Dr. Kyle Kingsley reports

GOODNESS GROWTH HOLDINGS ANNOUNCES THIRD QUARTER 2022 RESULTS

Goodness Growth Holdings Inc. today released its financial results for its third quarter ended Sept. 30, 2022. All currency figures referenced in this press release reflect United States-dollar amounts.

"Our third quarter results reflect continued revenue growth across each of our operating markets in Maryland, Minnesota, New Mexico and New York, as well as consistency of our gross margin performance as compared with the prior quarter," said chairman and chief executive officer Kyle Kingsley, MD. "Margin performance in our home market of Minnesota has been especially strong following the commencement of flower and edibles sales earlier this year, and we are also pleased with substantial increases in wholesale volumes in New York. We expect both of these positive trends to continue as we work toward the expected launch of adult-use sales in New York next year."

Dr. Kingsley continued: "While we are experiencing positive momentum in our business, we were extremely disappointed by Verano's decision to wrongfully repudiate our transaction, which we previously anticipated would close during the fourth quarter. We are unable to comment more on ongoing litigation beyond what has already been disclosed, but we reiterate that we believe this termination was unlawful and we will be seeking significant damages through the judicial process in British Columbia. We believe there is significant long-term value in our asset portfolio, and our management team and board of directors remains focused, as we always have been, on maximizing value for stakeholders."

Third quarter 2022 financial summary

Total revenue in the third quarter was $18.9-million, an increase of 41.0 per cent as compared with Q3 2021. Excluding contributions from discontinued operations in Arizona, total revenue increased 59.6 per cent and reflected strong growth in each of the company's operating markets. Retail revenue excluding Arizona increased 60.1 per cent to $16.4-million in Q3 2022. Wholesale revenue excluding Arizona increased by 56.1 per cent to $2.5-million, driven by increased sales in Maryland and New York.

Gross profit was $9.5-million, or 50.6 per cent of revenue, as compared with gross profit of $5.1-million or 38.3 per cent of revenue in Q3 last year. The improvement in gross margin was primarily driven by increased retail sales in Minnesota, as well as the discontinuation of operations in Arizona during the second quarter.

Total operating expenses in the third quarter were $9.7-million, an increase of $500,000 as compared with $9.2-million in the third quarter of 2021. The increase in total expenses was primarily attributable to an increase in professional fees related to the former agreement to be acquired by Verano Holdings.

Operating loss in the third quarter was $200,000, a decrease of $3.9-million compared with an operating loss of $4.1-million in Q3 last year. The improvement in operating performance was driven by increased revenue and gross profit dollars, partially offset by the increase in total operating expenses.

Total other expenses were $7.6-million during Q3 2022, compared with $2.2-million in Q3 2021. The variance in other expenses is primarily attributable to increased interest expense related to the company's credit facility, and an impairment of long-lived assets of $2.1-million.

Net loss in Q3 2022 was $8.4-million, as compared a loss of $6.9-million in Q3 2021. The variance compared with the prior year was driven by the improvement in operating income, offset by increased interest expenses and an impairment of long-lived assets.

EBITDA (earnings before interest, taxes, depreciation and amortization), as described in accompanying non-GAAP (generally accepted accouting principles) reconciliation, was a loss of $1.2-million during Q3 2022, compared with a loss of $3.1-million in Q3 2021. Adjusted EBITDA was $1.9-million in Q3 2022, as compared with a loss of $1.9-million in Q3 2021.

Other events

On Aug. 25, 2022, the company announced the launch of its Boundary Waters line of premium cannabis prerolls focused on sustainability and environmental preservation. Inspired by Minnesota's Boundary Waters Canoe Area Wilderness, which exists within Superior National Forest, Boundary Waters prerolls are hand-rolled from premium whole flower and are available in sativa, indica and hybrid strains, and can be purchased in five-roll packs.

On Oct. 13, 2022, Goodness Growth received a notice of purported termination of the agreement with Verano Holdings pursuant to which Verano had agreed to purchase all of the company's stock, subject to the satisfaction of certain conditions. The notice asserted certain breaches of the arrangement agreement, including claims the company's public filings and communications with respect to its business and continuing operations were misleading and that the company breached its representations to Verano under the arrangement agreement. Verano also claimed, as a result of such breaches, it is entitled to payment of the $14,875,000 termination fee and its transaction expenses. Goodness Growth denies all of Verano's allegations and affirmatively states that it has complied with its obligations under the arrangement agreement in all material respects at all times. Goodness Growth believes that Verano has no factual or legal basis to justify or support its purported grounds for termination of the arrangement agreement.

On Oct. 21, 2022, Goodness Growth commenced an action in the Supreme Court of British Columbia against Verano arising out of Verano wrongfully repudiating 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. 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.

Company continues to explore strategic alternatives

As a result of the termination of the arrangement agreement with Verano Holdings, the Goodness Growth board of directors and its transaction committee, which was formed to explore strategic alternatives for the company in the third quarter of 2021, remain focused on maximizing value for stakeholders. The committee, with the assistance of outside advisers, ran a thorough sale process and received multiple indications of interest prior to announcing the arrangement agreement with Verano on Feb. 1, 2022. The board of directors and committee continue to evaluate strategic alternatives for the company, which could include a disposition of a material business or assets of the company, or a merger or sale of the company. The company has not set a timetable for the completion of this review process.

Balance sheet and liquidity

As of Sept. 30, 2022, the company had 128,126,330 equity shares issued and outstanding on an as-converted basis, and 158,380,087 shares outstanding on an as-converted, fully diluted basis.

As of Sept. 30, 2022, total current assets were $53.9-million. The company had cash on hand of $21.8-million, which included net proceeds received from an increase on its delayed draw loan of $8.5-million during the third quarter. Total current liabilities were $26.3-million.

Conference call and webcast information

Goodness Growth management will host a conference call with research analysts tomorrow, Tuesday, Nov. 15, 2022, at 8:30 a.m. ET (7:30 a.m. CT) to discuss its financial results for its third quarter ended Sept. 30, 2022. Interested parties may attend the conference call by dialling 1-888-660-6217 (toll-free) (United States and Canada) or 1-929-203-1990 (toll) (international) and referencing conference ID 2214400. A live audio webcast of this event will also be available in the events and presentations section of the company's investor relations website.

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 Inc., and its science and intellectual property developer, 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 450 employees is focused on the development of differentiated products, driving scientific innovation of plant-based medicines and developing meaningful intellectual property. 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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