liability company, and Bryan Hill (solely with respect to the obligations set forth in Section 9.10 thereof).
“Charm City Intercreditor Agreement” shall mean that certain Intercreditor and Collateral Sharing Agreement dated as of November 19, 2021, between Collateral Agent and Charm City Seller and acknowledged and agreed to by Parent and Vireo Charm City.
“Charm City Note” shall mean that certain Secured Promissory Note in the principal amount of $2,000,000 dated November 19, 2021, issued by Vireo Charm City to Charm City Seller in connection with the Charm City Acquisition.
“Charm City Pledge Agreement” shall mean that certain Pledge Agreement dated as of November 19, 2021, by and between Vireo Health, Vireo Charm City and Charm City Seller.
“Charm City Seller” shall mean Charm City Medicus, LLC, a Maryland limited liability company.
“Change in Cannabis Law” shall mean any change in Applicable Law, including U.S. Federal Cannabis Law and U.S. State Cannabis Law, (a) that would make it unlawful for any Agent or Lender to (i) perform any of its obligations hereunder or under any other Credit Document, or (ii) to fund or maintain the Loans, (b) pursuant to which any Governmental Authority has enjoined any Agent or Lender from (i) performing any of its obligations hereunder or under any other Credit Document, or (ii) funding or maintaining the Loans, or (c) that would result in any business activity conducted by any Credit Party being a Restricted Cannabis Activity, and such result described in this clause (c) would have a Material Adverse Effect.
“Change in Law” shall mean (a) the adoption of any law, rule, regulation or treaty after the date of this Agreement, (b) any change in any law, rule, regulation or treaty or in the interpretation, implementation or application thereof by any Governmental Authority after the date of this Agreement or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority after the date of this Agreement; provided that notwithstanding anything herein to the contrary, (x) the Dodd Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives issued thereunder or in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the day enacted, adopted, issued or implemented.
“Change of Control” shall mean an event or series of events by which (a) on or after March 31, 2023, there is a report filed with any securities commission or securities regulatory authority in Canada, disclosing that any offeror (as such term is defined in section 1.1 of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids) has acquired beneficial ownership (within the meaning of the Securities Act) of, or the power to exercise control or direction over, or securities convertible into, any Voting Stock of Parent, that together with the offeror’s securities (as such term is defined in section 1.1 of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids) in relation to any Voting Stock of Parent, would
constitute Voting Stock representing more than 30.00% of the total voting power attached to all Voting Stock of Parent then outstanding; (b) there is consummated any amalgamation, consolidation, statutory arrangement (involving a business combination) or merger of Parent (i) in which Parent is not the continuing or surviving corporation or (ii) pursuant to which any Voting Stock would be reclassified, changed or converted into or exchanged for cash, securities or other property, other than (in each case) an amalgamation, consolidation, statutory arrangement or merger of Parent in which the holders of the Voting Stock immediately prior to the amalgamation, consolidation, statutory arrangement or merger have, directly or indirectly, more than 50.10% of the Voting Stock of the continuing or surviving corporation immediately after such transaction; (c) there occurs any other change of Control of Parent as it exists as at the date of this Agreement; (d) during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of Parent cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; (e) except as permitted by Section 9.03 or 9.04, Parent shall cease to own and control, beneficially and of record, 100.00% of the Capital Stock of each other Borrower; and (f) except as permitted by Section 9.03, 9.04 or 9.13, any Borrower shall cease to own and control, directly or indirectly, free and clear of all Liens or other encumbrances (other than Liens created pursuant to any Credit Document), (i) at least the percentage of the Capital Stock of each of its Subsidiaries held by such Borrower on the Closing Date and (ii) 100.00% of the Capital Stock of each of its Subsidiaries formed or acquired after the Closing Date; provided, however, that the acquisition of the Voting Stock of Parent by another Person that has been disclosed to Administrative Agent as of the Third Amendment Effective Date pursuant to the agreement referenced in the proviso of Section 7.29 shall not be a Change of Control.
“Chicago Atlantic” shall have the meaning set forth in the Preamble.
“Claims” shall have the meaning set forth in the definition of Environmental Claims.
“Closing Date” shall mean March 25, 2021.
“Code” shall mean the Internal Revenue Code of 1986, and the Treasury Regulations promulgated and rulings issued thereunder.
“Collateral” shall mean any assets of any Credit Party or other assets upon which Collateral Agent has been, or has purportedly been, granted a Lien in connection with this Agreement or any other Credit Document.
“Collateral Access Agreements” shall mean a collateral access agreement in form and substance reasonably satisfactory to Collateral Agent between Collateral Agent and any lessor, warehouseman, processor, bailee, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in, any Credit Party’s books and records or assets.
“Collateral Agent” shall have the meaning set forth in the Preamble.
“Collateral Assignee” shall have the meaning set forth in Section 12.06(d).
“Collections” shall mean all cash, checks, credit card slips or receipts, notes, instruments, and other items of payment (including insurance proceeds, proceeds of cash sales, rental proceeds, and tax refunds) of the Credit Parties.
“Commitment” shall mean the obligation of the Lenders to make the Loans hereunder, in each case in the Dollar amounts set forth beside such Lender’s name under the applicable heading on Schedule 1.01 or in the Assignment and Acceptance pursuant to which such Lender became a Lender under this Agreement, as such amounts may be changed from time to time pursuant to the terms of this Agreement. On the Closing Date, the total of the Commitments for all Lenders shall be $26,000,000 as set forth on Schedule 1.01., as to each Lender, the Existing Loans Commitment of such Lender.
“Communications” shall mean, collectively, any notice, demand, communication, information, document or other material that any Credit Party provides to Administrative Agent pursuant to any Credit Document or the transactions contemplated therein which is distributed to Administrative Agent or any Lender by means of electronic communications pursuant to Section 12.23, including through the Platform.
“Compliance Certificate” shall mean a certificate duly completed and executed by an Authorized Officer of Parent substantially in the form of Exhibit B, together with such changes thereto or departures therefrom as Administrative Agent may from time to time reasonably request or approve for the purpose of monitoring the Credit Parties’ compliance with the financial covenants contained herein or certain other calculations, or as otherwise agreed to by Administrative Agent.
“Confidential Information” shall have the meaning set forth in Section 12.16.
“Connection Income Taxes” shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes.
“Consolidated Adjusted EBITDA” shall mean, for a specified period, (a) the net income or loss of the Consolidated Companies, plus (b) to the extent deducted in determining net Income for such period, the sum of, without duplication, (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization expense, (iv) charges, costs, losses and expenses related to asset dispositions permitted under this Agreement or discontinued operations, (v) non-cash write-downs of assets, (vi) (A) fees, costs and expenses paid in cash in connection with the closing of the LoanCredit Documents, (B) pre-opening costs and expenses in connection with the opening of any retail, cultivation or processing location and (C) other extraordinary or non-recurring charges, costs and expenses, (vii) Judgments and costs and expenses incurred in connection with such Judgments and (vii) non-cash compensation expense in respect of stock option plans or other equity compensation plans, minus (c) to the extent included in determining net income for such period, the sum of, without duplication, (i) any income or gains from asset dispositions or discontinued operations, (ii) any extraordinary or non-recurring gains and (iii) non-cash write-ups of assets, in the case of each of the foregoing in clauses (a) through (c), for such period and as determined in accordance with GAAP consistently applied; provided that the aggregate amount of add-backs permitted pursuant to clause (a)(vi) shall not exceed $20,000,000 for any consecutive 12-month period.
“Consolidated Companies” shall mean Parent and its Subsidiaries on a consolidated basis in accordance with GAAP.
“Consolidated Fixed Charge Coverage Ratio” shall mean, with respect to the Consolidated Companies as of each applicable date of determination: (a) Consolidated Adjusted EBITDA for the Applicable Fiscal Period, plus the aggregate amount of GAAP rent expense of the Consolidated Companies
owed to third parties for the Applicable Fiscal Period, less the sum of (i) all Unfinanced Capital Expenditures made in the Applicable Fiscal Period (excluding Capital Expenditures funded from Borrowers’ internally-generated cash flow in an aggregate amount of up to $12,500,000 during the term of this Agreement), plus (ii) all cash Taxes due and payable by the Consolidated Companies in the Applicable Fiscal Period (without benefit of any refund), plus (iii) all cash distributions paid, and other distributions made, by the Consolidated Companies during the Applicable Fiscal Period, divided by (b) the sum of (i) the aggregate principal amount of the Indebtedness of the Consolidated Companies (including the principal or amortization component of any Attributable Indebtedness but excluding the Loans or the Indebtedness outstanding under the Charm City Note) that was paid or scheduled to be paid during the Applicable Fiscal Period plus (ii) the aggregate of amount of the interest payments (including the interest component of any payments in respect to Capitalized Lease Obligations) of the Consolidated Companies due and payable during the Applicable Fiscal Period, plus (iii) the aggregate amount of GAAP rent expense of the Consolidated Companies owed to third parties during the Applicable Fiscal Period, in the case of each of the foregoing in clauses (a) and (b), as determined in accordance with GAAP consistently applied.
“Contingent Liability” shall mean, for any Person, any agreement, undertaking or arrangement by which such Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the Capital Stock of any other Person. The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount of the debt, obligation or other liability guaranteed thereby.
“Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound other than the Obligations.
“Control” shall mean, as to any Person, (a) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to: (i) cast, or control the casting of, more than 50.00% of the maximum number of votes that might be cast at a general meeting of such Person; (ii) appoint or remove all, or the majority, of the directors or other equivalent officers of such Person; (iii) give directions with which the directors or other equivalent officers of such Person are obliged to comply; or (iv) to direct or cause the direction of the management or policies of a Person; and/or (b) the holding beneficially of more than 50.00% of the issued Capital Stock of such Person.
“Control Agreement” shall mean a pledge, collateral assignment, control agreement or bank consent letter, in form and substance reasonably satisfactory to Collateral Agent, executed and delivered by the applicable Credit Party, Collateral Agent, and the applicable securities intermediary or bank, which agreement is sufficient to give Collateral Agent “control” over each of such Credit Party’s securities accounts, deposit accounts or investment property, as the case may be.
“Copyright Security Agreements” shall mean any and all copyright security agreements entered into by the Credit Parties in favor of Collateral Agent (as required by the Agreement or any other Credit Document).
“Credit Agreement Joinder” shall mean a joinder substantially in the form of Exhibit C.
“Credit Documents” shall mean (a) this Agreement, the Security Documents, any Notes, the Charm City Intercreditor Agreement, any other subordination or intercreditor agreements in favor of any Agent with respect to this Agreement and (b) any other document or agreement executed by any Credit Party or Verano Guarantor, or by any Borrower on behalf of the Credit Parties or the Verano Guarantors, or any of them, and delivered to any Agent or Lender in connection with any of the foregoing or the Obligations.
“Credit Parties” shall mean, collectively, Borrowers and Guarantors (other than the Verano Guarantors), and “Credit Party” shall mean any of the Credit Parties, individually.
“CSE” shall mean the Canadian Securities Exchange and its successors.
“Default” shall mean any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
“Default Rate” shall mean a rate per annum equal to the sum of (a) (i) with respect to the Dispensary Loans, the Dispensary Loan Cash Interest Rate, or (ii) with respect to the other Loans, the Cash Interest Rate plus (b) 8.00%, plus (c) (i) with respect to the Dispensary Loans, the Dispensary Loan PIK Interest Rate, or (ii) with respect to the other Loans, the PIK Interest Rate.
“Delayed Draw Term Loan Maturity Date” shall mean April 30, 2023 (the “Delayed Draw Term Loan Initial Maturity Date”); provided, however, that, at Borrowers’ election, the Delayed Draw Term Loan Initial Maturity Date may be extended to April 30, 2024, so long as (a) Borrowers deliver written notice to Administrative Agent of their intent to extend the Delayed Draw Term Loan Maturity Date at least 30 days prior to the Delayed Draw Term Loan Initial Maturity Date, (b) no Default or Event of Default exists and (c) Borrowers pay to Administrative Agent, for the account of Agents and the Lenders, on the Delayed Draw Term Loan Initial Maturity Date, all fees, costs and expenses due to such Persons as of the Delayed Draw Term Loan Initial Maturity Date and an extension fee equal to $1,375,000.
“Delayed Draw Term Loan Initial Maturity Date” shall have the meaning set forth in the definition of Delayed Draw Term Loan Maturity Date.
“Delayed Draw Term Loans” shall mean the aggregate amount of $55,000,00035,000,000 provided by Lenders on or after the Third Amendment Initial Funding Date as provided in Sections 2.01(c), and 2.01(d) and 2.01(e).
“Delayed Draw Term Loan Make-Whole Amount” shall mean, with respect to any prepayment of the Delayed Draw Term Loans, or repayment in connection with an acceleration of such Loans, during the period commencing on the Third Amendment Initial Funding Date and ending on (and including) the Delayed Draw Term Loan Maturity Date, an amount equal to the greater of (a) the sum of all payments of interest on such Loans that would be due during such period after the date of such prepayment or repayment, if no prepayment or repayment of such Loans was made on or prior to the Delayed Draw Term Loan Maturity Date, and (b) 3.00% of the aggregate amount of such Loans being prepaid or repaid.
“Designated Jurisdiction” shall mean any country or territory to the extent that such country or territory is the subject of any Sanction.
“Dispensary Loans” shall mean the aggregate amount of $4,200,000 provided by Lenders to Borrowers on or about November 18, 2021, on the terms described in the Second Amendment, a portion of the proceeds of were used by Borrowers to finance the Charm City Acquisition.
“Dispensary Loan Cash Interest Rate” shall mean a per annum rate equal to 15.00%.
“Dispensary Loan Make-Whole Amount” shall mean, with respect to any prepayment of the Dispensary Loans, or repayment in connection with an acceleration of such Loans, prior to the Dispensary Loan Maturity Date, (a) if such prepayment or repayment occurs on or prior to November 18, 2023, an amount equal to the greater of (i) the sum of all payments of interest on such Loans that would be due after the date of such prepayment or repayment through November 18, 2023, if no prepayment or repayment of such Loans was made prior to such date, and (ii) 3.00% of the aggregate amount of such Loans being prepaid or repaid, and (b) if such prepayment or repayment occurs after November 18, 2023, 3.00% of the aggregate amount of such Loans being prepaid or repaid; provided, however, that if the Delayed Draw Term Loan Initial Maturity Date is extended as provided in the definition of Delayed Draw Term Loan Maturity Date, the amount to be paid pursuant to this clause (b) shall be the greater of (i) the sum of all payments of interest on such Loans that would be due after the date of such prepayment or repayment through the Dispensary Loan Maturity Date, if no prepayment or repayment of such Loans was made prior to such date, and (ii) 3.00% of the aggregate amount of such Loans being prepaid or repaid.
“Dispensary Loan Maturity Date” shall mean November 29, 2024.
“Dispensary Loan PIK Interest Rate” shall mean the rate of 2.00% per annum.
“Disposition” shall mean, with respect to any Person, any sale, transfer, lease, contribution or other conveyance (including by way of merger or amalgamation) of, or the granting of options, warrants or other rights to, any of such Person’s or their respective Subsidiaries’ assets (including Capital Stock of Subsidiaries) to any other Person in a single transaction or series of transactions.
“Disqualified Capital Stock” shall mean any Capital Stock that, by its terms (or by the terms of any security or other Capital Stock into which it is convertible or for which it is exchangeable) or upon the happening of any event or condition, (a) matures or is mandatorily redeemable (other than solely for Qualified Capital Stock after the Secured Parties are paid in full), pursuant to a sinking fund obligation or otherwise, (b) is redeemable at the option of the holder thereof (other than solely for Qualified Capital Stock or in connection with a transaction that would constitute an Event of Default under Section 10.01(j) after the Secured Parties are paid in full), in whole or in part, (c) provides for the scheduled payment of dividends in cash or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Capital Stock that would constitute Disqualified Capital Stock, in each case, prior to the date that is 91 days after the Dispensary Loanlatest Tranche Maturity Date; provided that if such Capital Stock is issued by Parent pursuant to a plan for the benefit of employees of Parent or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Capital Stock solely because it may be required to be repurchased by such Person in order to satisfy applicable statutory or regulatory obligations.
“Dollars” and “$” shall mean dollars in lawful currency of the United States.
“Elephant Head” shall have the meaning set forth in the Preamble.
“Employee Retention Credit” shall mean the Federal refundable tax credit for businesses that continued to pay employees while experiencing a full or partial suspension of operations limiting commerce, travel or group meetings due to COVID-19 or had significant declines in gross receipts from March 13, 2020, to December 31, 2020, or declines in gross receipts from January 1, 2021, through September 30, 2021.
“Environmental Claims” shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than
internal reports prepared by the Credit Parties (a) in the ordinary course of such Person’s business or (b) as required in connection with a financing transaction or an acquisition or disposition of real estate) or proceedings relating to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (collectively, “Claims”), including (i) any and all Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the Release or threatened Release of Hazardous Materials or arising from alleged injury or threat of injury to health or safety (to the extent relating to the exposure to Hazardous Materials) or the environment.
“Environmental Law” shall mean any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code and rule of common law now or hereafter in effect, and any binding judicial or administrative interpretation thereof, including any binding judicial or administrative order, consent decree or judgment, relating to the protection of the environment or human health or safety (to the extent relating to exposure to Hazardous Materials). For avoidance of doubt, Environmental Law does not include U.S. State Cannabis Laws, U.S. Federal Cannabis Laws, or any Applicable Law regulating the use of Cannabis products by consumers.
“Environmental Permit” shall have the meaning set forth in Section 7.14(a)(ii).
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, and the regulations promulgated thereunder.
“Event of Default” shall have the meaning set forth in Section 10.01.
“Excluded Accounts” shall mean any deposit account that is used solely to fund payroll or employee benefits, so long as the applicable Credit Party does not deposit or maintain funds in any such account in excess of amounts necessary to fund current payroll liabilities, payroll taxes or other wage and employee benefit payments.
“Excluded Issuances” shall mean (a) the issuance of Capital Stock (other than Disqualified Capital Stock) by Parent to members of the management, employees or directors of any Credit Party and (b) the issuance of Capital Stock of Parent (other than Disqualified Capital Stock) upon the exercise of any warrants or options issued by Parent on or prior to the Closing Date.
“Excluded Subsidiary” shall mean (a) 1776 Hemp, LLC, a Delaware limited liability company and wholly-owned by Vireo Health, so long as such Person has no operations or Indebtedness and the only asset held by such Subsidiary is HEMP-G-000084, the license provided to such Person pursuant to New York’s Industrial Hemp Agricultural Research Pilot Program, (b) Ohio Medical Solutions, Inc., an Ohio limited liability company, so long as 100.00% of the Capital Stock of such Person is sold on or before June 30, 2021, (c) 844 East Tallmadge LLC, an Ohio limited liability company, so long as 100.00% of the Capital Stock of such Person is sold on or before June 30, 2021, (d) each Person that (i) would be a Subsidiary of a Consolidated Company under the definition of Subsidiary if it were not an Excluded Subsidiary and (ii) has no assets, no Indebtedness and no operations, and (e) any other Person in which Parent does not hold any ownership interest, but that may be a Consolidated Company solely for accounting purposes (in accordance with GAAP).
“Excluded Taxes” shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i)
imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the latest date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by Borrowers under Section 12.06) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 4.04, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 4.04(f), (d) any U.S. federal withholding Taxes imposed under FATCA and (e) Canadian withholding Taxes imposed on a Recipient by reason of such Recipient (i) being a “specified shareholder” (as defined in subsection 18(5) of the Income Tax Act (Canada) ) of any Borrower, or (ii) not dealing at arm’s length with a “specified shareholder” (as defined in subsection 18(5) of the Income Tax Act (Canada)) of any Borrower.
“Executive Order” shall have the meaning set forth in Section 7.28.
“Existing Loans Commitment” shall mean, as to any Lender, its obligation to make Loans to Borrowers, the outstanding aggregate principal amount relating to such obligation being set forth for such Lender on Schedule 1.01. As of the Fifth Amendment Date, the Existing Loans Commitment have been terminated.
“Extraordinary Receipts” shall mean any cash received by or paid to or for the account of any Consolidated Company not in the ordinary course of business, including: (a) proceeds of Judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action to the extent not used to pay any corresponding cause of action or to reimburse a Consolidated Company for amounts previously expended, (b) indemnification payments received by any Consolidated Company to the extent not used or anticipated to be used to pay any corresponding liability or reimburse such Consolidated Company for the payment of any such liability, (c) any purchase price adjustment (other than a working capital adjustment) received in connection with any purchase agreements, (d) tax refunds, and (e) Employee Retention Credits and (f) pension plan reversions, net of Taxes paid or payable with respect to such amounts.
“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future Treasury Regulations thereunder or official interpretations thereof, any agreements entered into pursuant to current Section 1471(b)(1) of the Code (or any amended or successor version described above), and any intergovernmental agreements (together with any Applicable Laws implementing such agreements) implementing the foregoing.
“Federal Funds Rate” meansshall mean, for any period, a fluctuating per annum interest rate (rounded upwards, if necessary, to the nearest 1/100 of one percentage point) for each day during such period equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three federal funds brokers of recognized standing selected by Administrative Agent.
“Fees” shall mean all fees payable pursuant to, or referred to in, this Agreement.
“Fifth Amendment” shall mean that certain Fifth Amendment to Credit Agreement dated as of the Fifth Amendment Date among Borrowers, the Lenders party thereto, Administrative Agent and Collateral Agent.
“Fifth Amendment Date” shall mean the date of the Fifth Amendment.
“Financial Covenant” shall have the meaning set forth in Section 10.03.
“Financial Covenant Cure Period” shall have the meaning set forth in Section 10.03.
“Financial Covenant Equity Cure” shall have the meaning set forth in Section 10.03.
“Financial Covenant Event of Default” shall mean an Event of Default under Section 10.01(c) as a result of Borrower’s failure to comply with any Financial Performance Covenant.
“Financial Performance Covenants” shall mean the covenants set forth in Section 9.14.
“Foreign Lender” shall mean a Lender that is resident or organized under the laws of a jurisdiction other than that in which a Borrower is resident for tax purposes.
“Future Loan Purchase Ratio” shall mean a ratio to be negotiated between Borrowers and Lenders, in any case not less than 97.0098.00%.
“GAAP” shall mean generally accepted accounting principles in the United States set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), including the FASB Accounting Standards Codification™, which are applicable to the circumstances as of the date of determination, subject to Section 1.03.
“Governmental Authority” shall mean the government of the United States, any foreign country or any multinational or supranational authority, or any state, commonwealth, protectorate or political subdivision thereof, and any entity, body or authority exercising executive, legislative, taxing, judicial, regulatory or administrative functions of or pertaining to government, including the Pension Benefit Guaranty Corporation and other administrative bodies or quasi-governmental entities established to perform the functions of any such agency or authority.
“Guarantee Obligations” shall mean, as to any Person, any Contingent Liability of such Person or other obligation of such Person guaranteeing or intended to guarantee any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person, whether or not contingent, (a) to purchase any such Indebtedness or any property constituting direct or indirect security therefor, (b) to advance or supply funds (i) for the purchase or payment of any such Indebtedness or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such Indebtedness of the ability of the primary obligor to make payment of such Indebtedness or (d) otherwise to assure or hold harmless the owner of such Indebtedness against loss in respect thereof; provided that the term “Guarantee Obligations” shall not include endorsements of instruments for deposit or collection in the ordinary course of business and consistent with past practice (unless a departure from past practice coincides with an industry-wide departure from past practice or results from a new technological
development or custom) or customary and reasonable indemnity obligations in effect on the Closing Date, entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than with respect to Indebtedness). The amount of any Guarantee Obligation shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such Guarantee Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith and reasonable business judgment.
“Guarantor Obligations” shall have the meaning set forth in Section 6.01(a).
“Guarantors” shall mean (a) each direct or indirect Subsidiary of Parent (other than any Borrower or any Excluded Subsidiary) and (b) any other Person that provides a guarantee for the payment and performance of the Obligations pursuant to an agreement reasonably acceptable to Administrative Agent after the Closing Date.
“Hazardous Materials” shall mean (a) any petroleum or petroleum products, radioactive materials, friable asbestos, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing regulated levels of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of “waste”, “recycled materials”, “sludge”, “hazardous substances”, “hazardous waste”, “hazardous materials”, “extremely hazardous waste”, “restricted hazardous waste”, “toxic substances”, “toxic pollutants”, “contaminants”, or “pollutants”, or words of similar import, under any applicable Environmental Law; and (c) any other chemical, waste, recycled material, material or substance, which is prohibited, limited or regulated by any Environmental Law.
“Hedging Agreement” shall mean (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.
“Hostile Acquisition” shall mean the acquisition of the capital stock or other Capital Stock of a Person through a tender offer or similar solicitation of the owners of such capital stock or other Capital Stock which has not been approved (prior to such acquisition) by resolutions of the board of directors of such Person or by similar action if such Person is not a corporation, and, if such acquisition has been so approved, as to which such approval has not been withdrawn.
“Indebtedness” shall mean, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a)all indebtedness of such Person for borrowed money and all indebtedness of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b)the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;
(c)all obligations of such Person to pay the deferred purchase price of property or services, but excluding trade accounts payable in the ordinary course of business (which are not overdue for a period of more than 90 days past the applicable due date thereof);
(d)indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(e)all Attributable Indebtedness;
(f)all obligations of such Person with respect to the redemption, repayment or other repurchase or payment in respect of any Disqualified Capital Stock;
(g)all obligations of such Person with respect to Hedging Agreements (valued as the termination value thereof computed in accordance with a method approved by the International Swap Dealers Association and agreed to by such Person in the applicable Hedging Agreement, if any); and
(h)all Guarantee Obligations of such Person in respect of any of the foregoing;
provided that Indebtedness shall not include (w) prepaid or deferred revenue arising in the ordinary course of business on customary terms, (x) purchase price holdbacks arising in the ordinary course of business and on customary terms in respect of a portion of the purchase price of an asset to satisfy warranties or other unperformed obligations of the seller of such asset, (y) endorsements of checks or drafts arising in the ordinary course of business and consistent with past practice (unless a departure from past practice coincides with an industry-wide departure from past practice or results from a new technological development or custom), and (z) preferred Capital Stock to the extent not constituting Disqualified Capital Stock.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or another entity not disregarded for tax purposes) in which such Person is a general partner or a joint venture (whether partner or member), except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. The amount of Indebtedness of any Person for purposes of clause (e) above shall be deemed to be equal to the lesser of (x) the aggregate unpaid amount of such Indebtedness and (y) the fair market value of the property encumbered thereby as determined by such Person in good faith and reasonable business judgment.
“Indemnified Liabilities” shall have the meaning set forth in Section 12.05.
“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Credit Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Information Certificate” shall mean that certain Information Certificate dated as of the Closing Date and executed by Borrowers in favor of Collateral Agent and Lenders.
“Insolvency Event” shall mean, with respect to any Person, including any Lender, such Person or such Person’s direct or indirect parent company (a) makes a proposal under the BIA or becomes the subject of a bankruptcy, insolvency or examinership proceeding (including any proceeding under any Insolvency Legislation), or regulatory restrictions, (b) has had a receiver, examiner, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it or has called a meeting of its creditors, (c) admits in writing its inability, or be generally unable, to pay its debts as they become due or cease material operations of its present business, (d) commits an act of bankruptcy or becomes insolvent (such terms having the respective meanings ascribed thereto in the BIA), (e) is adjudicated insolvent or bankrupt by a court of competent jurisdiction, (f) admits the material allegations of a petition or application filed with respect to it in any bankruptcy, reorganization or insolvency proceeding, (g) takes any corporate action for the purpose of effecting any of the foregoing, (h) with respect to a Lender, such Lender is unable to perform hereunder due to the application of Applicable Law, or (i) in the good faith determination of Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment of a type described in clauses (a) or (b), provided that an Insolvency Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person or such Person’s direct or indirect parent company by a Governmental Authority or instrumentality thereof if, and only if, such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Insolvency Legislation” shall mean legislation in any applicable jurisdiction relating to reorganization, arrangement, compromise or re adjustment of debt, dissolution or winding up, or any similar legislation, and specifically includes the BIA, the Companies’ Creditors Arrangement Act (Canada), the Winding Up and Restructuring Act (Canada), the U.S. Bankruptcy Code and any similar legislation under Applicable Law.
“Intercompany Indebtedness” shall have the meaning set forth in Section 12.22.
“Investment” shall mean, relative to any Person: (a) any loan, advance or extension of credit made by such Person to any other Person, including the purchase by such first Person of any bonds, notes, debentures or other debt securities of any such other Person; (b) the incurrence of Contingent Liabilities for the benefit of any other Person; (c) acquisition of any Capital Stock or other investment held by such Person in any other Person; and (d) any contribution made by such Person to any other Person. The amount of any Investment at any time shall be the original principal or capital amount thereof less all returns of principal or equity thereon made on or before such time and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property at the time of such Investment.
“IP Rights” shall have the meaning set forth in Section 7.13.
“Judgment” shall mean any judgment or order for the payment of money, fine, enforcement penalty, or a settlement of any lawsuit or arbitration proceeding, or other disputed claim or enforcement action.
“Lender” and “Lenders” shall have the meanings set forth in the Preamble.
“Lien” shall mean any mortgage, pledge, security interest, hypothecation, charge, claim, assignment for collateral purposes, lien (statutory or other) or similar encumbrance, and any easement, right-of-way,
license, restriction (including zoning restrictions), defect, exception or irregularity in title or similar charge or encumbrance (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof); provided that in no event shall an operating lease entered into in the ordinary course of business and on customary terms or any precautionary UCC filings or PPSA registrations made pursuant thereto by an applicable lessor or lessee, be deemed to be a Lien.
“Liquidity” shall mean the sum, for the Credit Parties, of unrestricted cash and Cash Equivalents, in each case, which is held in a deposit account set forth on Schedule 7.25 and subject to a Control Agreement, other than those deposit accounts which are Excluded Accounts.
“Loans” shall mean, collectively, the amounts advanced by Lenders to Borrowers pursuant to Section 2.01, including the Dispensary Loans and the Delayed Draw Term Loans, plus the aggregate amount of interest at the PIK Interest Rate and the Dispensary Loan PIK Interest Rate added to such amounts pursuant to Section 2.04(b).
“Make-Whole Amount” shall mean, with respect to any voluntary prepayment of the Loans (other than the Dispensary Loans or the Delayed Draw Term Loans, and mandatory prepayment of the Loans pursuant to Section 4.02(a)(i), 4.02(a)(ii), 4.02(a)(iii) or 4.02(a)(vi), or repayment in connection with an acceleration of such Loans prior to the Tranche Maturity Date, (a) applicable to such Loans, if such prepayment or repayment occurs on or prior to the Delayed Draw Term Loan Initialsuch Tranche Maturity Date, an amount equal to the greater of (ia) the sum of all payments of interest on such Loans that would be due during such period after the date of such prepayment or repayment, if no prepayment or repayment of such Loans was made on or prior to the Delayed Draw Term Loan Initialsuch Tranche Maturity Date, and (ii) 3.00% of the aggregate amount of such Loans being prepaid or repaid and (b) if such prepayment or repayment occurs after the Delayed Draw Term Loan Initial Maturity Date,b) 3.00% of the aggregate amount of such Loans being prepaid or repaid; provided, however, that if the Delayed Draw Term Loan Initial Maturity Date is extended as provided in the definition of Delayed Draw Term Loan Maturity Date, the amount to be paid pursuant to this clause (b) shall be the greater of (i) such Tranche Maturity Date has been extended pursuant to Section 3.02 and such prepayment or repayment occurs after such Tranche Maturity Date as in effect on the Fifth Amendment Date, the Make-Whole Amount for such Loans will be the sum of all payments of interest on such Loans that would be due during such period after the date of such prepayment or repayment through the Maturity Date, if no prepayment or repayment of such Loans was made on or prior to such date, and (ii) 3.00% of the aggregate amount of such Loans being prepaid or repaidextended Tranche Maturity Date.
“Maryland Real Property” shall mean the Real Property of MaryMed located at 12418 Massey Road, Massey, Maryland 21650.
“MaryMed” shall have the meaning set forth in the Preamble.
“Massachusetts Real Property” shall mean the Real Property of Vireo Massachusetts located at 487 Mashapaug Road, Holland, MA, 01521.
“Material Adverse Effect” shall mean a material adverse effect on (a) the business, assets, liabilities (actual or contingent), operations, condition (financial or otherwise), results of operations or performance of Parent and its Subsidiaries taken as a whole, (b) the validity or enforceability of this Agreement, any other Credit Document or any Warrant Agreement, (c) the ability of any Credit Party to perform its obligations under any Credit Document or any Warrant Agreement to which it is a party, (d) the rights or remedies of the Secured Parties or the Lenders hereunder or thereunder, or (e) the priority of any Liens
granted to Collateral Agent in or to any Collateral (other than as a result of voluntary and intentional discharge of the Lien by Collateral Agent).
“Material Contracts” shall mean (a) any agreement evidencing, securing or pertaining to any Indebtedness, or any guaranty thereof, in a principal amount exceeding $500,000, (b) any real property lease where annual rent exceeds $250,000, (c) any operating lease where annual rentals exceed $250,000, (d) any agreement (other than the agreements set forth in the foregoing clauses (a) through (c)) which involves aggregate consideration payable to or by any Person of $500,000 or more on an annual basis, (e) any other agreement the termination of which (without contemporaneous replacement of substantially equivalent value) could reasonably be expected to have a Material Adverse Effect and (f) each Material Regulatory License.
“Material Credit Party” shall mean at any point of determination any Credit Party and its direct and indirect Subsidiaries, which account for, individually or in the aggregate, more than 10.00% of the annual aggregate revenue of the Consolidated Companies as measured on a trailing 12-month basis.
“Material Regulatory License” shall mean any Regulatory License designated on Schedule 7.19 by Borrowers as material, as such Schedule may be supplemented or updated in accordance with Section 8.01(i)(viii).
“Maturity Date” shall mean March 31April 30, 2024, as extended pursuant to Section 3.02.
“Mayflower” shall have the meaning set forth in the Preamble.
“MJ C201” shall have the meaning set forth in the Preamble.
“MJ P132” shall have the meaning set forth in the Preamble.
“Minnesota Disposition” shall have the meaning set forth in Section 8.18. [Redacted – competitively sensitive]
“Moody’s” shall mean Moody’s Investors Service, Inc. or any successor by merger or consolidation to its business.
“Mortgage” shall mean each mortgage, deed of trust, or deed to secure debt, trust deed or other security document granted by any applicable Credit Party or Verano Guarantor to Collateral Agent for the benefit of the Secured Parties in respect of any Real Property owned or leased by such Credit Party or Verano Guarantor, in such form as agreed between such Credit Party or Verano Guarantor and Collateral Agent.
“Net Cash Proceeds” shall mean, as applicable, (a) with respect to any Disposition by a Person, cash and cash equivalent proceeds received by or for such Person’s account, net of (i) fees, costs and expenses paid to third parties (other than Affiliates) and relating to such Disposition, (ii) the amount of any Indebtedness secured by any Permitted Lien on any asset (other than Indebtedness assumed by the purchaser of such asset) that is required to be, and is, repaid in connection with such Disposition, (iii) net income taxes to be paid in connection with such Disposition and (iv) sale, use or other transactional taxes paid or payable by such Person as a result of such Disposition, (b) with respect to any condemnation or taking of such assets by eminent domain proceedings of a Person, cash and cash equivalent proceeds received by or for such Person’s account (whether as a result of payments made under any applicable insurance policy therefor or in connection with condemnation proceedings or otherwise), net of (i) fees, costs and expenses paid to third parties (other than Affiliates) in connection with the collection of such proceeds, awards or other payments and (ii) taxes paid or payable by such Person as a result of such casualty, condemnation or taking, and (c) with respect to any offering of Capital Stock of a Person or the
issuance of any Indebtedness by a Person, cash and cash equivalent proceeds received by or for such Person’s account, net of (i) legal, underwriting, and other fees, costs and expenses paid to third parties (other than Affiliates) and incurred as a result thereof, (ii) transfer taxes paid by such Person or such Subsidiary in connection therewith and (iii) net income taxes to be paid in connection therewith.
“New York Cannabis FeesDisposition” shall mean the fees required by the State of New York in order for one or more Borrowers to remain “vertically integrated” under U.S. State Cannabis Laws in effect in the State of New York, to maintain any license or rights currently held or enjoyed by any Borrower under such laws, or to obtain the right to operate any additional cultivation, processing or dispensary location under such laws.sale, in one transaction or multiple transactions, of substantially all of Borrowers’ assets in New York state to a non-Affiliate of Borrowers pursuant to a sale of such assets, a sale of the Capital Stock of the Persons that own such assets or a combination of the foregoing. [Redacted – competitively sensitive]
“Non-Core Assets” shall mean the assets identified on Schedule 9.04.
“Note” shall mean a promissory note (or amended and restated promissory note) substantially in the form of Exhibit D.
“Notice of Control” shall have the meaning set forth in Section 8.12(b).
“Obligations” shall mean (a) with respect to each Borrower, all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of such Borrower arising under or in connection with any Credit Document or any Warrant Agreement, including all original issue discount, fees, costs, expenses (including fees, costs and expenses incurred during the pendency of any proceeding of the type described in Section 10.01(h), whether or not allowed or allowable in such proceeding) and premiums payable under any Credit Document, the principal of and interest (including interest accruing during the pendency of any proceeding of the type described in Section 10.01(h), whether or not allowed or allowable in such proceeding) on the Loans, all indemnification obligations and all obligations to pay or reimburse any Secured Party for paying any costs or expenses under any Credit Document, (b) all other fees to be paid to any Agent or Arranger under the Credit Documents or otherwise, or (c) with respect to each Credit Party or Verano Guarantor other than Borrowers, all obligations (monetary or otherwise, whether absolute or contingent, matured or unmatured) of such Credit Party or Verano Guarantor arising under or in connection with any Credit Document, all indemnification obligations and all obligations to pay or reimburse any Secured Party for paying any costs or expenses under any Credit Document.
“OFAC” shall mean the Office of Foreign Assets Control of the United States Department of the Treasury.
“OID” shall have the meaning set forth in Section 12.24.
“Organization Documents” shall mean, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate of incorporation, constitution or articles of formation or organization and operating agreement (if relevant); and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and, if applicable, any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.
“Other Connection Taxes” shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Credit Document, or sold or assigned an interest in any Loan or Credit Document).
“Other Taxes” shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Credit Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 12.06).
“Parent” shall have the meaning set forth in the Preamble.
“Participant” shall have the meaning set forth in Section 12.06(c).
“Participant Register” shall have the meaning set forth in Section 12.06(c)(ii).
“Patent Security Agreements” shall mean any patent security agreements entered into by a Credit Party in favor of Collateral Agent (as required by the Agreement or any other Credit Document), in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Patriot Act” shall mean, collectively, the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), and the Proceeds of Crime (money laundering) and Terrorist Financing Act (Canada).
“Payment Date” shall mean the last Business Day of each calendar month.
“Permits” shall mean, with respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other Contractual Obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or operations or to which such Person or any of its property or operations is subject.
“Permitted Liens” shall have the meaning set forth in Section 9.02.
“Person” shall mean any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any Governmental Authority.
“Phoenix Licenses” shall mean the Marijuana Establishment License Registration Certificate ID No. 00000093ESRF39774783, and Medical Marijuana Dispensary Registration Certificate ID NO. 000000028DCGV00174888 and all licenses, permits, permissions and other authorizations relating to the Phoenix Licenses-related cannabis operations of the Borrowers issued by the Arizona Department of Health Services or any other governmental agency.
“Phoenix Assets” shall mean collectively: the Phoenix Licenses; all cannabis and non-cannabis inventory, equipment, fixtures and all other personal property located at the dispensary; the management rights related to the Phoenix Licenses, and all real property leases, zoning entitlements, product or licensing agreements and all material revenue producing contracts (including all material vendor and service contracts) related to the Borrowers’ Phoenix Licenses-related cannabis operations, including retail dispensary and cultivation operations.
“PIK Interest” shall mean interest accruing at the PIK Interest Rate or the Dispensary Loan PIK Interest Rate, as applicable.
“PIK Interest Rate” shall mean the rate of 2.75% per annum.
“Platform” shall have the meaning set forth in Section 12.23.
“PPSA” shall mean the Personal Property Security Act (British Columbia) or any other applicable Canadian federal or provincial statute pertaining to the granting, perfecting, priority or ranking of Liens on personal property, and any successor statutes, together with any regulations thereunder, in each case as in effect from time to time, and any reference to any particular section of the PPSA shall be construed to also refer to any successor section thereto.
“Prime Rate” shall mean, for any date of determinationday, a floating rate equal to the rate publicly quoted from time to time in The Wall Street Journal’s “Bonds, Rates & Yields” table as the “prime rate”. The Prime Rate shall be determined on the first Business Day of each month for such month. on such day; provided, however, that in no event shall the Prime Rate be less than 7.75% per annum. Any change in such prime rate publicly quoted in The Wall Street Journal’s “Bonds, Rates & Yields” table shall take effect at the opening of business on the day specified in the public announcement of such change.
“Promotional Rights” shall have the meaning set forth in Section 12.16.
“Qualified Capital Stock” shall mean any Capital Stock that is not Disqualified Capital Stock.
“Real Property” shall mean, with respect to any Person, all right, title and interest of such Person (including any leasehold estate) in and to a parcel of real property owned, leased or operated by such Person together with, in each case, all improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership, lease or operation thereof.
“Recipient” shall mean (a) Administrative Agent and (b) any Lender.
“Red Barn” shall mean Red Barn Growers, a New Mexico non-profit corporation.
“Register” shall have the meaning set forth in Section 12.06(b)(iii).
“Regulation D” shall mean Regulation D of the Board as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements.
“Regulation U” shall mean Regulation U of the Board as from time to time in effect and any successor to all or a portion thereof establishing margin requirements.
“Regulation X” shall mean Regulation X of the Board as from time to time in effect and any successor to all or a portion thereof establishing margin requirements.
“Regulatory Licenses” shall mean (a) each Permit listed on Schedule 7.19 and (b) each Permit required to be held by any Consolidated Company, or that any Consolidated Company must have rights to use, to conduct its Business in compliance with Applicable Laws.
“Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the directors, officers, employees, agents, trustees, advisors of such Person and any Person that possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.
“Release” shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, depositing, disposing, emanating or migrating of Hazardous Materials in the environment.
“Replacement Lender” shall mean one or more substitute Lenders reasonably acceptable to Administrative Agent.
“Reporting Jurisdictions” shall mean (a) all of the jurisdictions in Canada in which Parent is a “reporting issuer”, including as of the date hereof, the Provinces of British Columbia, Alberta, and Ontario and (b) if Parent’s Capital Stock is listed and posting for trading on the New York Stock Exchange or Nasdaq, the applicable reporting jurisdictions in the United States.
“Required Lenders” shall mean, at any time when there is more than one Lender, at least two Lenders having Loans and unused Commitments representing greater than 50.00% of the sum of the aggregate Loans and unused Commitments at such time, or at any time when there is only one Lender, such Lender.
“Rescindable Amount” shall have the meaning set forth in Section 4.03(d).
“Restricted Cannabis Activities” shall mean, in connection with the cultivation, distribution, sale and possession of cannabis and related products: (a) any activity that is not permitted under applicable U.S. State Cannabis Laws; (b) notwithstanding compliance with applicable U.S. State Cannabis Laws, any activity which a Governmental Authority asserts is unlawful under U.S. Federal Cannabis Law and the
applicable Person is enjoined from conducting such activity; (c) distribution and sale of cannabis and related products to minors that is not approved under a U.S. State Cannabis Law; (d) payments to criminal enterprises, gangs, cartels and Persons subject to Sanctions; (e) non-compliance with anti-terrorism laws and other Applicable Law relating to money-laundering; (f) diversion of cannabis and related products from states where it is legal under U.S. State Cannabis Law to other states; (g) use of activities permitted under U.S. State Cannabis Law as a cover or pretext for the trafficking of other controlled substances or illegal drugs or other illegal activity; (h) the commission, or making threats, of violence and the use of firearms in violation of Applicable Law; (i) drugged driving and other adverse public health consequences associated with the use of cannabis and related products; (j) growing cannabis and related products on public lands; and (k) directly or indirectly, aiding, abetting or otherwise participating in a common enterprise with any Person or Persons in such activities.
“Restricted Debt” shall mean (a) the Indebtedness of any Credit Party existing on the Closing Date and listed on Schedule 7.24, and (b) any other Indebtedness the repayment of which is expressly subordinated and made junior to the payment in full of the Obligations and contains terms and conditions (including terms relating to interest, fees, repayment and subordination) satisfactory to Agents.
“Restricted Payment” shall mean, with respect to any Person, (a) the declaration or payment of any dividend on, or the making of any payment or distribution on account of, or setting apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of, any class of Capital Stock of such Person or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding, or the making of any other distribution in respect thereof, either directly or indirectly, whether in cash or property, (b) any payment of a management fee (or other fee of a similar nature) or any reimbursable costs and expenses related thereto by such Person to any holder of its Capital Stock or any Affiliate thereof and (c) the payment or prepayment of principal of, or premium or interest on, any Indebtedness subordinate to the Obligations.
“Resurgent” shall have the meaning set forth in the Preamble.
“Retail Management” shall have the meaning set forth in the Preamble.
“S&P” shall mean Standard & Poor’s Ratings Services or any successor by merger or consolidation to its business.
“Sales Tracking Software” shall mean any “seed-to-sale” tracking, point-of-sale, or other inventory or sales reporting software used by the Credit Parties.
“Sanction(s)” shall mean all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, (b) the Canadian government, or (c) the United Nations Security Council, the European Union, any European Union member state or Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
“SEC” shall mean the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“Second Amendment” shall mean that certain Second Amendment to Credit Agreement dated as of November 18, 2021, among Borrowers, the Lenders party thereto and Agents.
“Secured Parties” shall mean, collectively, (a) the Lenders, (b) Agents, (c) the beneficiaries of each indemnification obligation undertaken by any Credit Party or Verano Guarantor under the Credit
Documents, (d) any successors, endorsees, transferees and assigns of each of the foregoing to the extent any such transfer or assign is permitted by the terms of this Agreement and (e) any other holder of any Obligation or Secured Obligation (as defined in any applicable Security Document).
“Security Agreements” shall mean, collectively, the U.S. Security Agreement and the Canadian Security Agreement.
“Security Documents” shall mean, collectively, as applicable, the Security Agreements, security under 427 of the Bank Act (Canada) executed by the Canadian Credit Parties, the Collateral Access Agreements, the Control Agreements, the Patent Security Agreements, the Trademark Security Agreements, the Copyright Security Agreements, each Mortgage, and each other instrument or document executed and delivered pursuant to this Agreement or any of the Security Documents to guarantee or secure any of the Obligations.
“Solvency Certificate” shall mean a solvency certificate, duly executed and delivered by the chief financial officer of Parent to Administrative Agent, in form and substance reasonably satisfactory to Administrative Agent.
“Solvent” shall mean:
(a)with respect to any U.S. Credit Party, at any date, that (i) the sum of such Person’s debt (including Contingent Liabilities) does not exceed the present fair saleable value of such Person’s present assets (which, for this purpose, shall include rights of contribution in respect of obligations for which such Person has provided a guarantee), (ii) such Person’s capital is not unreasonably small in relation to its business as contemplated on such date, (iii) such Person has not incurred and does not intend to incur debts including current obligations beyond its ability to generally pay such debts as they become due (whether at maturity or otherwise), and (iv) such Person is “solvent” or is not “insolvent”, as applicable, within the meaning given that term and similar terms under Applicable Laws relating to fraudulent and other avoidable transfers and conveyances. For purposes of this definition, the amount of any Contingent Liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5); and
(b)with respect to any Canadian Credit Party, at any date, that (i) the aggregate property of such Credit Party is sufficient, if disposed of at a fairly conducted sale under legal process, to enable payment of all its obligations, due and accruing due; (ii) the aggregate property of such Credit Party is, at a fair valuation, sufficient to enable payment of all its obligations, due and accruing due; (iii) such Credit Party is able to meet its obligations as they generally become due; and (iv) such Credit Party has not ceased paying its current obligations in the ordinary course of business as they generally become due.
“Subsequent Funding Dates” shall mean the date of funding of each Loan, if any, that occurs after the Closing Date.
“Subsidiary” of any Person shall mean and include (a) any corporation more than 30.00% of whose Voting Stock having by the terms thereof power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, limited liability company,
association, joint venture or other entity in which such Person directly or indirectly through one or more Subsidiaries has more than (i) a 30.00% equity interest measured by either vote or value at the time or (ii) a 30.00% general partnership interest at the time. Unless otherwise expressly provided, all references herein to a Subsidiary shall mean a Subsidiary of Parent and shall exclude all Subsidiaries that are Excluded Subsidiaries.
“Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Termination Date” shall mean the date on which the Loans and the other Obligations (other than Unasserted Contingent Obligations) shall have been paid in full in cash in accordance with the terms of this Agreement.
“Third Amendment” shall mean that certain Third Amendment to Credit Agreement dated as of the Third Amendment Effective Date, among Borrowers, the Lenders and Agents.
“Third Amendment Effective Date” shall mean January 26, 2022.
“Third Amendment Initial Funding Date” shall mean the date on which all of the conditions to closing and funding set forth in Section 5.01 have been satisfied, or waived in accordance with Section 12.01, which date is expected to be on or about March 1, 2022.
“Total Credit Exposure” shall mean, as of any date of determination (a) with respect to each Lender, (i) prior to the termination of the Commitments, the sum of such Lender’s Commitment plus the outstanding principal amount of such Lender’s Loans or (ii) upon the termination of the Commitments, the outstanding principal amount of such Lender’s Loans and (b) with respect to all Lenders, (i) prior to the termination of the Commitments, the sum of all of the Lenders’ Commitments plus the aggregate outstanding principal amount of all Loans and (ii) upon the termination of the Commitments, the aggregate outstanding principal amount of all Loans.
“Trademark Security Agreements” shall mean the Trademark Security Agreements made in favor of Collateral Agent and the Lenders by each applicable Credit Party and any trademark security agreement entered into after the Closing Date (as required by the Agreement or any other Credit Document), in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Tranche Maturity Date” shall mean the Maturity Date or the Dispensary Loan Maturity Date, as applicable.
“Tranche Maturity Date Extension” shall mean the extension of the Maturity Date.
“Tranche Maturity Date Extension Notice” shall mean a written notice from Borrowers to Administrative Agent stating Borrowers’ intention to obtain a Tranche Maturity Date Extension and certifying that no Default or Event of Default exists as of the date of such notice and that no facts exist as of such date that will, with the passage of time, lead to the existence of a Default or Event of Default as of the date of such Tranche Maturity Date Extension.
“Transactions” shall mean the funding of the Loans pursuant hereto and the use of the proceeds thereof and all other transactions contemplated by or described in the Credit Documents.
“Treasury Regulations” shall mean the United States Treasury regulations promulgated under the Code.
“Triggering Event” shall mean the enacting of any adult-use cannabis legislation by both houses of the legislature, and approved by the Governor, of the State of Minnesota that would (a) require Vireo Minnesota to participate in a competitive application process for new licenses for one or more tiers (cultivation, processing, retail) of the adult-use market in the State of Minnesota, (b) limit Vireo Minnesota’s cannabis canopy to 10,000 square feet or less for a period of one year or more or (c) require Vireo Minnesota to be controlled, directly or indirectly, by a Person that is resident or formed, as the case may be, in the State of Minnesota. [redacted – competitively sensitive]
“U.S.” and “United States” shall mean the United States of America.
“U.S. Bankruptcy Code” shall mean the United States Bankruptcy Code (11 U.S.C. Section 101 et seq.).
“U.S. Credit Party” shall mean any Credit Party organized and existing under the laws of the United States or any state or subdivision thereof.
“U.S. Federal Cannabis Law” shall mean any federal laws of the United States treating cannabis and related products as illegal or as controlled substances.
“U.S. Person” shall mean any person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.
“U.S. Security Agreement” shall mean that certain Security Agreement dated as of the Closing Date, by and among each Credit Party party thereto and Collateral Agent for the benefit of the Secured Parties.
“U.S. State Cannabis Law” shall mean any law enacted by any state of the United States which legalizes cannabis and related products in some form and which implements strong and effective regulatory and enforcement systems to control the cultivation, distribution, sale and possession of cannabis and related products.
“U.S. Tax Compliance Certificate” has the meaning specified in Section 4.04(f)(ii)(B)(3).
“UCC” shall mean the Uniform Commercial Code as from time to time in effect in the state of Illinois and any other applicable jurisdiction.
“Unasserted Contingent Obligations” shall mean, at any time, Obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no assertion of liability (whether oral or written) and no claim or demand for payment or indemnification (whether oral or written) has been made or threatened.
“Unfinanced Capital Expenditures” shall mean, as to any Borrower, a Capital Expenditure not funded with (a) the proceeds of Indebtedness or (b) the proceeds of the issuance of Capital Stock.
“Verano Litigation” shall mean Goodness Growth Holdings, Inc. v. Verano Holdings Corp., a corporation existing under the laws of the Provincefiled in the Supreme Court of British Columbia, Canada, on October 21, 2022, as amended, refiled, supplemented, extended or otherwise amended from time to time.
“Verano Acquisition” shall mean the proposed acquisition by Verano of the Capital Stock of Parent, as more particularly provided in that certain Arrangement Agreement dated as of January 31, 2022,
between Parent and Verano, the Plan of Arrangement (as defined therein) and the other agreements, instruments and documents executed in connection therewith or relating thereto.
“Verano Credit Agreement” shall mean that certain Amended and Restated Credit Agreement dated as of May 10, 2021, among Verano, certain of its Subsidiaries, the “Lenders” (as defined therein) party thereto, Chicago Atlantic, as administrative agent and as collateral agent, and the other Persons party thereto.
“Verano Guarantors” shall have the meaning set forth in Section 8.10(d).
“Verdant Grove” shall have the meaning set forth in the Preamble.
“Vireo Arizona” shall have the meaning set forth in the Preamble.
“Vireo Charm City” shall mean Vireo of Charm City, LLC, a Maryland limited liability company.
“Vireo de Puerto Rico” shall have the meaning set forth in the Preamble.
“Vireo Health” shall have the meaning set forth in the Preamble.
“Vireo Massachusetts” shall have the meaning set forth in the Preamble.
“Vireo Minnesota” shall have the meaning set forth in the Preamble.
“Vireo Nevada” shall have the meaning set forth in the Preamble.
“Vireo NM” shall have the meaning set forth in the Preamble.
“Vireo NY” shall have the meaning set forth in the Preamble.
“Vireo PR” shall have the meaning set forth in the Preamble.
“Voting Stock” shall mean, with respect to any Person, shares of such Person’s Capital Stock having the right to vote for the election of directors (or Persons acting in a comparable capacity) of such Person under ordinary circumstances.
“Warrant Agreements” shall mean, collectively, those certain Warrant Agreements executed by the Borrowers party thereto for the issuance of Warrant Shares to, or as directed by, Administrative Agent, each Lender, each Participant and any designee thereof, in form and substance satisfactory to Administrative Agent and Lenders.
“Warrant Shares” shall have the meaning set forth in the Warrant Agreements.
“Withholding Agent” shall mean any Credit Party and Administrative Agent.
“Xaas” shall have the meaning set forth in the Preamble.
(e) on one or more Subsequent Funding Dates on or about the date which New York Cannabis Fees are due (or such other date to which Administrative Agent agrees in its discretion), Delayed Draw Loans in an aggregate amount not to exceed $20,000,000; and
(f) on one or more Subsequent Funding Dates, upon the request of Borrowers and as approved by Administrative Agent and Lenders in their discretion, Loans in the aggregate amount of up to $20,000,000, the proceeds of which shall be used by Borrowers to finance acquisitions made by a Credit Party on terms and subject to conditions satisfactory to Lenders in their discretion, or for such other purposes as may be consented to by the Lenders in their discretion, including that (i) Parent issues Warrant Agreements, in form and substance satisfactory to Administrative Agent, on each Subsequent Funding Date evidencing Warrant Shares in an aggregate amount equal to 20.00% warrant coverage based on the gross amount of the Loans advanced on such Subsequent Funding Date and with a strike price per share equal to the volume weighted average price of a share of Parent’s Capital Stock for the 10 trading-day period ending on the date immediately preceding such Subsequent Funding Date, and (ii) Borrowers issue Notes in the aggregate amount of the increased Aggregate Commitment. The Credit Parties acknowledge and agree that any Loans disbursed on a Subsequent Funding Date pursuant to this Section 2.01(f) shall be made in the sole and absolute discretion of Administrative Agent and Lenders. No Lender shall have any obligation to make any Loan under this Section 2.01(f). This Section 2.01(f) shall not constitute a commitment on the part of Administrative Agent or any Lender to make any Loans under and pursuant to this Section 2.01(f). The Aggregate Commitment shall be deemed increased as of each Subsequent Funding Date by the aggregate amount of the Loans made on such Subsequent Funding Date.
Each Loan may be repaid or prepaid in accordance with the provisions hereof, but once repaid or prepaid may not be reborrowed.
Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice, instruction or other communication given or made by Borrower Representative or given to Borrower Representative under any Credit Document on behalf of another Borrower (whether or not known to any other Borrower and whether occurring before or after such other Borrower became a Borrower under any Credit Document) shall be binding for all purposes on such Borrower as if such Borrower had expressly agreed, executed, made, given or concurred with it or received the relevant notice, demand or other communication. In the event of any conflict between any notices or other communications of Borrower Representative and any other Borrower, those of Borrower Representative shall prevail.
(a) To induce Administrative Agent and the Lenders to enter into the Third Amendment and for the Lenders to extend the Loans under Section 2.01(e), Borrowers agree to pay to Administrative Agent, or at its direction, an origination fee to be due and payable as follows: on each Subsequent Funding Date for such Loans, if any, an amount equal to 1.00% of the aggregate amount of such Loans advanced on such Subsequent Funding Date. For the avoidance of doubt, this fee shall be net funded on each applicable Subsequent Funding Date.
Extension of the Maturity Date
Consolidated Fixed Charge Coverage Ratio | Extended Maturity Date | |
|---|---|---|
December 31, 2023, and March 31, 2024 | 1.0 | July 31, 2024 |
June 30, 2024, and September 30, 2024 | 1.25 | January 31, 2025 |
September 30, 2024 | 1.5 | April 30, 2025 |
December 31, 2024 | 1.5 | July 31, 2025 |
March 31, 2025 | 1.5 | October 31, 2025 |
June 30, 2025, and September 30, 2025 | 1.5 | January 31, 2026 |
For purposes of this Section 3.02, the Consolidated Fixed Charge Coverage Ratio shall be determined for each applicable date as of the end of the Applicable Fiscal Period most recently ended for which financial statements and a Compliance Certificate have been delivered pursuant to Section 8.01(a) and 8.01(c), respectively.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Parent and Administrative Agent in writing of its legal inability to do so.
provided that, notwithstanding the foregoing, and after giving effect to all adjustments contemplated thereby, if any Lender receives an amount in excess of the maximum permitted by the Criminal Code (Canada) or other Applicable Law, then Borrowers shall be entitled, by notice in writing to such Lender, to obtain reimbursement from such Lender in an amount equal to the excess, and pending reimbursement, the amount of the excess shall be deemed to be an amount payable by such Lender to Borrowers and shall be promptly paid to Borrowers.
Any amount or rate of interest referred to in this Agreement shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that any Loan remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be pro-rated over the period from the earlier of the date of advance and the Closing Date to the Tranche Maturity Date, the Dispensary Loan Maturity Date or the Delayed Draw Term Loan Maturity Date, as applicable thereto, and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by Administrative Agent shall be conclusive for the purposes of that determination.
which certificates shall provide that each Secured Party may conclusively rely thereon until it shall have received a further certificate of an Authorized Officer of the applicable Person canceling or amending the prior certificate of such Person as provided in Section 8.01(l).
(C) if the Loans are being advanced pursuant to Section 2.01(f), evidence that the Credit Parties shall be in compliance with the Financial Performance Covenants recomputed as of the end of the Applicable Fiscal Period most recently ended for which financial statements have been delivered pursuant to Section 8.01(a) or 8.01(b) after giving effect to the requested Loan on a pro forma basis; and
(iv) if the Loans are being advanced pursuant to Section 2.01(f), a certificate detailing the planned distribution of proceeds from the Loans and a funds flow memorandum (prepared by Administrative Agent) detailing the sources and uses of such Loan, each of which shall be acceptable to Administrative Agent.
(g) Lien Certificates; Real Property Matters. If the Loans are being advanced pursuant to Section 2.01(f), Administrative Agent shall have received a record owner and lien certificate or similar certificate issued in connection with its title insurance policy, in form and substance satisfactory to Administrative Agent, and, if, necessary, amendments to the Mortgages, Assignments of Leases and Rents and title insurance policies to reflect any increase in the Aggregate Commitments, in each case, in form and substance satisfactory to Administrative Agent.
In order to induce the Lenders to enter into this Agreement and continue the Loans as provided for herein, the Credit Parties make the following representations and warranties to, and agreements with, the Lenders, all of which shall survive the execution and delivery of this Agreement and the making of the Loans:
(a)A complete and accurate list of all multiemployer plans, pension plans or other benefit plans established by, maintained by or contributed to by each Credit Party is set forth on Schedule 7.11.
(b)No Reportable Event or Prohibited Transaction, as each such term is defined in ERISA, has occurred or is reasonably expected to occur, and no US Credit Party has failed to meet the minimum funding requirements of ERISA.
(b)No Credit Party sponsors, contributes to or administers any Canadian Pension Plans. Except as would not reasonably be expected to have a Material Adverse Effect: (i) all obligations of each Credit Party (including fiduciary, contribution, funding, investment and administration obligations) required to be performed in connection with any employee benefit plans and any funding agreements therefor under the terms thereof and applicable statutory and regulatory requirements, have been performed or satisfied in a timely and proper fashion and in compliance with Applicable Law and the terms of the applicable employee benefit plan; (ii) there have been no improper withdrawals or applications of the assets of any Credit Party’s employee benefit plans; (iii) there are no outstanding disputes concerning the assets or liabilities of any Credit Party’s employee benefit plans; and (iv) no Credit Party has a contingent liability with respect to any post-employment or post-retirement benefits under an employee benefit plans and all post-employment and post-retirement liabilities, if any, under any employee benefit plans have been properly identified in the financial statements of the Credit Parties.
The Credit Parties hereby covenant and agree that on the Closing Date and thereafter, until the Loans, together with interest, Fees and all other Obligations incurred hereunder (other than Unasserted Contingent Obligations) are paid in full in accordance with the terms of this Agreement:
(d) If the Verano Acquisition occurs, (i) Parent shall (A) require Verano, substantially concurrently with the Verano Acquisition, to cause each of the obligors under the Verano Credit Agreement (such obligors, the “Verano Guarantors”), including Verano, to join this Agreement as a Guarantor, guaranty the Obligations and grant to the Collateral Agent, for the benefit of the Secured Parties, a security interest in the real and personal property of such Verano Guarantor to secure the Obligations, and (B)
execute or deliver, and require each of the Verano Guarantors to execute or deliver, such Security Documents, other Credit Documents and other agreements, documents and opinions reasonably requested by Agents, and (ii) the Credit Parties shall execute and deliver such amendments to this Agreement and the other Credit Documents as any Agent deems reasonable to reflect the addition of the Verano Guarantors as Guarantors (but not Credit Parties) under the Credit Documents, including modification of Sections 10.01(a)(ii), 10.01(b), 10.01(d), 10.01(e), 10.01(f) (by adding a cross-default to the Verano Credit Agreement), 10.01(g), 10.01(h) and 10.01(i).
(a) Solely to the extent not completed in connection with the Closing Date, a zoning report and environmental site assessment reflecting such Real Property’s compliance with Applicable Law.
(b) Solely to the extent not completed in connection with the Closing Date, if such Real Property is in a flood zone, a flood notification form signed by Parent and evidence that flood insurance is in place for the buildings and their contents located thereon.
(c) Duly-executed signatures to a Collateral Access Agreement for each leased location of Borrowers required to be subject thereto pursuant to Section 7.18.
(d) A duly-executed Control Agreement for each of the deposit accounts and securities accounts of the Credit Parties (other than Excluded Accounts and Borrowers’ deposit accounts with Severn Bank).
(e) Solely to the extent not completed in connection with the Closing Date or if the title company will not provide a title insurance commitment, or an update of an existing title policy, without a survey exception, an ALTA survey prepared by a surveyor reasonably acceptable to Collateral Agent and certified to Collateral Agent and the issuer of the title insurance policy in a manner reasonably satisfactory to Collateral Agent; provided, however, that Collateral Agent may agree to allow this requirement or any part hereof to be satisfied post-closing in its discretion.
The Credit Parties hereby covenant and agree that until the Loans, together with interest, Fees and all other Obligations incurred hereunder (other than Unasserted Contingent Obligations) are paid in full in accordance with the terms of this Agreement:
Notwithstanding anything to the contrary set forth in this Section 9.02, in no event shall any Credit Party create, incur, assume or suffer to exist any Lien (other than Liens in favor of Collateral Agent pursuant to the Credit Documents) upon the rights of any Credit Party or Subsidiary under any Material Contract or any accounts receivable, Collections or proceeds arising thereunder or with respect thereto.
(iii) Borrowers apply any Net Cash Proceeds arising therefrom pursuant to Section 4.02(a)(ii);
Notwithstanding anything to the contrary set forth in this Section 9.04, except with respect to any sale, transfer, or other disposition of the Phoenix Assets, in no event shall any Credit Party sell, transfer, assign or otherwise dispose of (other than in connection with the grant of a Lien in favor of Collateral Agent pursuant to the Credit Documents) any of its rights under or in respect of any accounts receivable, Collections or proceeds arising thereunder or with respect thereto other than as permitted under clause (c)(i)(B) above.
provided that no Investment otherwise permitted under clauses (d)(ii), (f), (g) or (k) shall be permitted to be made if, at the time of making any such Investment, any Default or Event of Default has occurred and is continuing or would result therefrom.
(a)No Credit Party will (a) fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as each term is defined in ERISA, to occur or (b) withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of a Credit Party or any of its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
(b)(i) No Credit Party nor any applicable regulatory authority shallshall (i) terminate a Canadian Pension Plan (in whole or in part) if, as a result of such termination, any Credit Party may be required to make an additional contribution to such Canadian Pension Plan, or to incur an additional liability or obligation to such Canadian Pension Plan, and (ii) no contribution failure shall occur under anyestablish, sponsor administer, contribute to or assume any liability, including any contingent liability, under a defined benefit Canadian Pension Plan or a multi-employer Canadian Pension Plan, (iii) acquire an interest in any Person if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to any defined benefit Canadian Pension Plan, and (iv) fail to withhold, make, remit or pay when due any employee or employer payments, contributions (including “normal cost”, contributions in respect of the provision or adverse deviations or in respect of any amendment that increases the going concern liabilities, “special payments” and any other payments in respect of any funding deficiencies or shortfalls) or premiums to or in respect of any Canadian Pension Plan pursuant to the terms of the particular plan, any applicable collective bargaining agreement or applicable pension benefits legislation in Canada or any other jurisdiction.
The foregoing prohibitions shall not apply to customary restrictions of the type described in clause (a) above (which do not prohibit the Credit Parties from complying with or performing the terms of this
Agreement and the other Credit Documents) which are contained in any agreement, (i) for the creation or assumption of any Lien on the sublet or assignment of any leasehold interest of any Credit Party or any of its Subsidiaries entered into in the ordinary course of business, (ii) for the assignment of any contract or licensed intellectual property entered into by any Credit Party or any of its Subsidiaries in the ordinary course of business or (iii) for the transfer of any asset pending the close of the sale of such asset pursuant to a Disposition permitted under this Agreement.
Period | Amount |
|---|---|
$1,000,000 | |
$1,500,000 | |
$2,000,000 | |
January 31, 2024 | $2,500,000 |
February 29, 2024, and the last day of each calendar month thereafter | $3,000,000 |
Period | Ratio |
|---|---|
July 31, 2023 – SeptemberJune 30, 2023, through and including December 31, 2023 | 0.50 to 1.00 |
OctoberJanuary 31, 20232024, and the last day of each calendar month thereafter | 1.00 to 1.00 |
For the avoidance of doubt, nothing in this Section 10.03 shall prevent any Borrower from receiving capital contributions in an aggregate amount in excess of the amount sufficient to cause compliance with the applicable Financial Covenant for the relevant testing period; provided that such excess shall not be added to EBITDA for the purpose of calculating compliance with such Financial Covenant or any other purpose.
Notwithstanding the foregoing, no amendment, modification or supplement of this Agreement or any other Credit Document shall be effective without the consent of the Credit Parties unless otherwise expressly provided in this Agreement or such other Credit Document.
All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, five Business Days after deposit in the mails, postage prepaid; and (C) if delivered by electronic mail (which form of delivery is subject to the provisions of Section 12.02(c)), when delivered if prior to 5:00 p.m. on a Business Day, and if after 5:00 p.m. on a Business Day, on the next following Business Day. In addition to the foregoing, to be effective, electronic mail notice must originate from an electronic mail address approved by all parties with at least 10 days’ advance written notice to allow parties to allow their systems to properly recognize and allow for delivery of such messages.
provided that in the case of clause (e) hereof, the Person to whom Confidential Information is so disclosed is advised of and has been directed to comply with the provisions of this Section 12.16. The applicable Agent or Lender shall endeavor to provide prior notice to Parent of any disclosure permitted under clauses (a), (b), (f) or (h) and a reasonable opportunity to obtain a protective order from the Person to whom Confidential Information is to be provided, in each case, if the circumstances of such disclosure so allow and only if permitted under Applicable Law; provided, however, that the failure to provide, or endeavor to provide, any such notice or to provide a reasonable opportunity to obtain a protective order shall not be deemed a default or breach of this Agreement by any Secured Party.
Notwithstanding the foregoing, each Agent and each Lender shall have the right to publicize, for general marketing and related promotional purposes, their relationship to the Credit Parties and the fact that they have extended the Loans to the Credit Parties (the “Promotional Rights”) with the consent of Parent, which consent shall not be unreasonably withheld, delayed or conditioned, and, in connection therewith, each Credit Party hereby grants to each Agent and each Lender a royalty free, non-exclusive limited license to use such Credit Party’s name and logos, now existing or hereafter acquired, in any literature, advertisements, websites, promotional or other marketing materials now or hereafter used by such Agent or Lender.
Notwithstanding the foregoing, no Agent or Lender shall have any obligation to keep information confidential if such information: (i) is or becomes public from a source other than an Agent or a Lender, or one of an Agent’s or a Lender’s Affiliates, consultants or legal or financial advisors in breach of this Agreement, (ii) is, was or becomes known on a non-confidential basis to or discovered by an Agent, any Lender or any of their Affiliates, consultants or legal or financial advisors independently from communications by or on behalf of any Credit Party, or (iii) is independently developed by an Agent without use of such confidential information, provided that, the source of such information was not known to be bound by a confidentiality agreement with (or subject to any other contractual, legal or fiduciary obligation of confidentiality to) the relevant Credit Party.
EACH AGENT AND EACH LENDER ACKNOWLEDGES THAT CONFIDENTIAL INFORMATION (AS DEFINED IN THIS SECTION 12.16) FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING ANY CREDIT PARTY AND ITS RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMMERCIALLY REASONABLE COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
ALL INFORMATION, INCLUDING WAIVERS AND AMENDMENTS, FURNISHED BY THE CREDIT PARTIES OR ANY AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE CREDIT PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE CREDIT PARTIES AND AGENTS THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.
SECTION 12.26Trading of Parent Capital Stock. Each of the Lenders hereby represents and warrants that, as of the Closing Date, such Lender has not sold any Capital Stock of Parent in the 10 Business Days prior to the Closing Date.
[Remainder of page intentionally left blank; signature pages deleted.]
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joshua Rosen, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Goodness Growth Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| (b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 15, 2023
By: | /s/ Joshua Rosen |
| |
| Joshua Rosen | | |
| Interim Chief Executive Officer | | |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John A. Heller, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Goodness Growth Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| (b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 15, 2023
By: | /s/ John A. Heller |
| |
| John A. Heller | | |
| Chief Financial Officer | | |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Goodness Growth Holdings, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Joshua Rosen | |
Joshua Rosen | |
Interim Chief Executive Officer | |
May 15, 2023 | |
| |
/s/ John A. Heller | |
John A. Heller | |
Chief Financial Officer | |
May 15, 2023 | |