Assisted 4 Living : Audited Financial Statements

Arboreta Healthcare, Inc.

Consolidated Financial Statements

December 31, 2021 and 2020

Table of Contents
Report of Independent Registered Public Accounting Firm......................................................................	1 - 3
Consolidated Financial Statements:
Consolidated Balance Sheets .................................................................................................................................	4
Consolidated Statements of Operations.............................................................................................................	5
Consolidated Statements of Stockholders' Equity.........................................................................................	6
Consolidated Statements of Cash Flows ...........................................................................................................	7
Notes to the Consolidated Financial Statements........................................................................................	8 - 36

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Arboreta Healthcare, Inc.

Lakewood Ranch, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Arboreta Healthcare, Inc. (the "Company") at December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has sustained net losses and has working capital deficits, which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty Our opinion is not modified with respect to this matter.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the

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Basis for Opinion, continued

amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as whole, and we are not, by communicating the critical matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Intangible Assets and Goodwill in Acquisitions

As described in Note 5 to the consolidated financial statements, the Company completed two acquisition transactions that were accounted for as business combinations. The Company recorded acquired intangible assets and goodwill at fair value on the acquisition dates based on net present value techniques utilizing post-tax cash flows and discount rates. The estimates that management used in calculating the net present values depend on assumptions specific to the nature of the activities with regard to the amount and timing of projected future cash flows; long-term forecasts; actions of competitors (competing services), future tax and discount rates.

The principal considerations for our determination that performing procedures relating to the valuation of intangible assets in acquisitions are a critical audit matter are (1) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value of intangible assets acquired due to the significant judgment by management when developing the estimates and (2) significant audit effort was required in evaluating the significant assumptions relating to the estimates, including the income projections and discount rates. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, reading the purchase agreements, and testing management's process for estimating the fair value of intangible assets. Testing management's process included evaluating the appropriateness of the valuation models, testing the completeness, accuracy, and relevance of underlying data used in the models, and testing the reasonableness of significant assumptions, including the income projections and discount rates. Evaluating the reasonableness of the income projections involved considering the current performance of the acquired businesses, the consistency with external market and industry data, and whether these assumptions were consistent with other evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of significant assumptions, including the discount rates, by comparing them against discount rate ranges that were independently developed using publicly available market data for comparable companies.

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Variable consideration for inpatient revenues

As discussed in Notes 2 and 7 to the consolidated financial statements, the Company provides inpatient services to patient and receives payments for those services from Medicare, Medicaid, private insurance, self-pay residents and other third-party payors. Net revenues are recorded at the transaction price, which the Company determines based on contractually agreed-upon amounts or rates, adjusted for estimates of variable consideration, such as implicit price concessions. The Company's net revenue was $53.7 million for the year ended December 31, 2021. The Company utilizes the expected value method to determine the amount of variable consideration that should be included in net revenues as an implicit price concession. This estimate is based upon contractual agreements, historical reimbursement experience within each payor type and current economic factors.

We identified the evaluation of the estimate of variable consideration for revenue contracts in the Company's inpatient segment as a critical audit matter. Complex and subjective auditor judgment was required to assess certain assumptions used to determine the estimate of variable consideration. These assumptions include the application of historical collection rates, by payor, and consideration of other changes in the current business operations and external environment, to the current period revenues. A high degree of auditor judgment was required to evaluate the relevance of historical collection rates by payor, and the length of the historical observation period for those collection rates, which are utilized to estimate variable consideration.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the Company's process for estimating variable consideration, which were used to determine the estimate of variable consideration. We tested a selection of cash receipts to assess the relevance and reliability of sources of data and key assumptions, including the historical collection rates by payor and the length of observation periods of the historical collection rates. Additionally, we: (1) assessed the collection rates used by management in estimating its variable consideration by comparing revenue recognized in prior periods to actual consideration received; and (2) evaluated whether historical collection rates were representative of the characteristics of the current payor portfolio. Specifically, we inquired of the Company's senior management, including the Company's divisional reporting leaders and revenue cycle management teams; inspected minutes of the Company's Board of Directors and certain other committees; and read relevant industry publications and news articles to remain apprised of developments in the current business operations and external environment that may have impacted variable consideration.

/s/Daszkal Bolton LLP

We have served as the Company's auditor since 2020

Fort Lauderdale, Florida

June 15, 2022

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