Curaleaf : FY21 Financial Statements

CURALEAF HOLDINGS, INC.

Consolidated Financial Statements

As of and for the Years Ended

December 31, 2021 and 2020

(Expressed in Thousands United States Dollars Unless Otherwise Stated)

	Page(s)
Report of Independent Registered Public Accounting Firm (PCAOB ID 6642)	1
Consolidated Financial Statements
Consolidated Statements of Financial Position	6
Consolidated Statements of Profits and Losses and Other Comprehensive Loss	7
Consolidated Statements of Changes in Equity	8
Consolidated Statements of Cash Flows	9
Notes to Consolidated Financial Statements	10-65

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of directors of Curaleaf Holdings, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Curaleaf Holding Inc. (the Company) as of December 31, 2021, the related consolidated statements of profits and losses and other comprehensive loss, changes in equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and the results of its operations and its cash flows for the year then ended, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

The consolidated financial statements of the Company as at December 31, 2020, and for the year then ended, were audited by us in accordance with Canadian auditing standards, and our report dated March 11, 2021, expressed an unmodified audit opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 7, 2022 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.

Restatement

As discussed in Note 23 to the consolidated financial statements, the consolidated financial statements for the year ended December 31, 2020 have been restated to correct misstatement.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the 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. 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 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 a whole, and we are not, by communicating the critical audit matters below,

Antares Professional Corporation, Chartered Professional Accountants ("PKF Antares") is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the impairment analysis for goodwill

As discussed in Note 10 to the consolidated financial statements, the goodwill balance as of December 31, 2021 was $605,496 thousand. The Company performs impairment testing on an annual basis or whenever events or changes in circumstances indicate that the carrying value of a cash generating unit ("CGU") might exceed its recoverable amount, which is determined based on the higher of the fair value less costs of disposal or value-in-use. The significant assumptions were determined to be estimated sales volumes, selling prices, gross margins and discount rates.

The impairment in the amount of $8,901 thousands, allocated $3,181 thousands to goodwill and $5,720 thousands to intangible assets was recorded during the year ended December 31, 2021. This impairment was recorded in the statement of income and comprehensive income (disclosed in Note10).

We identified the evaluation of goodwill impairment as a critical audit matter. There was a high degree of auditor judgment required to evaluate the significant assumptions used in determining the recoverable amount which required the use of professionals with specialized skills and knowledge. The sensitivity of reasonably possible changes to those assumptions could have a significant impact on the determination of the recoverable amount of CGUs and the Company's assessment of impairment.

The following are the primary procedures we performed to address this critical audit matter:

• We critically evaluated the determination of the CGUs and carrying values of each CGU;
• We compared the Company's historical forecasts to actual results to assess the Company's ability to accurately estimate sales volumes, selling prices and operating costs;
• We evaluated the reasonableness of the Company's estimated sales volumes used in estimating of recoverable amounts, by comparing the estimated sales volumes to historical actual results of the Company, planned business initiatives, and external industry reports;
• We tested the estimated selling prices by comparing to actual sales prices realized subsequently to year end. We assessed the reasonableness of cost of goods sold by comparing the actual cost of goods sold to the forecasted cost of goods sold;
• We involved valuation specialists with specialized skills and knowledge, who assisted in a) evaluating the discount rates used in the impairment analyses by comparing them to discount rate ranges that were independently developed using publicly available market data for comparable entities; and b) performing sensitivity analyses over the discount rates to assess their impact on the determination of recoverable amounts.
• We assessed the adequacy of the disclosure of the goodwill in the consolidated financial statements.

Acquisition of subsidiaries

As discussed in Note 4 to the consolidated financial statements, during 2021 the Company completed acquisition of EMMAC Life Science Limited, Grassroots Maryland and Los Suenos Farms.

The purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including intangible assets of licenses, tradenames, know-how and non-competition agreements. Management estimated the fair value of the intangible assets using a discounted cash flow approach. To estimate fair value, management is required to make estimates and assumptions on the projected revenue and related growth rates, profitability of the acquired business and discount rate.

Auditing the Company's accounting for acquisition of subsidiaries was complex due to the significant estimation uncertainty in the Company's determination of the fair value of identifiable intangible assets. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business. The significant assumptions used to estimate the fair value of the intangible assets included discount rates, revenue growth rates and profitability that form the basis of the forecasted results. These significant assumptions are forward looking and could be affected by future economic and market conditions.

Our audit procedures to address the critical audit matter included the following, among others:

• We assessed the reasonableness of the projected revenues and related growth by verifying key management's assumptions, such as population penetration to cannabis medical market in different jurisdictions and medical THC

Antares Professional Corporation, Chartered Professional Accountants ("PKF Antares") is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.

dosing to external sources. We also reconciled base sale prices to actual sales contracts and verified accuracy of historical information underlying projections;

• We assessed the reasonableness of profitability by comparing projected margins with historical and annualized actual data, as well as with market trends indicated in external sources;
• With the assistance of valuation specialists:
• • evaluated the Company's selection of valuation methodologies and
  • evaluated the reasonableness of the discount rate by (1) testing the source information underlying the determination of the discount rate and testing the mathematical accuracy of the calculation and (2) developing a range of independent estimates and comparing those to the discount rate selected by management.

Fair value less costs to sell biological assets

As discussed in Note 6 to the consolidated financial statements, the Company's consolidated biological assets related to cannabis is $78,600 thousand at December 31, 2021. Biological assets are carried at fair value less costs to sell prior to harvest. The valuation of fair value less costs to sell requires management to make significant judgements and assumptions relating to the stage of growth of the cannabis, sales price and expected yields.

We identified the assessment of the evaluation of the fair value of biological assets as a critical audit matter, as there was significant judgement by management when developing estimates. This led to a high degree of auditor judgement, subjectivity and effort in performing procedures to evaluate management's estimate of fair value less costs to sell and the significant assumptions, including the stage of growth, sales price and expected yields. In addition, the nature of the process for cannabis biological assets valuation is manual and requires management to use complex spreadsheet models to estimate the fair value less costs to sell. The models must use a variety of inputs and source data. Auditing the fair value measurement of cannabis biological assets required an increased extent of audit effort.

Our audit procedures to address this critical audit matter included, among others:

• obtain understanding of management's process for developing the fair value estimate;
• performing biological assets stock-counts in selected locations;
• testing the model used to calculate the fair value less costs to sell;
• testing the completeness, accuracy and relevance of the underlying data used in the calculation;
• evaluating the significant assumptions used by management including the stage of growth, sales price and expected yields by i) assessing quantities and growth stage as compared to the plant's birth date, and ii) assessing their reasonability considering historical actual information and observation of independent open source market prices.

We have served as the Company's auditor since 2018.

Calgary, Alberta	Chartered Professional Accountants
March 7, 2022

Antares Professional Corporation, Chartered Professional Accountants

Suite 400, 906 12th Ave SW, Calgary, Canada, T2R 1K7

1. [phone], www.pkfantares.com

Antares Professional Corporation, Chartered Professional Accountants ("PKF Antares") is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.