Dr. Kyle Kingsley reports

GOODNESS GROWTH HOLDINGS ANNOUNCES SECOND QUARTER 2022 RESULTS

Goodness Growth Holdings Inc. has released financial results for its second quarter ended June 30, 2022. All currency figures referenced in this press release reflect U.S. dollar amounts.

"Our second quarter results reflect improved margin performance driven by continued growth in our Minnesota, New Mexico and Maryland markets, as well as benefits from the recent wind-down of operations in Arizona, which we discussed last quarter," said chairman and chief executive officer, Kyle Kingsley, MD. "[Generally accepted accounting principle] gross margin performance includes activities related to our Arizona operations, which were wound down prior to the end of the second quarter. Excluding Arizona operations, we estimate that second quarter pro forma gross margins would have been approximately 55.0 per cent."

Dr. Kingsley continued: "Strong sales growth catalysts resulting from the recent regulatory changes in Minnesota and New Mexico are expected to persist into next year, and we're also looking forward to contributions from the launch of edibles products, which occurred in Minnesota earlier this month. Finally, our expansion project in New York is progressing ahead of the launch of adult-use sales in that important market, and we continue to expect our pending transaction to be acquired by Verano Holdings Corp. will close some time during the fourth quarter of this year."

Second quarter 2022 financial summary

Total revenue in the second quarter was $21.1-million, an increase of 48.2 per cent as compared with Q2 2021 and 34.9 per cent as compared with first quarter 2022. Excluding contributions from the company's former Arizona operations, total revenue increased 62.7 per cent year over year and reflected strong growth in the company's Maryland, Minnesota and New Mexico markets. Retail revenue excluding Arizona increased 74.5 per cent to $17.0-million in Q2 2022. Wholesale revenue excluding Arizona increased by 14.2 per cent to $2.7-million, driven by increased sales in Maryland and Minnesota.

Gross profit was $10.4-million, or 49.2 per cent of revenue, as compared with gross profit of $6.9-million, or 48.6 per cent of revenue, in Q2 last year. The improvement in gross profit dollars was driven by higher production volume and increased sales, with relatively stable margin performance.

Total operating expenses in the second quarter were $10.1-million, a reduction of $100,000 as compared with $10.2-million in the second quarter of 2021.

Operating income in the second quarter was $300,000, an increase of $3.5-million compared with an operating loss of $3.2-million in Q2 last year. The improvement in operating performance was driven by increased revenue and gross profit dollars, as well as the slight reduction in total operating expenses.

Total other expenses were $5.4-million during Q2 2022, compared with $2.9-million in Q2 2021. The variance in other expenses is primarily attributable to increased interest expense related to the company's credit facility.

EBITDA (earnings before interest, taxes, depreciation and amortization) was $1.1-million during Q2 2022, compared with a loss of $2.4-million in Q2 2021. Adjusted EBITDA was $2.3-million in Q2 2022, as compared with a loss of $1.0-million in Q2 2021.

Net loss in Q2 2022 was $6.2-million, as compared with a loss of $7.0-million in Q2 2021. The variance compared to the prior year was driven by the improvement in operating income, offset by 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 at 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 Growth multiple voting shares and Goodness Growth supervoting shares will receive 22.652 Verano shares for each Goodness Growth multiple voting share and Goodness Growth supervoting share held, respectively. The transaction is subject to the approval of shareholders, the approval of the Supreme Court of British Columbia, New York State regulatory requirements and other customary conditions of closing.

On June 23, 2022, the company announced the launch of HiColor cannabis-infused chews in New York, which are now available through the company's retail and wholesale channels in the New York market. The new line of cannabis-infused edibles is currently available in five gourmet flavours and two formulations.

On Aug. 2, 2022, the company announced the launch of cannabis-infused gummies at all eight of the company's Green Goods dispensaries in Minnesota in accordance with Minnesota's new regulations, allowing certified medical cannabis patients in the state to purchase certain edible products containing cannabis. Gummies are available in 10-milligram formulations and in key lime, concord grape, Hawaiian pineapple and Oxnard strawberry flavours. An additional formulation, with equal amounts of tetrahydrocannabinol and cannabidiol and in Alfonso mango flavour, is expected to follow later this year.

Balance sheet and liquidity

As of June 30, 2022, the company had 128,111,328 equity shares issued and outstanding on an as-converted basis and 159,619,637 shares outstanding on an as-converted, fully diluted basis.

As of June 30, 2022, total current assets were $46.4-million. The company had cash on hand of $17.0-million, which included net proceeds received from an increase on its delayed draw loan of $13.5-million during the second quarter. Total current liabilities were $18.5-million.

About Goodness Growth Holdings Inc.

Goodness Growth 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 Inc., and its science and intellectual property incubator, Resurgent Biosciences Inc. 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 is 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 five markets, and operates 18 dispensaries across the United States.

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