Vireo Growth Inc 10-Q for FY2024 Q2

Vireo Growth Inc. (VREOF)

10-Q 2024-08-06 For: 2024-06-30

Added on April 10, 2026

About this 10-Q

Vireo Growth Inc filed this 10-Q on August 6, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $25.11M; up 24.3% from $20.2M a year earlier
Net loss: $668.41K; compared with a net loss of $7.33M a year earlier
Diluted EPS: $0.00; compared with -$0.06 a year earlier

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British Columbia, Canada		82-3835655
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

207 South 9^th Street, Minneapolis, MN		55402
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Large accelerated filer	◻	Accelerated filer	◻
Non-accelerated filer	þ	Smaller reporting company	þ
		Emerging growth company	þ


PART I - FINANCIAL INFORMATION	3
ITEM 1 – FINANCIAL STATEMENTS	3
Consolidated Balance Sheets – June 30, 2024 (unaudited) and December 31, 2023 (audited)	3
Consolidated Statements of Net Loss and Comprehensive Loss – Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	4
Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) - Three Months Ended June 30, 2024 and 2023 (unaudited)	5
Consolidated Statements of Cash Flows - Six Months Ended June 30, 2024 and 2023 (unaudited)	6
Notes to Unaudited Consolidated Financial Statements	7
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4 - CONTROLS AND PROCEDURES	34
PART II – OTHER INFORMATION	34
ITEM 1 - LEGAL PROCEEDINGS	34
ITEM 1A – RISK FACTORS	35
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35
ITEM 5 - OTHER INFORMATION	35
ITEM 6 - EXHIBITS	36
SIGNATURES	37


	June 30,		December 31,
	2024		2023
Assets
Current assets:
Cash	$	11,229,297	$	15,964,665
Accounts receivable, net of credit losses of $230,624 and $254,961, respectively		2,260,137		3,086,640
Income tax receivable		12,261,964		12,278,119
Inventory		20,092,498		19,285,870
Prepayments and other current assets		771,186		1,336,234
Notes receivable, current		3,750,000		3,750,000
Warrants held		4,867,643		1,937,352
Assets Held for Sale		93,401,886		91,213,271
Total current assets		148,634,611		148,852,151
Property and equipment, net		26,261,755		23,291,183
Operating lease, right-of-use asset		10,941,864		2,018,163
Intangible assets, net		8,308,953		8,718,577
Deposits		533,745		383,645
Total assets	$	194,680,928	$	183,263,719
Liabilities
Current liabilities
Accounts payable and accrued liabilities	$	9,176,236	$	7,674,389
Long-Term debt, current portion		61,502,285		60,220,535
Right of use liability		953,389		890,013
Uncertain tax liability		26,726,000		22,356,000
Liabilities held for sale		88,414,795		88,326,323
Total current liabilities		186,772,705		179,467,260
Right-of-use liability		19,466,941		10,543,934
Other long-term liabilities		196,598		155,917
Convertible debt, net		9,682,176		9,140,257
Long-Term debt, net		1,121,306		—
Total liabilities		217,239,726		199,307,368

Commitments and contingencies (refer to Note 17)

Stockholders’ deficiency
Subordinate Voting Shares ($- par value, unlimited shares authorized; 114,605,008 shares issued and outstanding at June 30, 2024 and 110,007,030 at December 31, 2023)		—		—
Multiple Voting Shares ($- par value, unlimited shares authorized; 300,714 shares issued and outstanding at June 30, 2024 and 331,193 at December 31, 2023)		—		—
Super Voting Shares ($- par value; unlimited shares authorized; 0 shares issued and outstanding at June 30, 2024 and December 31, 2023)		—		—
Additional Paid in Capital		188,249,124		187,384,403
Accumulated deficit		(210,807,922)		(203,428,052)
Total stockholders' deficiency	$	(22,558,798)	$	(16,043,649)
Total liabilities and stockholders' deficiency	$	194,680,928	$	183,263,719


☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	(612) 999-1606
	(Registrant’s telephone number, including area code)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenue	$	25,108,247	$	20,196,556	$	49,195,562	$	39,284,980
Cost of sales
Product costs		11,516,604		10,275,584		23,663,492		19,853,795
Inventory valuation adjustments		41,000		589,676		(263,000)		579,676
Gross profit		13,550,643		9,331,296		25,795,070		18,851,509
Operating expenses:
Selling, general and administrative		7,564,231		8,059,427		14,615,844		15,216,262
Stock-based compensation expenses		(60,568)		2,037,204		119,221		3,712,798
Depreciation		72,925		117,681		146,471		277,191
Amortization		180,033		159,028		360,067		318,794
Total operating expenses		7,756,621		10,373,340		15,241,603		19,525,045

Income (loss) from operations		5,794,022		(1,042,044)		10,553,467		(673,536)

Other income (expense):
Gain (loss) on disposal of assets		(97,471)		(2,747,881)		(218,327)		(2,747,881)
Interest expenses, net		(7,518,454)		(7,744,794)		(16,241,091)		(14,879,584)
Other income (expenses)		1,593,492		5,798,335		2,911,081		5,820,648
Other income (expenses), net		(6,022,433)		(4,694,340)		(13,548,337)		(11,806,817)

Loss before income taxes		(228,411)		(5,736,384)		(2,994,870)		(12,480,353)

Current income tax expenses		(440,000)		(1,652,871)		(4,385,000)		(3,377,871)
Deferred income tax recoveries		—		60,000		—		123,000
Net loss and comprehensive loss		(668,411)		(7,329,255)		(7,379,870)		(15,735,224)
Net loss per share - basic and diluted	$	(0.00)	$	(0.06)	$	(0.05)	$	(0.12)
Weighted average shares used in computation of net loss per share - basic and diluted		143,583,496		128,126,330		143,354,913		128,126,330


	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, 2023	86,721,030	$	—	348,642	$	—	65,411	$	—	$	181,321,847	$	(177,880,963)	$	3,440,884
Stock-based compensation	—		—	—		—	—		—		2,464,574		—		2,464,574
Warrants issued in financing activities	—		—	—		—	—		—		497,055		—		497,055
Obligation to issue shares	—		—	—		—	—		—		1,407,903		—		1,407,903
Net Loss	—		—	—		—	—		—		—		(15,735,224)		(15,735,224)
Balance at June 30, 2023	86,721,030	$	—	348,642	$	—	65,411	$	—	$	185,691,379	$	(193,616,187)	$	(7,924,808)

Balance, January 1, 2024	110,007,030		—	331,193		—	—		—		187,384,403		(203,428,052)		(16,043,649)
Conversion of MVS shares	3,047,900		—	(30,479)		—	—		—		—		—		—
Stock-based compensation	—		—	—		—	—		—		119,221		—		119,221
Options exercised	50,000		—	—		—	—		—		16,500		—		16,500
Warrants exercised	200,000		—	—		—	—		—		29,000		—		29,000
Shares issued	1,300,078		—	—		—	—		—		700,000		—		700,000
Net Loss	—		—	—		—	—		—		—		(7,379,870)		(7,379,870)
Balance at June 30, 2024	114,605,008	$	—	300,714	$	—	—	$	—	$	188,249,124	$	(210,807,922)	$	(22,558,798)

	Common Stock
	SVS			MVS			Super Voting Shares							Total
										Additional Paid-		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		in Capital		Deficit		Equity (deficiency)
Balance, April 1, 2023	86,721,030	$	—	348,642	$	—	65,411	$	—	$	184,219,278	$	(186,286,932)	$	(2,067,654)
Stock-based compensation	—		—	—		—	—		—		788,980		—		788,980
Obligation to issue shares	—		—	—		—	—		—		186,066		—		186,066
Warrants issued in financing activities	—		—	—		—	—		—		497,055		—		497,055
Net Loss	—		—	—		—	—		—		—		(7,329,255)		(7,329,255)
Balance at June 30, 2023	86,721,030	$	—	348,642	$	—	65,411	$	—	$	185,691,379	$	(193,616,187)	$	(7,924,808)

Balance, April 1, 2024	111,041,230	$	—	320,851	$	—	—	$	—	$	187,564,192	$	(210,139,511)	$	(22,575,319)
Conversion of MVS shares	2,013,700		—	(20,137)		—	—		—		—		—		—
Stock-based compensation	—		—	—		—	—		—		(60,568)		—		(60,568)
Options exercised	50,000		—	—		—	—		—		16,500		—		16,500
Warrants exercised	200,000		—	—		—	—		—		29,000		—		29,000
Shares issued	1,300,078		—	—		—	—		—		700,000		—		700,000
Net Loss	—		—	—		—	—		—		—		(668,411)		(668,411)
Balance at June 30, 2024	114,605,008	$	—	300,714	$	—	—	$	—	$	188,249,124	$	(210,807,922)	$	(22,558,798)


	For the Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,379,870)	$	(15,735,224)
Adjustments to reconcile net loss to net cash used in operating activities:
Inventory valuation adjustments		(263,000)		579,676
Depreciation		146,471		277,191
Depreciation capitalized into inventory		1,121,141		1,294,065
Non-cash operating lease expense		211,319		327,692
Amortization of intangible assets		360,067		318,794
Amortization of intangible assets capitalized into inventory		49,557		—
Stock-based payments		119,221		3,712,798
Warrants receivable		—		(1,248,224)
Warrants held		(2,930,291)		—
Interest Expense		2,916,255		3,223,635
Deferred income tax		—		(123,000)
Accretion		108,902		593,063
Loss on disposal of Red Barn Growers		—		2,909,757
Loss (gain) on disposal of assets		120,856		(161,727)
Change in operating assets and liabilities:
Accounts Receivable		842,353		(60,197)
Prepaid expenses		565,048		608,486
Inventory		(407,734)		(1,737,376)
Income taxes		16,154		592,427
Uncertain tax position liabilities		4,370,000		—
Accounts payable and accrued liabilities		1,215,694		2,557,998
Changes in operating lease liabilities		(281,874)		—
Change in assets and liabilities held for sale		(2,100,143)		(91,247)
Net cash provided by (used in) operating activities		(1,199,874)		(2,161,413)

CASH FLOWS FROM INVESTING ACTIVITIES:
PP&E Additions		(4,088,734)		(2,478,645)
Proceeds from sale of Red Barn Growers net of cash		—		439,186
Proceeds from sale of property, plant, and equipment		—		125,000
Deposits		(150,100)		(260,545)
Net cash provided by (used in) investing activities		(4,238,834)		(2,175,004)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt, net of issuance costs		1,131,400		—
Proceeds from convertible debt, net of issuance costs		—		3,497,462
Proceeds from issuance of shares		700,000		—
Proceeds from warrant exercises		29,000		—
Proceeds from option exercises		16,500		—
Debt principal payments		(1,062,000)		(1,976,362)
Lease principal payments		(111,560)		(987,953)
Net cash provided by (used in) financing activities		703,340		533,147

Net change in cash		(4,735,368)		(3,803,270)

Cash, beginning of period		15,964,665		15,149,333

Cash, end of period	$	11,229,297	$	11,346,063


Name of entity		Place of incorporation
EHF Cultivation Management, LLC		Arizona, USA
Elephant Head Farm, LLC		Arizona, USA
HiColor, LLC		Minnesota, USA
MaryMed, LLC		Maryland, USA
Mayflower Botanicals, Inc.		Massachusetts, USA
Minnesota Medical Solutions, LLC		Minnesota, USA
MJ Distributing C201, LLC		Nevada, USA
MJ Distributing P132, LLC		Nevada, USA
Resurgent Biosciences, Inc.		Delaware, USA
Retail Management Associates, LLC		Arizona, USA
Verdant Grove, Inc.		Massachusetts, USA
Vireo Health de Puerto Rico, Inc.		Puerto Rico
Vireo Health of Nevada 1, LLC		Nevada, USA
Vireo Health of New Mexico, LLC		Delaware, USA
Vireo Health of New York, LLC		New York, USA
Vireo Health of Puerto Rico, LLC		Delaware, USA
Vireo Health, Inc.		Delaware, USA
Vireo of Charm City, LLC		Maryland, USA
XAAS Agro, Inc.		Puerto Rico


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Retail	$	20,819,019	$	17,143,099	$	40,418,459	$	33,614,899
Wholesale		4,289,228		3,053,457		8,777,103		5,670,081
Total	$	25,108,247	$	20,196,556	$	49,195,562	$	39,284,980




Assets held for sale	June 30,		December 31,
	2024		2023
Property and equipment	$	87,962,541	$	86,864,965
Intangible assets		662,500		662,500
Operating lease, right-of-use asset		3,381,612		3,381,612
Deposits		1,395,233		304,194
Total assets held for sale	$	93,401,886	$	91,213,271

Liabilities held for sale
Right of Use Liability	$	88,414,795	$	88,326,323
Total liabilities held for sale	$	88,414,795	$	88,326,323


	June 30		December 31,
	2024		2023
Work-in-progress	$	13,188,031	$	13,058,348
Finished goods		5,906,445		5,278,331
Other		998,022		949,191
Total	$	20,092,498	$	19,285,870


	June 30,
	2024	2023
Stock options	29,843,198	30,185,610
Warrants	19,237,649	9,437,649
RSUs	2,500,916	3,102,765
Convertible debt	72,645,878	27,756,593
Total	124,227,640	70,482,617


	June 30		December 31,
	2024		2023
Land	$	863,105	$	863,105
Buildings and leasehold improvements		15,339,998		15,124,915
Furniture and equipment		7,098,616		7,807,250
Software		39,388		242,204
Vehicles		288,938		284,000
Construction-in-progress		4,109,949		128,220
Right of use asset under finance lease		7,938,138		7,938,138
		35,678,132		32,387,832
Less: accumulated depreciation		(9,416,377)		(9,096,649)
Total	$	26,261,755	$	23,291,183


	Operating Leases		Finance Leases
	June 30, 2024		June 30, 2024		Total
2024	$	1,120,387	$	6,780,539	$	7,900,926
2025		3,047,603		13,773,155		16,820,758
2026		2,727,346		14,183,661		16,911,007
2027		2,474,144		14,606,527		17,080,671
2028		2,254,049		15,042,128		17,296,177
Thereafter		7,824,515		218,572,918		226,397,433
Total minimum lease payments	$	19,448,044	$	282,958,928	$	302,406,972
Less discount to net present value		(4,402,521)		(189,169,326)		(193,571,847)
Less liabilities held for sale		(2,970,335)		(85,444,460)		(88,414,795)
Present value of lease liability	$	12,075,188	$	8,345,142	$	20,420,330


	June 30,
	2024		2023
Weighted-average remaining lease term (years) – operating leases	7.96		4.70
Weighted-average remaining lease term (years) – finance leases	16.58		17.43
Weighted-average discount rate – operating leases	8.35	%	15.00	%
Weighted-average discount rate – finance leases	16.20	%	15.27	%


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Work-in-progress	$	(13,500)	$	540,967	$	(201,700)	$	556,039
Finished goods		54,500		48,709		(61,300)		23,637
Total	$	41,000	$	589,676	$	(263,000)	$	579,676


Goodwill - December 31, 2022	$	183,836
Divestitures (Note 3)		(183,836)
Goodwill - December 31, 2023 and June 30, 2024	$	—


	Licenses & Trademarks
Balance, December 31, 2022	$	8,776,946
Divestitures		(409,239)
Additions		1,090,919
Amortization		(728,419)
Write off		(11,630)
Balance, December 31, 2023	$	8,718,577
Amortization		(409,624)
Balance, June 30, 2024	$	8,308,953


	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


		Weighted Average		Weighted Avg.
	Number of Options	Exercise Price		Remaining Life
Balance, December 31, 2022	23,547,558	$	0.66	7.30
Forfeitures	(4,137,079)		0.82	—
Granted	10,558,845		0.25	6.42
Balance, December 31, 2023	29,969,324	$	0.50	6.18
Forfeitures	(616,126)		0.79	—
Exercised	(50,000)		0.33	—
Granted	540,000		0.54	—
Options Outstanding at June 30, 2024	29,843,198	$	0.49	5.72

Options Exercisable at June 30, 2024	25,427,087	$	0.42	5.30


	Number of	Weighted Average		Weighted Average
SVS Warrants	Warrants	Exercise Price		Remaining Life
Warrants outstanding at December 31, 2022	150,000	$	1.49	2.00
Granted	16,250,000		0.20	5.00
Warrants outstanding at December 31, 2023	16,400,000	$	0.21	4.57
Granted	—		—	—
Exercised	(200,000)		0.145	—
Warrants outstanding at June 30, 2024	16,200,000	$	0.21	4.07

Warrants exercisable at June 30, 2024	16,200,000	$	0.21	4.07


		Weighted Avg.
	Number of Shares	Fair Value
Balance, December 31, 2022	3,221,677	$	0.81
Forfeitures	(678,666)		0.54
Balance, December 31, 2023	2,543,011		0.88
Granted	121,625		0.41
Forfeitures	(163,720)		0.54
Balance, June 30, 2024	2,500,916		0.88

Vested at June 30, 2024	1,025,253	$	0.95


Exhibit No.		Description of Exhibit

3.1		Notice of Alteration, Notice of Articles and Certificate of Name Change dated June 25, 2024 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed July 1, 2024)

3.2		Articles of Vireo Growth Inc. dated June 25, 2024 (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed July 1, 2024)

10.71		Binding Letter of Intent, dated April 1, 2024, between Goodness Growth Holdings Inc. and ACE Venture Enterprises, Inc.
10.72		Eighth Amendment to Lease Agreement, dated April 1, 2024, by and between IIP-NY 2 LLC and Vireo Health of New York LLC

10.73		Seventh Amendment to Credit Agreement, dated as of April 30, 2024, by and among Goodness Growth Holdings, Inc. and certain of its subsidiaries, the persons from time-to-time parties thereto as guarantors, the lenders party thereto, and Chicago Atlantic Advisers, LLC, as administrative agent and as collateral agent

10.74		Eighth Amendment to Credit Agreement, dated as of June 14, 2024, by and among Goodness Growth Holdings, Inc. and certain of its subsidiaries, the persons from time-to-time parties thereto as guarantors, the lenders party thereto, and Chicago Atlantic Advisers, LLC, as administrative agent and as collateral agent

10.75		Employment Agreement between Goodness Growth Holdings Inc. and Joshua Rosen, effective January 1, 2024.

10.76		Goodness Growth Holdings, Inc. 2019 Equity Incentive Plan Restricted Stock Unit Agreement, by and between Goodness Growth Holdings, Inc. and Joshua Rosen, effective March 31, 2024 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed June 6, 2024)

10.77		Form of Goodness Growth Holdings, Inc. 2019 Equity Incentive Plan Restricted Stock Unit Agreement (Employee Restricted Stock Unit Award) (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed June 6, 2024)

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 Interim 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 Vireo Growth’s Quarterly Report on Form 10-Q as of and for the quarter ended June 30, 2024, 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.

	VIREO GROWTH INC. (Registrant)

Date: August 6, 2024	By:	/s/ Joshua Rosen
		Name:	Joshua Rosen
		Title:	Chief Executive Officer and Interim Chief Financial Officer (signing on behalf of the Registrant and as a principal financial officer of the Registrant)

	ACE following the Closing Date, profits to be calculated based upon an adjusted net income measure to be mutually agreed upon by the Parties in the definitive agreements (hereinafter “Net Profits”) and to expire on an agreed upon date to be determined in good faith (the “Net Profits Interest”). ACE shall be entitled to customary protections by way of the consulting agreement, including but not limited to nonperformance protections and the ability to terminate any consulting agreement with fair and due compensation to GDNS, both Parties acting reasonably. Ace shall have an option to buy-out GDNS’ Net Profit interest following the Closing Date, for fair market value as agreed upon by the Parties based upon a projection of future profits discounted to present value and subject to additional deductions and exclusions as further described in the definitive agreements. 6. In association with a consulting agreement, GDNS agrees to license GDNS’s entire portfolio of brands for the State of New York other than specifically excluded portfolios to be agreed upon by the Parties (which excluded portfolios shall include GDNS’ hemp-derived beverage portfolio) to ACE to assist with ACE’s commercialization efforts on a limited, exclusive, non-assignable or sub-licensable, royalty-free basis for the duration of the consulting relationship and a reasonable tail to be agreed upon in good faith in the event of termination of the consulting relationship. 7. ACE shall secure waivers of fee requirements, or acknowledgements of fees paid, from the New York Office of Cannabis Management prior to the Closing Date. 8. ACE hereby commits to a Closing Date of no later than June 30, 2024.
Due Diligence Period:	ACE hereby agrees and confirms that all due diligence required for ACE to consummate a transaction will be completed on or before May 15, 2024.
Exclusivity:	Nothing in this Binding Letter of Intent shall be construed as creating any prohibitions on GDNS or VireoNY from entering into any other similar agreement or arrangement to sell or dispose of substantially all of the assets or equity interests of VireoNY (“Alternate Transaction”). In the event GDNS or VireoNY enter into a definitive agreement for an Alternate Transaction all binding obligations of the Parties herein shall be null and void and the Parties shall incur no liability arising hereunder (including, but not limited to, repayment of the Loan). Notwithstanding the foregoing, to the extent that ACE provides the ACE Loan to VireoNY at any time before the Closing Date

	(the date of such ACE Loan, the “Exclusivity Date”), each of GDNS and VireoNY agrees that from and after the Exclusivity Date it will not and will cause its subsidiaries and each its and their respective officers, directors, managers, shareholders, members, employees, agents, consultants, advisors and representatives (collectively, “Company Representatives”) not to, directly or indirectly: (a) solicit, initiate, knowingly encourage or knowingly facilitate any inquiry or the making of any proposal or offer (other than that of ACE) relating to an Alternate Transaction (other than in the ordinary course of business); (b) enter into or otherwise participate in any discussions or negotiations with any person (other than ACE) relating to any Alternate Transaction; (c) furnish to any person (other than ACE) access to its properties, assets, books, contracts, personnel or records for the purposes of determining whether to make or pursue any inquiries or proposals relating to any Alternate Transaction; or (d) enter into any agreement or understanding with any person (other than ACE) with respect to any of the foregoing, or otherwise cooperate with, assist, participate in, or facilitate any effort or attempt by, any person (other than ACE) to seek to do any of the foregoing.
Confidentiality:	This LOI is binding, and the Parties’ discussions regarding this contemplated Transaction may not be made public except for such disclosures as are required by applicable disclosure requirements, securities law, law, regulation or court order. No Party shall make any press release, public statement or other similar announcement without the prior written approval of the other Parties.
Costs and Expenses:	Each Party shall be responsible for its own costs and expenses (including any fees or other expenses payable to legal counsel or other advisors) incurred in connection with the Transaction contemplated herein.
Representation and Transaction Fees:	Parties all acknowledge and agree that there are no brokers, “finders,” or other representatives due compensation associated with the proposed Transaction other than Hyperion Capital, Inc. (“Hyperion”) representing GDNS.
Binding Provisions:	All provisions herein shall be considered binding.
Internal and Regulatory Approvals:	ACE hereby represents and confirms that no additional internal approvals are required in order to consummate the Transaction, which shall include but not be limited to: (a) ACE’s Board of Directors; and (b) ACE’s shareholders by way of a shareholder vote. ACE and GDNS acknowledge that certain regulatory approvals may be required



By:	/s/ Joshua Rosen
	Joshua Rosen
	Interim Chief Financial Officer