Good morning. My name is Devin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Goodness Growth Holdings third quarter 2022 results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question at any time, again, press star and then the number one. Thank you. Mr. Sam Gibbons of Investor Relations, you may begin your conference.
Thank you, Devin, and thanks everyone for joining us. With me on today's call are our Chief Executive Officer, Dr. Kyle Kingsley, and our Chief Financial Officer, John Heller. Today's conference call is being webcast live from the Investor Relations section of our website. Dial-in and webcast details for the call have also been provided in this morning's earnings release, which is also available on our website. Before we get started, we'd like to remind everyone that today's conference call may contain forward-looking statements within the meaning of U.S. and Canadian securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in such forward-looking statements. For more information on forward-looking statements, please refer to cautionary note regarding forward-looking statements in the earnings release.
We'd also like to remind investors and analysts that on October thirteenth, twenty twenty-two, we received notice from Verano Holdings Corp. that it was purporting to terminate the arrangement agreement dated January thirty-first, twenty twenty-two with Goodness Growth, pursuant to which Verano had agreed to acquire Goodness Growth on satisfaction of certain conditions. We believe that this purported termination was invalid and have treated it as a wrongful repudiation of the arrangement agreement. We filed suit against Verano in the Supreme Court of British Columbia on October twenty-first. Litigation at this time beyond what has already been disclosed, and direct your attention to the pleadings which are available from the court. Now I'll hand the call over to Dr. Kingsley.
Thanks, Sam. Good morning, everyone, and thank you all for joining us today. I'll begin with a high-level review of our third quarter performance and provide a brief update on our management team and board strategic priorities following the wrongful repudiation of our transaction to be acquired by Verano. After that, John will review our financial performance and balance sheet in more detail. 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 to the prior quarter. Total revenue of $18.9 million increased approximately 41% compared to the third quarter of last year.
If you exclude last year's contributions from our former operations in Arizona, which were discontinued earlier this year, total revenue grew approximately 60% year-over-year, driven by significant increases in retail sales in Minnesota, Maryland, and New Mexico, as well as wholesale sales growth in New York. On a sequential basis, excluding our former Arizona operations, sales declined 4.5% as compared to the second quarter of this year, with the decline driven primarily by lower sales in New Mexico, as store count across the state has increased significantly following the commencement of adult use sales during the second quarter.
As a reminder, there is no cap on the number of adult use dispensaries allowed for licensed operations in New Mexico, and the state has quickly grown store count per 100,000 residents well above industry average trends since the state transitioned to adult use sales. Our home market in Minnesota remains especially strong following the commencement of flower and edible sales earlier this year, and we are also pleased with substantial increases in wholesale volumes in New York. We expect both these positive trends to remain strong growth drivers for our business as we continue working toward the launch of adult use sales in New York next year. Gross margin performance improved significantly year-over-year from 38.3% of sales in the third quarter of last year to 50.6%.
Gross margin has benefited from our recent wind down of operations in Arizona, and when we exclude previous contributions from Arizona, we've now delivered two consecutive quarters of positive adjusted EBITDA performance with gross margins in excess of 50% of sales. We're also very pleased with recent regulatory developments in Maryland and Minnesota, which should create additional revenue growth opportunities for our business. Last week, in a largely expected outcome, Maryland voters approved a ballot initiative to legalize recreational use sales. Even more importantly, however, were the midterm election results in our home state of Minnesota. Democrats gained control of the state senate for the first time since 2014, which opens a pathway for the state legislature to pass an adult use legalization bill without opposition.
Despite strong support from the governor, previous initiatives to pass marijuana reform in Minnesota have been blocked by the former Republican majority in the state senate, so this has been a very positive regulatory development in one of our most important markets. Lawmakers have already voiced strong support for this initiative since the conclusion of the midterm elections. We believe it is likely that legalization of adult use program could be approved by the state legislature in Minnesota sometime in 2023. Despite the many positive trends we are experiencing in our business, we were extremely disappointed by Verano's decision to wrongfully repudiate our transaction on October thirteenth. As a reminder, we previously anticipated the transaction to be acquired by Verano would close sometime during the fourth quarter of this year.
We reiterate that this repudiation was wrongful, and we will be seeking significant damages through the judicial process based on Verano's breach of contract and its duty of good faith and honest performance. While this unexpected development with Verano has resulted in a steep decline in our share price, we continue to believe there is significant long-term value in our asset portfolio, and that view has been validated by the strong support we've received from some of our largest shareholders over the course of the last several weeks. Our management team and board of directors remains focused on maximizing value for shareholders.
A transaction committee was formed by our board of directors to explore strategic alternatives for the company in the third quarter of 2021, and is continuing to evaluate all opportunities to maximize value for stakeholders in the wake of termination of the Verano transaction. We would like to remind investors that the transaction committee, with the assistance of outside advisors, ran a thorough sale process and received multiple bids on the company prior to announcing the agreement with Verano on February 1, 2022. Transaction committee will be revisiting those opportunities as it continues evaluating strategic alternatives for the company. We also remind investors that there was some license overlap with the combined Goodness Growth and Verano asset portfolio, and we were already in the process of identifying potential divestitures to satisfy regulatory requirements in certain jurisdictions if the Verano transaction had closed.
While strategic alternatives for the companies could include a disposition of a material business or assets or a merger sale of the company, we are unable to set a timetable for the completion of this review process at this time. Regardless of any outcomes of this review process, we have an extremely attractive portfolio of U.S. cannabis assets and are looking forward to additional positive regulatory developments in our markets in Maryland and New York, with New York's long-awaited transition to adult use sales expected next week and the recent legalization of adult use sales in Maryland following a successful ballot initiative in last week's election.
Quantifying the opportunity in Maryland will depend on outcomes of the state's adult use program's implementation. Historical per capita spending trends across the United States suggest Maryland is currently around $6 within the existing medical spending of about $15 within two years of legalization. We're looking forward to unlocking this new catalyst for sales growth in the Maryland market next year. As a reminder, in Maryland, we currently have two operating Green Goods dispensaries in Frederick and Baltimore, as well as approximately 100 testing space, where we are already manufacturing a full spectrum of cannabis product categories. We recently began selling high-dose edibles in Maryland, and we're one of the first movers in this market. We are continuing to enhance our manufacturing capabilities in Maryland to accommodate greater variety of adult use products.
We're confident that our dispensaries will be highly competitive stores in that market when adult use sales begin, which we believe is likely to occur next summer. In New York, per capita spending in the existing medical market is one of the lowest in the country at approximately $0.70. At maturity, based on these per capita spending trends, the New York adult use more than $5 billion in potential annual sales at maturity. We were one of the first five licensed operators in this market back in 2015 and are extremely proud of our leadership position we've established in the state's existing medical program. Today, we are one of the larger operators with 41,600 sq ft of cultivation capacity and produce 1 of the most diverse product sets operating in the market.
The exact timing of the implementation of adult use sales next year remains uncertain. Our operations are governed by similar concepts. We would be able to operate our stores until midnight and maintain our existing home delivery service, which we believe is one of the largest legal home delivery operations in the state and currently accounts for more than 50% of our retail sales. We've been responsibly stockpiling bulk oil inventory where possible so that we can maintain a strong focus on flower production upon the launch of adult use, which will be critical in ensuring long-term success in New York's market. Flower sales and wholesale sales have been increasing nicely since these operating plans were implemented. As we mentioned earlier, we expect to continue growing wholesale sales in New York leading up to the launch of adult use program.
We've operationalized 170,000 sq ft of the 324,000 sq ft structure. As we've done in the past, we have partnered with IIP through a sale leaseback transaction to finance most of the first phase of the construction, which should be completed in the first half of next year. The new building is predominantly composed of cultivation space, as well as a new home for our cloning and vegging space, drying, curing, trimming, and flower packaging operations. The remaining square footage of the new building remains available shelf space for facility expansion. We will be retrofitting the old facility to enhance our processing and manufacturing capabilities. I'll now hand the call over to John for more detailed review of the financials.
Thank you, Kyle. Thanks to everyone for joining us this morning. I'll begin with a review of highlights from the quarter. Please keep in mind that all numbers stated refer to U.S. dollar amounts unless otherwise noted. Total revenue increased 41%. Contributions from our recently discontinued operations in Arizona. Total revenue increased 59.6% year-over-year and reflected strong growth in each of our operating markets. Retail revenue, excluding Arizona, increased 60.1% to $16.4 million in Q3 2022. Wholesale revenue, excluding Arizona, increased 56.1% to $2.5 million, driven by increased sales in Maryland and New York. Gross profit in the third quarter was $9.1 million or 38.3% of revenue in the third quarter of last year.
Total operating expenses in the third quarter were $9.7 million, an increase of $0.5 million compared to $9.2 million in the third quarter of last year. The increase in total expenses was primarily attributable to an increase in professional fees. On a GAAP basis, SG&A expenses of $8.5 million increased 4.7% compared to Q3 of last year and reflected 45% of sales compared to 60% of sales in Q3 last year. These improvements in SG&A as a percent of revenue were expected given the ramp-up in sales we've been experiencing across our footprint. Loss from operations in Q3 was $0.2 million, an improvement of $3.9 million. 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 in the third quarter, compared to $2.2 million in Q3 of last year. The variance due to the company's credit facility and an impairment of long-lived assets of $2.1 million, which I'll discuss more momentarily in my review of the balance sheet. Net loss in Q3 was $8.4 million, compared to a loss of $6.9 million in the third quarter last year, with the variance driven by the improvement in operating income offset by increased interest expenses and the impairment of long-lived assets. EBITDA as described in Q3 of 2022 compared to a loss of $3.1 million in Q3 2021, with the variance primarily attributable to higher interest expenses.
Adjusted EBITDA was a gain of $1.9 million in Q3 2022 as compared to a loss of $1.9 million in Q3 2021. As of September 30th, 2022, the company had $128.1 million in total assets and $26.3 million in stockholders' equity. We ended the quarter with total current assets of $53.9 million, including cash on hand of $21.8 million, which included net proceeds received from an increase on our delayed draw loan of $8.5 million during the quarter, but does not include an additional $7 million in expected cash proceeds from an increased draw on our credit facility in the first quarter of next year. We had $55.6 million in long-term debt outstanding as of September 30th, 2022, of which $6 million in debt is due within the next 12 months.
During the nine months ended September 30, 2022, the company drew $27.1 million in principal debt from its delayed draw loans. Proceeds received net of deferred financing fees of $2.1 million were $24.9 million. The delayed draw loans have a maturity date of April 30, 2023. We have the unilateral option to extend the maturity date another 12 months for an additional fee of $1.4 million, and we expect to exercise this option. As Kyle mentioned during his prepared remarks, our management team and board of directors continues to explore all opportunities to maximize value for stakeholders.
We have identified property, equipment, and leased assets and liabilities associated with our assets and businesses in Maryland, as well as assets in Arizona, Nevada, and Massachusetts, with carrying amounts that are expected to be recovered principally through sale or disposal rather than through continuing use. The sale of some of these assets and liabilities is highly probable. They can be sold in their immediate condition, and sales are expected to occur within the next 12 months. As such, these assets and liabilities have been classified as held for sale. The carrying value of these assets exceeded fair value, less expected costs to sell. As such, the company recorded an impairment loss of $2.1 million in the third quarter and $7.5 million for the 9 months ended September 30, 2022. I'll now hand the call back to Kyle for some additional closing comments.
Thanks, John. While the unexpected unlawful termination of the Verano transaction has been disappointing for all of our stakeholders, our asset portfolio is positioned for strong growth next year, and we believe we remain a very attractive long-term player in the United States cannabis market. Despite the near-term challenges created by the repudiation of the arrangement agreement with Verano, we are operating in the midst of a regulatory climate which has never been more promising for our business and for the broader U.S. cannabis industry. As we discussed, our historically medical markets in Maryland, Minnesota, and New York are all on the cusp of enacting adult use programs, and these will each serve as strong growth catalysts for Goodness Growth.
Furthermore, bipartisan support for federal legalization, which could open access to SAFE Banking and a variety of other potential social equity improvements, remains very strong, with potential for meaningful change to occur during the upcoming lame duck session of Congress, which ends on January third, 2023. President Biden's recent decision to ask Congress to review the scheduled classification of marijuana under the Controlled Substances Act was another major step toward righting the wrongs caused by the failed war on drugs. There are several potential outcomes from this review process, which could be extremely favorable for our company, especially considering our reputation as one of the most respected leaders in the true science and medicine of cannabis in the United States. We've recently seen additional new entrants to the U.S. market from non-traditional, non-multi-state operators. We believe this type of interest is likely to continue in the current environment.
Our asset portfolio, combined with our medical and scientific leadership and one of the strongest portfolios of intellectual property in cannabis, will remain a very attractive opportunity for strategic partners for the foreseeable future. Our management team and board of directors remains committed to maximizing value for stakeholders, and we're continuing to work very closely with our outside advisors and lenders to protect our long-term interests. We're continuing to focus on executing what's within our control amidst the current landscape, and we'd like to thank all of our team members and stakeholders for the continued support for the company and its mission. Operator, that concludes our prepared remarks. We'll now open the line to analyst questions.
At this time, I would like to remind everyone in order to ask a question, please press star and then the number one on your telephone keypad. Our first question comes from Eric Des Lauriers with Craig-Hallum Capital Group.
Great. Thank you for taking my questions. First one here just on Minnesota. It's great to see that, you know, at over 50% of sales by now. Could you just comment on your overall capacity utilization on, you know, cultivation and production side of things? You know, obviously, we have smokable flower now allowed, and, you know, the prospects for adult use just got ratcheted up significantly. I'm wondering, you know, to what extent you have the capacity to, you know, serve that expected increase in demand. Thanks.
Yeah, Eric, appreciate that. We do have this, you know, significant capability for increasing our throughput through the existing facility. Actually, through the course of this winter, we're looking at, you know, augmenting HVAC, so we can, you know, get even more dense with our production in the existing 60,000 sq ft of flowering greenhouse that we have. We also have access to adjacent 20 acres of property for any additional expansion, you know, moving ahead. You know, we're considering all options here right now. The first step is augmentation of the existing facilities, which provide significant upside to current throughput. But we do have that 20 acres, which we're excited about as we look at the advent of adult use in the state.
Yeah, that makes sense. Next question on Maryland. So if I heard John's comments correctly, you have some Maryland assets that are held for sale. Could you just help us understand, you know, perhaps which assets are held for sale here? I know, you know, presumably, you know, like everything is on the table strategically for you guys, but just how are you looking at the Maryland opportunity with the assets you have, given the potential for adult use coming up here?
Yeah. Eric, in relation to Maryland, we just have some of the structures for the. We were gonna build a second greenhouse there that was put on pause, and there was some equipment and some, you know, some part of an additional greenhouse that we are looking to sell, and we just have written that down to what we believe is the realizable value. That's the only thing in Maryland at this point that's been reflected on the balance sheet.
Eric, in broad strokes, the board of directors and transaction committee are looking at sort of all assets and all paths forward here. We can't get a whole lot more granular than that as far as specific assets.
No, that makes sense. Yeah, it's good to hear that it's just, you know, those two structures that, you know, if you guys do decide to, you know, stick in Maryland, you know, you do have significant assets to, you know, meet that adult use demand. Last question from me here. Appreciate the color you guys gave on New York. You know, it sounds like wholesale delivery continuing to go well for you guys. Can you comment just on the overall competitive landscape with the illicit market? You know, how much of a risk do you see from that illicit competition? Are you noticing a big difference sort of, you know, within New York City and then the more suburban and rural areas of the state?
Thanks.
Yeah. Obviously, there's a substantial illicit market in New York. You know, we believe it's just a matter of time until there's actually requirement for regulated, safe, public health-facing, volume of plant material. You know, one thing that we're seeing is it doesn't seem to be nearly as much capacity coming online in New York. Our plan is really to right-size our facility, gear it towards anticipated demand and also to really, you know, use the existing facility that we have. We do have 40,000 sq ft of flowering greenhouse there right now. You know, we're taking a measured approach here, really trying to gauge demand. Obviously, the big uncertainty in New York is the go-live date for adult use.
You know that once we get more clarity there, we'll be able to say more.
All right. Thanks for taking my questions.
Thanks, Eric.
There are no further questions at this time. I turn the call over to Dr. Kingsley.
Thank you all for joining us today. We wish everyone a safe and happy holiday season, and we'll look forward to connecting with you all in the new year. Thank you.