Dr. Kyle Kingsley reports

GOODNESS GROWTH HOLDINGS ANNOUNCES FIRST QUARTER 2022 RESULTS

Goodness Growth Holdings Inc. has released its financial results for its first quarter ended March 31, 2022. All currency figures referenced in this press release reflect U.S. dollar amounts.

"Our first quarter results reflected continued growth across all of our markets besides Arizona, where we have been working through the loss of biomass related to weather impacts we've discussed previously," said chairman and chief executive officer Kyle Kingsley, MD. "The recent launch of flower sales in Minnesota's medical market is going exceptionally well for our Green Goods retail stores in the state, and we also expect the recent transition to adult-use sales in New Mexico to contribute to stronger sales growth throughout the remainder of this year. Our business will continue to benefit from these recent regulatory transitions in our markets, and we also believe it's possible that adult-use sales could begin in New York sometime during the second half of 2022."

Dr. Kingsley continued: "First quarter results were also impacted by an inventory adjustment in Arizona and impairments of long-lived assets in Arizona and Maryland. Given our pending transaction with Verano Holdings Corp. and the licence overlaps in these markets, we've revised our operating plans. We recently wound down operations at the outdoor farm in Amado, Ariz., and will no longer pursue the phase 2 expansion in Massey, Md. We are continuing to focus on our expansion in New York, and expect the pending transaction with Verano to close sometime during the fourth quarter."

First quarter 2022 financial summary

Total revenue in the first quarter was $15.6-million, an increase of 18.2 per cent as compared with Q1 2021. Excluding contributions from Ohio and Arizona retail, total revenue increased 34.5 per cent and reflected growth in each of the company's other markets. Retail revenue, excluding Arizona, increased 40.3 per cent to $12.4-million in Q1 2022. Wholesale revenue, excluding Ohio, increased by 17.3 per cent to $3.2-million, reflecting strong growth in Maryland, New York and Minnesota, partially offset by a decline in the Arizona market.

Gross profit was $2.5-million, or 15.9 per cent of revenue, as compared with gross profit of $5.6-million or 42.6 per cent of revenue in Q1 last year. The decline in gross profit margin was driven primarily by an inventory valuation adjustment of $3.4-million related to writedowns of Arizona inventory to net realizable value as compared with the prior-year quarter. Excluding inventory valuation adjustments, gross margins were relatively flat.

Total operating expenses in the first quarter were $10.2-million, a reduction of $200,000 as compared with $10.4-million in the first quarter of 2021. The decline in total expenses was attributable to a decrease in stock-based compensation of approximately $1.4-million, partially offset by an increase in general and administrative expenses of $1.2-million, which was driven by professional fees related to the pending Verano transaction, and increased salaries.

Total other expenses were $8.5-million during Q1 2022, compared with other expense of $500,000 in Q1 2021. The variance in other expenses was primarily attributable to a loss on impairment of long-lived assets of $5.3-million driven by write-offs in Maryland and Arizona, and increased interest expense related to the company's credit facility.

EBITDA (earnings before interest, taxes, depreciation and amortization), as described in accompanying non-GAAP (generally accepted accounting principles) reconciliation, was a loss of $10.7-million during Q1 2022, compared with a loss of $3.5-million in Q1 2021. Adjusted EBITDA was a loss of $2.6-million in Q1 2022, as compared with a loss of $1.8-million in Q1 2021.

Net loss in Q1 2022 was $14.6-million, as compared with a loss of $6.9-million in Q1 2021. The variance compared with the prior year was driven by the writedown of Arizona inventory to realizable value, the impairment of long-lived assets and increased interest expenses.

Other events

On Feb. 1, 2022, the company announced that it has entered into a definitive arrangement agreement with Verano Holdings Corp. pursuant to which Verano will acquire all of the issued and outstanding shares of the company in an all-share transaction valued at the time of announcement of approximately $413-million (U.S.) on a fully diluted basis. Under the terms of the arrangement agreement, each holder of Goodness Growth subordinate voting shares will receive 0.22652 of a Verano Class A subordinate voting share for each Goodness Growth subordinate voting share held and each holder of Goodness multiple voting shares and Goodness Growth super voting shares will receive 22.652 Verano shares for each Goodness Growth multiple voting share and Goodness Growth super voting share held, respectively. The transaction is subject to the approval of shareholders, the approvals of the Supreme Court of British Columbia, receipt of U.S. regulatory approvals and New York State regulatory requirements, and other customary conditions of closing.

On March 1, 2022, the company began the sale of smokable cannabis flower in Minnesota's medical cannabis program. At launch, the company had six strains of flower available at all eight of its Green Goods dispensaries in Minnesota, and today it is producing approximately 25 strains of cannabis for patients. Select strains of the company's smokable cannabis flower are also available for purchase at all other registered medical cannabis dispensaries in the state to help ensure that all Minnesotans have access to cannabis flower.

On April 1, 2022, the company began adult-use sales in New Mexico. The company's cultivation facility in the state is now producing approximately 30 strains of cannabis for patients and customers, and its four Green Goods dispensaries in Albuquerque, Gallup, Las Cruces and Santa Fe are now selling both medical and adult-use products, including whole flower, vapes, prerolls, beverages and extracts.

Balance sheet and liquidity

As of March 31, 2022, the company had 128,111,328 equity shares issued and outstanding on an as-converted basis, and 159,693,031 shares outstanding on an as-converted, fully diluted basis.

As of March 31, 2022, total current assets were $38.8-million, including cash on hand of $8.6-million. Total current liabilities were $20.5-million.

About Goodness Growth Holdings Inc.

Goodness Growth Holdings is a physician-led, science-focused holding company whose mission is to bring the power of plants to the world. The company's operations consist primarily of its multistate cannabis company subsidiary, Vireo Health, and its science and intellectual property incubator, Resurgent Biosciences. The company manufactures proprietary, branded cannabis products in environmentally friendly facilities and state-of-the-art cultivation sites and distributes its products through its growing network of Green Goods and other retail locations and third party dispensaries. Its team of more than 500 employees are focused on the development of differentiated products, driving scientific innovation of plant-based medicines and developing meaningful intellectual property. Today, the company is licensed to grow, process and/or distribute cannabis in seven markets and operates 18 dispensaries across the United States.

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