CURALEAF HOLDINGS, INC.

Unaudited Condensed Interim Consolidated Financial Statements

As of and for the Three and Nine Months Ended

September 30, 2023 and 2022

(Expressed in Thousands United States Dollars Unless Otherwise Stated)

TABLE OF CONTENTS

	Page(s)
Condensed Interim Consolidated Financial Statements:
Condensed Interim Consolidated Balance Sheets (Unaudited)	1
Condensed Interim Consolidated Statements of Operations (Unaudited)	2
Condensed Interim Consolidated Statements of Comprehensive Loss (Unaudited)	3
Condensed Interim Consolidated Statements of Shareholders’ Equity (Unaudited)	4
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)	5-6
Notes to Condensed Interim Consolidated Financial Statements	7-30

Curaleaf Holdings, Inc.

Condensed Interim Consolidated Balance Sheets

(in thousands)

		As of
	Note	September 30, 2023		December 31, 2022
		Unaudited		Audited
Assets
Current assets:
Cash, cash equivalents and restricted cash		$	118,114	$	163,177
Accounts receivable, net of allowance for credit losses of $9,803 and $13,201, respectively		38,064		45,179
Inventories, net	5	219,868		234,782
Assets held for sale	6	65,842		193,561
Prepaid expenses and other current assets		36,209		28,836
Current portion of notes receivable		5,692		—
Total current assets		483,789		665,535
Deferred tax asset		1,685		1,564
Property, plant and equipment, net	7	572,640		595,846
Right-of-use assets, finance lease, net	8	146,290		156,586
Right-of-use assets, operating lease, net	8	117,079		118,155
Intangible assets, net	9	1,188,931		1,213,303
Goodwill	9	667,262		625,129
Investments		2,502		2,797
Tax Receivable		35,119		33,296
Other assets		11,176		15,457
Total assets		$	3,226,473	$	3,427,668
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	20	$	63,723	$	80,789
Accrued expenses		100,969		103,311
Income tax payable		237,333		163,662
Lease liability, finance lease	8	9,445		8,340
Lease liability, operating lease	8	17,045		17,001
Current portion of notes payable	10	62,245		51,882
Current contingent consideration liability	4, 20	11,743		18,537
Liabilities held for sale	6	24,617		35,545
Deferred consideration		24,012		24,446
Financial obligation	8	4,722		4,740
Other current liabilities		359		1,725
Total current liabilities		556,213		509,978
Deferred tax liability		311,037		308,974
Notes payable	10	522,377		570,788
Lease liability, finance lease	8	162,061		167,411
Lease liability, operating lease	8	109,498		113,307
Uncertain tax provision		107,582		94,516
Contingent consideration liability	4, 20	4,750		10,572
Deferred consideration	4	40,220		36,854
Financial obligation	8	200,441		214,139
Other long-term liability		298		312
Total liabilities		2,014,477		2,026,851
Temporary Equity:
Redeemable non-controlling interest contingency	12	119,285		121,113
Shareholders’ equity:
Additional paid-in capital		2,194,594		2,163,061
Treasury shares		(5,208)		(5,208)
Accumulated other comprehensive income		(19,151)		(18,593)
Accumulated deficit		(1,077,524)		(859,556)
Total shareholders’ equity		1,092,711		1,279,704
Total liabilities and shareholders’ equity		$	3,226,473	$	3,427,668

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

1

Curaleaf Holdings, Inc.

Condensed Interim Consolidated Statements of Operations (Unaudited)

(in thousands, except for share and per share amounts)

		Three months ended September 30,				Nine months ended September 30,
	Note	2023		2022		2023		2022
Revenues:
Retail and wholesale revenues		$	331,796	$	324,640	$	997,100	$	931,576
Management fee income		1,376		1,173		4,263		3,656
Total revenues		333,172		325,813		1,001,363		935,232
Cost of goods sold		183,120		158,120		543,106		428,448
Gross profit		150,052		167,693		458,257		506,784
Operating expenses:
Selling, general and administrative	14	97,120		101,732		316,315		306,252
Share-based compensation	13	6,222		5,196		14,178		21,125
Depreciation and amortization	7, 8, 9	31,497		28,251		98,849		82,323
Total operating expenses		134,839		135,179		429,342		409,700
Income from operations		15,213		32,514		28,915		97,084
Other income (expense):
Interest income		—		32		23		101
Interest expense	10	(13,078)		(14,456)		(40,128)		(41,626)
Interest expense related to lease liabilities and financial obligations	8	(10,503)		(10,611)		(31,830)		(25,196)
Loss on impairment		(24,790)		—		(24,790)		—
Other (expense) income, net	15	(2,796)		1,070		4,070		20,897
Total other expense, net		(51,167)		(23,965)		(92,655)		(45,824)
(Loss) income before provision for income taxes		(35,954)		8,549		(63,740)		51,260
Income tax expense		(34,880)		(49,972)		(114,540)		(140,183)
Net loss from continuing operations		(70,834)		(41,423)		(178,280)		(88,923)
Net loss from discontinued operations¹	3	(22,895)		(12,733)		(46,410)		(25,257)
Net loss		(93,729)		(54,156)		(224,690)		(114,180)
Less: Net loss attributable to non-controlling interest		(1,382)		(2,767)		(6,721)		(4,415)
Net loss attributable to Curaleaf Holdings, Inc.		$	(92,347)	$	(51,389)	$	(217,969)	$	(109,765)
Per share - basic and diluted:
Net loss from continuing operations		$	(0.10)	$	(0.06)	$	(0.25)	$	(0.13)
Net loss from discontinued operations		(0.03)		(0.02)		(0.06)		(0.04)
Loss per share attributable to Curaleaf Holdings, Inc. – basic and diluted	16	$	(0.13)	$	(0.08)	$	(0.31)	$	(0.17)
Weighted average common shares outstanding – basic and diluted	16	725,319,477		709,638,533		721,206,068		709,802,875
1 The nine months period ended September 30, 2023 includes a pre-tax loss of $2.0 million on the sale of certain discontinued operations in Colorado (see Note 3 — Discontinued operations).

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

2

Curaleaf Holdings, Inc.

Condensed Interim Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands)

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Net loss from continuing operations	$	(70,834)	$	(41,423)	$	(178,280)	$	(88,923)
Foreign currency translation differences	(7,942)		(17,094)		149		(37,154)
Total comprehensive loss from continuing operations	(78,776)		(58,517)		(178,131)		(126,077)
Total comprehensive loss from discontinued operations, net of tax	(22,895)		(12,733)		(46,410)		(25,257)
Total comprehensive loss	(101,671)		(71,250)		(224,541)		(151,334)
Less: Comprehensive loss attributable to non-controlling interest	(4,031)		(8,151)		(6,014)		(16,157)
Comprehensive loss attributable to Curaleaf Holdings, Inc.	$	(97,640)	$	(63,099)	$	(218,527)	$	(135,177)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

3

Curaleaf Holdings, Inc.

Condensed Interim Consolidated Statements of Shareholders’ Equity (Unaudited)

(in thousands, except for share amounts)

	Redeemable Noncontrolling Interest		Common Shares		Additional Paid-in Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Shareholders' Equity
			Number of Shares
			SVS	MVS
Balances as of December 31, 2021	$	118,972	614,369,729	93,970,705	$	2,047,531	$	(5,208)	$	(6,744)	$	(489,458)	$	1,546,121
Issuance of shares in connection with acquisitions	—		1,219,463	—	4,297		—		—		—		4,297
Acquisition escrow shares returned and retired	—		(980,098)	—	(10,370)		—		—		—		(10,370)
Initial NCI - Four20 Pharma	14,556		—	—	—		—		—		—		—
Foreign currency exchange variance	(11,742)		—	—	—		—		(25,412)		—		(25,412)
Exercise and forfeiture of stock options and RSUs	—		1,982,817	—	(875)		—		—		—		(875)
Reclassifications	—		—	—	3,738		—		(379)		81		3,440
Share-based compensation	—		152,508	—	21,125		—		—		—		21,125
Net loss	(4,415)		—	—	—		—		—		(109,765)		(109,765)
Balances as of September 30, 2022	$	117,371	616,744,419	93,970,705	$	2,065,446	$	(5,208)	$	(32,535)	$	(599,142)	$	1,428,561
Balances as of December 31, 2022	$	121,113	623,520,125	93,970,705	$	2,163,061	$	(5,208)	$	(18,593)	$	(859,556)	$	1,279,704
Issuance of shares in connection with acquisitions	—		7,186,083	—	17,321		—		—		—		17,321
Contribution from NCI	4,186		—	—	—		—		—		—		—
Foreign currency exchange variance	707		—	—	—		—		(558)		—		(558)
Exercise and forfeiture of stock options and RSUs	—		1,655,351	—	34		—		—		—		34
Reclassifications	—		—	—	—		—		—		1		1
Share-based compensation	—		—	—	14,178		—		—		—		14,178
Net loss	(6,721)		—	—	—		—		—		(217,969)		(217,969)
Balances as of September 30, 2023	$	119,285	632,361,559	93,970,705	$	2,194,594	$	(5,208)	$	(19,151)	$	(1,077,524)	$	1,092,711

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

4

Curaleaf Holdings, Inc.

Condensed Interim Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Nine months ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss from continuing operations	$	(178,280)	$	(88,923)
Adjustments to reconcile Net loss from continuing operations to Net cash provided by operating activities:
Depreciation and amortization	144,497		111,890
Share-based compensation	14,178		21,125
Non-cash interest expense	44,669		6,263
Amortization of operating lease right-of-use assets	11,828		9,027
Loss on impairment	19,127		—
Gain on debt retirement	(3,285)		(1)
Loss on sale or retirement of asset	3,301		—
Gain on investment	(2,353)		(14,998)
Bad debt expense	1,344		—
Gain on sale of property, plant and equipment	—		(1,178)
Deferred tax expense	(15,011)		(18,469)
Other non-cash expenses	4,760		—
Changes in assets and liabilities:
Accounts receivable, net	5,614		(6,202)
Inventories	17,698		(40,598)
Prepaid expenses and other current assets	(9,742)		(2,041)
Tax receivables	(1,823)		—
Held for sale, net	4,600		532
Other assets	3,567		(34,284)
Accounts payable	(17,475)		50,376
Income tax payable	73,598		65,514
Lease liability, operating lease	(25,184)		(7,971)
Accrued expenses and other current liabilities	(1,354)		(3,986)
Net cash provided by operating activities from continuing operations	94,274		46,076
Net cash used in operating activities from discontinued operations	(21,293)		(11,772)
Net cash provided by operating activities	72,981		34,304
Cash flows from investing activities:
Purchase of property, plant and equipment, net	(49,375)		(104,982)
Proceeds from sale of entities	—		10,577
Proceeds from consolidation of acquisitions	1,360		—
Purchase of intangibles	(1,214)		—
Cash acquired from acquisition	—		26,635
Acquisition-related cash payments	(4,996)		(112,368)
Note receivable from third party	(5,692)		2,315
Net cash used in investing activities from continuing operations	(59,917)		(177,823)
Net cash provided by investing activities from discontinued operations	1,805		5,786
Net cash used in investing activities	(58,112)		(172,037)
Cash flows from financing activities:
Proceeds from financing agreement	9,187		51,729
Minority interest investment in Curaleaf International	4,177		—
Lease liability payments	(5,759)		(3,405)
Principal payments on notes payable	(47,778)		(2,204)
Principal payments on financing liabilities	(21,424)		—
Remittances of statutory tax withholdings on share-based payment awards	—		(4,459)
Exercise of stock options	—		(875)
Deferred consideration payment	(2,358)		—
Contingent Consideration payment	(6,198)		—
Net cash (used in) provided by financing activities from continuing operations	(70,153)		40,786
Net cash used in financing activities from discontinued operations	—		(356)
Net cash (used in) provided by financing activities	(70,153)		40,430
Net decrease in cash and cash equivalents	(55,284)		(97,303)
Net increase in restricted cash	8,726		—
Cash, cash equivalents and restricted cash, beginning of period	163,177		299,329
Effect of exchange rate on cash	1,495		(4,344)
Cash, cash equivalents and restricted cash, end of period	$	118,114	$	197,682

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Non-cash investing & financing activities:
Issuance of notes in connection with acquisitions	$	—	$	145,433
Issuance of shares in connection with acquisitions	—		6,169
Contingent consideration incurred in connection with acquisitions	—		3,941
Impairment - operating lease right-of-use assets	302		—
Impairment - finance lease right-of-use assets	243		—
Capital expenditures within accrued expenses and other current liabilities	27,070		—
Supplemental disclosure of cash flow information:
Cash paid for taxes	$	46,193	$	120,741
Cash paid for interest	22,516		22,909

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

6

Curaleaf Holdings, Inc.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited)

(in thousands, except for gram, share and per share amounts)

Note 1 — Operations of the company

Curaleaf Holdings, Inc. (the “Company”, “Curaleaf” or the “Group”) was incorporated under the laws of British Columbia, Canada on November 13, 2014. Curaleaf operates as a life science company developing full scale cannabis operations, with core competencies in cultivation, manufacturing, dispensing, and cannabis research.

On October 25, 2018, the Company completed a reverse takeover transaction, and completed a related private placement, which closed one day prior on October 24, 2018 (collectively, the “Business Combination”). Following the Business Combination, the Company’s subordinate voting shares (“SVS”) were listed on the Canadian Securities Exchange (“CSE”) under the symbol “CURA” and quoted on the OTCQX ® Best Market under the symbol “CURLF”. The head office of the Company is located at 420 Lexington Ave, Suite 2035, New York, New York 10170. The Company’s registered and records office address is located at Suite 1700-666 Burrard Street, Vancouver, British Columbia, Canada.

For the purposes of these unaudited condensed interim consolidated financial statements as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and 2022, and the accompanying notes to these unaudited condensed interim consolidated financial statements, (the “Condensed Interim Consolidated Financial Statements”), the terms “Company” and “Curaleaf” mean Curaleaf Holdings, Inc. and, unless otherwise indicated, includes its subsidiaries. Any references to the cultivation, processing, manufacturing, extraction, retail operations, dispensing or distribution of cannabis, logistics, or similar terms specifically relate only to the Company’s licensed subsidiary entities. Operations of the licensed subsidiary entities are dependent on each entity’s license type, and the applicable local law and associated regulations.

Note 2 — Basis of presentation

The accompanying Condensed Interim Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America as issued by the Financial Accounting Standards Board. The Company’s significant accounting policies and methods of application are described in Summary of significant accounting policies in the annual audited consolidated financial statements of the Company as of and for the years ended December 31, 2022 and 2021 (“Annual Financial Statements”). The Condensed Interim Consolidated Financial Statements have been prepared consistent with those accounting policies.

The Condensed Interim Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements for Curaleaf Holdings, Inc. and the notes thereto, included in the Company’s Annual Financial Statements.

In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Certain previously reported amounts have been reclassified between line items to conform to the current period presentation. Results of interim periods should not be considered indicative of the results for the full year. These unaudited interim condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported in the unaudited condensed consolidated financial statements. Actual results could differ from these estimates.

Discontinued Operations

The Company classifies items as discontinued operations in accordance with Accounting Standards Codification (“ASC”) 205 - Presentation of Financial Statements (“ASC 205”). A disposal of a component of an entity or group of components of an entity shall be reported in discontinued operations if the disposal represents a strategic shift that has, or will have, a major effect on an entity’s operations and financial results and meets the criteria for assets held for sale, is already disposed of by sale, or is disposed of other than by sale (i.e. via abandonment, distribution to owners in a spin off, etc.). To classify as an asset held for sale, the asset or disposal group must meet all of the following conditions: i) the asset is available for immediate sale in its present condition, ii) management is committed to a plan to sell, iii) an active program to locate a buyer and complete the plan has been initiated, iv) the asset is being actively marketed for sale at a sales price that is reasonable in relation to its fair value, v) the sale is highly probable within one year from the date of classification, and vi) actions required to complete the plan indicate that it is unlikely that the plan will be significantly changed or withdrawn. An asset held for sale is measured at the lower of its carrying amount or fair value less cost to sell unless the asset held for sale meets the exceptions as denoted by ASC 205. Fair value is the amount obtainable from the

7

sale of the asset in an arm’s length transaction, less the costs of disposal. Once classified as held for sale, any depreciation and amortization cease to be recorded.

When the Company makes the decision to sell an asset or group of assets, it is evaluated to determine if it is held for sale or if it qualifies as a discontinued operation based on the three criteria described above and as outlined in ASC 205. When a component of the Company qualifies as discontinued operations, the results of the component are presented as a part of assets held for sale in the Condensed Interim Consolidated Balance Sheets, separately as Net loss from discontinued operations in the Condensed Interim Consolidated Statements of Operations, and separately per each type of cash flow (Net cash used in operating activities from discontinued operations, Net cash provided by investing activities from discontinued operations, and net cash provided by (used in) investing activities from discontinued operations) in the Condensed Interim Consolidated Statements of Cash Flows. Additionally, the summarized results of discontinued operations and the major classes of assets and liabilities are disclosed in a separate footnote (see Note 3 — Discontinued operations).

Certain amounts presented in the Condensed Interim Consolidated Balance Sheets for the prior year period have been reclassified to exclude discontinued operations and therefore present continuing operations balances.

Summary of significant accounting policies

Cash and cash equivalents include cash deposits in financial institutions, other deposits that are readily convertible into cash, with original maturities of three months or less, and cash held at retail locations. As of the three and nine months ended September 30, 2023, the Company has a restricted cash balance of $8.7 million.

There have been no additional changes to the Company’s significant accounting policies as described in Note 2 — Basis of presentation in the Company’s Annual Financial Statements.

Recently Adopted Accounting Standards

Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurements of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), was issued in June 2022 by the Financial Accounting Standards Board. ASU 2022-03 clarified that a contractual restriction on the sale of an equity security is not considered part of the unit of account of an equity security. As a result, such restriction is not considered in measuring fair value of the equity security. ASU 2022-03 is effective for all other entities for fiscal years beginning after December 15, 2024 and interim periods within those fiscal years, with early adoption permitted. The Company early adopted and applied ASU 2022-03, prospectively, as of the quarter ended September 30, 2023, noting no material impact to the Company’s Condensed Interim Consolidated Financial Statements.

Recently Issued Accounting Standards

The Company reviews recently issued accounting standards on a quarterly basis and has determined there are no standards yet to be adopted which are relevant to the Company’s disclosures.

+Note 3 — Discontinued operations

On January 26, 2023, the Company announced its planned closure of a majority of its operations in California, Colorado and Oregon. During the quarter ended September 30, 2023, the Company announced its planned closure of its operations in Kentucky and Michigan, and its planned closure of its adult-use operations in Maine. These planned closures represent a strategic shift that will have a major effect on the Company’s operations and financial results. These discontinued operations are a component of the Company’s domestic reportable segment.

The planned closure of these operations meet the ASC 205 held for sale criteria as of September 30, 2023; therefore, the Company has reflected the financial results of the discontinued operations in the Unaudited Condensed Interim Consolidated Statements of Operations.

The Company signed an asset purchase agreement, effective July 1, 2023, for the sale of its operations in Oregon to Hotbox Farms LLC (“Hotbox Farms”). The sale, which remains subject to regulatory approval, is expected to be completed by December 31, 2023. In connection with the sale, the Company also signed a management services agreement with Hotbox Farms to provide certain administrative and operational support services and a licensing agreement to use certain of the Company’s intellectual property. During the three and nine months ended September 30, 2023, the Company recorded a pre-tax loss related to disc ops of $22.9 million and $46.4 million.

8

The following table summarizes the major classes of assets and liabilities of the Company’s discontinued operations as of September 30, 2023 and December 31, 2022.

	September 30, 2023		December 31, 2022
Assets
Accounts receivable, net	$	2,318	$	6,998
Inventories, net	3,123		15,861
Prepaid expenses and other current assets	1,347		3,472
Total current assets	6,788		26,331
Deferred tax asset	13,020		13,328
Income tax receivables	22,577		14,093
Property, plant and equipment, net	2,667		23,820
Right-of-use assets, finance lease	—		282
Right-of-use assets, operating lease	1,458		4,491
Intangible assets, net	—		6,708
Other assets	—		217
Total non-current assets	39,722		62,939
Total assets	$	46,510	$	89,270
Liabilities
Accounts payable	$	2,120	$	4,483
Accrued expenses	6,981		11,519
Lease liability, finance lease	27		26
Lease liability, operating lease	699		591
Current portion of notes payable	77		82
Total current liabilities	9,904		16,701
Notes payable	—		68
Lease liability, finance lease	292		313
Lease liability, operating lease	2,003		2,133
Total non-current liabilities	2,295		2,514
Total liabilities	$	12,199	$	19,215

The summarized results of the Company’s discontinued operations were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Total revenue	$	7,007	$	13,913	$	23,202	$	48,618
Cost of goods	14,408		19,786		41,259		54,472
Gross loss	(7,401)		(5,873)		(18,057)		(5,854)
Other operating expenses	5,393		7,505		11,572		22,066
Operating loss	(12,794)		(13,378)		(29,629)		(27,920)
Total other income (expense), net	(17,215)		19		(23,895)		(546)
Loss from discontinued operations before provision for income taxes	(30,009)		(13,359)		(53,524)		(28,466)
Loss from discontinued operations before provision for income taxes	(30,009)		(13,359)		(53,524)		(28,466)
Income tax benefit	7,114		626		7,114		3,209
Net loss from discontinued operations, net of tax included in the Condensed Interim Consolidated Statements of Operations	$	(22,895)	$	(12,733)	$	(46,410)	$	(25,257)

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Note 4 — Acquisitions

Clever Leaves’ EU-GMP

On July 5, 2023, Terra Verde LDA, a wholly owned subsidiary of Curaleaf International, acquired the assets of Clever Leaves’ EU-GMP, a certified cannabis processing facility in Setubal, Portugal. The acquisition was structured as an asset purchase, including all equipment and lease rights to a processing and warehousing facility, for $2.7 million.

Deseret Wellness LLC

On April 10, 2023 the Company acquired 100% of all issued and outstanding share capital of Deseret Wellness LLC (“Deseret”), the largest cannabis retail operator in Utah, with consideration consisting of cash and stock. The Deseret acquisition includes three retail dispensaries located in the cities of Park City, Provo and Payson. Deseret immediately strengthened the Company’s retail footprint in Utah, providing the state's medical patients with a wide variety of quality products including cannabis flower, vape cartridges, edibles, and concentrates.

The following table presents the fair value of the assets acquired and liabilities assumed in the acquisition of Deseret as of the acquisition date and an allocation of the consideration to net assets acquired:

	Deseret Wellness
Cash	$	1,360
Prepaid expenses and other current assets	137
Inventory	807
Property, plant and equipment, net	1,692
Right-of-use assets	406
Other assets	57
Licenses	10,620
Trade name	890
Non-compete agreements	230
Goodwill	7,002
Deferred tax liabilities	(3,339)
Liabilities assumed	(5,242)
Net assets acquired	$	14,620
Consideration paid in cash	$	2,067
Deferred consideration classified as a liability	12,553
Total consideration	$	14,620
Cash outflow, net of cash acquired	$	707

The fair value of the consideration, paid through the issuance of SVS, was based on a third-party valuation that takes into account transfer restrictions and the time value of money. The Company incurred $0.3 million of transaction costs related to the acquisition of Deseret. During the period ended September 30, 2023, the Company recorded a measurement period adjustment to the purchase price allocation reported as of June 30, 2023. The measurement period adjustment reduced inventory and increased goodwill in the amount of $0.2 million. The acquisition remains subject to post-closing adjustments, and the Company is in the process of finalizing purchase price accounting.

The Company calculated, on a pro forma basis, the combined results of the acquired entity as if the acquisition had occurred as of January 1, 2023. These unaudited pro forma results are not necessarily indicative of either the actual consolidated results had the acquisition occurred as of January 1, 2023, or of the future consolidated operating results. For the Deseret acquisition, total unaudited pro forma revenue and net income for the nine months ended September 30, 2023 was $6.6 million and $0.2 million, respectively.

10

Revenue and net income from Deseret included in the Condensed Interim Consolidated Statements of Operations for the three and nine months ended September 30, 2023 was $3.4 million and $0.5 million, respectively.

Tryke Companies

On October 4, 2022, the Company completed the acquisition of Tryke Companies (dba Reef Dispensaries) (the “Tryke Acquisition”), a privately held, vertically integrated, multi-state cannabis operator, upon which the Company took ownership of six highly trafficked dispensaries under the Reef brand, with two retail stores in Arizona and four in Nevada, including the Phoenix metropolitan area, Las Vegas strip, and North Las Vegas.

The transaction consideration included an initial payment at closing of $10.0 million in cash and 2.7 million SVS and additional cash and shares consideration of $75.0 million and 16.5 million SVS, to be paid in three installments on the first, second and third anniversaries of the closing.

Contingent consideration

Contingent consideration recorded relates to the Company’s business combinations and asset acquisitions. As discussed in Note 2 — Basis of presentation, contingent consideration payable is subject to significant judgment and estimates, such as projected future revenue. Refer to Note 20 — Fair value measurements and financial risk management for further discussion surrounding the inputs utilized in the Company’s determination of its fair value of contingent consideration.

Changes in the contingent consideration account balance are as follows:

	Acquisitions(1)
	HMS		EMMAC		Sapphire		Four20		Tryke		Total
Carrying amount, December 31, 2022	$	1,854	$	10,360	$	3,895	$	4,690	$	8,310	$	29,109
Payments of contingent consideration	(1,854)		(4,430)		(3,890)		(3,285)		-		(13,459)
Revaluation of contingent consideration	-		(1,430)		-		1,182		884		636
Difference in exchange	-		156		43		(38)		-		161
Gain (loss) on contingent consideration not paid	-		94		(48)		-		-		46
Carrying amount, September 30, 2023	-		4,750		-		2,549		9,194		16,493
Less: current portion	-		-		-		(2,549)		(9,194)		(11,743)
Non-current contingent consideration liability	$	-	$	4,750	$	-	$	-	$	-	$	4,750
(1) As defined individually in the Company’s Annual Financial Statements.

Note 5 — Inventories

Inventories consist of the following as of September 30, 2023 and December 31, 2022:

	September 30, 2023		December 31, 2022
Raw materials:
Cannabis	$	44,739	$	43,054
Non-Cannabis	19,580		17,258
Total raw materials	64,319		60,312
Work-in-process	79,276		118,997
Finished goods	79,403		74,317
Transferred to Assets held for sale	(3,130)		(18,844)
Inventories, net	$	219,868	$	234,782

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Note 6 — Assets and liabilities held for sale

Changes in the carrying amount of assets and liabilities held for sale are as follows:

Assets held for sale	Discontinued Operations		GR Entities		Total
Balance at December 31, 2022	$	89,270	$	104,291	$	193,561
Transferred in/(out)	(42,760)		(84,959)		(127,719)
Total assets held for sale at September 30, 2023	$	46,510	$	19,332	$	65,842

Liabilities associated with assets held for sale	Discontinued Operations		GR Entities		Total
Balance at December 31, 2022	$	19,214	$	16,331	$	35,545
Transferred in/(out)	(7,015)		(3,913)		(10,928)
Total liabilities associated with assets held for sale at September 30, 2023	$	12,199	$	12,418	$	24,617

Former Grassroots Entities (“GR Entities”)

Pursuant to the Amended and Restated Agreement and Plan of Merger (the “Grassroots Merger Agreement”), on October 14, 2022, the former owners of Grassroots (as defined in the Annual Financial Statements) exercised their option to be paid in the form of cash and SVS in the amount of $28.3 million, and the Company gained the sole right to proceeds from the sale of the Illinois Assets (as defined in the Annual Financial Statements).

On April 1, 2021, the Company and the owners of the Illinois Assets (the “Plaintiffs”) signed definitive agreements to sell the Illinois Assets to Parallel Illinois, LLC (“Parallel”). Under the terms of the transaction, the purchase price for the Illinois Assets consisted of up to $100 million base price to be paid $60 million in cash and $40 million in Parallel stock, plus earnouts of up to an additional $55 million payable through 2023. The Company received a $10 million deposit from Parallel, which was refundable under limited circumstances. On February 25, 2022, the Company received correspondence from Parallel’s attorneys indicating that Parallel was not in a position to complete the acquisition of the Illinois Assets and, therefore, declared its agreement to purchase the Illinois Assets terminated. The Plaintiffs asserted that Parallel’s actions constituted material breaches of the definitive agreements, and on February 2, 2022, the Plaintiffs filed an arbitration against Parallel and certain principals of Parallel for breach of contract, fraudulent misrepresentation and other claims. During the six months ended June 30, 2022, as a result of the breach of contract, the Company determined that the $10 million deposit received from Parallel was no longer refundable, and accordingly recognized a gain within the “Other income” line item in the Condensed Interim Consolidated Statements of Operations at that time. In September 2023, the Company signed a final settlement agreement, as part of which, Parallel formally released its claims against the Plaintiffs, including with respect to any claim for return of the $10 million deposit. See Note 18 — Commitments and contingencies, for further information.

During the quarter ended March 31, 2022, the Company signed a letter of intent to sell the Grassroots Vermont entities; PhytoScience Management Group, Inc., including Vermont Patients Alliance, LLC, PhytoScience Institute, LLC, and Nutraceutical Science Laboratories, LLC and accordingly has recorded the associated net assets of these entities as held for sale during the current period in the Condensed Interim Consolidated Balance Sheets.

Since the acquisition, the Company has been actively marketing certain rights and interests for certain real estate assets associated with the acquisition of Grassroots. As of June 23, 2023, after continued unsuccessful marketing of these real estate assets, the Company terminated the marketing of these real estate assets and reclassified them from held-for-sale to held-and-used.

Recently Added to Held-For-Sale

During the quarter ended September 30, 2023, the Company obtained signed letters of intent or has been actively marketing certain rights and interests to sell Alternative Therapies Group, Inc. (Massachusetts), Acres Cultivation, LLC and its licenses (Nevada), House of Herbs (Nevada), and certain locations of its Bellmawr, NJ facilities, and accordingly, has recorded the associated net assets of these entities as held for sale during the current period in the Condensed Interim Consolidated Balance Sheets.

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Discontinued Operations

As described above in Note 3 — Discontinued operations, the Company began marketing its net assets of its operating entities in Michigan, Kentucky, and adult-use Maine for sale during the period ended September 30, 2023 and as such, these net assets have been classified as held for sale in the Condensed Interim Consolidated Balance Sheets.

All assets and liabilities held for sale are included within the Domestic operations reportable segment. See Note 17 — Segment reporting, for further information regarding the Company’s segments as of September 30, 2023.

Note 7 — Property, plant and equipment, net

Property, plant and equipment, net consisted of the following as of September 30, 2023 and December 31, 2022:

	September 30, 2023		December 31, 2022
Land	$	8,410	$	8,903
Building and improvements	514,956		452,775
Furniture and fixtures	185,412		181,918
Information technology	7,062		5,105
Construction in progress	54,656		79,448
Transferred to assets held for sale	(28,664)		(12,508)
Total property, plant and equipment	741,832		715,641
Less: Accumulated depreciation	(169,192)		(119,795)
Property, plant and equipment, net	$	572,640	$	595,846

Assets included in construction in progress represent projects related to both cultivation and dispensary facilities not yet completed or otherwise not ready for use.

Depreciation expense totaled $17.7 million and $52.8 million for the three and nine months ended September 30, 2023, respectively, of which $11.7 million and $36.2 million, respectively, were recognized as cost of goods sold. The remaining $6.0 million and $16.7 million, respectively, were recognized as a part of Total operating expenses in the Condensed Interim Consolidated Statements of Operations.

The Company recognized impairment expense of $20.3 million on its property, plant and equipment for the three and nine months ended September 30, 2023 in connection with the inclusion of its operations in Kentucky, Michigan and adult-use operations in Maine within discontinued operations during the quarter ended September 30, 2023 (see Note 3 — Discontinued operations).

Note 8 — Leases

The Company leases real estate for its dispensaries, cultivation facilities, production plants, and corporate offices. Lease right-of-use assets (“ROU assets”) and liabilities are recognized for real estate leases with an initial term greater than 12 months on the Condensed Interim Consolidated Balance Sheets. Certain of the Company’s leases contain cancellation options, in the event the Company is unable to obtain regulatory approval and permitting for a selected site, as well as other contingencies. In addition, the majority of the Company’s real estate leases include extension options, which are typically at the option of the Company to exercise. Cancellation and extension options are used to determine the Company’s ROU assets and lease liabilities only when the Company has determined that it is probable that it will exercise the options. The majority of the Company’s lease payments are in-substance fixed, with the exception of certain real estate leases that include annual escalation clauses based on an index or contractual rate.

The Company has historically entered into transactions in which real estate property or equipment owned by the Company is sold to and immediately leased back from the buyer. The Company analyzes each such transaction to determine if the transaction should be accounted for as a sale leaseback. If the Company determines that the transaction did not result in control of the real estate property or equipment being transferred to the buyer, the financed asset is recognized in Property, plant and equipment, net and the corresponding obligation is recognized in Financing lease obligations on the Condensed Interim Consolidated Balance Sheets.

13

Leases with an initial term of 12 months or less are not recorded on the Condensed Interim Consolidated Balance Sheets. Certain real estate leases require payment for taxes, insurance, maintenance, and other common area charges. These variable expenses are considered non-lease components. These variable payments are excluded from the measurements of lease liabilities and are expensed as incurred. The Company accounts for real estate leases and the related non-lease components together as a single component.

The Company also leases machinery and equipment under lease arrangements that are of low-value or are short-term in nature; therefore, the Company does not recognize any ROU assets and lease liabilities for these leases. Expenses recognized relating to short-term leases and low-value leases of machinery and equipment for the three and nine months ended September 30, 2023 and 2022 were immaterial.

The components of the Company’s real estate lease costs recognized in the Condensed Interim Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 are as follows:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Finance lease cost:
Amortization of ROU assets	$	3,860	$	2,518	$	11,479	$	7,546
Interest on lease liabilities	4,512		3,511		13,700		9,643
Total finance lease cost	8,372		6,029		25,179		17,189
Sale leaseback financial obligations:
Interest on financial obligations	5,991		7,100		18,130		15,553
Depreciation on leased assets	4,136		5,110		13,258		11,044
Total financial obligations cost	10,127		12,210		31,388		26,597
Total operating lease cost	6,714		4,595		20,973		15,439
Total lease cost(1)	$	25,213	$	22,834	$	77,540	$	59,225
(1) Excludes short-term lease cost due to immateriality of the amounts therein.

As of September 30, 2023 and December 31, 2022, the Company’s asset and liability related to its sale leaseback arrangements accounted for as financial obligations consist of the following:

	September 30, 2023		December 31, 2022
Financed property and equipment, net of accumulated depreciation of $41.6 million and $28.3 million	$	171,226	$	194,253
Financial obligation liability:
Current financial obligation liability	$	4,722	$	4,740
Non-current financial obligation liability	200,441		214,139
Total financial obligation liability	$	205,163	$	218,879

Supplemental cash flows information related to the Company’s leases are as follows:

	For the nine months ended September 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	(13,700)	$	(10,750)
Operating cash flows from operating leases	(21,743)		(16,633)
Financing cash flows from finance leases	(6,082)		(3,405)
Cash flows from sale leaseback financial obligations	(21,424)		(15,952)
Proceeds from sale leasebacks accounted for as financial obligations	243		51,729
Total cash flows from lease activities	$	(62,706)	$	4,989

14

	As of
	September 30, 2023		December 31, 2022
ROU assets obtained in exchange for lease obligations:
Finance lease	$	1,028	$	71,637
Operating leases	11,003		62,362
Total ROU assets obtained in exchange for lease obligations	$	12,031	$	133,999

Weighted average remaining lease terms and weighted average discount rate on the Company’s lease liabilities as of September 30, 2023 and December 31, 2022 are as follows:

	September 30, 2023		December 31, 2022
Weighted average remaining lease term (in years) - Finance leases	10.3		11.0
Weighted average remaining lease term (in years) - Operating leases	7.1		7.7
Weighted average discount rate - Finance leases	10.7	%	10.6	%
Weighted average discount rate - Operating leases	10.4	%	9.9	%

As of September 30, 2023, maturities of the Company’s lease liabilities are as follows:

Fiscal Year	Operating Leases		Finance Leases		Financial Obligations
2023 (remaining three months)	$	7,454	$	6,726	$	6,913
2024	28,247		27,166		28,018
2025	25,331		27,165		28,735
2026	23,807		27,542		30,094
2027	22,492		28,165		30,494
2028 and thereafter	72,754		178,461		269,683
Total undiscounted remaining minimum lease payments	180,085		295,225		393,937
Less imputed interest	(53,542)		(123,719)		(188,774)
Total discounted remaining minimum lease payments	$	126,543	$	171,506	$	205,163

Note 9 — Goodwill and intangible assets

As of September 30, 2023	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Long-lived intangible assets:
Licenses and service agreements	$	1,272,385	$	(234,539)	$	1,037,846
Tradenames	166,596		(34,441)		132,155
Intellectual property and know-how	105		(50)		55
Non-compete agreements	31,833		(12,958)		18,875
Intangible assets	$	1,470,919	$	(281,988)	$	1,188,931

As of December 31, 2022	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Long-lived intangible assets:
Licenses and service agreements	$	1,218,889	$	(163,393)	$	1,055,496
Tradenames	165,592		(28,615)		136,977
Intellectual property and know-how	98		(30)		68
Non-compete agreements	31,554		(10,792)		20,762
Intangible assets	$	1,416,133	$	(202,830)	$	1,213,303

The gross carrying amount of intangible assets increased by $54.8 million during the nine months ended September 30, 2023 primarily due to the reclassification of certain assets previously classified as held for sale to held for use coupled with additions from the acquisition of Deseret Wellness (see Note 4 — Acquisitions).

15

Amortization of intangible assets was $24.3 million and $78.7 million, respectively, for the three and nine months ended September 30, 2023.

The Company recognized impairment expense of $7.8 million on its intangible assets for the three and nine months ended September 30, 2023 in connection with the inclusion of its operations in Kentucky, Michigan and adult-use operations in Maine within discontinued operations during the quarter ended September 30, 2023 (see Note 3 — Discontinued operations).

Changes in the carrying amount of Goodwill are as follows:

Balance as of December 31, 2022	$	625,129
Purchase price adjustments (Note 4)	119
Acquisitions (Note 4)	7,002
Change in Assets Held for Sale (Note 6)	41,678
Loss on Impairment	(6,710)
Effect of foreign currency translation	44
Balance as of September 30, 2023	$	667,262

Note 10 — Notes payable

Notes payable consist of the following as of September 30, 2023 and December 31, 2022:

	September 30, 2023		December 31, 2022
Senior Secured Notes – 2026
Principal amount	$	475,000	$	475,000
Unamortized debt discount/deferred financing	(17,029)		(20,037)
Net carrying amount	$	457,971	$	454,963
Bloom Notes – 2023
Principal amount	$	—	$	50,000
Unamortized debt premium (discount)	—		(74)
Net carrying amount	$	—	$	49,926
Bloom Notes – 2024
Principal amount	$	46,000	$	50,000
Unamortized debt premium (discount)	286		(1,755)
Net carrying amount	$	46,286	$	48,245
Bloom Notes – 2025
Principal amount	$	60,000	$	60,000
Unamortized debt discount	(4,702)		(7,115)
Net carrying amount	$	55,298	$	52,885
Seller notes payable	$	6,604	$	6,728
Other notes payable	18,463		9,923
Total other notes payable	$	25,067	$	16,651
Current portion of notes payable	$	62,245	$	51,882
Long-term notes payable	522,377		570,788
Total notes payable	$	584,622	$	622,670

16

Senior Secured Notes – 2026

In December 2021, the Company closed on a private placement of senior secured notes due 2026, for aggregate gross proceeds of $475 million (“Senior Secured Notes – 2026”). The note indenture dated December 15, 2021 governing the Senior Secured Notes – 2026 (the “Note Indenture”) enables the Company to issue additional senior secured notes on an ongoing basis as needed, subject to maintaining leverage ratios and complying with other terms and conditions of the Note Indenture. The principal restrictions on incurring indebtedness include the requirement that a fixed charge coverage ratio of 2.5:1 and consolidated debt to consolidated EBITDA ratio of 4:1 be maintained when taking into account the incurrence of additional debt. The issue of additional Senior Secured Notes or other debt pari passu to the existing notes is permitted provided that the consolidated secured debt to consolidated EBITDA ratio of 3:1 is maintained when taking into account the incurrence of additional debt, and certain other conditions are met. The Company and certain of its guarantor subsidiaries are required to grant a first lien security interest in their respective assets to the trustee appointed under the Note Indenture, including assets acquired after the issue of the Notes, subject to limited exceptions. Despite the first lien granted to the holders of the Notes, the Note Indenture permits the Company to grant a more senior lien to secure up to $200 million of additional financing from commercial banks, providing for revolving credit loans, provided that the interest rate applicable to such revolving credit loans shall be lower than the interest rate applicable to the Senior Secured Notes – 2026. The Senior Secured Notes – 2026 bear interest on the unpaid principal amount at a rate of 8% per annum, compounded semi-annually and payable in arrears on June 15th and December 15th of each year during the term of the Senior Secured Notes – 2026.

The Senior Secured Notes – 2026 may be redeemed early but are subject to a prepayment premium dependent on the loan year. All or part of the outstanding Senior Secured Notes – 2026 may be redeemed between June 15, 2023 and June 14, 2024 with a premium of 4%; between June 15, 2024 and June 14, 2025 with a premium of 2%, or June 15, 2025 or after without a premium.

The Company recognized interest expense under the Senior Secured Notes – 2026 of $10.6 million and $31.5 million for the three and nine months ended September 30, 2023, respectively.

Bloom Notes

In connection with the Bloom acquisition, the Company issued secured promissory notes to the former owners of Bloom (the “Bloom Notes”) in the aggregate of $160 million, which mature over three years. The first and second set of notes each total $50 million with maturities dates in January 2023 and 2024, and each bear interest at the rate of 6% per annum with interest payments due quarterly.

The final set of promissory notes are convertible promissory notes with a principal amount totaling $60 million, which mature in January 2025 and bear interest at a rate of 4% per annum. Interest payments are not required until maturity, at which time the entire then-outstanding principal balance and accrued interest will be due. At the option of the former owners of Bloom, the third set of promissory notes may be paid by the Company through the issuance of SVS at maturity.

There are no prepayment penalties on the Bloom Notes.

As part of a settlement agreement reached in April 2023, between the Company and the former owners of Bloom, the parties to the settlement agreement agreed to reduce the future principal payments of the Bloom Notes by $10 million. The Company settled in full the $50 million note due January 2023 for $44 million. The remaining principal reduction of $4 million was applied to the $50 million note due January 2024. This transaction resulted in a recognition of Gain on extinguishment of debt of $4.4 million during the nine months ended September 30, 2023, which is included in Other income (expense), net on the Condensed Interim Consolidated Statements of Operations.

The Company recognized interest expense under the Bloom Notes of $2.7 million and $11.4 million for the three and nine months ended September 30, 2023, respectively.

Seller notes

As of September 30, 2023, the Company had two Seller notes outstanding with an aggregate balance of $6.6 million, which included the Phyto acquisition seller note in the amount of $1.8 million, inclusive of accrued interest, and a seller note related to the Scottsdale, AZ building purchase, due December 2036, in the amount of $4.8 million. The Scottsdale seller note bears interest at a rate of 5% per annum.

17

Other Notes

As of September 30, 2023, Other notes primarily consist of a note outstanding at Broad Horizons Holdings, LLC in the amount of $7.5 million, due December 31, 2024. The note bears interest at a rate of 15% per annum and interest payments are due quarterly.

Asset-Based Revolving Credit Facility

Effective August 25, 2023, the Company entered into an asset-based revolving credit facility with East West Bank, under which the Company subsequently borrowed $6.5 million (the “Promissory Note”). The Promissory Note bears interest at a rate of 6% per annum, with interest payments due monthly, and has a maturity date of August 25, 2024.

Future maturities

As of September 30, 2023, future principal payments due under the Company’s notes payable were as follows:

Period	Amount
2023 (remaining three months)	$	10
2024	61,951
2025	62,226
2026	475,026
2027	6,854
Total future debt obligations	$	606,067

Information about the Company’s exposure to interest rate risks and liquidity risks is included in Note 20 — Fair value measurements and financial risk management.

Note 11 — Shareholders’ equity

The authorized and issued share capital of the Company is as follows:

Authorized

As of September 30, 2023, the authorized share capital consists of an unlimited number of multiple voting shares (“MVS”) without par value and an unlimited number of SVS without par value.

Issued

As of September 30, 2023, the Company had 93,970,705 MVS issued and outstanding, that were held indirectly by Boris Jordan, the Company's Executive Chairman.

Holders of the MVS are entitled to 15 votes per share and are entitled to notice of and to attend at any meeting of the shareholders, except a meeting of which only holders of another particular class or series of shares will have the right to vote. As of September 30, 2023 and December 31, 2022, MVS represented approximately 12.9% and 13.1%, respectively, of the total issued and outstanding shares and 69.0% and 69.3%, respectively, of the voting power attached to such outstanding shares. The MVS are convertible into SVS on a one-for-one basis at any time at the option of the holder or upon termination of the MVS structure. The dual-class structure will remain until the earlier to occur of (i) the transfer or disposition of the MVS by Mr. Boris Jordan to one or more third parties which are not permitted holders; (ii) Mr. Jordan or his permitted holders no longer beneficially owning, directly or indirectly and in the aggregate, at least 5% of the issued and outstanding SVS and MVS on a non-diluted basis; and (iii) the first business day following the first annual meeting of shareholders of the Company following the SVS being listed and posted for trading on a U.S. national securities exchange such as The Nasdaq Stock Market or The New York Stock Exchange.

Holders of the SVS are entitled to one vote per share.

18

As of September 30, 2023 and December 31, 2022, the Company had 632,361,559 and 623,520,125, respectively, SVS issued and outstanding; Changes in the number of SVS issued and outstanding are as follows:

	SVS	MVS	Total
As of December 31, 2022	623,520,125	93,970,705	717,490,830
Issuance of shares in connection with acquisitions (Note 4)	7,186,083	—	7,186,083
Exercise and forfeiture of stock options and restricted stock units (Note 13)	1,655,351	—	1,655,351
As of September 30, 2023	632,361,559	93,970,705	726,332,264

The Company reserved 72,633,226 and 71,749,083 SVS, as of September 30, 2023 and December 31, 2022, respectively, for the issuance of stock options under the Company’s 2018 Long Term Incentive Plan (“LTIP”) (see Note 13 — Share-based payment arrangements).

Treasury shares

There were no shares repurchased into treasury during the three and nine months ended September 30, 2023 and 2022.

Note 12 — Redeemable non-controlling interest

On April 7, 2021, the Company established Curaleaf International together with a strategic investor who provided initial capital of $130.8 million in exchange for a 31.5% equity stake in Curaleaf International. Curaleaf and the strategic investor entered into a shareholders’ agreement regarding the governance of Curaleaf International pursuant to which Curaleaf has control over operational issues as well as the raising of capital and the ability to exit Curaleaf International. In addition, the strategic investor’s stake is subject to put/call rights that permit either party to cause the stake to be bought out by Curaleaf for Curaleaf equity starting the earlier of change of control or in 2025.

In connection with the acquisition of Four20 in September 2022, the selling shareholders and Curaleaf International entered into a put/call option which permits either party to trigger the roll-up of the remaining equity of Four20 no earlier than two years after the launch of adult use cannabis sales in Germany and no later than the end of 2025, if adult use launch has not occurred by such date.

The estimated redemption value of the put/calls were below their carrying value, which is recorded on the Company’s Condensed Interim Consolidated Balance Sheets as Temporary Equity in the amount of $119.3 million and $121.1 million as of September 30, 2023 and December 31, 2022, respectively.

Note 13 — Share-based payment arrangements

The 2011 and 2015 Equity Incentive Plans provided for the grant of incentive stock options and non-statutory stock options (collectively, “stock options”), restricted stock awards, restricted share units, stock appreciation rights, and other share-based awards. In connection with the Business Combination, all unexercised stock options of Curaleaf, Inc. issued and outstanding under the 2011 and 2015 Equity Incentive Plans were converted to the option to receive an equivalent substitute option under the LTIP. The LTIP provides for the grant of stock options, stock appreciation rights, restricted stock and restricted share units (“RSUs”), performance awards, including performance share units (“PSUs”), dividend equivalents, and other share-based awards. The number of SVS reserved for issuance under the LTIP is calculated as 10% of the aggregate number of SVS and MVS outstanding on an “as-converted” basis.

Valuation of share-based awards

The fair value of each grant of share-based awards is estimated on the date of grant using the Black-Scholes valuation model, where appropriate. In instances where share-based awards have performance or market conditions, the Company utilizes the Monte Carlo valuation model to simulate the various outcomes that affect the value of the share-based awards.

19

Assumptions used in calculating the fair value of stock options granted during the nine months ended September 30, 2023 and 2022 are summarized below:

	2023				2022
Fair value at grant date	$	1.82			$	3.69
Exercise price	$	2.95			$	7.35
Expected volatility	68.5		%		69.8		%
Expected life	6.0			years	5.4			years
Expected dividends	—		%		—		%
Risk-free interest rate (based on government bonds)	3.4		%		1.1		%
Total intrinsic value of options exercised (in 000s)	$	701			$	5,236
Total fair value of shares vested (in 000s)	$	9,326			$	18,022

The aggregate intrinsic values of shares outstanding as of September 30, 2023 and 2022, and the weighted average remaining contractual terms of shares exercisable and shares outstanding and vested as of September 30, 2023 and 2022 are summarized below:

	September 30,
	2023			2022
Aggregate intrinsic value of shares outstanding at the end of the period (in 000s)	$	41,980		$	37,060
Weighted-average remaining contractual term - shares exercisable	4.2		years	4.9		years
Weighted-average remaining contractual term - shares outstanding and vested	4.6		years	5.3		years

The expected volatility is estimated based on historical volatility, as the Company believes this is the best estimate of the expected volatility over the expected life of its equity-based awards. The expected life in years represents the period of time that equity-based awards granted are expected to be outstanding. The expected term of equity-based awards granted to non-employees is equal to the contractual term of the equity-based awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the equity-based award for time periods approximately equal to the expected term of the equity-based award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

During the three and nine months ended September 30, 2023, the Company recorded share-based compensation for its equity-based awards in the amount of $6.2 million and $14.2 million, respectively, compared to $5.2 million and $21.1 million for the three and nine months ended September 30, 2022, respectively.

Reconciliation of outstanding stock options

The number and weighted-average exercise prices of stock options under the LTIP were as follows:

	Number of options	Weighted average exercise price		Number of options	Weighted average exercise price
	2023	2023		2022	2022
Outstanding at January 1,	24,539,168	$	6.89	23,578,470	$	6.76
Forfeited	(1,884,951)	8.59		(1,612,347)	13.26
Expired	(1,385,140)	9.36		(478,800)	4.66
Exercised	(181,775)	0.19		(763,303)	0.53
Granted(1)	8,270,278	2.95		4,534,822	7.35
Outstanding at September 30,	29,357,580	$	5.41	25,258,842	$	6.68
Options exercisable at September 30,	15,865,770	$	5.61	18,641,477	$	5.86
(1) Includes stock options the Company issued to the Company’s Executive Chairman during the nine months ended September 30, 2023, that vest based on the achievement of certain market-based performance goals, including the achievement of certain stock price performance over a performance period. There are three stock price targets which can be achieved over the performance period and are based on an average closing price of the Company’s common stock.

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Reconciliation of RSUs

RSUs vest based on the satisfaction of service conditions.

The number of RSUs awarded under the LTIP were as follows:

	Number of RSUs
	2023	2022
Outstanding at January 1,	4,284,439	2,876,413
Forfeited	(1,221,939)	(801,960)
Vested	(1,111,873)	(1,219,514)
Granted	4,364,741	3,652,269
Outstanding at September 30,	6,315,368	4,507,208

Reconciliation of PSUs

During the nine months ended September 30, 2023, the Company issued PSUs to certain executives that vest based on the satisfaction of both service conditions and the achievement of certain annual performance goals including meeting certain annual revenue and other financial metric targets.

The number of PSUs awarded under the LTIP were as follows:

	Number of PSUs	Weighted-Average Grant Date Fair Value
	2023	2023
Outstanding at January 1	—	$	—
Forfeited	(147,051)	2.89
Vested	—	—
Granted	2,240,372	2.89
Outstanding at September 30,	2,093,321	$	2.89

Note 14 — Selling, general and administrative expense

Selling, general and administrative expenses consist of the following:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Selling, general and administrative expenses:
Salaries and benefits	$	48,106	$	53,531	$	155,185	$	161,226
Sales and marketing	12,431		9,717		32,668		26,968
Rent and occupancy	12,246		12,001		36,616		35,885
Travel	1,093		3,033		4,421		7,784
Professional fees	8,305		5,760		30,991		23,292
Office supplies and services	11,662		6,320		36,274		18,110
Other	3,277		11,370		20,160		32,987
Total selling, general and administrative expense	$	97,120	$	101,732	$	316,315	$	306,252

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Note 15 — Other income (expense), net

Other income (expense), net consists of the following:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Other income (expense), net:
(Loss) gain on disposal of assets	$	(800)	$	(233)	$	(3,112)	$	1,156
(Loss) gain on investment	(3,326)		147		2,275		15,001
(Loss) gain on extinguishment of debt	1,134		(1)		4,433		—
Other income, net	196		1,157		474		4,740
Total other income, net	$	(2,796)	$	1,070	$	4,070	$	20,897

Note 16 — Earnings per share

Basic and diluted loss per share attributable to Curaleaf Holdings, Inc. was calculated as follows:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Numerator:
Net loss from continuing operations	$	(70,834)	$	(41,423)	$	(178,280)	$	(88,923)
Less: Net loss attributable to redeemable non-controlling interest	(1,382)		(2,767)		(6,721)		(4,415)
Net loss from continuing operations attributable to Curaleaf Holdings, Inc.	(69,452)		(38,656)		(171,559)		(84,508)
Net loss from discontinued operations	(22,895)		(12,733)		(46,410)		(25,257)
Net loss attributable to Curaleaf Holdings, Inc.	$	(92,347)	$	(51,389)	$	(217,969)	$	(109,765)
Denominator:
Weighted average common shares outstanding – basic and diluted(1)	725,319,477		709,638,533		721,206,068		709,802,875
Net loss per share from continuing and discontinued operations:
Net loss per share from continuing operations attributable to Curaleaf Holdings, Inc. – basic and diluted	$	(0.10)	$	(0.06)	$	(0.25)	$	(0.13)
Net loss per share from discontinued operations attributable to Curaleaf Holdings, Inc. – basic and diluted	$	(0.03)	$	(0.02)	$	(0.06)	$	(0.04)
(1) As a result of the net losses incurred by the Company from its continuing operations and its discontinued operations for the three and nine months ended September 30, 2023 and 2022, the calculation of diluted net loss per share for each period presented gives no consideration to potentially anti-dilutive securities, and as such, is the same as basic net loss per share for each period presented.

The securities excluded from the computation of diluted loss per share attributable to Curaleaf, Inc. for the periods indicated due to their anti-dilutive effect are as follows:

	Nine months ended September 30,
	2023	2022
Options to purchase SVS	29,357,580	25,258,842

Note 17 — Segment reporting

In accordance with ASC 280 - Segment Reporting, the Company determined its two operating segments, which are also its reportable segments, are (i) domestic operations and (ii) international operations. These segments reflect how the Company’s chief operating decision maker (“CODM”) manages, allocates resources to and evaluates the performance of the Company’s operations, as well as how the Company’s internal management financial reporting is structured.

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The following table presents financial information for the Company’s continuing operations disaggregated by reportable segment. As the Company’s CODM does not review total assets or net income (loss) by segment, such information is not presented below.

	Domestic		International		Total
For the three months ended September 30, 2023:
Revenues	$	316,920	$	16,252	$	333,172
Gross profit	144,206		5,846		150,052
For the nine months ended September 30, 2023:
Revenues	$	958,349	$	43,014	$	1,001,363
Gross profit	443,086		15,171		458,257
Long-lived assets as of September 30, 2023	$	2,422,479	$	320,205	$	2,742,684
For the three months ended September 30, 2022:
Revenues	$	318,417	$	7,396	$	325,813
Gross profit	167,269		424		167,693
For the nine months ended September 30, 2022:
Revenues	$	912,295	$	22,937	$	935,232
Gross profit	500,393		6,391		506,784
Long-lived assets as of December 31, 2022	$	2,431,661	$	330,472	$	2,762,133

Note 18 — Commitments and contingencies

Indemnification agreements

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and senior management team that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnification agreements. The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its Condensed Interim Consolidated Financial Statements.

Litigation

The Company is involved in claims or lawsuits that arise in the ordinary course of business. Accruals for claims or lawsuits are provided to the extent that losses are deemed both probable and estimable. Although the ultimate outcome of these claims or lawsuits cannot be ascertained, on the basis of present information and advice received from counsel, it is management’s opinion that the disposition or ultimate determination of such claims or lawsuits will not have a material adverse effect on the Company.

Among other legal disputes, the Company is currently, or was, involved in the following proceedings relating to material disputes:

Eagle Valley Holdings, LLC. On January 4, 2023, a Curaleaf subsidiary that purchased the Bloom assets in Arizona, filed suit against Eagle Valley Holdings, LLC, Q Business Consulting, LLC, LBSF, LLC, the sellers of the Bloom assets, and Edmond Vartughian, their designated representative, in Arizona Superior Court in Maricopa County, alleging breach of the contractual representations and warranties and fraudulent inducement of Curaleaf’s acquisition of the Bloom assets. The parties resolved the claims on March 21, 2023 and dismissed the suit. As part of the settlement agreement, the parties have agreed to reduce the future principal payments of the Bloom notes by $10 million. The purchase price for Bloom was paid $69 million in cash on closing of the transaction, net of working capital adjustments,

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with the remaining approximately $160 million to be paid through the issuance of three promissory notes of $50 million, $50 million and $60 million due, respectively, on the first, second and third anniversary of closing of the transaction. Curaleaf has settled in full the $50 million note due January 2023 for $44 million and the principal of the $50 million note due January 2024 has been reduced by $4 million.

Sentia Wellness. On January 6, 2022, Measure 8 Ventures, LP, and other purchasers of debentures from Sentia Wellness, Inc. ("Sentia"), filed suit against Nitin Khanna and six other former officers, directors, and/or advisors of Sentia in the Circuit Court of the State of Oregon for Multnomah County alleging violations of Oregon securities law by making false and misleading statements and omissions to induce the plaintiffs to purchase over $74 million of debentures in Sentia. On August 24, 2022, the defendants filed their amended answer to the plaintiffs' complaint along with affirmative defenses and various counter-claims against the plaintiffs (together with plaintiff’s claims, the “Sentia Claims”) as well as claims (the “Third-Party Claims”) against third-parties Curaleaf Holdings, Inc., Cura Partners, Inc., and other individuals including Mr. Boris Jordan. The Third-Party Claims against Boris Jordan include claims for unjust enrichment, breach of fiduciary duty, fraud, violation of Oregon law, misappropriation of trade secrets, and tortious interference in connection with Curaleaf’s acquisition of Cura Partners, Inc. Nitin Khanna and the third-party plaintiffs seek actual damages in an amount of $515 million and other relief jointly and severally against the third-party defendants including Mr. Jordan. On October 25, 2022, Nitin Khanna and the third-party plaintiffs filed a stipulation of dismissal, which was subsequently signed by the judge, and which dismissed their claims against Curaleaf Holdings, Inc. and Cura Partners, Inc., but the claims against Mr. Jordan have not been dismissed.

On October 20, 2023, all parties to the Sentia Claims and the Third-Party Claims signed a comprehensive settlement dismissing claims among the parties including the Sentia Claims and Third-Party Claims. In connection with this settlement, subject to filing necessary documents with the relevant tribunals, all such claims against Mr. Jordan, Curaleaf Holdings, Inc. and their related entities will be dismissed with prejudice. None of Mr. Jordan, Curaleaf Holdings, Inc. and their related parties have made any admission or paid any consideration in connection with the settlement.

Connecticut Arbitration. Pursuant to the Second Operating Agreement of Doubling Road Holdings, LLC, the holders (the “Holders”) of a majority of the Series A-2 Units of Doubling Road Holdings had the right (the “Put Right”) to require that PalliaTech CT, LLC or any of its affiliates purchase all of the Series A-2 Units in exchange for shares of PalliaTech, Inc. (now Curaleaf, Inc.), the parent of PalliaTech CT, pursuant to a defined “Buy-Out Exchange Ratio.” On October 25, 2018, the Holders, the Company, and others entered into a Stipulation of Settlement in order to resolve a dispute with respect to the applicable Buy-Out Exchange Ratio for the Put Right. The Stipulation of Settlement provided, among other things, that PalliaTech CT purchased the Holders’ interests in exchange for (1) a payment of $40.1 million; (2) 4,755,548 SVS; and (3) the potential for additional equity in the Company depending on the results of a “Settlement Second Appraisal.” Pursuant to the Settlement Second Appraisal, dated December 12, 2019, and the terms of the Stipulation of Settlement, the Holders received 2,016,859 additional SVS. On January 23, 2020, the Holders filed claims in arbitration including for fraudulent inducement and breach of contract, relating primarily to a lock-up agreement that the Holders signed in connection with the Stipulation of Settlement. The hearing of the case took place in April 2022 and on September 6, 2022, the arbitrator issued a Final Partial Award dismissing all of the DRH plaintiffs’ claims and awarding costs of the arbitration to Curaleaf. The arbitrator issued a final award of the costs to be paid by the DRH plaintiffs to Curaleaf, and the immaterial reimbursement was received during the quarter ended December 31, 2022.

Parallel Illinois, LLC. On April 1, 2021, Curaleaf and the owners of the Illinois Assets (the “Plaintiffs”) signed definitive agreements to sell the Illinois Assets to Parallel Illinois, LLC (“Parallel”). Under the terms of the transaction, the purchase price for the Illinois Assets consists of up to $100 million base price to be paid $60 million in cash and $40 million in Parallel stock, plus earnouts of up to an additional $55 million payable through 2023. The Company received a $10 million deposit from Parallel, which was refundable under limited circumstances. On February 25, 2022, the Company received correspondence from Parallel’s 17 attorneys indicating that it will not be in a position to complete the acquisition of the Illinois Assets due to lack of financing, among other reasons, and declared its agreement to purchase the Illinois Assets terminated. The Company has asserted that Parallel’s actions have constituted material breaches of its agreement with Parallel and on February 2, 2022 filed an arbitration against Parallel and certain principals of Parallel for breach of contract, fraudulent misrepresentation and other claims. As a result of the breach of contract, management determined that the $10 million deposit received from Parallel is no longer refundable as of June 30, 2022, and accordingly recognized a gain within “Other income” in the Condensed Interim Consolidated Statement of Profits and Losses and Other Comprehensive Loss. As a result of the termination of the sale of the Illinois Assets to Parallel, during the current period, the Company grossed up a liability within “Other current liabilities” for the Illinois Exit Payment that will be due to the former owners of Grassroots, which was earlier recorded as a reduction (net) of held for sale assets, a result of the potential Illinois Waterfall Payment that will no longer be required to be remitted to the former owners of Grassroots in the event of Illinois Exit Payment. In September 2023, the Plaintiffs signed a final settlement with Parallel of their claims against Parallel arising out of its failure to complete the acquisition of the Illinois Assets. Parallel, which

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is currently in restructuring discussions with its creditors, has agreed to pay the Plaintiffs $500,000 contingent upon completion of such restructuring. Parallel has delivered to the Plaintiffs a confession of judgment for $15 million, which will be effective if Parallel fails to complete its restructuring and pay the settlement amount by January 2024 (subject to certain extensions). As part of this settlement, Parallel has formally released its claims against the Plaintiffs, including with respect to any claim for return of the $10 million deposit.

Taxes

The Company records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. There is inherent uncertainty in quantifying income tax positions, especially considering the complex tax laws and regulations for federal, state and foreign jurisdictions in which the Company operates. The Company has recorded tax benefits for those tax positions where it is more likely than not that a tax benefit will result upon ultimate settlement with a tax authority that has all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will result, no tax benefit has been recognized in the Condensed Interim Consolidated Financial Statements.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and foreign jurisdictions, where applicable. The Company is currently in the Internal Revenue Service (the “IRS”) examination Appeals process for the tax years 2016, 2017, and 2018. The Company’s subsidiary, Curaleaf North Shore, Inc. (formerly known as Alternative Therapies Group, Inc.) has settled its Tax Court case related to an IRS examination for 2018. The settlement will not have a material effect on the Company’s Condensed Interim Consolidated Financial Statements. As of September 30, 2023 there is reasonable possibility that the unrecognized tax benefits will change within 12 months due to expirations of statute of limitations or audit settlements.

The IRS has proposed adjustments relating to the Company’s treatment of certain expenses under Section 280E of the Internal Revenue Code (“Section 280E”), however, the Company is defending its tax reporting positions before the IRS. The outcome of this audit remains unclear at this point. The Company also intends to litigate any further such challenges because it currently believes all of its other tax positions can be sustained under an IRS examination. The ultimate resolution of tax matters could have a material effect on the Company’s Condensed Interim Consolidated Financial Statements. As the IRS interpretations on Section 280E continue to evolve, the impact of any such challenges cannot be reliably estimated. The Company's tax years are still open under statute from December 31, 2016, to the present.

Note 19 — Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

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The Company incurred the following transactions with related parties during the three and nine months ended September 30, 2023 and 2022 and had the following outstanding related party payable balance as of September 30, 2023 and December 31, 2022:

	Related party transactions
	Three months ended September 30,				Nine months ended September 30,				Related party payable outstanding as of
Transaction	2023		2022		2023		2022		September 30, 2023		December 31, 2022
Consulting fees (1)	$	403	$	272	$	801	$	966	$	—	$	—
Travel and reimbursement (2)	—		23		45		346		—		—
Rent expense reimbursement (3)	—		18		—		54		—		—
Platform fees (4)	26		—		203		—		—		—
Senior Secured Notes - 2026 (5)	224		239		662		704		(10,000)		(10,000)
	$	653	$	552	$	1,711	$	2,070	$	(10,000)	$	(10,000)
(1) Consulting fees relate to real estate management and general advisory services provided by (i) Frontline Real Estate Partners, LLC, a company controlled by Mitchell Kahn, a Board Member, and in which Matt Darin, Chief Executive Officer, has a minority interest, as well as (ii) Measure 8 Venture Management, LLC, an investment company controlled by Boris Jordan, Executive Chairman and control person of the Company (including funds managed by such entity, “Measure 8”). There are on-going contractual commitments related to these transactions. The total consulting fees paid to Measure 8 were $0.3 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively, and were $0.3 million and $0.6 million for the nine months ended September 30, 2023 and 2022, respectively. The total consulting fees paid to Frontline Real Estate Partners, LLC were $0.1 million and $0.2 million for the three months ended September 30, 2023 and 2022, respectively, and $0.4 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively.
(2) Travel and reimbursement relate to payments made to Measure 8 for reimbursements of certain expenses incurred. There are on-going contractual commitments related to these transactions.
(3) The Company recognized a rent expense credit for a sublease between Curaleaf NY LLC and Measure 8 and rent expense for a lease between GR Companies, Inc. and FREP Elm Place II, LLC, a company owned in part by Mr. Kahn. Both arrangements represent on-going contractual commitments based on executed leases.
(4) During the second quarter of 2023, Leaf Trade, Inc. (“Leaf Trade”) and SD Technologies (“Sweed”) completed a business combination and Measure 8 acquired a 6.8% stake in the holding company, High Tech Holdings, Inc. and received a seat on the board of directors. Leaf Trade provides Curaleaf with their B2B platform for Curaleaf’s Wholesale sector in exchange for fees to use the platform.
(5) Baldwin Holdings, LLC, in which Joseph F. Lusardi, the Company’s Executive Vice Chairman, and 3D Financial, in which Peter Derby, a Board Member, owns a direct equity interest, held $10 million and $2 million, respectively, of the total $475 million of Senior Secured Notes – 2026. The Company recognized interest expense related to the portion of the Senior Secured Notes - 2026 held by Baldwin Holdings, LLC. The Promissory Note – 2024, previously held by Baldwin Holdings, LLC and 3D Financial, was exchanged for Senior Secured Notes – 2026 as part of the private placement of Senior Secured Notes – 2026 completed by the Company in December 2021. As a result of this exchange, the Company repaid the notes, including interest and prepayment penalty. For the three and nine months ended September 30, 2022, the Company recognized interest expense under the Promissory Note - 2024. For the three and nine months ended September 30, 2023, the Company recognized interest expense under the Senior Secured Notes - 2026, some of which are attributable to Baldwin Holdings, LLC’s and 3D Financial’s direct equity interests. The Senior Secured Notes – 2026 held by Baldwin Holdings, LLC and 3D Financial contain certain repayment and interest components that represent on-going contractual commitments with this related party.

Note 20 — Fair value measurements and financial risk management

The Company’s financial instruments consist of cash, restricted cash and cash equivalents, notes receivable, accounts payable, accrued expenses, long-term debt, and redeemable non-controlling interest contingency. The fair values of cash, restricted cash, notes receivable, accounts payable, and accrued expenses approximate their carrying values due to the relatively short-term to maturity. The Company’s long-term notes payable carrying value at its effective interest rate approximates fair value.

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of the inputs to fair value measurements. The three levels of hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; and

Level 3 – Inputs for the asset or liability that are not based on observable market data.

The Company’s assets measured at fair value on a nonrecurring basis include investments, long-lived assets, and goodwill. The Company reviews the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 measurements.

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There were no transfers between levels in the fair value hierarchy during the nine months ended September 30, 2023 and the year ended December 31, 2022.

The following tables present the placement in the fair value hierarchy of liabilities that were measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

	Fair value measurements as of September 30, 2023 using:
	Level 1		Level 2		Level 3		Total
Contingent consideration liabilities	$	—	$	—	$	16,493	$	16,493

	Fair value measurements as of December 31, 2022 using:
	Level 1		Level 2		Level 3		Total
Contingent consideration liabilities	$	—	$	—	$	29,109	$	29,109

Level 1

Cash and cash equivalents, net accounts receivable, accounts payable and accrued liabilities, notes payable, investments, and other current assets and liabilities represent financial instruments for which the carrying amount approximates fair value.

Level 2

The Company does not have any assets or liabilities upon which the fair value is based upon Level 2 inputs.

Level 3

The fair value of contingent consideration is based upon the following Level 3 inputs:

•EMMAC – present value of EMMAC’s achievement regulatory approval for recreational cannabis and meeting certain revenue targets in the U.K. market as discussed in Note 4 — Acquisitions of the Company’s Annual Financial Statements. The following discount rates were utilized in the determination of the present value of the liabilities.

◦Regulatory approval for recreational cannabis – 1.8% in 2022 and 11.6% in 2023.

◦Revenue targets in the U.K. market – 1.8% in 2022 and 11.2% in 2023.

•Sapphire – present value of Sapphire’s achievement of certain revenue, script, and active patient count milestones during 2023 as discussed in Note 4 — Acquisitions of the Company’s Annual Financial Statements.

•Four20 – present value of Curaleaf’s shares to be issued utilizing a discount rate of 16.2% for the second tranche of shares to be issued, respectively as of September 30, 2023.

Financial Risk Management

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

Credit Risk

Credit risk is the risk of a potential loss to the Company if a customer or third party to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s notes and accounts receivable. The maximum credit exposure at September 30, 2023 and 2022 is the carrying amount of cash and cash equivalents, accounts receivable and notes receivable. The Company does not have significant credit risk with respect to its customers. All cash and cash equivalents are placed with major U.S. financial institutions.

The Company provides credit to its wholesale and management services agreement (“MSA”) customers in the normal course of business and has established processes to mitigate credit risk. The amounts reported in the Condensed Interim Consolidated Balance Sheets are net of allowances for credit losses, estimated by the Company’s management based on prior experience and its assessment of the current economic environment. The Company reviews its trade receivable accounts regularly and reduces amounts to their expected realizable values by adjusting the allowance credit losses when management determines that the account may not be fully collectible. The Company applies ASC 310 – Receivables for the measurement of expected credit losses, which uses an expected loss allowance model for all trade receivables. The Company has not adopted standardized credit policies, but rather assesses credit on a customer-by-customer basis in an effort to minimize those risks.

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Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with financial liabilities. The Company manages liquidity risk through the management of its capital structure. The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due.

In December 2021, the Company closed a private placement of Senior Secured Notes - 2026, for aggregate gross proceeds of $475 million to the Company. The notes bear interest on the unpaid principal amount at a rate of 8% per annum, compounded semi-annually and payable in arrears on June 15th and December 15th of each year during the term of the notes; the first of which will be June 15, 2022. The Note Indenture governing the Senior Secured Notes - 2026 contains numerous positive and negative covenants of the Company. If the Company breaches a covenant under the Note Indenture, the trustee may, under certain circumstances, accelerate the maturity of the principal amount outstanding or realize on the collateral granted by the Company over its assets. A breach of covenant under the Note Indenture could have a material adverse impact on the Company’s financial position.

In connection with the Bloom acquisition, the Company issued three sets of secured promissory notes to the former Bloom owners in the aggregate of $160 million, which mature over three years. The first set of notes totaled $40 million and matured in January 2023. The second set of notes total $44 million, which mature in January 2024, bears interest at the rate of 6% per annum and interest payments are due quarterly.

The final set of promissory notes are convertible promissory notes with a principal amount totaling $60 million, which mature in January 2025 and bear interest at a rate of 4% per annum. Interest payments are not required until maturity, when all principal and accrued interest will be due. At the option of the sellers of Bloom, the third set of promissory notes may be paid by the Company issuing SVS at maturity. All three notes may be prepaid without penalty.

In addition to the commitments outlined in Note 10 — Notes payable and Note 18 — Commitments and contingencies, the Company has the following gross remaining contractual obligations:

	< 1 Year		1 to 3 Years		Total
For the period ended September 30, 2023:
Accounts payable	$	63,723	$	—	$	63,723
Accrued expenses	100,969		—		100,969
Other current liabilities	359		—		359
Contingent consideration liability	11,743		4,750		16,493
Other long-term liability	—		298		298
	$	176,794	$	5,048	$	181,842

	< 1 Year		1 to 3 Years		Total
For the period ended December 31, 2022:
Accounts payable	$	80,789	$	—	$	80,789
Accrued expenses	103,311		—		103,311
Other current liabilities	1,725		—		1,725
Contingent consideration liability	18,537		10,572		29,109
Other long-term liability	—		312		312
	$	204,362	$	10,884	$	215,246

Currency Risk

The operating results and financial position of the Company are reported in U.S. dollars. Some of the Company’s financial transactions have been and may be denominated in currencies other than the U.S. dollar. The results of the Company’s operations are subject to currency transaction and translation risks.

As of September 30, 2023 and 2022, the Company had no hedging agreements in place with respect to foreign exchange rates. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks at this time.

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Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Cash and cash equivalents bear interest at market rates. The Company’s notes receivable and financial debts have fixed rates of interest and are carried at amortized cost. The Company does not account for any fixed-rate financial assets or financial liabilities at fair value, therefore, a change in interest rates at the reporting date would not affect profit or loss.

Capital Management

The Company’s objectives when managing capital are to ensure that there are adequate capital resources to safeguard the Company’s ability to continue as a going concern and maintain adequate levels of funding to support its ongoing operations and development such that it can continue to provide returns to shareholders and benefits for other stakeholders.

The capital structure of the Company consists of items included in shareholders’ equity and debt, net of cash and cash equivalents. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the Company’s underlying assets. The Company plans to use existing funds, as well as funds from the future sale of products to fund operations and expansion activities.

Note 21 — Variable interest entities

The following tables presents the summarized financial information about the Company’s consolidated VIEs which are included in the Company’s Condensed Interim Consolidated Financial Statements. The entities indicated below were determined to be VIEs as the Company possesses the power to direct activities through management service agreements or financing arrangements. As of September 30, 2023 and December 31, 2022, VIEs classified as Other VIEs, in the following table, are CLF MD Processing and LLC and Broad Horizon Holdings, LLC.

The following table presents summarized financial information about the Company’s VIEs as of September 30, 2023 and December 31, 2022 included within the Condensed Interim Consolidated Balance Sheets:

	September 30, 2023						December 31, 2022
	Primary Organic Therapy, Inc.		Remedy Compassion Center, Inc.		Other VIEs		Primary Organic Therapy, Inc.		Remedy Compassion Center, Inc.		Other VIEs
Current assets	$	33,569	$	20,282	$	9,713	$	21,146	$	13,922	$	4,719
Non-current assets	33,344		5,676		12,423		32,932		5,762		9,233
Current liabilities	57,382		29,770		10,684		46,780		21,259		5,651
Non-current liabilities	6,630		1,027		7,934		3,952		735		6,094
Equity attributable to Curaleaf Holdings, Inc.	2,901		(4,838)		3,518		3,346		(2,310)		2,207

The following table presents summarized financial information about the Company’s VIEs for the three and nine months ended September 30, 2023 and 2022 included within the Condensed Interim Consolidated Statements of Operations:

	Three months ended September 30,
	2023						2022
	Primary Organic Therapy, Inc.		Remedy Compassion Center, Inc.		Other VIEs		Primary Organic Therapy, Inc.		Remedy Compassion Center, Inc.		Other VIEs
Revenues	$	5,655	$	6,526	$	10,898	$	2,631	$	2,667	$	6,266
Net income (loss) attributable to Curaleaf Holdings, Inc.	2,086		(2,658)		607		(514)		1,313		1,826

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	Nine months ended September 30,
	2023						2022
	Primary Organic Therapy, Inc.		Remedy Compassion Center, Inc.		Other VIEs		Primary Organic Therapy, Inc.		Remedy Compassion Center, Inc.		Other VIEs
Revenues	$	8,839	$	9,551	$	3,298	$	9,931	$	7,718	$	1,586
Net loss attributable to Curaleaf Holdings, Inc.	(840)		(2,469)		(29)		(710)		(153)		(514)

Note 22 — Revenue disaggregation

The following table presents the disaggregation of the Company’s total revenues from continuing operations for the three and nine months ended September 30, 2023 and 2022:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Revenues:
Retail revenue	$	273,233	$	258,220	$	820,057	$	729,064
Wholesale revenue	58,563		66,420		177,043		202,512
Management fee income	1,376		1,173		4,263		3,656
Total revenues	$	333,172	$	325,813	$	1,001,363	$	935,232

Note 23 — Subsequent events

On October 3, 2023, the Company announced the closing of its marketed offering of SVS for total gross proceeds to the Company of C$16.2 million. The SVS were offered in each of the Provinces of Canada, other than Québec, pursuant to a prospectus supplement dated September 28, 2023 to the Company's base shelf prospectus dated December 30, 2022, and in the United States on a private placement basis to “qualified institutional buyers” pursuant to exemptions from the registration requirements of the United States Securities Act of 1933, as amended, and applicable state securities laws.

On October 10, 2023, the Company announced that it filed its application to list its SVS (the “Potential Listing”) on the Toronto Stock Exchange (“TSX”). The Potential Listing remains subject to the review of the TSX and is contingent on the satisfaction of all listing and regulatory requirements. In the event the Potential Listing is completed, it is anticipated that the Company’s direct and indirect wholly owned subsidiaries that operate in the U.S. (the “U.S. Subsidiaries”) would be subject to certain restrictions on cash transfers, whereby, amongst other things, (i) the Company would be prohibited from flowing any cash to the U.S. Subsidiaries, and (ii) the U.S. Subsidiaries would be prohibited from flowing any cash to the Company, whether by way of dividend or otherwise. There is no assurance that the TSX will approve the listing application, or that the Company will complete the listing as currently proposed. See “Risk Factors – Risks Related to the Potential Listing” for further details.

On October 12, 2023, the Company issued to the Tryke Acquisition seller 5,142,919 SVS as part of the installment consideration payment due on the first anniversary of the closing of acquisition, pursuant to the Membership Purchase Agreement, signed November 8, 2021, and amended on October 4, 2022.

On October 13, 2023, the Company issued to the Four20 Pharma sellers 701,531 SVS as a “true up” payment on due on the first anniversary of the closing of the Four20 Pharma acquisition in accordance with the Share Purchase Agreement, signed, August 8, 2022.

RISK FACTORS

Risks Related to the Potential Listing

The completion of the Potential Listing is subject to a number of conditions precedent, certain of which are outside the control of the Company, including the receipt of conditional approval from TSX and regulatory approvals. There can be no certainty that all conditions precedent to the Potential Listing will be satisfied or waived, nor can there be any certainty as to the timing of their satisfaction or waiver. Moreover, a substantial delay in obtaining satisfactory approvals and consents could result in the Potential Listing not being completed. Certain costs relating to the Potential Listing, such as legal, accounting and advisory fees must be paid by the Company even if the Potential Listing is not completed. This may have a material adverse effect upon the business, financial condition and results of operations of the Company

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and may cause the value of the SVS to decline. In addition, if the Potential Listing is not completed, the market price of the SVS may be negatively impacted to the extent that the market price reflects a market assumption that a Potential Listing will be completed.

The Potential Listing could cause the attention of management of the Company to be diverted from day-to-day operations. These disruptions could be exacerbated by a delay in the completion of the Potential Listing and could have an adverse effect on the business, operating results or prospects of the Company regardless of whether the Potential Listing is ultimately completed.

On October 16, 2017, the TSX provided clarity regarding the application of Sections 306 (Minimum Listing Requirements) and 325 (Management) and Part VII (Halting of Trading, Suspension and Delisting of Securities) of the TSX Company Manual (collectively, the “TSX Requirements”) to issuers with business activities in the cannabis sector. In TSX Staff Notice 2017-0009, the TSX stated that issuers with ongoing business activities that violate U.S. federal law regarding cannabis are not in compliance with the TSX Requirements. The TSX noted that these non-compliant business activities may include (i) direct or indirect ownership of, or investment in, entities engaging in activities related to the cultivation, distribution or possession of cannabis in the U.S., (ii) commercial interests or arrangements with such entities, (iii) providing services or products specifically targeted to such entities, or (iv) commercial interests or arrangements with entities engaging in providing services or products to U.S. cannabis companies. The TSX reminded issuers that, among other things, should the TSX find that a listed issuer is engaging in activities contrary to the TSX Requirements, the TSX has the discretion to initiate a delisting review. The TSX reminded issuers that, among other things, should the TSX find that a listed issuer is engaging in activities contrary to the TSX Requirements, the TSX has the discretion to initiate a delisting review.

In the event the Potential Listing is completed, it is anticipated that the U.S. Subsidiaries would be subject to certain restrictions on cash transfers, whereby, amongst other things, (i) the Company would be prohibited from flowing any cash to the U.S. Subsidiaries, and (ii) the U.S. Subsidiaries would be prohibited from flowing any cash to the Company, whether by way of dividend or otherwise. Should the Company proceeds with a TSX Listing, it is expected to be able to comply with the TSX Requirements following the Potential Listing, there is a risk that our interpretation may differ from the TSX and failure to comply with the TSX Requirements could result in the denial of an application for certain approvals, and could even lead to a delisting from the TSX, which could have a material adverse effect on the trading price of our SVS and could have a material adverse effect on our business, financial condition and results of operations.

Should the Company proceed with the Potential Listing, it is expected to be able to comply with the TSX Requirements following a Potential Listing, but there is a risk that our interpretation may differ from the TSX and failure to comply with the TSX Requirements could result in the denial of an application for certain approvals, and could even lead to a delisting from the TSX, which could have a material adverse effect on the trading price of our SVS and could have a material adverse effect on our business, financial condition and results of operations.

In the event of a Potential Listing, any investments, joint ventures or operations thereafter in the United States, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada. As a result, we may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on our ability to invest in the United States or any other jurisdiction, in addition to those described herein.

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