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critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the consolidated financial statementsthat were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that arematerial to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. thecommunication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on theaccounts or disclosures to which they relate. assignmentfor the benefit of creditors assummarized in footnote 10 “assignment for the benefit of creditors” to the consolidated financial statements, the company’ssubsidiaries, prime efs, llc and shypdirect, llc, executed a deed of assignment for benefit of creditors (“abc”) in the stateof new jersey, assigning all of the prime efs and shypdirect assets to an assignee for the benefit of creditors and filing for dissolution.this resulted in removal of the assets and liabilities of prime efs and shypdirect from the consolidated financial statements and a gainon deconsolidation of approximately $12,427,000. weidentified the assignment for the benefit of creditors as a critical audit matter. auditing management’s assessment to deconsolidatethe company’s subsidiaries, prime efs, llc and shypdirect, llc, was complex and involved a high degree of subjectivity. theprimary procedures we performed to address this critical audit matter included a) review of applicable gaap literature. there is no guidancespecifically for assignment for benefit of creditors, however we relied on asc 810-10, “consolidations”. per asc 810-10-15-10,a majority-owned subsidiary shall not be consolidated if control does not rest with the majority owner; b) research and review of anaccounting guide on bankruptcies and liquidation. per the guide, a parent deconsolidates a subsidiary as of the date the parent no longerhas control of the subsidiary; c) we obtained legal opinions from company counsels. the legal opinions conclusions support management’sbelief that creditors of prime efs, llc and shypdirect, llc cannot look to these former subsidiaries or to the company to satisfy theirpre-assignment debts and their only recourse is through the abc process and therefore the company does not have control over the assetsor liabilities of the subsidiaries, or the subsidiaries themselves; and d) consultations with aicpa technical hotline representativeand other accounting experts. based on our conversations, the aicpa representative and other accounting experts concurred that deconsolidationwas appropriate; e) inquired of management concerning the existence of any guarantees made by the company for paying obligations of thesubsidiaries. management represented that no such guarantees were made. f-3 analysisof liquidity and going concern assummarized in footnote 2 “liquidity” to the consolidated financial statements, the company has a history of net losses andnet cash used in operating activities and believes such conditions will continue for a period of time into the future. these are consideredadverse conditions or events that lead management to consider whether there is substantial doubt about the ability of the entity to continueas a going concern for a reasonable period of time. however, management believes that $6.6 million of cash raised through the issuanceof series g convertible preferred stock created a cash balance and positive working capital that alleviates the substantial doubt relatedto going concern and the need for a going concern risk disclosure. weidentified the going concern risk analysis as a critical audit matter. auditing management’s going concern analysis including theirprocess to develop the analysis and the projections of future cash flows, operating trends, and assessments of internal and externalmatters that may affect the company’s future operations and cash flows involved a high degree of subjectivity. additionally, auditingmanagement’s plans to address the going concern risk involved highly subjective auditor judgment. theprimary procedures we performed to address this critical audit matter included (a) assessed the reasonableness of management’sprocess for developing their assessment of whether a going concern risk exists, (b) assessed the reasonableness of assumptions managementused in their future cash flow projections including comparison to prior year results, consideration of positive and negative evidenceimpacting management’s forecasts, and consideration of the company’s financing arrangements in place as of the report date,(c) developed our own independent calculation of expected source and use of funds and needs of the company over the one year period fromthe date of issuance of the consolidated financial statements, (d) confirmed cash balances as of december 31, 2021 with the banks andtested management’s bank reconciliations, (e) identified management’s plans for dealing with the adverse conditions and eventsdiscussed above and assessed the reasonableness of the assumptions of such plans, (f) assessed whether it is probable that management’splans, when implemented, will mitigate the adverse effects of the conditions and events discussed above, (g) concluded whether substantialdoubt exists as to whether the company can continue as a going concern for a period of one year after the consolidated financial statementsare issued and (h) considered the effect of such conclusion on the consolidated financial statement disclosures and our report of anindependent registered public accounting firm. /s/salberg & company, p.a. salberg& company, p.a.wehave served as the company’s auditor since 2017.

critical audit matter thecritical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters doesnot alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit mattersbelow, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. 25 inventory valuation as discussedin note 1 of the financial statements, the company’s balance of inventory was $1,445,134 as of march 31, 2021. the valuation ofinventories requires management to make significant assumptions and complex judgments about the future salability of the inventory andits net realizable value. these assumptions include the assessment of net realizable value by inventory category considering future usageand market demand for their products. additionally, management makes qualitative judgments related to discontinued, slow moving and obsoleteinventories. we identifiedinventory valuation as a critical audit matter. auditing these complex judgments and assumptions involves especially challenging auditorjudgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specializedskill or knowledge needed. the primary procedures we performed to address thiscritical audit matter included: ·gaining an understanding of management’s process and methodology todevelop the estimates.·evaluating the reasonableness of the significant assumptions used by managementincluding those related to inventory usage.·evaluating management’s historical ability to forecast sales for inventoryand to identify slow moving inventory.·comparing management’s assertions regarding future product sales tocommunication between management and the board of directors.·testing the completeness, accuracy and relevance of the underlying dataused in management’s estimate.·performing inquiries with appropriate non-financial personnel, includingsales and production employees, regarding obsolete or discontinued inventory models, cancelled sales orders and other factors to corroboratemanagement’s assertions regarding qualitative judgments about discontinued, slow moving and obsolete inventory. /s/ eide bailly llp we have served as the company’s auditor since2008.

critical audit matter the critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.deferred tax assets critical audit matter description as described in notes 2 and 13 to the consolidated financial statements, the company recognizes deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. the company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized.we identified the deferred tax assets as a critical audit matter due to the valuation allowance assessment which represents a significant estimate with a high degree of subjectivity.how we addressed the matter in our audit the primary procedures we performed to address this critical audit matter included: f-2 • obtained an understanding of management’s estimate regarding the valuation allowance including the method/assumptions/data used to develop the estimate by reviewing management prepared memo.• reviewed the qualification and objectivity of the company’s outside consultant who assisted in management’s determination of the valuation allowance.• examined the underlying data used in determining the valuation allowance, including historical financial data and future financial projections for reasonableness.• reviewed tax position and other disclosures related to the tax provision. /s/ baker tilly us, llp we have served as the company's auditor since 2014.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. revenue recognition - determination of total estimated contract costs for contracts recognized over time as described in note 2 to the consolidated financial statements, the company generally recognizes revenue over time as it performs its obligations because there is a continuous transfer of control of the deliverable to the customer. under unit-price contracts with more than an insignificant amount of partially completed units and fixed price contracts, revenue is recognized as performance obligations are satisfied over time, with the percentage completion generally measured as the percentage of costs incurred to the total estimated costs for such performance obligation. during the year ended december 31, 2019, approximately 50% of the company’s revenue recognized were associated with this revenue recognition method. contract costs include all direct materials, labor and subcontract costs and indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. as described by management, actual revenues and project costs can vary, sometimes substantially, from previous estimates due to changes in a variety of factors, including unforeseen or changed circumstances not included in quanta’s cost estimates or covered by its contracts. the estimating process is based on the professional knowledge and experience of quanta’s project estimators, project managers and finance professionals. some of the factors that may lead to changes in estimates include concealed or unknown site conditions; changes in the cost of equipment, commodities, materials or labor; unanticipated costs or claims due to delays caused by customers or third parties; customer failure to provide required materials or equipment; errors in engineering, specifications or designs; project modifications or contract termination; adverse weather conditions and natural disasters; changes in estimates related to the length of time to complete a performance obligation; and performance and quality issues requiring rework or replacement. the principal considerations for our determination that performing procedures relating to revenue recognition for contracts recognized over time is a critical audit matter are that there was significant judgment by management when estimating the total contract costs. this in turn led to a high degree of auditor judgment, effort and subjectivity in performing procedures and evaluating audit evidence relating to management’s estimate of the total costs of the contracts recognized over time. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process including controls over the determination of total estimated contract cost for contracts recognized over time. these procedures also included, among others, (i) evaluating and testing management’s process for determining the total estimated contract cost for a sample of contracts, which included evaluating the contracts and other documents that support those estimates, and testing of underlying contract costs; (ii) evaluating management’s ability to reasonably estimate total contract costs by performing a comparison of the actual total estimated contract cost as compared with prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the total estimated contract cost and (iii) evaluating management’s methodologies and the consistency of management’s methodologies over the life of the contract.acquisition of the hallen construction co. - fair value of the customer relationships as described in notes 2 and 4 to the consolidated financial statements, the company completed the acquisition of the hallen construction co. (“hallen”) on august 30, 2019, which resulted in $175 million of intangible assets recorded, principally the customer relationships. the fair value of customer relationships is estimated as of the date a business is acquired based on the 58value-in-use concept utilizing the income approach, specifically the multi-period excess earnings method. this method discounts to present value the projected cash flows attributable to the customer relationships, with consideration given to customer contract renewals and estimated customer attrition rates. the significant estimates used by management in determining the fair values of customer relationship intangible assets include future revenues, discount rates and customer attrition rates.the principal considerations for our determination that performing procedures relating to the acquisition of hallen is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value measurement of the customer relationship intangible assets acquired due to the significant judgment by management when estimating the fair value of the customer relationship intangible assets, (ii) significant audit effort was required in evaluating the significant assumptions related to the fair value of the customer relationship intangible assets, such as the future revenues, the discount rates and customer attrition rate, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationship intangible assets and controls over development of significant assumptions, including future revenues, the discount rates and the customer attrition rate. these procedures also included, among others, (i) reading the purchase agreement, (ii) testing management’s process for estimating the fair value of the customer relationship intangible assets, (iii) evaluating the appropriateness of the valuation method and the reasonableness of significant assumptions, including the future revenues, the discount rates and the customer attrition rate for the customer relationship intangible assets, and (iv) testing the completeness, accuracy, and relevance of underlying data used in the estimate. evaluating the reasonableness of the future revenues and customer attrition rate assumptions involved considering the past performance of the acquired business, as well as economic forecasts. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s valuation method and significant assumptions, including the discount rates and customer attrition rate. /s/ pricewaterhouse coopers llp houston, texas february 28, 2020 we have served as the company’s auditor since 2002.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.28table of contents valuation of alternative investments - pension assets description of the matter at october 25, 2020, the company had $1.6 billion in plan assets related to the defined benefit pension plans. approximately 48% of the total pension assets are in global stocks – collective investment funds, private equity funds, real estate – domestic funds, hedge funds, fixed income – collective investment funds, and fixed income – hedge funds. these types of investments are referred to as “alternative investments.” as documented in note f of the financial statements, these alternative investments are valued at net asset value (nav) or are valued using significant unobservable inputs. auditing the fair value of these alternative investments is challenging because of the higher estimation uncertainty of the inputs to the fair value calculations, including the underlying na vs, discounted cash flow valuations, comparable market valuations, and adjustments for currency, credit liquidity and other risks. additionally, certain information regarding the fair value of these alternative investments is based on unaudited information available to management at the time of valuation.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls addressing the risk of material misstatement relating to valuation of alternative investments. this included testing management's review controls over the valuation of alternative investments, for example, a review of fund performance in comparison to the selected benchmark and meetings with the investment advisor on a quarterly basis to review market performance and fund returns in comparison with relevant indices and the investment policy. we also tested management’s independent price testing of underlying investments performed for certain investments on a quarterly basis.our audit procedures included, among others, inquiring of management and the investment advisor regarding changes to the investment portfolio and investment strategies. we confirmed the fair value of the investments and ownership interest directly with the fund managers. we inspected the trust statement for observable transactions near year end to compare to the estimated fair value. we also obtained the latest audited financial statements for certain investments, performed a rollforward of the investment balance to compute an estimated market return on investment, and compared the market return to relevant benchmarks./s/ ernst & young llp we have served as the company's auditor since 1931.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit mattersdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. valuationof derivative liabilities descriptionof the matter: asdiscussed in note 11 to the financial statements, the company has issued convertible notes that require derivative accounting primarilydue to the variable conversion features. management evaluates convertible debentures and associated warrants in accordance with asc topic815, “derivatives and hedging,” and uses the black scholes model to value the derivatives. this model requires managementto make assumptions, use judgment, and can be complex. auditingmanagements assessments and valuations can be complex, involves judgment, and requires a thorough understanding of the convertible noteterms. how we addressed the matter in our audit: wereviewed all contracts to obtain a thorough understanding of the terms. we tested the inputs and assumptions management used in the black scholes model. we performed independent valuations of the derivatives to test management’s valuations. lastly, we obtained confirmationsdirectly from the note holders as well as the transfer agent to test the note balances, note terms, and conversions during the year. haynie& company salt lake city, utah august2, 2021 wehave served as the company’s auditor since 2016.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. valuation and related purchase price allocations of properties acquired in connection with the transfer and redemption of preferred interests as described in notes 1, 3, and 14 to the consolidated financial statements, on october 15, 2020, an affiliate of blackstone transferred its common equity interest in bre ddr iv to the company for consideration of $1.00 and the company’s preferred investment in the bre ddr iv joint venture was redeemed, thereby leaving the company as the sole owner of seven properties, each subject to a mortgage loan. in addition, on november 20, 2020, the company transferred its common and preferred equity interests in bre ddr iii to an affiliate of blackstone in exchange for bre ddr iii’s interests in two of bre ddr iii’s single purpose entities, each of which owned a retail property subject to a mortgage. the properties received as a result of the transfer and redemption were accounted for as asset acquisitions. management estimated the aggregate fair value of the net assets received, excluding closing costs, to be $94.2 million. in connection with estimating the fair value of the net assets received, the fair value of each property was estimated, with the aggregate gross fair value of the properties received estimated to be $272.3 million. the valuation technique used to value the properties was a discounted cash flow analysis for each property. the discounted cash flow analyses used to estimate the fair value of properties received involves significant estimates and assumptions, including discount rates, exit capitalization rates and certain market leasing assumptions. furthermore, the purchase price of the gross property fair value is allocated to the assets and liabilities acquired, comprised of tangible assets, consisting of land, building, and improvements and the intangible assets and liabilities, consisting of above- and below-market leases and in-place leases. as disclosed by management, the company’s allocation process includes various valuation methods and involves estimates and assumptions considered significant, including discount rates, estimated land values (per square foot), overall capitalization rates and certain market leasing assumptions. the fair value of land of an acquired property considers the value of land as if the site was unimproved based on comparable market transactions. the fair value of the building is determined as if it were vacant by applying an overall capitalization rate to market leasing assumptions. above- and below-market lease values are calculated based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between contractual and estimated market rents, measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the estimated term of any below-market, fixed-rate renewal options for below-market leases. the value of acquired in-place leases is recorded based on the present value of the estimated gross monthly market rental rate for each individual lease multiplied by the estimated period of time it would take to lease the space to a new tenant. the principal considerations for our determination that performing procedures relating to the valuation and related purchase price allocations of properties acquired in connection with the exchange of preferred interests is a critical audit matter are (i) the significant judgment by management in estimating the fair value of the properties acquired and related purchase price allocations to tangible and intangible assets and liabilities acquired, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to management’s significant assumptions related to discount rates, exit capitalization rates, and certain market leasing assumptions used to estimate the fair value of the properties received and the discount rates, estimated land values (per square foot), overall capitalization rates and certain market leasing assumptions for the purchase price allocation; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the company’s acquisition process, including controls over the valuation and related purchase price allocations of the properties acquired. these procedures also included, among others, (i) reading the respective transfer and redemption agreements and (ii) testing management’s process for estimating the fair value of the properties acquired and related purchase price allocations to tangible and intangible assets and liabilities acquired. testing management’s process included (i) evaluating the appropriateness of the valuation methods, testing the completeness and accuracy of data provided by management, (ii) evaluating the reasonableness of the significant assumptions related to discount rates, exit capitalization f-3 rates, and certain market leasing assumptions used to estimate the fair value of the properties received and the discount rates, estimated land values (per square foot), overall capitalization rates and certain market leasing assumptions for certain properties for the purchase price allocation, and (iii) for certain properties, the involvement of professionals with specialized skill and knowledge to assist in evaluating the reasonableness of those significant assumptions. evaluating the reasonableness of significant assumptions relating to discount rates, exit capitalization rates, and certain market leasing assumptions used to estimate the fair value of the properties received and the discount rates, estimated land values (per square foot), overall capitalization rates, and certain market leasing assumptions for the purchase price allocation involved considering whether the assumptions used were consistent with evidence obtained in other areas of the audit and third party market data. identification of impairment indicators for real estate assets as described in notes 1 and 6 to the consolidated financial statements, the carrying value of the company’s total net real estate assets was $3,562.3 million and net intangible assets was $33.1 million as of december 31, 2020. management reviews its individual real estate assets, including undeveloped land and construction in progress, and intangibles for potential impairment indicators whenever events or changes in circumstances indicate that the carrying value may not be recoverable. impairment indicators are primarily the result of a change in hold period or significant, prolonged decreases in projected cash flows. for assets with impairment indicators, management determines if the undiscounted future cash flows are sufficient to recover the asset’s carrying value. the principal considerations for our determination that performing procedures relating to the identification of impairment indicators for real estate assets is a critical audit matter are (i) the significant judgment by management to identify events or changes in circumstances indicating that the carrying amounts may not be recoverable, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s evaluation of impairment indicators. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the company’s impairment process, including controls over the identification of events or changes in circumstances that indicate the carrying amounts may not be recoverable. these procedures also included, among others, testing management’s process for identifying individual real estate assets with potential impairment indicators. testing management’s process included evaluating management’s evaluation of impairment indicators. /s/ pricewaterhouse coopers llp cleveland, ohio february 25, 2021we have served as the company’s auditor since 1992.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. accrued research and development costs as described in notes 2 and 9 to the consolidated financial statements, the company has entered into various research and development contracts with companies both inside and outside of the united states. when billing terms under these contracts do not coincide with the timing of when the work is performed, management is required to make estimates of outstanding obligations to those third parties as of the end of the reporting period. within accrued expenses, total accrued research and development expenses amounted to $25.0 million as of december 31, 2021, which include accruals for these estimated research and development obligations. accrual estimates are based on a number of factors, including management’s assessment of progress towards completion of the research and development activities, invoicing to date under the contracts, communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced, and the costs included in the contracts. significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. the principal considerations for our determination that performing procedures relating to accrued research and development costs is a critical audit matter are (i) the significant judgment by management in determining the accrued costs, which in turn led to (ii) significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence for these accrued costs and the factors related to management’s assessment of progress towards completion of the research and development activities, invoicing to date under the contracts and communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included, among others (i) testing management’s process for estimating accrued research and development costs, (ii) evaluating the appropriateness of the methodology used by management to determine the estimate, (iii) evaluating the reasonableness of the factors related to management’s assessment of progress towards completion of the research and development activities, invoicing to date under the contracts and communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced by testing specific tasks and the associated cost incurred for services the company has not yet been invoiced for or otherwise notified of the actual cost at period end, and (iv) testing the completeness and accuracy of the data inputs to the estimate, including total costs included within executed contracts and actual billed expenses under these contracts. /s/ pricewaterhouse coopers llp boston, massachusetts february 24, 2022 we have served as the company's auditor since 2016.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the consolidated financial statementsthat were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that arematerial to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. thecommunication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on theaccounts or disclosures to which they relate. stockfor services asdescribed in note 7 to the consolidated financial statements, the company issued common stock for services. management establishestheir estimate for the value of the stock for services using historical stock price information. theprincipal considerations for our determination that performing procedures relating to stock for services is a critical audit matter aredue to the material impact it has on the consolidated financial statements. addressingthe matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidatedfinancial statements. these procedures included, among others, evaluating the reasonableness of the historical stock price informationused by management to determine the expense related to stock for services. /s/pinnacle accountancy group of utah wehave served as the company’s auditor since 2020

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.valuation of intangible assets acquired in business combinations as described in note 4 to the consolidated financial statements, the company completed the acquisitions of iwg high performance conductors, inc. (“hpc”) and z-medica, llc (“z-medica”) for net consideration of $260.0 million and $500.0 million, respectively, in 2020, which resulted in $511.0 million of intangible assets being recorded. the intangible assets acquired were comprised of intellectual property and customer relationships for both hpc and z-medica, and trade names for z-medica. as disclosed by management, the fair value of intangible assets acquired is determined using various methods under the income approach. the more significant judgments and assumptions used in the valuation of intangible assets may include revenue growth rates, royalty rate, discount rate, attrition rate, and ebitda margin. the principal considerations for our determination that performing procedures relating to the valuation of intangible assets acquired in business combinations is a critical audit matter are (i) the significant judgment by management in determining the fair value of acquired intangible assets;(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures relating to the fair value measurement of intangible assets acquired and evaluating the revenue growth rates, royalty rates, discount rates, attrition rates, and ebitda margins; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing of the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the intangible assets. these procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for estimating the fair value of intangible assets. testing management’s process included evaluating the appropriateness of the valuation methods, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of the revenue growth rates, royalty rates, discount rates, attrition rates, and ebitda margins. evaluating the reasonableness of the revenue growth rates, attrition rates, and ebitda margins involved considering the past performance of the acquired businesses, as well as economic and industry forecasts. the royalty rates were evaluated by considering historical and current royalty rates of similar intangible assets in the industry. the discount rates were evaluated by considering the cost of capital of comparable businesses and other industry factors. professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the valuation methods and evaluating the reasonableness of the revenue growth rates, ebitda margins, the royalty rates, attrition rates, and discount rates./s/ pricewaterhouse coopers llp philadelphia, pennsylvania february 25, 2021we have served as the company’s auditor since 1962.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.sponsor warrants – refer to notes 1, 8, 13, and 15 to the financial statements critical audit matter description as described in notes 1, 8, 13, and 15 to the financial statements, the company recorded sponsor warrants as liabilities on the balance sheet at fair value. subsequent changes in the fair value of the warrants are recognized in the consolidated statement of operations at each reporting period. the company recognized $12 million of expense related to the fair value adjustment of the sponsor warrants for the year ended december 31, 2021. as the company completed the redemption of all of its outstanding sponsor warrants on july 9, 2021, there is no remaining balance related to the sponsor warrants as of december 31, 2021.we identified the assessment of the accounting and classification of the sponsor warrants as a critical audit matter due to the complexity in assessing the exercise and settlement features unique to the sponsor warrants. auditing these elements required a 57table of contents significant degree of auditor judgment and increased audit effort, including specialized skills and knowledge, due to the complexity of the application of the accounting guidance to the warrant features to determine the appropriate accounting and classification of the sponsor warrants.how the critical audit matter was addressed in the audit our audit procedures related to the sponsor warrants included the following, among others:•we tested the effectiveness of controls over management’s accounting for the sponsor warrants, including those over the completeness and accuracy of the technical accounting analysis for significant and unusual transactions.•we evaluated the company’s analysis of the accounting for the sponsor warrants, including the completeness and accuracy of the information used in the analysis and the judgments made by management by utilizing the assistance of professionals in our firm with specialized skill and knowledge. we consulted on management’s conclusion regarding the accounting for the sponsor warrants, including the classification of the sponsor warrants as liabilities and the treatment of subsequent changes in the fair value of the sponsor warrants.•we evaluated the financial statement presentation and disclosures regarding the accounting conclusions reached, including the classification of the sponsor warrants./s/ deloitte & touche llp san francisco, california february 24, 2022we have served as the company’s auditor since 2015.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit mattersdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 16 instrumentswith embedded conversion features descriptionof the matter asdiscussed in note 1 to the consolidated financial statements, the company issues instruments with embedded conversion features. someof these embedded conversion features result in a derivative liability that is measured at fair value. auditingderivative liability is complex and highly judgmental due to the variability and uncertainty associated with the company’s assessmentof estimates used in calculating the value of the derivative liability. changes in these estimates would have a significant effect onthe valuation of the derivative liability and the related change in fair value of derivative liability. how we addressed the matter in our audit totest the derivative liability, our audit procedures included, among others, evaluating the appropriateness of the company’s accountingpolicy for instruments with embedded conversion features and the estimates and assumptions used in calculating the fair value of thederivative liability. we evaluated whether the methods used to calculate the fair value of the derivative liability were applied consistently.we also tested the completeness and accuracy of the underlying data used for the fair value measurement. /s/rose, snyder & jacobs llp wehave served as the company’s auditor since 2008.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. fcc broadcast license impairment assessments -licenses acquired in the kfmb, gray stations, dispatch stations, and nexstar stations acquisitions as described in notes 1 and 3 to the consolidated financial statements, the company’s consolidated fcc broadcast licenses balance was $2.1 billion as of december 31, 2020, of which $897.7 million related to fcc broadcast licenses acquired in the kfmb, gray stations, dispatch stations, and nexstar stations acquisitions, which were subject to a quantitative impairment assessment. intangible assets with indefinite lives are tested annually, or more often if circumstances dictate, for impairment and written down to fair value as required. fair value is estimated by management using an income approach called the greenfield method. the greenfield method utilizes a discounted cash flow model that incorporates several key assumptions, including market revenues, long-term growth projections, estimated market share for a typical market participant, estimated profit margins based on market size and station type, and the discount rate (determined by management using a weighted average cost of capital). the principal considerations for our determination that performing procedures relating to the fcc broadcast license impairment assessments for the licenses acquired in the kfmb, gray stations, dispatch stations, and nexstar stations acquisitions is a critical audit matter are the significant judgment by management when developing the fair value measurement of the fcc broadcast licenses. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to market revenues, long-term growth projections, estimated market share for a typical market participant, estimated profit margins based on market size and station type, and the discount rate. in addition, the audit effort involved the use of professionals with specialized skill and knowledge.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s impairment assessments, including controls over the valuation of the company’s fcc broadcast licenses for the licenses acquired in the kfmb, gray stations, dispatch stations, and nexstar stations acquisitions. these procedures also included, among others, (i) testing management’s process for developing the fair value estimates; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness, accuracy, and relevance of underlying data used in the model; and (iv) evaluating the significant assumptions used by management related to market revenues, long-term growth projections, estimated market share for a typical market participant, estimated profit margins based on market size and station type, and the discount rate. evaluating management’s assumptions related to market revenues, estimated market share for a typical market participant and estimated profit margins based on market size and station type involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance in the market being evaluated, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. the discount rate was evaluated by considering the cost of capital of comparable businesses and other industry factors. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s discounted cash flow model and the discount rate and long-term growth projections assumptions./s/ pricewaterhouse coopers llp arlington, virginia march 1, 2021we have served as the company’s auditor since 2018.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.58table of contents healthcare segment revenue description of the matter for the year ended december 31, 2019, the company’s revenue derived from remote cardiac monitoring services in its healthcare segment was $372.0 million. as explained in note 3 to the consolidated financial statements, the company measures and recognizes revenue for contracted payors (including medicare) at a transaction price negotiated with each payor for services provided, on a case rate basis.auditing the company’s healthcare segment revenue is complex and required a high degree of judgment in the application of our audit procedures and evaluating the results of those audit procedures to address the completeness and accuracy of the underlying data used to recognize healthcare segment revenue, which is compiled using end-user computing applications.how we addressed the matter in our audit we tested the company’s controls that address the risk of material misstatement relating to the occurrence and measurement of healthcare segment revenue. for example, we tested management’s review of the contracted rates utilized to determine the transaction price for each service provided and controls over the completeness and accuracy of the underlying data used to recognize healthcare segment revenue. to test the company’s healthcare segment revenue, our audit procedures included, among others, performing analytical review procedures over key financial ratios, and selecting a representative sample of healthcare segment revenue transactions and comparing the components of the revenue calculations to source data including remote cardiac monitoring results and contracted rates to test the completeness and accuracy of the data compiled from end-user computing applications. accounting for acquisition of geneva healthcare, inc.description of the matter as explained in note 4 to the consolidated financial statements, on march 1, 2019, the company completed its acquisition of geneva healthcare, inc. (“geneva”) for a total purchase price of $77.9 million. the transaction was accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on the respective fair values.auditing the company's accounting for the acquisition of geneva was complex due to the significant estimation uncertainty in determining the fair value of its identifiable intangible assets, which principally consisted of customer relationships, technology and trade names. the significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business that rely upon limited historical data on which to base those assumptions. the significant assumptions used to estimate the fair value of the customer relationships included the future operating performance and cash flows generated by the customer relationships and a discount rate. the significant assumptions used to estimate the fair value of the technology included the projected revenues generated by the technology, a royalty rate, and a discount rate. the significant assumptions used to estimate the fair value of the trade name included projected revenues generated by the trade name, a royalty rate, and a discount rate. these significant assumptions are forward looking and could be affected by future economic and market conditions.59table of contents how we addressed the matter in our audit we tested the company’s controls over its accounting for acquisitions, including the valuation of identifiable intangible assets. for example, we tested the company's controls over management’s review of the identifiable intangible asset valuation models, as well as the significant assumptions used in the valuation models.to test the estimated fair value of the intangible assets acquired, we performed audit procedures that included, among others, evaluating the company's selection of the valuation methodologies used, evaluating the significant assumptions described above, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. for example, we compared the significant assumptions to current industry, market and economic trends, as well as to the historical results of the acquired business. we involved our valuation specialists to assist in our evaluation of the methodologies used by the company and the significant assumptions included in the fair value estimates. additionally, we performed sensitivity analyses to evaluate changes in the fair value of the intangible assets that would result from changes in the significant assumptions. valuation of contingent consideration description of the matter as explained in note 2 to the consolidated financial statements, the company measures and records the fair value of contingent consideration on a recurring basis. as explained in note 4 to the consolidated financial statements, the total purchase price for the acquisition of geneva included the acquisition date fair value of contingent consideration of $13.2 million. as explained in note 6 to the consolidated financial statements, this liability was remeasured to $12.9 million as of december 31, 2019.auditing the company's valuations of the contingent consideration related to the geneva acquisition was complex due to the significant estimation required by management. the significant estimation was primarily due to the complexity of the valuation model used by management to measure the fair value of the contingent consideration and the sensitivity of the respective fair values to the significant underlying assumptions. the company used a monte carlo simulation to measure the fair value of the contingent consideration. the significant assumptions used in the simulation included estimated projected revenues, estimated stock price volatility in future periods, and discount rates. these significant assumptions are forward looking and could be affected by future economic and market conditions.how we addressed the matter in our audit we tested the company’s controls over the valuations of the contingent consideration. for example, we tested controls over management’s review of the contingent consideration valuation models, as well as the significant assumptions used in the valuation models.to test the estimated fair value of the contingent consideration related to the geneva acquisition, our audit procedures included, among others, assessing the terms of the arrangement, including the conditions that must be met for the contingent consideration to become payable, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. we also involved our valuation specialists to assist in evaluating the use of the monte carlo simulation for the contingent consideration and testing the significant assumptions used in the model. we compared the significant assumptions to current industry, market and economic trends and to the historical results for the acquired business. 60table of contents/s/ ernst & young llp we have served as the company’s auditors since 2004.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.amortization and valuation of deferred policy acquisition costs (“dac”) related to variable and interest sensitive life products and variable annuity products with guaranteed minimum benefits as described in note 2 to the consolidated financial statements, dac represents acquisition costs that vary with and are primarily related to the acquisition of new and renewal insurance business that are deferred. a significant portion of the $4.2 billion dac as of december 31, 2020 is associated with the variable and interest sensitive life and variable annuity products with guaranteed minimum benefits. dac associated with certain variable annuity products is amortized based on estimated assessments, with dac on the remainder of variable annuities, universal life and investment-type products amortized over the expected total life of the contract group as a constant percentage of estimated gross profits. dac is subject to recoverability testing at the time of policy issue and loss recognition testing at the end of each accounting period. the dac amortization and valuation estimates for these products are determined using models and significant assumptions related to projected future separate account performance, mortality, contract persistency, and general account investment spread.the principal considerations for our determination that performing procedures relating to the amortization and valuation of dac related to variable and interest sensitive life products and variable annuity products with guaranteed minimum benefits is a critical audit matter are (i) the significant judgment by management when determining the amortization and valuation estimates, which in turn led to a high degree of auditor judgment and subjectivity in performing audit procedures relating to the amortization and valuation of dac; (ii) the significant audit effort in evaluating the audit evidence relating to the models and significant assumptions related to projected future separate account performance, mortality, contract persistency, and general account investment spread; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. as previously disclosed by management, a material weakness existed during the year related to this matter. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to amortization and valuation of dac related to variable and interest sensitive life products and variable annuity products with guaranteed minimum benefits, including controls over the relevant models and development of the significant assumptions. these procedures also included, among others, testing management’s process for determining the amortization and valuation estimates of dac, which included (i) testing the completeness and accuracy of the historical data provided by management to develop and update the significant assumptions, (ii) testing that significant assumptions are accurately reflected in the relevant models, and (iii) the use of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the relevant models and the reasonableness of the significant assumptions related to projected future separate account performance, mortality, contract persistency, and general account investment spread. evaluating these significant assumptions involved consideration of the company’s experience, industry trends, and market conditions, as applicable.valuation of guaranteed minimum benefit features related to certain life and annuity contracts as described in notes 2 and 8 to the consolidated financial statements, future policy benefits and other policyholders’ liabilities of $39.9 billion as of december 31, 2020 included reserves related to guaranteed minimum death benefits (“gmdb”) and guaranteed minimum income benefit (“gmib”) features, some of which are related to embedded derivatives liabilities, and reserves related to participating traditional life products, non-participating traditional life products, and individual health benefit liabilities. for certain contracts with guaranteed minimum benefit features, the benefits are accounted for as reserves and determined by estimating the expected value of death or income benefits in excess of the projected contract accumulation value and recognizing the excess over the estimated life based on expected assessments (i.e., benefit ratio). the liability equals the current benefit ratio multiplied by cumulative assessments recognized to date, plus interest, less cumulative excess payments to date. the determination of this estimated liability is based on models that involve numerous assumptions and subjective judgments, including those regarding expected market rates of return and volatility, contract surrender and withdrawal rates, mortality experience, and, for contracts with the gmib feature, gmib election rates. for certain contracts with guaranteed 123table of contentsminimum benefit features, the benefits are accounted for as embedded derivatives, at fair value using a discounted cash flow valuation technique that incorporates significant unobservable inputs with respect to non-performance risk, lapse rates, withdrawal rates, annuitization, and mortality rates. the principal considerations for our determination that performing procedures relating to the valuation of guaranteed minimum benefit features related to certain life and annuity contracts is a critical audit matter are (i) the significant judgment by management when determining these estimates, which in turn led to a high degree of auditor judgment and subjectivity in performing audit procedures relating to the valuation of guaranteed minimum benefit features; (ii) the significant audit effort in evaluating the audit evidence relating to benefits accounted for as reserves, specifically, the significant assumptions of expected market rates of return and volatility, contract surrender and withdrawal rates, mortality experience, and, for contracts with the gmib feature, gmib election rates, and for benefits accounted for as embedded derivatives, the unobservable inputs of non-performance risk, lapse rates, withdrawal rates, annuitization, and mortality rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. as previously disclosed by management, a material weakness existed during the year related to this matter. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to valuation of guaranteed minimum benefit features related to certain life and annuity contracts, including controls over the relevant models and development of the significant assumptions and unobservable inputs. these procedures also included, among others, testing management’s process for determining the valuation of guaranteed minimum benefit features, which included (i) testing the completeness and accuracy of the historical data provided by management to develop and update the significant assumptions and unobservable inputs, (ii) testing that significant assumptions and unobservable inputs are accurately reflected in the relevant models, and (iii) the use of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the relevant methods used for the valuation of guaranteed minimum benefit features and the reasonableness of the significant assumptions related to expected market rates of return and volatility, contract surrender and withdrawal rates, mortality experience, and, for contracts with the gmib feature, gmib election rates, and unobservable inputs of non-performance risk, lapse rates, withdrawal rates, annuitization, and mortality rates. evaluating these significant assumptions and unobservable inputs involved consideration of the company’s experience, industry trends, and market conditions, as applicable.valuation of guaranteed minimum income benefit (“gmib”) reinsurance contract asset as described in notes 2 and 8 to the consolidated financial statements, the fair value of the gmib reinsurance contract asset was $2.5 billion as of december 31, 2020. a portion of the directly written gmi bs are accounted for as insurance liabilities, but the associated reinsurance agreements contain embedded derivatives. these embedded derivatives are included in gmib reinsurance contract asset, at fair value. the gmib reinsurance contract asset’s fair value reflects the present value of reinsurance premiums, net of recoveries, and risk margins over a range of market consistent economic scenarios. management determined the fair value of the gmib reinsurance contract asset using a discounted cash flow valuation technique that incorporates significant unobservable inputs with respect to non-performance risk, lapse rates, withdrawal rates, utilization rates, volatility rates, and mortality rates. the principal considerations for our determination that performing procedures relating to the valuation of gmib reinsurance contract asset is a critical audit matter are (i) the significant judgment by management when determining the fair value of the gmib reinsurance contract asset, which in turn led to a high degree of auditor judgment and subjectivity in performing audit procedures relating to the fair value measurement; (ii) the significant audit effort in evaluating the audit evidence relating to the valuation technique and significant unobservable inputs related to non-performance risk, lapse rates, withdrawal rates, utilization rates, volatility rates, and mortality rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. as previously disclosed by management, a material weakness existed during the year related to this matter. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to valuation of the gmib reinsurance contract asset, including controls over the valuation technique and determination of significant unobservable inputs. these procedures also included, among others, testing management’s process for determining the fair value of the gmib reinsurance contract asset, which included (i) testing the completeness and accuracy of the historical data provided by management to develop and update the significant unobservable inputs, (ii) testing that significant unobservable inputs are accurately reflected in the relevant valuation technique, and (iii) the use of professionals with specialized skill and knowledge to assist in evaluating the appropriateness of the valuation technique and the reasonableness of significant unobservable inputs related to non-performance risk, lapse rates, withdrawal rates, utilization rates, volatility rates, and mortality rates. evaluating these significant unobservable inputs involved consideration of the company’s experience, industry trends, and market conditions, as applicable.124table of contents/s/ pricewaterhouse coopers llp new york, new york february 24, 2021we have served as the company’s auditor since 1993.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.accrued promotional allowances – refer to note 1 to the financial statements critical audit matter description we identified accrued promotional allowances as a critical audit matter because of the extent and subjective nature of management judgment required with respect to estimating consumer participation and/or distributor and retail customer performance levels and future promotional claims.2how the critical audit matter was addressed in the audit our audit procedures over accrued promotional allowances, with respect to management’s judgment regarding levels of consumer participation and/or distributor and retail customer performance levels and future promotional claims, included the following, among others:• we selected a sample of accrued promotional allowances recorded for specific distributors and retail customers and (1) developed an expectation of the accrual using current-year claim and payment data, and/or (2) vouched known claim submissions, unpaid as of period-end, to underlying supporting documentation. • we tested the promotional expenditure amount recorded as a reduction to net sales and assessed the reasonableness of management’s estimate by developing an expectation of the amount, based on historical promotional expenditure amounts recorded as a percentage of sales, and compared our expectation to the recorded promotional expenditure amount. • we performed inquiries with the company’s sales and marketing personnel to corroborate our understanding of new and existing promotional programs that may alter the relationship between gross billings and promotional allowances, as such programs are considered by management when estimating future promotional claims. • we evaluated management’s ability to estimate promotional allowances by comparing the actual promotional allowances subsequently paid to the original estimates of management./s/ prager metis cp as, llc we have served as the company’s auditor since 2019.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.125valuation of europe, middle east, and africa (emea) reporting unit goodwill and certain indefinite lived intangible assets description of the matter at december 31, 2020, the balance of the company’s goodwill related to the emea reporting unit was $329 million and the balance of the hotpoint and jenn air indefinite lived brand intangible asset was $158 million and $304 million, respectively. as discussed in note 1, note 6, and note 11 to the consolidated financial statements, goodwill and indefinite lived intangible assets are tested for impairment at least annually or when impairment indicators are present at the reporting unit or intangible asset level, respectively. auditing management’s assessment of the estimated fair value of the emea reporting unit goodwill was complex and required the involvement of valuation specialists due to the judgmental nature of the assumptions utilized in the valuation process. the fair value estimate was sensitive to significant assumptions such as revenue growth, ebit margins and the discount rate. the estimate also included assumptions related to the terminal growth rate, tax rate, capital expenditures, depreciation and amortization and changes in working capital requirements. in addition, auditing management’s assessment of the estimated fair value of both the hotpoint and jenn air indefinite lived brand intangible assets was complex and required the involvement of valuation specialists due to the judgmental nature of the assumptions used in the valuation process. the fair value estimate was sensitive to significant assumptions such as future revenue, royalty rate and discount rate. the estimate also included assumptions related to the tax rate. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s goodwill and indefinite lived intangible asset fair value assessment process. this included testing controls over management’s review over the projected financial information and other key assumptions used in the valuation model as well as controls over the carrying value of the emea reporting unit and both the hotpoint and jenn air brand intangibles. to test the estimated fair value of goodwill related to the emea reporting unit as well as the hotpoint and jenn air indefinite lived brand intangible assets, we performed audit procedures that included, among others, assessing methodologies used in the model and testing the significant assumptions discussed above. this included comparing the significant assumptions used by management to current industry and economic trends, changes to the company’s business model, customer base or product mix and other relevant factors. we assessed the reasonableness of management’s projections used in the fair value calculation and obtained support for initiatives supporting these projections. we also compared previous forecasts to actual results to assess management’s forecasting process. for example, for forecasted revenue we compared the revenue growth assumptions to the company’s historical growth rate, external economic and industry data, and various business plans designed to grow revenue. to assess the discount rate, we reviewed the methodology used by the company and considered each input relative to current economic factors. we involved valuation specialists to assist in evaluating the key assumptions and methodologies. we performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the emea reporting unit and the indefinite lived intangible assets that would result from changes in the assumptions. in addition, we tested the mathematical accuracy of the model. 126valuation of unrecognized income tax benefits and indirect tax matters description of the matter as of december 31, 2020, the company has unrecognized income tax benefits and indirect tax matters as described in note 8 and note 15 to the consolidated financial statements, respectively. these matters also include assessments disclosed in the befiex credits and other brazil tax matters section of note 8 of $488 million related to brazilian income tax and indirect tax matters. as described in note 15, the company has unrecognized tax benefits of $427 million. the company records the benefits of an uncertain tax position in the consolidated financial statements after determining it is more likely than not that the uncertain tax position will be sustained upon examination based on its technical merits. the company accrues liabilities for the contingencies which relate to indirect tax matters when a loss probable and the amount or range of loss is reasonably estimable. auditing management’s accounting and disclosure for these unrecognized tax benefits and indirect tax matters was complex because the evaluation is based on interpretations of domestic and international tax laws, is subjective, requires significant judgment and often requires the use of subject matter resources to assist in the evaluation. how we addressed the matter in our audit we identified and tested controls that address the risk of material misstatement relating to the valuation of these income tax and indirect tax matters. this included, among others, testing controls over the company’s process to assess the technical merits and measurement of these positions. we also tested the company’s process to determine the disclosure for these matters.with the assistance of our income tax professionals and subject matter resources, we performed audit procedures that included, among others, evaluating the technical merits, measurement and related disclosure for the company’s positions. for example, we assessed the inputs utilized and the conclusions reached in the assessments performed by the management, and compared the methods used to alternative methods. we also reviewed certain legal opinions obtained from external advisors and internal legal counsel, examined the company’s communications with the relevant tax authorities and read the minutes of the meetings of the committees of the board of directors. in addition, we used our knowledge of historical settlement activity, tax laws, and other market information to evaluate the technical merits of the company’s positions. furthermore, we monitored leading cases within the respective jurisdictions to determine if precedence set in those rulings impacted the company’s cases and we monitored external sources for any information which could impact these cases. 127revenue recognition - completeness and valuation of customer sales incentives (promotions liabilities)description of the matter at december 31, 2020, the company’s accrued promotional liability was $831 million. as discussed in note 2 to the consolidated financial statements, the company recognizes a reduction to revenue and a corresponding accrued promotional liability based on the amount of customer sales incentives to be paid to trade customers. this estimate is accounted for as a reduction to revenue in the period incurred and primarily calculated using the expected value method. auditing the accrued promotions liability was complex and subjective due to the large volume of activity, the manual nature of adjustments made to the liability in certain countries, and the inherent estimation uncertainty in the process performed to estimate the reduction to revenue and corresponding promotional liability. in addition, assessing the completeness of the accrual required significant auditor judgment.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the completeness and valuation of the reduction to revenue and corresponding promotional liability. for example, we tested controls over management’s review of adjustments to the accrual, as well as their review of significant assumptions to the accrual, including the validation of third-party sales data.our audit procedures over completeness and valuation included, among others, testing a sample of key inputs to the promotional liability, including reviewing key customer contractual agreements and third-party sales data. we performed testing over activity subsequent to the balance sheet date to determine the impact, if any, these items have on the 2020 financial statements. in addition, to assess management’s estimation accuracy, we perform a lookback analysis which compares the amount accrued in the prior year to the amount subsequently paid. we also performed analytical procedures on a disaggregated level and performed inquiries of sales personnel and key finance management personnel. in addition, we sent confirmations to third parties, which included confirmation of the sales incentive amounts owed to customers./s/ ernst & young llp we have served as the company's auditor since 1927.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.fresh start reporting — refer to note 4 to the financial statements critical audit matter description as described in note 4 to the consolidated financial statements, and in connection with the emergence from chapter 11, the company qualified for and adopted fresh start reporting in accordance with asc 852, reorganizations. management derived a reorganization value from the company’s enterprise value which was estimated to be $1.25 billion. the reorganization value represents the fair value of the company’s total assets before considering liabilities and is intended to approximate the amount a willing buyer would pay for the company’s assets immediately after restructuring. the company allocated the reorganization value to its individual assets based on their estimated fair values.115 auditing the adoption of fresh start reporting was complex due to the significant estimation uncertainty in determining the fair value of the company’s assets. the identified intangible assets of $71 million, which principally consisted of trade names, technology, licenses, and customer relationships, were subject to significant estimation uncertainty primarily due to the sensitivity of the respective fair values to underlying assumptions in the discounted cash flow models used to measure the intangible assets. significant assumptions included discount rates and certain assumptions that form the basis of the forecasted results such as revenue growth rates, margins, and attrition rates which may be affected by future economic and market conditions.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimates and assumptions utilized in the company’s adoption of fresh start reporting included the following, among others: •to test the estimated fair value of identified intangible assets, our audit procedures included the involvement of fair value specialists to evaluate the company’s selection of valuation methodology, evaluate the methods and significant assumptions used by management, and evaluate the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. •we compared significant assumptions mentioned above to the company’s historical results and third-party industry projections.•we also evaluated the adequacy of the company’s financial statement disclosures related to the bankruptcy and adoption of fresh start reporting.income taxes — accounting for uncertainty in income taxes — refer to note 1 and note 9 to the financial statements critical audit matter description the company’s annual tax rate is based on its income, statutory tax rates, and tax planning opportunities available in the various jurisdictions in which it operates. tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties. the company records unrecognized tax benefits in multiple jurisdictions and evaluates the future potential outcomes of tax positions, based upon interpretation of the country-specific tax law and the likelihood of future settlement. as of march 31, 2021, the company’s recorded unrecognized tax benefits totaled $20.6 million. conclusions on recognizing and measuring uncertain tax positions involved significant management estimates and judgment and included complex considerations of local tax laws and related regulations in the various jurisdictions in which the company operates.we identified uncertain tax positions as a critical accounting matter because of the significant estimates and assumptions involved in recording uncertain tax positions. this required a high degree of auditor judgment and an increased extent of effort, including the need to involve our tax specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimates and assumptions utilized in the company’s determination of uncertain tax positions included the following, among others: •with the assistance of our income tax specialists, we read and evaluated management’s documentation, including relevant accounting policies, relevant authoritative tax literature, and information obtained by management from outside tax specialists and attorneys, that detailed the basis of the uncertain tax positions. •with the assistance of our income tax specialists, we evaluated management’s judgement of the appropriate unit of account for the unrecognized tax benefits and audited the measurement calculations and the interest and penalties balances, as applicable.•we challenged the reasonableness of management’s judgments regarding the future resolution of the uncertain tax positions, through evaluating the technical merits of the uncertain tax positions by considering how tax law, including statutes, regulations, and case law, impacted management’s judgments and through consideration of the company’s history of settlements.116 •for those uncertain tax positions that had not been effectively settled, we evaluated whether management had appropriately considered new information that could significantly change the recognition, measurement, or disclosure of the uncertain tax positions through review of correspondence with taxing authorities and evaluation of changes to issued guidance./s/ deloitte & touche llp raleigh, north carolina june 29, 2021 we have served as the company’s auditor since its fiscal 2006.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by 57table of contents communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. revenue recognition - customer contracts with multiple performance obligations as described in note 3 to the consolidated financial statements, the company recorded total revenues of $557 million for the year ended march 31, 2021. the company’s contracts with customers may include multiple performance obligations that consist of various combinations of software solutions and related services, which are generally capable of being distinct and accounted for as separate performance obligations. the total transaction price is allocated to each performance obligation within a contract based on estimated standalone selling prices. standalone selling prices are generally determined based on the prices charged to customers, except for certain software licenses that are based on the residual approach because their standalone selling prices are highly variable and certain maintenance customers that are based on substantive renewal rates. the principal considerations for our determination that performing procedures relating to revenue recognition, specifically customer contracts with multiple performance obligations, is a critical audit matter are the significant judgment by management in identifying distinct performance obligations for each contract and in determining the amount to be allocated to each performance obligation. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to whether management appropriately (i) identified all performance obligations and (ii) allocated the transaction price to each performance obligation within the contract. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls related to management’s identification of performance obligations, determination of the estimated standalone selling price, and allocation of transaction price. these procedures also included, among others, reviewing contracts with customers for a sample of contracts and i) testing management’s identification of distinct performance obligations in its contracts with customers, ii) testing management’s estimate of standalone selling prices and (iii) testing management’s allocation of transaction price to the performance obligations. /s/ pricewaterhouse coopers llp irvine, california may 26, 2021 we have served as the company’s auditor since 2009.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. impairment of goodwill for certain reporting units within the u.s. and international drilling segments as described in note 2 to the consolidated financial statements, the company had a consolidated goodwill balance of $28.4 million as of december 31, 2019. during the year ended december 31, 2019, the company recorded consolidated impairment losses of $156.0 million for goodwill for certain reporting units including $52.2 million and $75.6 million in the u.s. and international drilling segments, respectively. management reviews goodwill for impairment annually during the second quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the carrying amount of such goodwill may exceed their fair value. management initially assesses goodwill for impairment based on qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one or more of its reporting units is greater than its carrying amount. if the carrying amount exceeds the fair value, an impairment charge will be recognized in an amount equal to the excess; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. the fair values calculated in these impairment tests were determined using discounted cash flow models which require the use of significant unobservable inputs, representative of a level 3 fair value measurement. the cash flow models involve assumptions, that vary by reporting unit, and include the company’s utilization of rigs or other oil and gas service equipment, revenues and earnings from affiliates, as well as direct costs, general and administrative costs, depreciation, applicable income taxes, capital expenditures and working capital requirements. as disclosed by management, the fair value estimates of these reporting units are sensitive to varying dayrates, utilization and costs. the future cash flows were discounted to present value using discount rates determined to be appropriate for each reporting unit. terminal values for each reporting unit were calculated using a gordon growth methodology with a long-term growth rate of 2%. the principal considerations for our determination that performing procedures relating to the impairment of goodwill for certain reporting units within the u.s. and international drilling segments is a critical audit matter are there was significant judgment by management when developing the fair value for certain reporting units. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the cash flow models and significant assumptions, which vary by reporting unit for the related impairment assessments, including utilization of rigs, dayrates, applicable income taxes, capital expenditures, long term growth rates and discount rates. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and in evaluating the audit evidence obtained.42table of contents addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s impairment assessment of goodwill for certain reporting units, including controls over the fair value estimates. these procedures also included, among others, testing management’s process for developing the fair value estimates; evaluating the appropriateness of the discounted cash flow models; testing the completeness, accuracy, and relevance of underlying data used in the models; and evaluating the significant assumptions used by management, which vary by reporting unit, including utilization of rigs, dayrates, applicable income taxes, capital expenditures, long term growth rates and discount rates. evaluating management’s assumptions involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting units, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s discounted cash flow models and certain significant assumptions, including discount rates. /s/ pricewaterhouse coopers llp houston, texas february 25, 2020 we have served as the company’s auditor since 1987.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.valuation of the elizabeth arden fragrances and professional portfolio reporting units as discussed in notes 1 and 6 to the consolidated financial statements, the company’s goodwill balance as of december 31, 2021 was $562.8 million. the company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of a reporting unit more likely than not exceeds its fair value using a discounted cash flow model. we identified the evaluation of the goodwill impairment analyses for the elizabeth arden fragrances and professional portfolio reporting units as a critical audit matter. there was a high degree of subjective auditor judgment in evaluating the key assumptions used in the discounted cash flow models used to estimate the fair values of the reporting units. specifically, the key assumptions, including forecasted net sales, forecasted earnings before interest, taxes, depreciation f-2table of contents revlon, inc. and subsidiarie sand amortization (ebitda) margins, and discount rates, as minor changes to those assumptions could have a significant effect on the company’s assessment of the fair value of the reporting units. additionally, specialized skills and knowledge were required to assess these assumptions.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s goodwill impairment assessment process. these included controls related to the determination of the estimated fair value of the reporting units and the development of the assumptions described above. we evaluated the company’s forecasted net sales and ebitda margins used in the fair value analyses by comparing each to historical results, forecasted net sales growth rates and ebitda margins of peer companies based on publicly available market data. we compared the company’s historical forecasted net sales and ebitda margin to actual results to assess management’s ability to accurately forecast. in addition, we involved valuation professionals with specialized skill and knowledge, who assisted in:•evaluating the appropriateness of the selected guideline public companies by researching the companies and reviewing the business description•evaluating the discount rates by comparing them to discount rate ranges that were independently developed using publicly available market data for comparable companies liquidity as discussed in note 1 to the consolidated financial statements, at december 31, 2021, the company believes its cash and cash equivalents and its existing credit capacity and management’s actions in the normal course to reduce variable spending will be sufficient to fund the company’s planned operations for at least the next 12 months beyond the date of the issuance of the consolidated financial statements.we identified the assessment of liquidity and the company’s ability to continue as a going concern as a critical audit matter. the evaluation of certain assumptions used in the company’s estimate of its cash inflows and outflows used in its forecasted model of liquidity for at least 12 months beyond the date of the issuance of the consolidated financial statements involved a high degree of subjective auditor judgment due to uncertainty in the estimate of cash inflows and outflows. specifically, managements’ assumptions including forecasted net sales, forecasted earnings before interest, taxes, depreciation and amortization (ebitda), and management’s actions in the normal course to reduce variable spending.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s assessment of its ability to continue as a going concern. these included controls related to the assumptions used in the forecasted model of liquidity and sensitivity analyses over the forecasted models of liquidity. we assessed the reasonableness of key assumptions underlying management’s liquidity models by comparing the key assumptions to historical results. we compared management’s prior key assumptions to actual results to assess their ability to forecast. we performed sensitivity analyses to assess the impact of changes in the key assumptions included in management’s liquidity forecast models. we assessed management’s liquidity forecast model in the context of other audit evidence obtained during the audit to determine whether it supported or contradicted the conclusions reached by management./s/ kpmg llp we have served as the company’s auditor since 1991.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgements. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. estimation of variable consideration for ongoing collaboration agreements description of the matter as discussed in note 7 to the consolidated financial statements, the company has multiple ongoing collaboration agreements which include rights to future payments totaling up to $2.06 billion as of december 31, 2019 that are payable upon the achievement of various developmental, regulatory and commercial milestones related to certain programs under development. these future payments represent variable consideration that is included in the transaction price for these collaboration agreements to the extent that the company determines it is probable that a significant revenue reversal of cumulative revenue recognized under the contract will not occur. when the company cannot conclude that it is probable that a significant revenue reversal of cumulative revenue under the contract will not occur, the company constrains the related variable consideration resulting in its exclusion from the transaction price. the company’s estimation of variable consideration to be constrained impacts the reported amounts of revenue and deferred revenue within the consolidated financial statements. in determining the portion of the transaction price to be constrained, management considers the probability and uncertainty of whether the related developmental, regulatory and commercial milestones will be achieved given the nature of clinical development and the stage of the underlying programs. this assessment is performed at each reporting period. in making this evaluation, management considers both internal and external information available including information from industry publications, the stage of development of the underlying programs and other relevant factors. changes to the constraint of variable consideration can have a material effect on the amount of revenue recognized in the financial reporting period. as a result, auditing the accounting for the application of constraint to variable consideration required especially complex auditor judgement. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s revenue recognition process. for example, we tested controls over management's estimation of the total transaction price for its collaboration agreements including those related to the application of constraint to variable consideration associated with future developmental, regulatory and commercial milestones. to audit the company’s judgements related to the application of constraint to variable consideration, we performed audit procedures that included, among others, evaluating the company’s judgements related to the probability of achieving the related future developmental, regulatory and commercial milestones. to evaluate the company’s estimated probability of achieving developmental, regulatory and commercial milestones, we considered the nature of clinical development and the stage of development of the underlying programs in relation to relevant external data and compared the probabilities of achieving the milestones to current industry trends and available information from other guideline companies within the same industry and other relevant factors. we also discussed the probability of achieving the milestones in relation to each program’s phase of development with the company’s research and development managers. f-3 revenue recognition for collaboration agreements with vertex pharmaceuticals incorporated description of the matter as discussed in note 7 to the consolidated financial statements, on july 23, 2019 the company entered into a series of agreements with vertex pharmaceuticals inc., collectively referred to as the “2019 collaboration agreements”, which resulted in the recognition of $289.6 million of revenue for the year ended december 31, 2019 and $12.7 million of deferred revenue as of december 31, 2019. accounting for the 2019 collaboration agreements required the company to make a number of significant judgements, including the estimation of the standalone selling price of each identified performance obligation. the estimates of the standalone selling price for certain performance obligations reflect management’s assumptions regarding probability weighted projected discounted cash flows for each of the underlying programs. the estimates of standalone selling prices were sensitive to changes in assumptions such as the probability of scientific success of the programs, discount rate, and certain assumptions that form the basis of the forecasted cash flows (e.g., price per patient). in developing these assumptions, management considered both internal and external information available including information from other guideline companies within the same industry and other relevant factors. changes to these assumptions can have a material effect on the allocation of the transaction price to the performance obligations as well as the amount and timing of revenue recognized. as a result, auditing the estimates of standalone selling price for certain performance obligations required especially complex auditor judgement. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s revenue recognition process. for example, we tested controls over management's process to determine the significant assumptions described above with respect to the estimation of the standalone selling price of certain performance obligations. to audit the company’s revenue recognition related to the 2019 collaboration agreements, we performed audit procedures that included, among others, evaluating management’s estimates of the standalone selling price of certain performance obligations. for example, we evaluated the probability weighted projected discounted cash flow assumptions used by the company in developing the estimates of standalone selling price by comparing the significant assumptions described above to current industry trends using available information from other guideline companies within the same industry and other relevant factors. we also performed a sensitivity analysis of the significant assumptions to evaluate the impact that the change in the estimated standalone selling price of certain performance obligations resulting from changes in the significant assumptions would have on the allocation of transaction price to each performance obligation, as well as revenue recognized during the period. we involved our valuation professionals to assist in the assessment of the estimation methodology and the significant assumptions used in determining the estimated standalone selling price of certain performance obligations. /s/ ernst & young llp we have served as the company’s auditor since 2015.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. annual goodwill impairment assessment – commercial vehicle reporting unit as described in notes 1 and 3 to the consolidated financial statements, goodwill impairment testing is performed at the reporting unit level, which is the operating segment in the case of commercial vehicle goodwill. the company’s consolidated goodwill balance was $482 million as of december 31, 2021, and the goodwill associated with the commercial vehicle segment was $201 million. management tests goodwill for impairment annually as of october 31 and more frequently if events occur or circumstances change that would warrant an interim review. management estimates the fair value of the reporting unit using a model that incorporates various valuation methodologies, including discounted cash flow projections and multiples of current earnings. in determining fair value using discounted cash flow projections, management makes significant assumptions and estimates about the extent and timing of future cash flows, including revenue growth rates, projected segment ebitda, discount rates, and exit earnings multiples. the principal considerations for our determination that performing procedures relating to the annual goodwill impairment assessment of the commercial vehicle reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value of the commercial vehicle reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, projected segment ebitda, discount rates, and exit earnings multiples; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s annual goodwill impairment assessment, including controls over management’s valuation of the commercial vehicle reporting unit. these procedures also included, among others (i) testing management’s process for determining the fair value of the commercial vehicle reporting unit; (ii) evaluating the appropriateness of management’s discounted cash flow model; (iii) testing the completeness and accuracy of the underlying data used in the discounted cash flow model; and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, projected segment ebitda, discount rates, and exit earnings multiples. evaluating management’s significant assumptions related to revenue growth rates and projected segment ebitda involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the commercial vehicle reporting unit; (ii) the consistency with external industry data; and (iii) whether these significant assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the company's discounted cash flow model and (ii) the reasonableness of the discount rates and exit earnings multiples significant assumptions. valuation allowance assessment of deferred tax assets related to united states (u.s.) foreign tax credit carryforwards as described in notes 1 and 18 to the consolidated financial statements, the company has deferred tax assets of $218 million related to other credit carryforwards, of which $98 million are u.s. foreign tax credits offset with $35 million of valuation allowance as of december 31, 2021. a valuation allowance is provided when, in management’s judgment based upon available information, it is more likely than not that a portion of such deferred tax assets will not be realized. to make this assessment, management considers the historical and projected future taxable income or loss by tax jurisdiction. management considers all components of comprehensive income and weighs the positive and negative evidence, putting greater reliance on objectively verifiable historical evidence than on projections of future profitability that are dependent on actions that have not taken place as of the assessment date. management also considers changes to the historical profitability of actions that occurred through the date of assessment and objectively verifiable effects of material forecasted events that would have a sustained effect on future profitability, as well as the effect on historical profits of nonrecurring events. the principal considerations for our determination that performing procedures relating to the valuation allowance assessment of deferred tax assets related to u.s. foreign tax credit carryforwards is a critical audit matter are (i) the significant judgment by management when determining the realizability of the u.s. foreign tax credit carryforwards and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to projected taxable income or loss by jurisdiction. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the valuation allowance assessment of the u.s. foreign tax credit carryforwards, including controls over management’s development of projected taxable income or loss by jurisdiction. these procedures also included, among others (i) evaluating management’s assessment of the realizability of the deferred tax assets; (ii) testing the completeness and accuracy of the underlying data used in the valuation allowance assessment; and (iii) evaluating the reasonableness of the significant assumptions used by management related to projected taxable income or loss by jurisdiction. evaluating management’s significant assumptions related to projected taxable income or loss by jurisdiction involved evaluating whether the significant assumptions used by management were reasonable considering (i) the current and past performance of the company and (ii) whether these significant assumptions were consistent with evidence obtained in other areas of the audit. /s/ pricewaterhouse coopers llp toledo, ohio february 23, 2022 we have served as the company’s auditor since 1916.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.goodwill impairment assessment as described in note 1 to the consolidated financial statements, the company’s consolidated goodwill balance was $26,041 million as of december 31, 2020. management assesses goodwill for impairment at the reporting unit level annually and whenever events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. management estimates the fair values of its reporting units by using forecasts of discounted future cash flows and peer market multiples. the company would record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (limited to the amount of goodwill). as disclosed by management, estimates of discounted future cash flows require management to make assumptions related to revenue and operating income growth rates, discount rates and other factors. management also considers peer revenues and earnings trading multiples from companies that have operational and financial characteristics that are similar to the respective reporting units and estimates weighted average costs of capital.the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are (i) the significant judgment by management when estimating the fair value of the reporting units, (ii) a high degree of auditor judgment and effort in performing procedures to evaluate management’s significant assumptions related to discount rates and peer market multiples, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. f-3addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the goodwill impairment assessment, including controls over the valuation of the company’s reporting units. these procedures also included, among others, testing management’s process for developing the fair value estimates; evaluating the appropriateness of the discounted cash flow and market models; testing the completeness, accuracy, and relevance of underlying data used in the models; and evaluating the significant assumptions used by management related to the discount rates, the terminal growth rates and peer market multiples. evaluating management’s assumptions related to the terminal growth rates involved evaluating whether the assumptions used were reasonable considering the consistency with external market data. evaluating management’s assumptions related to the peer market multiples involved evaluating the population of peer companies used in the analyses and testing selected market data used by management to determine the multiples by comparison to publicly available information. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s discounted cash flow models and the discount rate assumptions. income taxes as described in notes 1 and 8 to the consolidated financial statements, the company’s total income tax expense for the period ended december 31, 2020 was $850 million. the company has deferred income tax liabilities, net, of $1,105 million (including a valuation allowance of $933 million) and unrecognized income tax benefits of $1,091 million as of december 31, 2020. as disclosed by management, the company operates in numerous countries under many legal forms and, as a result, is subject to the jurisdiction of numerous domestic and non-u.s. tax authorities, as well as to tax agreements and treaties among these governments. determination of taxable income in any jurisdiction requires management to interpret the related tax laws and regulations and to use estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits. management assesses income tax positions and records tax benefits for all years subject to examination based upon evaluation of the facts, circumstances and information available at the reporting date. for those tax positions where it is more likely than not that a tax benefit will be sustained, management has recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. for those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. management estimates the degree to which tax assets will result in a benefit, after consideration of all positive and negative evidence, and provides a valuation allowance for tax assets that it believes will more likely than not go unused. in situations in which management has been able to determine that the company’s deferred tax assets will be realized, that determination generally relies on future reversals of taxable temporary differences and expected future taxable income. if it becomes more likely than not that a tax asset will be used, management reverses the related valuation allowance. the principal considerations for our determination that performing procedures relating to income taxes is a critical audit matter are (i) the significant judgment by management when determining the provision for income taxes, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits due to numerous and complex tax laws, the frequency of tax filings, as well as judgments regarding the realizability of deferred tax assets, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the provision for income taxes, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the provision for income f-4taxes, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits, including controls over the realizability of deferred tax assets. these procedures also included, among others, (i) testing the accuracy of the income tax provision, including the rate reconciliation and permanent and temporary differences, (ii) evaluating whether the data utilized in the calculation of the provision for income taxes was appropriate and consistent with evidence obtained in other areas of the audit, (iii) evaluating management’s assessment of the realizability of deferred tax assets on a jurisdictional basis, (iv) evaluating the identification of reserves for unrecognized tax benefits and the reasonableness of the “more likely than not” determination in consideration of jurisdictions, court decisions, legislative actions, statutes of limitations, and developments in tax examinations, (v) testing the calculation of the liability for unrecognized tax benefits by jurisdiction, including estimates of the amount of tax benefit expected to be sustained, and (vi) evaluating the adequacy of the company’s disclosures. professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of management’s judgments and estimates related to the application of foreign and domestic tax laws and regulations. /s/ pricewaterhouse coopers llp boston, massachusetts february 24, 2021 we have served as the company’s auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 140 accounting for uncertain tax positions description of the matter as described in note 13 and note 16 to the consolidated financial statements, the company is involved in various income tax matters for which the ultimate outcomes are uncertain. as of december 31, 2019, the gross amount of unrecognized tax benefits was $392 million. additionally, as described in note 13, on september 17, 2015 the company received a statutory notice of deficiency (“notice”) from the internal revenue service for the tax years 2007 through 2009 in the amount of $3.3 billion for the period, plus interest. while the company continues to disagree strongly with the irs' position, there is no assurance that the u.s. tax court will rule in the company's favor, and it is possible that all or some portion of the adjustment proposed by the irs notice ultimately could be sustained. auditing management’s evaluation of uncertain tax positions, including the uncertain tax position associated with the irs notice, was especially challenging due to the level of subjectivity and significant judgment associated with the recognition and measurement of the tax positions that are more likely than not to be sustained. how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the effectiveness of controls over the company’s accounting process for uncertain tax positions. our procedures included testing controls addressing the completeness of uncertain tax positions, controls relating to the identification and recognition of the uncertain tax positions, controls over the measurement of the unrecognized tax benefit, and controls over the identification of developments related to existing uncertain tax positions. our audit procedures included, among others, evaluating the assumptions the company used to assess its uncertain tax positions and related unrecognized tax benefit amounts by jurisdiction. we also tested the completeness and accuracy of the underlying data used in the identification and measurement of uncertain tax positions. we evaluated evidence of the status of the litigation with the irs, including inquiries of tax counsel and written representations of management. we involved professionals with specialized skill and knowledge to assist in our evaluation of the tax technical merits of the company’s assessment, including the assessment of whether the tax positions are more likely than not to be sustained, the amount of the potential benefits to be realized, and the application of relevant tax law. we also assessed the company’s disclosure of uncertain tax positions included in note 13 and note 16. valuation of trademarks with indefinite lives and goodwill description of the matter as described in note 1 of the company’s consolidated financial statements, the company performs an annual impairment assessment of its indefinite-lived intangible assets, including trademarks with indefinite lives and goodwill, or more frequently if events or circumstances indicate that assets might be impaired. each impairment assessment may be qualitative or quantitative. trademarks with indefinite lives and goodwill were $9,266 million and $16,764 million, respectively, at december 31, 2019.auditing the valuation of trademarks with indefinite lives and reporting units with goodwill involved complex judgment due to the significant estimation required in determining the fair value of the trademarks with indefinite lives and related reporting units with goodwill, respectively. specifically, the fair value estimates were sensitive to significant assumptions about future market and economic conditions. significant assumptions used in the company’s fair value estimates included sales volume, pricing, cost of raw materials, delivery costs, inflation, cost of capital, marketing spending, foreign currency exchange rates, and tax rates, as applicable. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s annual impairment assessments for trademarks with indefinite lives and reporting units with goodwill. for example, we tested management’s risk assessment process to determine whether to perform a quantitative or qualitative assessment and management’s review controls over the valuation models and underlying assumptions used to develop such estimates. for impairment assessments of reporting units with goodwill, we also tested controls over the determination of the carrying value of the reporting units. we tested the estimated fair values of the trademarks with indefinite lives and reporting units with goodwill based on our risk assessments. our audit procedures included, among others, comparing significant judgmental inputs to observable third party and industry sources, considering other observable market transactions, and evaluating the reasonableness of management’s projected financial information by comparing to third party industry projections, third party economic growth projections, and other internal and external data. we performed sensitivity analyses of significant assumptions to evaluate the change in the fair value of the trademarks with indefinite lives and reporting units with goodwill and also assessed the historical accuracy of management’s estimates. in addition, we involved specialists to assist in our evaluation of certain significant assumptions used in the company’s discounted cash flow analyses. we also assessed the company’s disclosure of its annual impairment assessments included in note 1./s/ ernst & young llp we have served as the company's auditor since 1921.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.accounting for equity method investment in nexus gas transmission, llc as described in note 1 to the consolidated financial statements, the company has investments in non-consolidated affiliates that are accounted for using the equity method. under the equity method, investments are recorded at historical cost as an asset and adjusted for capital contributions, dividends received, and the company’s share of the investee’s earnings or losses, which is recorded as earnings from equity method investees. the company’s equity method investments are periodically evaluated for certain factors that may be indicative of other-than-temporary impairment. as of december 31, 2021, the company’s equity method investment balance in nexus gas transmission, llc (“nexus”) was $1,348 million. for the year ended december 31, 2021, earnings from equity method investees were $126 million, of which earnings from nexus were a portion.the principal considerations for our determination that performing procedures relating to the accounting for the equity method investment in nexus is a critical audit matter are a high degree of audit subjectivity and effort in performing procedures and evaluating the audit evidence obtained related to the recognition of the nexus investment balance and earnings. 52addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included, among others, (i) testing the completeness and accuracy of the nexus investment balance and earnings by reconciling to investee financial information and testing investment activity, including contributions and distributions; (ii) performing inquiries with management and investee auditors and inspecting information to understand and evaluate management’s consideration of nexus accounting matters, including management’s assertion that there were no indicators of other-than-temporary impairment; and (iii) performing procedures to evaluate subsequent events impacting nexus. /s/ pricewaterhouse coopers llp detroit, michigan february 25, 2022we have served as the company’s auditor since 2020.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.contractual allowance and allowance for doubtful accounts – contracted third-party payors as described in note 2 to the consolidated financial statements, a large part of the company’s transactions are covered by third-party payors with whom there is a contractual agreement or established amount the third-party payor will pay (contracted third-party payors). these contracts impose a number of obligations regarding billing and other matters, and the company’s noncompliance with a material term of such contracts may result in a denial of the claim. the company recognizes revenue from contracted third-party payors, net of contractual allowances, and recognizes an allowance for doubtful accounts for uncollectible patient accounts receivable. as of december 31, 2020, the company’s contractual allowance balance was $21.3 million and allowance for doubtful accounts balance was $12.7 million, a portion of which relates to revenue from services provided to patients insured by contracted third-party payors. management accounts for denied claims as a form of variable consideration that is included as a reduction to the transaction price and recorded as an adjustment to revenue as a contractual allowance. management accounts for the allowance for doubtful accounts at the time revenue is recognized, with such provisions presented as bad debt expense within selling, general and administrative expenses. the estimated denied claims and uncollectible receivables are based on historical information which require judgment by management in determining which historical period is used.the principal considerations for our determination that performing procedures relating to the contractual allowances and allowance for doubtful accounts for contracted third-party payors is a critical audit matter are the significant judgment by management in developing estimates of the contractual allowances and allowance for doubtful accounts. this in turn led to a high degree of auditor subjectivity, judgment, and effort in performing procedures and evaluating the audit evidence obtained related to management’s estimates of the contractual allowances and allowance for doubtful accounts, relating to management’s judgments regarding the historical period used on which to base the estimate. as disclosed by management, a material weakness existed during the year related to this matter.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included, among others, (i) evaluating management’s process for developing estimates of the contractual allowances and allowance for doubtful accounts, including comparing the historical period used by management with reasonable alternative historical periods based on current and past history of denied claims and uncollectible amounts, (ii) testing the completeness and accuracy of the historical information used by management in the estimate, by testing a sample of transactions, and (iii) testing management’s process for developing the estimate on the data on which it is based./s/ pricewaterhouse coopers llp san jose, california81table of contents february 26, 2021 we have served as the company’s auditor since 2009.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. •depletion expense and impairment of oil and gas properties impacted by the company's estimation of proved reserves as described further in notes 2 and 6 to the financial statements, the company accounts for its oil and natural gas properties using the full cost method of accounting which requires management to make estimates of proved reserve volumes and future net revenues to record depletion expense and to determine if any impairment exists for its oil and natural gas properties. to estimate the volume of proved reserves and future net revenues, management makes significant estimates and assumptions including forecasting the production decline rate of producing properties and forecasting the timing and volume of production associated with the company’s development plan for proved undeveloped properties. in addition, the estimation of proved reserves is also impacted by management’s judgments and estimates regarding the financial performance of wells associated with proved reserves to determine if wells are expected, with reasonable certainty, to be economical under the appropriate pricing assumptions required in the estimation of depletion expense and impairment expense. we identified the estimation of proved f-2table of contentsreserves of oil and natural gas properties due to its impact on depletion expense and impairment of oil and natural gas properties as a critical audit matter. the principal consideration for our determination that the estimation of proved reserves is a critical audit matter is that changes in certain inputs and assumptions, which require a high degree of subjectivity, necessary to estimate the volume and future revenues of the company’s proved reserves could have a significant impact on the measurement of depletion expense or impairment expense. in turn, auditing those inputs and assumptions required subjective and complex auditor judgment.our audit procedures related to the estimation of proved reserves included the following, among others.•we tested the effectiveness of controls relating to management’s estimation of proved reserves for the purpose of estimating depletion expense and assessing the company’s oil and natural gas properties for potential impairment. specifically, these controls related to the use of historical information in the estimation of proved reserves derived from the company’s accounting records and the management review controls performed on information provided to the reservoir engineering specialists and the management review controls on the final proved reserves report prepared by the company’s reservoir engineering specialists. •we evaluated the level of knowledge, skill, and ability of the company’s reservoir engineering specialists and their relationship to the company, made inquiries of those reservoir engineers regarding the process followed and judgments made to estimate the company’s proved reserve volumes, and read the reserve report prepared by the company’s reservoir engineering specialists.•we evaluated sensitive inputs and assumptions used to determine proved reserve volumes and other financial inputs and assumptions, including certain assumptions that are derived from the company’s accounting records. these assumptions included historical pricing differentials, future operating costs, estimated future capital costs, and ownership interests. we tested management’s process for determining the assumptions, including examining the underlying support, on a sample basis. specifically, our audit procedures involved testing management’s assumptions as follows:◦compared the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the current year and examined contractual support for the pricing differentials; ◦evaluated the models used to estimate the future operating costs at year-end and compared the models to historical operating costs; ◦evaluated the models used to estimate future capital expenditures to amounts expended for recently drilled and completed wells;◦evaluated the ownership interests used in the reserve report by inspecting lease and title records; ◦evaluated the company's evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining historical conversion rates and support for the company's ability to fund and intent to develop the proved undeveloped properties; and◦applied analytical procedures to the reserve report by comparing the reserve report to historical actual results and to the prior year reserve report./s/ grant thornton llp we have served as the company's auditor since 2007.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. goodwill impairment assessment as described in note 1 to the consolidated financial statements, the company’s consolidated goodwill balance was $170.7 million at december 31, 2020. goodwill is tested for impairment at least annually at the reporting unit level. the company performed a quantitative impairment analysis using the income approach for each of its reporting units. the determination of the fair value of the reporting units requires management to make significant estimates and assumptions related to forecasts of future revenue, operating income and discount rates taking into consideration recent business and market trends. 38 we identified goodwill impairment assessment of a certain reporting unit whose operations are cyclical in nature as a critical audit matter. the principal considerations for our determination include significant judgment required by management when developing the fair value measurement of the reporting unit using the income approach, including assumptions relating to revenue growth rates, operating income and discount rates. auditing these elements involved especially subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed. the primary procedures we performed to address this critical audit matter included: •testing the design, implementation and operating effectiveness of controls relating to management’s goodwill impairment assessment, including controls over assessment of the reasonableness of assumptions used in the income approach. •evaluating the reasonableness of management assumptions used in the forecasts of future revenue and operating margin through: (i) comparing these assumptions to historical operating results for the reporting units and external market and industry data, and (ii) evaluating the reasonableness of these assumptions against evidence obtained in other areas of the audit. •utilizing personnel with specialized knowledge and skill with valuation to assist in assessing the reasonableness of certain valuation assumptions, such as the discount rate, incorporated into the income approach. /s/ bdo usa, llp we have served as the company’s auditor since 2013.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.f-2table of contents evaluation of the incremental borrowing rates used to measure the right-of-use assets and operating lease liabilities upon adoption of asc topic 842.as discussed in note 2 and note 8 to the consolidated financial statements, the company recorded operating lease right-of-use (rou) assets and operating lease liabilities of $22.2 million and $26.9 million, respectively, at january 1, 2019. the rate implicit in the lease is not readily determinable, therefore, the company uses incremental borrowing rates to measure the present value of lease payments. the incremental borrowing rates are developed using information on indicative borrowing rates adjusted for company and market specific factors. we identified the evaluation of incremental borrowing rates used to measure rou assets and operating lease liabilities upon adoption of asc topic 842 as a critical audit matter. it required especially challenging auditor judgement and specialized skills and knowledge to assess the incremental borrowing rates since the company does not have any external borrowings. the primary procedures we performed to address this critical audit matter included the following. we involved valuation professionals with specialized skills and knowledge, who assisted in:●evaluating the company’s indicative borrowing rate by comparing it to a borrowing rate independently developed using publicly available market data for comparable entities, and ●developing a synthetic credit rating which was adjusted for market data of comparable companies to determine an independent range of incremental borrowing rates. the synthetic credit rating approach compared financial ratios of the company to the ratios of other comparable public companies with established credit ratings. the model determined a median value for each financial ratio at each credit rating and then a simple average score for each financial ratio was calculated to determine a range of overall credit ratings.we performed sensitivity analyses by comparing the company’s incremental borrowing rates to that of the independently developed range noted above to evaluate the impact on the company’s measurement of the rou assets and operating lease liabilities evaluation of clinical materials and related committed purchase obligation impairment analysis as discussed in notes 2, 5, and 10 to the consolidated financial statements, the company has clinical materials of $4.0 million as of december 31, 2019 and a related accrued purchase commitments of $5.0 million, of which $2.5 million is payable in 2020 and $2.5 million is payable in 2021. the company assesses the clinical materials and related committed purchase obligations for impairment at each reporting date and whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable, considering the on-hand materials and committed purchase obligations. during the year ended december 31, 2019 the company recognized $5.0 million of accrued purchase commitments and research and development expense relating to the uncertainty surrounding the utilisation of clinical materials. we identified the evaluation of clinical materials and related committed purchase obligations impairment analysis as a critical audit matter. a high degree of auditor judgement was required in assessing the company’s assumptions within the manufacturing forecasts relating to the shelf life of clinical materials and forecasts of clinical trial enrollments used to estimate future clinical material utilization.the primary procedures we performed to address this critical audit matter included the following: ●we tested certain internal controls over the company’s process for assessing the impairment of clinical materials and committed purchase obligations, including controls over the development of assumptions listed above to estimate future clinical material utilization.f-3table of contents●we evaluated the company’s ability to accurately estimate the clinical material utilization by comparing historically estimated future utilization to actual results.●we assessed the assumptions, listed above, in the impairment analysis through a combination of inquiry of finance and operations personnel and inspection of manufacturing budgets to assess the impact of clinical trial enrollment, current quantities on hand, and forecasted future demand of clinical materials. ●we examined the company’s assumption of shelf life of the clinical materials into the manufacturing forecasts by obtaining third party confirmations of stability testing results.●we performed sensitivity analyses of the clinical trial enrollments and the timeline to utilize the clinical materials to evaluate their impact on the company’s clinical material impairment analysis./s/ kpmg llp we have served as the company’s auditor since 2010.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 78 table of contents estimates related to the sale of future royalties description of the matter as described in note 7 to the consolidated financial statements, the company has entered into agreements with counterparties to monetize future royalty payments that the company is entitled to receive upon commercialization of certain products that were previously licensed to others. cash is received upon execution of such royalty monetization agreements, which are then accounted for as either a liability if the company has significant continuing involvement in the related royalty stream or as deferred revenue if there is no significant continuing involvement. regardless of whether there is significant continuing involvement, the company is required to estimate the amount and timing of future royalty payments to be received from licensors and paid to the counterparties of the royalty monetization agreements. the company periodically assesses the amount and timing of expected royalty payments using a combination of internal projections and forecasts from external sources. there are a number of factors that could materially affect the amount and timing of royalty payments, most of which are not within the company’s control and management’s estimates of the amount and timing of royalty payments to be received require the use of significant unobservable inputs. these inputs are derived using internal management estimates developed based on third party data and reflect management’s judgements, current market conditions surrounding competing products, and forecasts. the significant unobservable inputs can include, to the extent applicable, estimates of patient populations, selling price, peak sales and sales ramp, the expected term of the related royalty streams, the timing of expected product launch and its impact on royalty rates, as well as the overall probability of clinical success and regulatory approval. a significant change in unobservable inputs could result in a material increase or decrease to the amount and timing of future cash flows. the company recognized non-cash interest expense on the liability related to the sale of future royalties of $22.7 million for the year ended december 31, 2020 and the liability related to the sale of future royalties, net was $166.1 million as of december 31, 2020. during 2020, the company also recognized $87.0 million of deferred revenue related to the sale of a royalty stream to a third party as discussed in note 3.auditing management’s estimates of future royalty payments was especially challenging due to the significant judgment used by management in estimating the amount and timing of future royalty payments, which required the use of subjective inputs.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s processes for estimating the amount and timing of future royalty payments.our audit procedures included, among others, testing management’s process for estimating the amount and timing of future royalty payments and evaluating the reasonableness of significant assumptions used by management when developing the estimate of expected future royalties to be paid, including estimates of patient populations, selling price, peak sales and sales ramp, the expected term of the related royalty streams, the timing of expected product launch and its impact on royalty rates, as well as the overall probability of clinical success and regulatory approval. evaluating the reasonableness of management’s assumptions included, among others, consideration of (i) relevant industry forecasts, (ii) consistency with external market research and industry data, and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. 79 table of contents revenue from collaborative and licensing arrangements description of the matter as described in note 3, collaboration arrangements may include multiple elements such as license fees, milestone payments, royalties, and research and development cost reimbursement. further, collaborations may include the delivery of various goods or services to the collaboration partner such as licenses to intellectual property or research and development services. the company recognized $36.5 million as license revenue during 2020 under the agreement with ji xing pharmaceuticals limited (the “ji xing license agreement”). auditing the company’s accounting for revenues from this collaboration arrangement was especially challenging due to the complex and highly judgmental nature of evaluating the terms of the related agreements, identifying performance obligations, and determining and allocating the transaction price to the performance obligations.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s processes for assessing the accounting treatment of any new collaboration agreements or modifications to existing collaboration agreements, including assessing the identification of and effort to satisfy performance obligations.to test the accounting for revenue from the ji xing license agreement, we tested and evaluated, among other things, the performance obligation identified, the estimates and assumptions used to determine the transaction price, and the allocation of the transaction price to the performance obligation. we also assessed whether the accounting conclusions for the ji xing license agreement were appropriate. /s/ ernst & young llp we have served as the company’s auditor since 2018.

critical audit matters the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.uncertain tax positions — refer to notes 1 and 8 to the financial statements critical audit matter description the company has a complex legal structure involving numerous domestic and foreign locations with constantly changing tax laws, regulations, and legal interpretations. the company’s management is required to interpret and apply these tax laws and regulations in determining the amount of its income tax liability and provision. when an uncertain tax position is identified by management, the company must evaluate if it is more likely than not, based on the technical merits, that the uncertain tax position will be sustained upon examination. the company recognizes a benefit for tax positions using the highest cumulative tax benefit that is more likely than not to be realized. the company establishes a liability for unrecognized tax benefits that do not meet this threshold. the 69table of contentsevaluation of each uncertain tax position requires management to apply specialized skill, knowledge, and significant judgment related to the identified position. the company’s liability for unrecognized tax benefits and related accrued interest and penalties as of december 31, 2021 was $580 million and $502 million, respectively.because of the complexity of tax laws, regulations and legal interpretations relevant to numerous taxing jurisdictions in which the company operates, auditing uncertain tax positions and the determination of whether the more likely than not threshold was met requires a high degree of auditor judgment and increased extent of effort, including the involvement of our income tax specialists. how the critical audit matter was addressed in the audit our audit procedures related to uncertain tax positions included the following, among others: •we tested the effectiveness of internal controls over income taxes, including those over identifying uncertain tax positions and measuring liabilities.•we evaluated, with the assistance of our income tax specialists, the company’s uncertain tax positions by performing the following:–obtaining company and third-party opinions or memoranda regarding the uncertain tax positions.–identifying key judgements underlying the company’s position and evaluating whether the conclusions are consistent with our interpretation of the relevant laws and regulations. –evaluating the company’s method of measuring its liability for unrecognized tax benefits, including underlying data and assumptions.–evaluating the basis for certain intercompany transactions, such as transfer pricing, by comparison to economic studies performed by management and third-party data.–evaluating matters raised by taxing authorities in former and ongoing tax audits. –assessing changes and interpretation of applicable tax law./s/ deloitte & touche llp midland, michigan february 4, 2022we have served as the company's auditor since 1905.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. goodwill impairment assessment - environmental reporting unit as described in notes 1 and 6 to the consolidated financial statements, the company’s consolidated goodwill balance was $738.4 million as of december 31, 2019, and the goodwill associated with the environmental reporting unit was $395.1 million. as disclosed by management, the company performs the annual goodwill impairment test as of october 1, or more frequently, if indicators of impairment exist, or if a decision is made to dispose of a business. the company uses a discounted cash flow model to estimate the current fair value of reporting units. a number of significant assumptions and estimates are involved in the preparation of the discounted cash flow model, including future revenues and operating margin growth, the weighted-average cost of capital, tax rates, capital spending, pension funding, the impact of business initiatives and working capital projections. the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the environmental reporting unit is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting unit. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s cash flow projections and significant assumptions, including future revenues and operating margin growth and the weighted-average cost of capital. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.45table of contents addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the company’s environmental reporting unit. these procedures also included, among others (i) testing management’s process for developing the fair value estimate, (ii) evaluating the appropriateness of the discounted cash flow model, (iii) testing the completeness, accuracy, and relevance of underlying data used in the model, and (iv) evaluating the significant assumptions used by management, including future revenues and operating margin growth and the weighted-average cost of capital. evaluating management’s assumptions related to future revenues and operating margin growth involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s discounted cash flow model, including the weighted-average cost of capital. revenue recognition using the cost-to-cost method - rail segment as described in notes 1 and 16 to the consolidated financial statements, a portion of the company’s total railway track maintenance equipment sales revenue of $146 million for the year ended december 31, 2019 was generated from contracts with customers using the cost-to-cost method. as disclosed by management, the company uses the cost-to-cost method to measure progress for its contracts because management believes that the measure best depicts the transfer of control to the customer, which occurs as the company incurs cost on the contracts. accounting for contracts with customers using the cost-to-cost method requires significant judgment relative to assessing risks, estimating contract revenues (including estimates of variable consideration, if applicable), estimating contract costs (including estimating any liquidating damages or penalties related to performance, engineering costs to design the machine and material, labor, and overhead manufacturing costs to build the machine), making assumptions for schedule and technical items, properly executing the engineering and design phases consistent with customer expectations, the availability and costs of labor and material resources, productivity, and evaluating whether a significant financing component is present. the principal considerations for our determination that performing procedures relating to revenue recognition using the cost-to-cost method in the rail segment is a critical audit matter are there was significant judgment by management when developing the estimated costs to complete contracts. this in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the estimates of the costs to complete, such as the engineering costs to design the machine and the material, labor, and overhead manufacturing costs to build the machines. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of estimated contract revenues and costs. the procedures also included, among others, evaluating and testing management’s process for determining the estimate of costs at completion for a sample of contracts, which included evaluating the reasonableness of significant assumptions used by management, including the engineering costs to design the machine and the material, labor, and overhead manufacturing costs to build the machine and considering the factors that can affect the accuracy of those estimates. evaluating the reasonableness of significant assumptions used involved assessing management’s ability to reasonably estimate costs to complete contracts by testing management’s process for evaluating the company’s ability to properly develop an estimate for costs to complete a contract, including reviewing similar completed contracts actual costs incurred and observing the progress of open contracts.clean earth acquisition - fair value of intangible assets as described in notes 1 and 3 to the consolidated financial statements, the company completed the acquisition of clean earth for $628 million of cash consideration in 2019, which resulted in $242.2 million of intangible assets being recorded. as disclosed by management, the determination of fair value of assets acquired and liabilities assumed requires numerous estimates and assumptions with respect to the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, discount rates, and useful lives. the principal considerations for our determination that performing procedures relating to the clean earth acquisition - fair value of intangible assets is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value measurement of intangible assets acquired due to the significant judgment by management when developing the estimate, (ii) significant audit effort was required in evaluating the significant assumptions relating to the estimate, such as the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, discount rates, and useful lives, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 46table of contents addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the intangible assets and controls over development of the assumptions related to the valuation of the intangible assets, including the estimates of the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, discount rates, and useful lives. these procedures also included, among others, (i) reading the purchase agreement, (ii) testing management’s process for estimating the fair value of intangible assets, (iii) testing the completeness, accuracy, and relevance of underlying data used in the determination of the fair value of intangible assets, and (iv) testing management’s cash flow projections used to estimate the fair value of the intangible assets. testing management’s process included evaluating the appropriateness of the valuation method and the reasonableness of significant assumptions, including the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, discount rates, and useful lives. evaluating the reasonableness of the timing and amounts of cash flow projections, revenue growth rates, customer attrition rates, and useful lives involved considering the past performance of the acquired business, as well as economic and industry forecasts. the discount rate was evaluated by considering the cost of capital of comparable businesses and other industry factors. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s valuation method, including the discount rate./s/pricewaterhouse coopers llp philadelphia, pennsylvania february 21, 2020we have served as the company’s auditor since at least 1933.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.fair value - level 3 fixed maturity securities - refer to note 6 to the financial statements critical audit matter description the company has certain fixed maturity securities that are not actively traded and classified as level 3 assets. since such securities trade infrequently and have little or no price transparency, the company’s market standard valuation techniques for determining the estimated fair value of such securities rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. the determination of these unobservable inputs involve significant management judgment and estimation and typically cannot be supported by reference to market activity.auditing of unobservable inputs used by management to estimate the fair value of level 3 securities required a high degree of auditor judgement and an increased extent of effort, including the involvement of our fair value specialists.how the critical audit matter was addressed in the audit our audit procedures related to the proprietary models and unobservable inputs used by management to estimate the fair value of level 3 securities included the following, among others: 156table of contents•we tested the effectiveness of controls, including those surrounding the valuation of level 3 securities.•we obtained an understanding and evaluated the appropriateness of the company’s pricing sources.•for a selection of securities, we compared the accuracy of the company’s estimated fair value price to a price independently developed by our fair value specialists.actuarial assumptions - refer to notes 1, 6, and 8 to the financial statements critical audit matter description the estimated valuation of future policy benefits, embedded derivatives, and the amortization of deferred acquisition costs are measured based on actuarial methodologies and underlying economic and future policyholder behavior assumptions. significant judgment was involved in the setting of the future policyholder behavior assumptions used to determine the estimated valuation of future policy benefits, embedded derivatives and the amortization of deferred acquisition costs. these assumptions include mortality, longevity, and withdrawal (lapse). given the significant estimation uncertainty and complexity of the company’s actuarial assumptions, auditing these estimates required a high degree of auditor judgment and an increased extent of effort, including the involvement of our actuarial specialists.how the critical audit matter was addressed in the audit our audit procedures related to the assumptions used by management to estimate the valuation of future policy benefits and embedded derivatives and the amortization of deferred policy acquisition costs included the following, among others: •we tested the effectiveness of controls, including those related to the performance of experience studies and the setting of best estimate assumptions. •we tested the accuracy and completeness of the underlying data that served as the basis for the estimated assumptions.•with the assistance of our actuarial specialists, we assessed the reasonableness of assumptions used in developing the estimates by comparing conclusions reached by management to the related experience study results and industry experience, as applicable.premiums receivable and other reinsurance balances - refer to note 1 to the financial statements critical audit matter description premiums are accrued when due and in accordance with information received from the ceding company. when the company enters into a new reinsurance agreement, the methodology to record estimated premiums receivables is based on the terms of the reinsurance treaty. similarly, when a ceding company fails to report information on a timely basis, the methodology used by the company to record estimated premiums receivables is based on the terms of the reinsurance treaty and historical experience. other management estimates include adjustments to the premiums receivable for increased in force in existing treaties and lapsed premiums based on historical experience. given the significant judgment used in determining estimated premium receivable, auditing the actual methodologies and estimates required a high degree of auditor judgment and an increased extent of effort.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimation of premiums receivable included the following, among others:•we tested the effectiveness of controls that address management’s estimation of accrued premiums receivable.•we tested management’s historical accuracy of estimation by comparing a selection of premiums received during the year to previously-reported premiums receivable.•for a selection of management’s premiums receivable estimates, we compared our independently-developed expectation to management’s estimate.•we utilized statistical analysis to identify outliers in the population for further testing. /s/ deloitte & touche llp st. louis, missouri february 26, 2021 we have served as the company’s auditor since 2000.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. allowance for loan losses as more fully described in notes 1 and 4 to the company’s consolidated financial statements, the allowance for loan losses represents losses that are estimated to have occurred. the allowance for loan losses is based on collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. the allowance consists of allocated and general components. the allocated component relates to specific allowances on loans that are classified as impaired. the general component relates to loans that are not classified as impaired and is based on historical charge-off experience and the qualitative factors for each class of loans with similar risk characteristics. qualitative factors include general conditions in economy; loan portfolio composition; delinquencies; changes in underwriting policies; credit administration practices; and experience, ability and depth of lending management, among other factors. management discloses that this evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.we identified the valuation of the allowance for loan losses as a critical audit matter. auditing the allowance for loan losses involves a high degree of subjectivity in evaluating management’s estimates, such as evaluating management’s assessment of economic conditions and other qualitative or environmental factors, evaluating the adequacy of specific allowances associated with impaired loans, and assessing the appropriateness of loan grades.the primary procedures we performed to address this critical audit matter included:testing of completeness and accuracy of the information utilized in the calculation of the allowance for loan losses;evaluating the qualitative adjustments to historical loss rates, including assessing the basis for the adjustments and the reasonableness of the significant assumptions;testing the allowance model for computational accuracy;f-2table of contents assessing the reasonableness of specific allowances on certain impaired loans;evaluating the overall reasonableness of significant assumptions used by management;testing the assignment of loan risk ratings;evaluating the accuracy and completeness of disclosures in the consolidated financial statements./s/ hutchinson and bloodgood llp we have served as the company's auditor since 2005.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. accrued product warranties for the wholesale segment as described in note 12 to the consolidated financial statements, as of april 30, 2022, the company had accrued product warranties of $27 million, of which the wholesale segment comprises a significant portion. management accrues an estimated liability for product warranties when revenue is recognized on the sale of warrantied products. management estimates future warranty claims on product sales based on historical claims experience and periodically adjusts the provision to reflect changes in actual experience. the liability estimate incorporates repair costs, including materials, labor and overhead amounts necessary to perform repairs, and any costs associated with delivering the repaired product to customers. the principal considerations for our determination that performing procedures relating to the accrued product warranties for the wholesale segment is a critical audit matter are (i) the significant judgment by management when developing the accrual and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures relating to the estimation methodology and the applicability of historical cost of materials and labor used in the methodology. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the accrued product warranties for the wholesale segment. these procedures also included, among others, evaluating the appropriateness of the estimation methodology applied in the accrual, evaluating the applicability of the historical cost of materials and labor used in the methodology, and testing the historical cost of materials and labor. /s/ pricewaterhouse coopers llp detroit, michigan june 21, 2022we have served as the company’s auditor since 1968.

critical audit matters thecritical audit matter communicated below is a matter arising from the current period audit of the financial statements that wascommunicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are materialto the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication ofcritical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, bycommunicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts ordisclosures to which it relates. valuationof assets and liabilities assumed in the acquisition of tbd safety llc critical audit matter description as discussed in note 3 to the consolidatedfinancial statements, the company completed its acquisition of tbd safety llc (tbd safety) for $5.1 million on october 16, 2020.the company accounted for this transaction under the acquisition method of accounting for business combinations. accordingly,the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, includingidentified intangible assets of $3.6 million and resulting goodwill of $0.2 million. the company estimated the fair value of theintangible assets using the income approach method (valuation method), which is a specific discounted cash flow method that requiredmanagement to make significant estimates and assumptions related to future cash flows and the selection of implied rate of returnand discount rates. auditingmanagement’s assessment of fair value of the acquired assets and assumed liabilities is highly subjective and judgmental.further changes in either the assumptions or method utilized may have a material impact on the fair value assigned to the acquiredassets and liabilities assumed in the tbd safety acquisition. this required a high degree of auditor judgment and an increasedextent of effort, including the need to involve our valuation specialists, when performing audit procedures to evaluate the reasonablenessof management’s key assumptions used in developing the fair value estimates, such as: (i) forecasted revenue growth rates(ii) future cash flows and (iii) weighted-average cost of capital (wacc) and (iv) discount rate. how we addressed the matter in our audit ouraudit procedures included, amongst others: ●we evaluated the reasonableness of management’s forecasts of future revenue growth rates and cash flows by comparing the projections to historical results and certain peer companies. ●we compared the company’s (1) forecasted revenue growth rates and ebitda margins to tbd safety’s historical actual results to assess the company’s ability to accurately forecast. ●with the assistance of our valuation specialists, we evaluated the reasonableness of the valuation methodology and discount rates by: ○testing the source information underlying the determination of the valuation method and discount rates and testing the mathematical accuracy of the calculations. ○developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management. /s/ marcum llp marcum llp we have served as the company’s auditor since 2017.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit mattersdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. critical audit matter description asdescribed further in notes 5, 6, 7, and 8 of the financial statements, during the year ended december 31, 2021 and in prior periods,the company issued convertible debt and warrants that required management to assess whether the conversion features of the convertibledebt required bifurcation and separate valuation as derivative liabilities and whether the warrants required accounting as derivativeliabilities. the company determined that the conversion features of certain of its convertible debt and certain warrants issued in financingarrangements were required to be accounted for as derivative liabilities due to: (1) variable conversion prices causing the companyto be unable to assert that it had sufficient authorized but unissued shares available to settle instruments considering all other stock-basedcommitments. the derivative liabilities were recorded at fair value when issued and subsequently re-measured to fair value uponsettlement or at the end of each reporting period. the company utilized a black-scholes option pricing model to determine the fair valueof the derivative liabilities, which uses certain assumptions related to exercise price, term, expected volatility, and risk-freeinterest rate. weidentified auditing the determination and valuation of the derivative liabilities as a critical audit matter due to the significantjudgements used by the company in determining whether the embedded conversion features and warrants required derivative accountingtreatment and the significant judgements used in determining the fair value of the derivative liabilities. auditing the determinationand valuation of the derivative liabilities involved a high degree of auditor judgement, and specialized skills and knowledge were needed. howthe critical audit matter was addressed in the audit ouraudit procedures included the following, among others: ●we inspected and reviewed debt agreements, warrant agreements, and conversion notices to evaluate the company’s determination of whether derivative accounting was required, including assessing and evaluating management’s application of relevant accounting standards to such transactions.●we tested the reasonableness, accuracy, and completeness of the data and assumptions used by the company in the black-scholes option pricing model, including exercise price, expected term, expected volatility, and risk-free interest rate.●we developed independent expectations for comparison to the company’s estimates.●we evaluated the accuracy and completeness of the company’s presentation of these instruments in the financial statements and related disclosures in notes 5, 6, 7, and 8, including evaluating whether such disclosures were in accordance with relevant accounting standards. haynie& company wehave served as the company’s auditor since 2018.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 46table of contents accounting for the loyalty program description of the matter during 2019 the company recognized $2,211 million of revenues previously deferred as of december 31, 2018 and had deferred revenue of $5,718 million as of december 31, 2019 associated with the marriott bonvoy guest loyalty program (the “loyalty program”). as discussed in note 2 to the financial statements, the company recognizes revenue for performance obligations relating to loyalty program points and free night certificates as they are redeemed and the related performance obligations are satisfied. the company recognizes a portion of revenue for the licensed ip performance obligation under the sales-based royalty criteria, with the remaining portion recognized on a straight-line basis over the contract term. revenue is recognized utilizing complex models based upon the estimated standalone selling price per point and per free night certificate, which includes judgment in making the estimates of variable consideration and breakage of points.auditing loyalty program results is complex due to: (1) the complexity of models and high volume of data used to monitor and account for loyalty program results, (2) the material weakness in the company’s internal control over financial reporting relating to the insufficient complement of resources, including it and accounting processes and personnel, to perform the ongoing accounting associated with the loyalty program and (3) the complexity and judgment of estimating the standalone selling price per loyalty program point, including both the estimate of variable consideration under the company’s co-brand credit card agreements and the estimated breakage of loyalty program points which requires the use of specialists. such estimates are complex given the significant estimation uncertainty associated with projecting future cardholder spending and redemption activity. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of certain controls over the company’s process of accounting for the loyalty program. we tested controls over management’s review of the assumptions and data inputs utilized in estimating the standalone selling price per loyalty program point, as well as the development of the estimated breakage. to test the recognition of revenues and costs associated with the loyalty program, we performed audit procedures that included, among others, testing the clerical accuracy and consistency with us gaap of the accounting model developed by the company to recognize revenue and costs associated with the loyalty program, and testing significant inputs into the accounting model, including the estimated standalone selling price and recognition of points earned and redeemed during the period. because of the material weakness we expanded our sample sizes selected for substantive testing and performed additional testing over the completeness and accuracy of loyalty program data. we involved our actuarial professionals to assist in our testing procedures with respect to the estimate of the breakage of loyalty program points. we evaluated management’s methodology for estimating the breakage of loyalty program points, and we tested underlying data and actuarial assumptions used in estimating the breakage. we evaluated the reasonableness of management’s assumptions, including projections of cash flows, used to estimate variable consideration under the company’s co-brand credit cards. accounting for general & administrative expenses and reimbursed expenses description of the matter during 2019 the company recognized $938 million of general and administrative expenses and $16,439 million of reimbursed expenses. as discussed in note 2 to the financial statements, the company incurs certain expenses that are for the benefit of, and reimbursable from, hotel owners and franchisees. such amounts are recorded in the period in which the expense is incurred and include judgment with respect to the allocation of certain costs between general & administrative expenses, which are non-reimbursable, and reimbursed expenses. 47table of contents auditing the classification of general and administrative expenses and reimbursed expenses is complex due to: (1) judgment associated with testing management’s conclusions regarding the allocation of costs between reimbursable and non-reimbursable expenses, (2) the complexity associated with allocating above-property expenses to hotel owners and franchisees due to the high volume of data used to monitor and account for reimbursed expenses and (3) incentives within management’s compensation structure designed to limit the growth in general and administrative expenses. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s process of accounting for reimbursed expenses, general and administrative expenses, and the process for allocating expenses. for example, we tested management’s controls over the review of the allocation of certain costs to determine if they were reasonably classified.to test the recognition of reimbursed expenses for appropriate classification, we performed audit procedures that included, among others, (1) testing a sample of transactions that were classified within reimbursed expenses in order to evaluate the appropriate accounting treatment and financial statement classification pursuant to the terms of the management and franchise agreements, (2) performed analytical procedures over total reimbursed expenses and general and administrative expenses in order to identify any trends or indicators of material errors in the classification of expenses, (3) tested manual journal entries made to reimbursed expenses and general and administrative expenses and (4) evaluated the methodology of cost allocations, including any material changes to allocations during the period. accounting for acquisitions and dispositions description of the matter as discussed in note 3 to the financial statements, the company executed acquisitions and disposals of real estate, including: (1) the acquisition of the remaining interest in two joint ventures that resulted in the recognition of the indefinite-lived intangible brand asset for ac hotels by marriott of $156 million and management and franchise agreements of $34 million, (2) the acquisition of the w new york - union square for $206 million, (3) the acquisition of elegant hotels for $128 million in cash and assumed elegant’s net debt outstanding of $63 million and (4) the dispositions of the st. regis new york and the sheraton gateway hotel in toronto international airport, resulting in recognition of aggregate gains on the disposition of real estate assets of $134 million recognized within “gains and other income, net” during 2019.auditing the accounting for acquisitions and dispositions is complex and judgmental as a result of: (1) the magnitude of acquisitions, real estate dispositions and related gains on disposition recognized during the year, (2) significant estimation involved in estimating the fair value of acquired real estate and intangible assets, including the estimate of the relative fair value of assets acquired and (3) technical accounting complexities associated with each individual acquisition and disposition. for dispositions, such complexities included the determination of whether the sale meets the definition of a business, the appropriate treatment of deferred taxes, and in instances where the company enters into an agreement to manage or franchise the property subsequent to disposition, whether such agreements are consistent with market value.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s process of accounting for acquisitions and dispositions during the year. for example, we tested management’s controls over the review of the technical accounting conclusions reached.to test the accounting for acquisitions and dispositions we performed audit procedures that included, among others, assessing the technical positions taken by management, vouching of consideration paid in acquisitions and proceeds received in dispositions, testing the estimate of fair value or relative fair value allocation to acquired assets, testing the clerical accuracy of the company’s gain or loss calculations, and testing the appropriateness of the allocation of deferred taxes to individual asset dispositions. 48table of contents /s/ ernst & young llp we have served as the company’s auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. income taxes - valuation allowances - refer to notes 1 and 13 to the financial statements critical audit matter description the company recognizes deferred income tax assets for deductible temporary differences and carryforwards. valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized based on estimates of future taxable income.during the year ended december 31, 2019, the company recorded a valuation allowance of $203 million related to indefinite-lived non-us net operating loss carryforwards. management’s determination that a valuation allowance was necessary in the current year was influenced by current year changes in global tax laws, which have adversely impacted the time period over which the company could reasonably realize the deferred tax asset based on its current global structure and ability to execute prudent and feasible tax planning actions. we identified the valuation allowance as a critical audit matter because it is dependent upon an analysis of complex tax laws and subjective projections of future taxable income. as a result, performing audit procedures to evaluate the reasonableness of management's projections and the timing for recognition of the valuation allowance, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists.39table of contents how the critical audit matter was addressed in the audit our audit procedures related to estimated future taxable income and the determination of whether it is more likely than not that the deferred tax asset will be realized included the following, among others:•we tested the effectiveness of controls over the valuation allowance assessment for income taxes, including management’s controls over the identification and evaluation of changes in global tax laws, estimates of future taxable income, and the determination of whether it is more likely than not that the deferred tax asset will be realized.•with the assistance of our income tax specialists: •we identified and evaluated changes in global tax laws and the potential impact on the company’s ability to utilize the deferred tax asset.•we considered management’s intent and ability to execute prudent and feasible tax planning actions based upon their underlying economic substance and local tax laws.•we evaluated management’s ability to accurately estimate future taxable income by comparing actual results to management’s historical estimates.•we considered whether management’s determination that a valuation allowance was required in the current year was indicative of management bias by evaluating the company’s historical conclusions reached with respect to the realizability of its deferred tax assets in other jurisdictions with unlimited carryforward periods.other accrued liabilities - commitments and contingent liabilities - harris county san jacinto environmental proceeding - refer to note 14 to the financial statements critical audit matter description the company has obligations related to certain environmental matters. such obligations are recorded when it is probable that a liability has been incurred and the loss can be reasonably estimated.the company has been named a potentially responsible party (“prp”) at the harris county san jacinto waste pits superfund site (“san jacinto”). the company has been participating in the remediation activities at the site with other pr ps. during 2017, the environmental protection agency (“epa”) issued a record of decision (“rod”) which included a waste removal and relocation remedy for the site, including an estimate of costs to remediate. due to uncertainty about the technological feasibility of executing the remedy prescribed within the rod, the company believes additional losses for this site are not estimable. we identified the san jacinto environmental proceeding as a critical audit matter because of the uncertainty associated with executing the remedy prescribed in the rod. as a result, auditing management's determination that additional losses for the site are not reasonably estimable required a high degree of auditor judgment and an increased extent of effort, including the need to involve our environmental specialists.how the critical audit matter was addressed in the audit our audit procedures related to management’s determination and the company’s disclosure that additional losses are not estimable related to san jacinto included the following, among others:•we tested the effectiveness of controls related to san jacinto, including management’s controls over evaluating whether the liability was reflective of current circumstances, included necessary costs (i.e. probable and estimable), and the related disclosure in the financial statements was accurate and complete.•with assistance from our environmental specialists:•we inquired of the company’s environmental specialists, including inquiries of both internal and external legal counsel, to understand the status of progress under the 2018 administrative order on consent (“aoc”) as well as the status of ongoing discussions with the epa and the other regulatory agencies involved.•we inspected correspondence between the pr ps and the epa to gain an understanding of progress and developments related to the site based on the timeline and requirements outlined in the aoc, including consideration of contradictory evidence or indications of management bias.•we assessed management’s assertion regarding the technical feasibility of compliance with the rod in evaluating the recorded liability. 40table of contents•we evaluated the sufficiency of the company’s disclosures related to additional losses not being reasonably estimable./s/ deloitte & touche llp memphis, tennessee february 19, 2020 we have served as the company's auditor since 2002.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the consolidated financial statementsthat were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that arematerial to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. thecommunication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on theaccounts or disclosures to which they relate. saleof series f preferred stock- temporary equity as described in footnote 9 “series f preferred stock”, on july 30, 2021, the company entered into a securities purchase agreement (the “spa”) with anaffiliated investor to purchase an aggregate amount of 500 shares of a newly created series f convertible preferred stock of the company(the “series f preferred”) for total proceeds of $1,000,000. the company also issued 63,897,764 warrants (the “warrant”)with the preferred shares. the series f preferred stock has a stated value of $2,000 per share, shall accrue dividendsmonthly in arrears, at the rate of 8% per annum on the stated value, and is redeemable at the option of the holder under certaincircumstances. weidentified the accounting for the sale of the series f preferred stock as a critical audit matter. the analysis of the accounting treatmentfor the sales of the series f preferred stock was complex. theprimary procedures we performed to address these critical audit matters included (a) reviewed and tested management’s conclusionsas to whether certain instruments or contracts qualified for derivative treatment or equity or temporary equity by comparing management’sanalysis and conclusions to authoritative and interpretive literature, (b) compared the accounting treatment and presentation of the series f preferred shares and warrants to that described by the authoritative and interpretive literature, (c) tested management’sprocess for valuing temporary equity by comparing it to generally accepted methodologies for valuing temporary equity. /s/ salberg & company, p.a.salberg& company, p.a.wehave served as the company’s auditor since 2020.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. allowance for credit losses – model and forecast of macroeconomic variables as described in notes 1 and 9 to the financial statements, the allowance for credit losses (“acl”) for loans and finance leases is an accounting estimate of expected credit losses over the contractual life of financial assets carried at amortized cost and off-balance-sheet credit exposures. the calculation of the acl for loans and finance leases, is primarily measured based on a probability of default / loss given default modeled approach. a significant amount of judgment was required when assessing the reasonableness and quality of the model design and construction, including whether the models were relevant to the company’s loan portfolio and were suitable for use. additionally, the estimate of the probability of default and loss given default assumptions uses relevant current and forward-looking macroeconomic variables, such as: unemployment rate; housing and real estate price indices; interest rates; market risk factors; and gross domestic product, and considers conditions throughout puerto rico, the virgin islands, and the state of florida. a significant amount of judgment is required to assess the reasonableness of the macroeconomic variables. changes in the model design as well as changes to these assumptions could have a material effect on the company’s financial results. 136 the model and the current and forward-looking macroeconomic variables used contribute significantly to the determination of the acl for loans and finance leases. we identified the assessment of the model design and construction and the assessment of relevant macroeconomic variables as a critical audit matter as the impact of these judgments represents a significant portion of the acl for loans and finance leases and because management’s estimate required especially subjective auditor judgment and significant audit effort, including the need for specialized skill. the primary procedures we performed to address these critical audit matters included: ●testing the effectiveness of controls over the evaluation of the conceptual design and construction of the models and the evaluation of the current and forward-looking macroeconomic variables, including controls addressing: o management’s review and approval of the models and methodologies used to establish the acl. o management’s review and approval of the macroeconomic variables. o management’s review of the reasonableness of the results of the macroeconomic variables used in the calculation. o management’s review of the results of the third-party model validations. ●substantively testing management’s process, including evaluating their judgments and assumptions, for assessing the conceptual design and construction of the models and for developing the macroeconomic variables, which included: o evaluation, with the assistance of professionals with specialized skill and knowledge, of the reasonableness of management’s judgments related to the conceptual design and construction of the models. o evaluation of the completeness and accuracy of data inputs used as a basis for the adjustments relating to macroeconomic variables. o evaluation, with the assistance of professionals with specialized skill and knowledge, of the reasonableness of management’s judgments related to the macroeconomic variables used in the determination of the acl for loans. among other procedures, our evaluation considered, evidence from internal and external sources, loan portfolio performance trends and whether such assumptions were applied consistently period to period. o analytical evaluation of the variables period to period for directional consistency and testing for reasonableness. /s/ crowe llp we have served as the company’s auditor since 2018.

critical audit matters the critical audit matters communicatedbelow are matters arising from the current period audit of the consolidated financial statements that were communicated or requiredto be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidatedfinancial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of criticalaudit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not,by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accountsor disclosures to which they relate. recognition of stock-based compensation cost for stock options issued as described in note 14 to the consolidatedfinancial statements, the company granted stock options to its employees and consultant for unpaid salaries and consulting feeand estimated total stock compensation expense related to the issuance of stock options of $1,706,419 for the year ended december31, 2020. the stock compensation cost was valued at the grant date, and management evaluated the fair value of these stock optionsat the grant date and recognized based on the vesting schedule. we identified the recognition of stockoptions as a critical audit matter due to the significant judgments made by management when developing underlying assumptions. the following are the primary procedureswe performed to address this critical audit matter. we obtained an understanding and evaluated the design and implementation ofcertain controls relating to significant judgments and assumptions developed by management. we evaluated and tested sources ofdata and assumptions used by management. in addition, we tested the completeness and accuracy of the underlying assumptions usedby management. /s/ kccw accountancy corp.we have served as the company's auditorsince 2019.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.revenue recognition - allocation of transaction price in revenue arrangements with multiple performance obligations as described in notes 2 and 10 to the consolidated financial statements, other subscription revenue was $294.5 million for the year ended january 31, 2021. certain of the company’s contracts with customers contain multiple performance obligations, such as the license portion of time-based software licenses, post-contract customer support, and services. for these contracts that contain multiple performance obligations, management allocates the transaction price to each performance obligation based on a relative standalone selling price. management determines each standalone selling price based on multiple factors, including past history of selling such performance obligations as standalone products. management estimates standalone selling price for performance obligations with no observable evidence using adjusted market, cost plus and residual methods to establish the standalone selling prices. in cases where directly observable standalone sales are not available, management utilizes all observable data points including competitor pricing for a similar or identical product, market and industry data points, and the company’s pricing practices. the principal considerations for our determination that performing procedures relating to revenue recognition - allocation of transaction price in revenue arrangements with multiple performance obligations is a critical audit matter are (i) the significant judgment by management in estimating the standalone selling price for certain of the company’s performance obligations and allocating the transaction price based on a relative allocation of standalone selling price to those individual performance obligations, which in turn led to (ii) significant auditor judgment, subjectivity and effort in performing procedures and evaluating management’s estimates of standalone selling price and the allocation of transaction price to the individual performance obligations. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the estimation of the standalone selling price and the allocation of transaction price to the individual performance obligations. these procedures also included testing management’s process for estimating the standalone selling prices, which involved (i) evaluating the appropriateness of the methodologies used by management in establishing the standalone selling prices; (ii) assessing the reasonableness of the significant assumptions developed by management; and (iii) testing the source data utilized in management’s estimate calculations. these procedures also included testing the relative allocation of transaction price to individual performance obligations based on a sample of contracts./s/ pricewaterhouse coopers llp san jose, california march 22, 2021we have served as the company's auditor since 2013.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.evaluation of the identification of related parties and related party transactions as discussed in note 17 to the consolidated financial statements, the dolan family, including trusts for the benefit of members of the dolan family (collectively, the dolan family group) is the majority beneficial owner of the company, msg networks inc. (msg networks), madison square garden entertainment corp. (msg entertainment), and amc networks inc. (amc networks). in addition, there are certain overlapping directors and executive officers between the companies. each of these entities is a related party. following the distribution of msg entertainment, the company has entered into a number of transactions with msg entertainment, including agreements for use of the madison square garden arena, sales and service representation agreements, sponsorship allocation, transition services and delayed draw term loans, as well as certain shared executive support costs for the company’s executive chairman and vice chairman. the company has entered into agreements for media rights and other transactions with msg networks and the company has also entered into transactions with amc f- 2networks. further, the company has entered into several arrangements with members of the dolan family group for shared office space and aircraft services and timesharing. we identified the evaluation of the identification of related parties and related party transactions as a critical audit matter. auditor judgment was involved in assessing the sufficiency of the procedures performed to identify related parties and related party transactions of the company. the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s related party process, including controls over the identification of the company’s related party relationships and transactions. we performed the following procedures to evaluate the identification of related parties and related party transactions by the company: •read new agreements and contracts between the company and related parties •queried the accounts payable system for transactions with related parties; •inspected director and officer questionnaires from the company’s directors and officers;•evaluated the company’s reconciliation of its applicable accounts to the related parties’ records of transactions and balances;•read the company’s minutes from meetings of the board of directors and related committees; •inquired with executive officers, key members of management, and the audit committee of the board of directors regarding related party transactions.•received confirmations from related parties and compared responses to the company’s records; •read public filings, external news, and research sources for information related to transactions between the company and related parties; and•listened to the company’s quarterly investor relations calls.assessment of the results from discontinued operations as discussed in notes 1 and 3 to the consolidated financial statements, on april 17, 2020, the company distributed all the outstanding common stock of msg entertainment to its stockholders. msg entertainment owns, directly or indirectly, the entertainment and sports booking businesses previously owned and operated by the company through its entertainment and sports business segments, respectively. management determined that the allocable shared revenue and expenses of msg entertainment should be presented as discontinued operations in the consolidated statements of operations for all periods presented. we identified the assessment of the results from discontinued operations as a critical audit matter. given the nature of the transactions and the degree of integration of msg entertainment with the company’s continuing operations in the periods before the distribution, there was a high degree of subjective auditor judgment required to assess management’s identification, segregation, and recording of the allocable shared revenue and expenses for the discontinued businesses. the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s discontinued operations assessment process, including controls related to the identification, segregation, and recording of allocable shared revenue and expenses, and the resulting entries made to the income statement account balances. specifically, we read the distribution agreements and evaluated the company’s discontinued operations accounting memorandums that document management’s accounting conclusions. we tested the recognition and classification of amounts included in discontinued operations by recalculating revenue and expenses using the company’s historical accounting records. we read the company’s disclosure and assessed whether the disclosure appropriately described the determination of discontinued operations./s/ kpmg llp we have served as the company’s auditor since 2015.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. acquisition of fsb bancorp – acquired loans as described in notes 1 and 2 to the consolidated financial statements, the company completed the acquisition of fsb bancorp (fsb) for total consideration of $28.9 million. the company accounted for this transaction under the acquisition method of accounting in accordance with asc 805, business combinations, which requires purchased assets and liabilities assumed and consideration exchanged to be recorded at their respective fair values at the date of acquisition. management engaged a third-party specialist to develop the fair value estimate of fsb’s loan portfolio as of the acquisition date in accordance with asc 820. inputs and assumptions used in the fair value estimate of the loan portfolio, includes interest rate, servicing, credit and liquidity risk, and required equity return. the fair value of loans was calculated using a discounted cash flow analysis and the loans had a fair value of $271.4 million and a contractual balance of $273.9 million at the acquisition date.57table of contents we identified the acquisition date fair value of acquired fsb loans as a critical audit matter as auditing this estimate requires subjective auditor judgment. the principal considerations for this determination are the level of judgement involved in evaluating management’s identification of loans with evidence of credit deterioration, the need for specialized skill in evaluating the reasonableness of unobservable inputs and assumptions used in management’s estimation of the fair value of all acquired loans, and the size of the acquired loan portfolio. the primary audit procedures we performed to address this critical audit matter included: testing the design and operating effectiveness of controls over the estimate of fair value of acquired fsb loans, including controls addressing: o management’s evaluation of the reasonableness of the methods and assumptions used to estimate fair value o management’s review of the completeness and accuracy of the loan level data used in the calculation o management’s evaluation over the determination of purchase credit impaired classification substantively testing management’s process, including evaluating their judgments, for estimating the fair value of acquired fsb loans, which included:o testing the completeness and accuracy of loans determined to have credit deterioration at acquisition date and evaluating the reasonableness of the criteria utilized by management in their determination; o utilizing a crowe llp valuation specialist to assist in evaluating the reasonableness of significant assumptions and methods utilized, and overall reasonableness of the fair values; o testing the completeness and accuracy of the loan level data used in the calculation; allowance for loan losses – allowance for loans collectively evaluated for impairment. as described in notes 1 and 4 to the consolidated financial statements, the company’s allowance for loan losses is management’s best estimate of probable incurred losses inherent in the loan portfolio as of the balance sheet date. the allowance for loan losses was $20.4 million at december 31, 2020, which consists of two components: the allowance related to loans individually evaluated for impairment, representing $1.5 million and the allowance related to loans collectively evaluated for impairment, representing $18.9 million. the general portfolio allocation is segmented into homogeneous pools of loans with similar characteristics. separate pools of loans include loans pooled by loan grade and by portfolio segment for pass and watch loans. an average historical loss rate over the past seven years multiplied by the loss emergence period factor is applied against these loans. for both the criticized and non-criticized loan pools in the general portfolio allocation, additional qualitative factors are applied. the qualitative factors applied to the general portfolio allocation reflect management’s evaluation of various conditions. the conditions evaluated include the following: levels and trends in delinquencies, non-accruals, and criticized loans; trends in volume and terms of loans; effects of any changes in lending policies and credit quality underwriting standards; experience, ability, and depth of management; national and economic trends and conditions; changes in the quality of the loan review system; concentrations of credit risk; changes in collateral value; and large loan risk. the total possible qualitative allocation is determined by comparing peer bank historical charge-off rates to the bank’s historical charge-off rate. the actual qualitative allocation is determined by qualitative factor by loan type based on metrics that management believes are appropriate indicators of whether the bank is in a low, moderate, or high risk range relative to historical experience for each qualitative factor. we identified the allowance for loans collectively evaluated for impairment as a critical audit matter because of the necessary judgment applied by us to evaluate management’s significant estimates and subjective assumptions relating to 1) the determination of the loss emergence period by segment, 2) the determination of migration adjustments for criticized loans, and 3) the determination of aggregate qualitative adjustments. changes in these assumptions could have a material effect on the corporation’s financial results.‎ 58table of contents the primary procedures we performed to address this critical audit matter included: testing the effectiveness of controls over the evaluation of the allowance related to loans collectively evaluated for impairment, including controls addressing:o data inputs, judgments and calculations used to determine the loss emergence period and migration adjustments for criticized assets.o problem loan identification and delinquency monitoring. o management’s review of the qualitative and quantitative analysis related to the qualitative risk factors.o independent loan review and independent annual credit reviews of the commercial portfolios. substantively testing management’s process, including evaluating their judgments and assumptions, for developing the allowance for loans collectively evaluated for impairment, which included:o testing the mathematical accuracy of the calculation, including historical losses, loss emergence periods and migration adjustments for criticized loans.o evaluation of the reasonableness of management’s judgments related to the historical loss experience and estimated loss emergence period, including the evaluation of triggering events related to default and actual losses. the evaluation of triggering events included evaluation of management's assessment of problem loan identification and delinquencies. o evaluation of reasonableness of management’s judgments related to qualitative adjustments to determine if they are calculated to conform with management’s policies and were consistently applied period over period. our evaluation considered the weight of evidence from internal and external sources and loan portfolio performance.o analytically evaluating the allowance related to loans collectively evaluated for impairment by loan segment year over year for reasonableness.o testing the loan grades of the commercial portfolios. /s/ crowe llp we have served as the company's auditor since 2020.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.presentation of mobility and delivery revenue agreements, including incentives, discounts and promotions to drivers, merchants and end-users as described in notes 1 and 2 to the consolidated financial statements, the company derives its revenues principally from drivers’ and merchants’ use of the company’s platform, on-demand lead generation, and related services in connection with mobility and delivery services, as well as from direct fees charged to end-users for use of the platform and in exchange for delivery services. management applies judgment in determining whether the company is the principal or agent in transactions with drivers, merchants and end-users. this determination impacts the presentation of revenue on a gross or net basis as well as the presentation of incentives provided to drivers and merchants and discounts and promotions offered to end-users, to the extent they are not customers. for the year ended december 31, 2021, the company’s mobility and delivery revenue, net of incentives, was $15.3 billion and discounts, loyalty programs, promotions, refunds, and credits provided to end-users who are not customers totaled $2.4 billion, of which a significant portion relates to discounts and promotions.the principal considerations for our determination that performing procedures relating to the presentation of mobility and delivery revenue agreements, including incentives, discounts and promotions to drivers, merchants, and end-users is a critical audit matter are the significant judgment by management in assessing the presentation of revenue on a gross or net basis, as well as the presentation of incentives, discounts and promotions offered to drivers, merchants, and end-users, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to whether transaction attributes were appropriately analyzed and presented by management.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the company’s revenue recognition process, including controls over the presentation of mobility and delivery revenue, incentives, discounts and promotions. these procedures also included, among others, testing, on a sample basis, trip transaction attributes and assessing management’s classification of new or changed agreements by examining documentation related to the agreement terms, driver statements, rider receipts, and discount, promotion and incentive terms, and assessing the impact of those terms and attributes on the presentation of revenue and income statement classification.valuation of insurance reserves as described in note 1 to the consolidated financial statements, insurance reserves is the liability for unpaid losses and loss adjustment expenses, which represents the estimate of the ultimate unpaid obligation for risks retained by the company and includes an amount for case reserves related to reported claims and an amount for losses incurred but not reported as of the balance sheet date. the estimate of the ultimate unpaid obligation utilizes generally accepted actuarial methods applied to historical claim and loss experience. in addition, management uses assumptions based on actuarial judgment related to claim and loss development patterns and expected loss costs, which consider frequency trends, severity trends, and relevant industry data. these reserves are continually reviewed by management and adjusted as experience develops and new information becomes known. the company’s short-term and long-term insurance reserves as of december 31, 2021 totaled $4.0 billion.the principal considerations for our determination that performing procedures relating to the valuation of insurance reserves is a critical audit matter are the significant judgment by management when developing the estimate of the insurance reserves, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the actuarial methods and management’s significant assumptions related to loss development patterns and expected loss costs. the audit effort also involved the use of professionals with specialized skill and knowledge.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the company’s valuation of insurance reserves, including controls over the development of the significant assumptions related to loss development patterns and expected loss costs. these procedures also included, among others, the involvement of professionals with specialized skill 72and knowledge to assist in (i) developing, for selected reserve components, an independent actuarial estimate of the insurance reserves, and comparison of this independent estimate to management’s actuarially determined reserves, and (ii) testing, for other selected reserve components, management’s process for estimating the insurance reserves. developing the independent estimate involved independently developing the loss development patterns and expected loss costs and testing the completeness and accuracy of data provided by management. testing management’s process for estimating the insurance reserves involved evaluating the appropriateness of management’s actuarial methods, evaluating the reasonableness of the significant assumptions used by management related to loss development patterns and expected loss costs used in those methods, and testing the completeness and accuracy of data used by management./s/ pricewaterhouse coopers llp san francisco, california february 24, 2022we have served as the company’s auditor since 2014.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.assessment of the allowance for loan losses related to loans collectively evaluated for impairment as discussed in notes 1 and 5 to the consolidated financial statements, the company’s allowance for loan losses at december 31, 2019 was $246.6 million of which $208.9 million related to commercial loans (commercial portfolio) collectively evaluated for impairment and $26.5 million related to retail loans (retail portfolio) collectively evaluated for impairment. the allowance related to loans collectively evaluated for impairment (all) consists of both quantitative and qualitative loss components. the company estimates the quantitative component of the all for the commercial portfolio using a methodology that incorporates (1) the probability of default for a given loan risk rating (pd), and (2) historical 
loss-given-default data (lgd), both derived using look-back periods and loss emergence periods, which are based on loan risk ratings. the qualitative component represents adjustments to the quantitative component for qualitative factors. for the retail portfolio, the quantitative component of the all is estimated using a methodology that gives consideration to historical portfolio loss experience over a look-back period and a loss emergence period.f-2we identified the assessment of the quantitative and qualitative component of the all for the commercial portfolio and the quantitative component of the all for the retail portfolio as a critical audit matter because they involved significant measurement uncertainty requiring complex auditor judgment, and knowledge and experience in the industry. in addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. this assessment of the all encompassed the evaluation of the all methodology, inclusive of the methodologies used to estimate (1) p ds and lg ds, including look-back periods, loss emergence periods, and loan risk ratings and to determine qualitative factors for the commercial portfolio, and (2) historical portfolio loss experience over the look-back period and the loss emergence period for the retail portfolio.the primary procedures we performed to address the critical audit matter included the following. we tested certain internal controls over the company’s all process, including controls related to the (1) development of the all methodology, (2) determination of the key factors and assumptions consisting of p ds, lg ds, look-back periods, loss emergence periods, and qualitative factor adjustments used to estimate the all for the commercial portfolio, and historical portfolio loss experience, look-back period and the loss emergence period used to estimate the all for the retail portfolio, (3) periodic testing of commercial portfolio loan risk ratings, (4) calculation of the all estimate, and 
(5) analysis of the all results, trends and ratios.we evaluated the company’s process to develop the all estimate by testing certain sources of data, factors, and assumptions that the company used, and considered the relevance and reliability of such data, factors, and assumptions. in addition, we involved credit risk professionals with specialized industry knowledge and experience, who assisted in:•evaluating the company’s all methodology for compliance with u.s. generally accepted accounting principles,•testing the historical loss look-back period assumptions used in the commercial and retail portfolio methodologies to evaluate the length of those periods,•evaluating the methodology used to develop p ds, lg ds and the loss emergence periods used in the commercial portfolio,•evaluating the methodology used to develop historical portfolio loss experience and the loss emergence period used in the retail portfolio,•testing the commercial portfolio qualitative factor framework and related adjustments by:◦evaluating the metrics used to allocate the qualitative factor adjustments, including the relevance of sources of data and assumptions,◦analyzing the determination of each qualitative factor adjustment, and◦evaluating trends in the total all, including the qualitative factor adjustments, for consistency with trends in loan portfolio growth (attrition) and credit performance.•testing individual loan risk ratings for a selection of commercial loans in the current year by evaluating the financial performance of the borrower and the underlying collateral.assessment of the fair value measurements of acquired loans and core deposit intangibles in the bsb bancorp and united financial acquisitions as discussed in note 2 to the consolidated financial statements, the company completed the acquisitions of bsb bancorp, inc. (bsb bancorp) and united financial bancorp, inc. (united financial) on april 1, 2019 and november 1, 2019, respectively. the acquisitions were accounted for as business combinations using the acquisition method of accounting. accordingly, assets acquired, liabilities assumed and consideration paid were recorded at their estimated fair values at the time of the respective acquisition dates. for the bsb bancorp acquisition, the fair value of acquired loans was $2.6 billion and the fair value of the core deposit intangible (cdi) was $39.5 million. for the united financial acquisition, the fair value of acquired loans was $5.5 billion and the fair value of the cdi was $41.5 million. the fair values of acquired loans were based on the income approach, utilizing a discounted cash flow methodology that projected principal and interest cash flows based on loan contractual terms, applying key assumptions for credit losses using loan risk ratings, and prepayment rates and discounting these cash flows at implied market based discount rates. the fair values of the cd is were based on a cost savings methodology under the income approach, whereby projected cost savings were derived by estimating costs to carry deposits compared to alternative funding costs, and included key inputs and assumptions related to customer attrition rates, net maintenance costs, costs of alternative funding, deposit interest rates and discount rates.f-3we identified the assessment of the fair value measurements for loans and cd is acquired as part of the bsb bancorp and united financial acquisitions as a critical audit matter. the assessment encompassed the evaluation of the fair value methodologies for acquired loans and cd is, including the key inputs and assumptions used in the fair value estimates. the valuation assumptions for acquired loans related to loan risk ratings, prepayment rates and discount rates, and the valuation assumptions for the cd is related to customer attrition rates and net maintenance costs involved significant measurement uncertainty and required specialized skills and knowledge to evaluate. additionally, there was auditor judgment involved in designing and performing audit procedures in order to evaluate and test these key inputs and assumptions.the primary procedures we performed to address the critical audit matter included testing certain internal controls over the (1) development of the fair value methodologies, (2) determination of the key valuation assumptions for acquired loans related to loan risk ratings, prepayment rates and discount rates, and the key valuation assumptions for the cdi related to customer attrition rates and net maintenance costs, (3) evaluating the inputs used to develop the key assumptions, and 
(4) analysis of the fair value measurements results. we tested individual loan risk ratings for a selection of acquired commercial loans by evaluating the financial performance of the borrower and the underlying collateral. we involved valuation professionals with specialized skills and knowledge, who assisted in:•evaluating the valuation methodologies, for compliance with u.s. generally accepted accounting principles,•developing an estimate of the fair value of the loans using the loan contractual terms and independently developed assumptions for credit losses, discount rates and prepayment rates used by other market participants, and compared the results to the company’s fair value estimate,•evaluating the cdi assumption related to net maintenance costs, and inputs used to develop those assumptions, that were used in the fair value measurements,•evaluating the cdi assumption related to customer attrition rates by comparing to third party data used by other market participants, and evaluating the mathematical accuracy of certain calculations within the cdi fair value measurement./s/ kpmg llp we have served as the company’s auditor since 1986.

critical audit matter the critical audit matter communicated below isa matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to theaudit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on thefinancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinionon the critical audit matter or on the accounts or disclosures to which it relates. revenue recognition — identification of contractualterms in certain customer arrangements as described in note 1 to the consolidatedfinancial statements, management assesses relevant contractual terms in its customer arrangements to determine the transaction price andrecognizes revenue upon transfer of control of the promised goods or services in an amount that reflects the consideration the companyexpects to receive in exchange for those products or services. management applies judgment in determining the transaction price whichis dependent on the contractual terms. in order to determine the transaction price, management may be required to estimate variable considerationwhen determining the amount and timing of revenue recognition.the principal considerations for ourdetermination that performing procedures relating to the identification of contractual terms in customer arrangements to determine thetransaction price is a critical audit matter are there was significant judgment by management in identifying contractual terms due tothe volume and customized nature of the company’s customer arrangements. this in turn led to significant effort in performing ouraudit procedures which were designed to evaluate whether the contractual terms used in the determination of the transaction price andthe timing of revenue recognition were appropriately identified and determined by management and to evaluate the reasonableness of management’sestimates.addressing the matter involved performingprocedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. theseprocedures included testing the effectiveness of controls relating to the revenue recognition process, including those related to theidentification of contractual terms in customer arrangements that impact the determination of the transaction price and revenue recognition.these procedures also included, among others, (i) testing the completeness and accuracy of management’s identification of the contractualterms by examining customer arrangements on a test basis, and (ii) testing management’s process for determining the appropriateamount and timing of revenue recognition based on the contractual terms identified in the customer arrangements. /s bf borgers cpa pcbf borgers cpa pc we have served as the company's auditor since 2021

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. equity transactions as described in note 7 to the financial statements, the company has multiple equity instruments with various levels of complexity and volumes including warrants and stock options. f-2 the principal considerations for our determination that the complexity of the company’s equity structure should be a critical audit matter were based on the volume of equity transactions, including conversions to common stock, common stock issuance activity and warrant activity making it challenging to ensure adequate disclosure of all equity transactions. auditing such estimates and activity required extensive audit effort due to the volume and complexity of these transactions and a high degree of auditor judgment when performing the requisite audit procedures and evaluating the results of those procedures. the primary audit procedures we performed to address this critical audit matter included: ● we evaluated the design effectiveness of controls over the company’s process for accounting for and recording equity transactions ● we tested the assumptions used within the black-scholes model calculation to estimate the value of stock options and warrants granted, which included key assumptions such as the estimated life of the stock options and warrants and volatility of the company’s stock price /s/ wipfli llp we have served as the company’s auditor since 2005.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.revenue recognition — clinical research– refer to note 2 to the financial statements critical audit matter description- 50 - the company recognizes contract revenue over the contract term as the service progresses, because the transfer of control to the customer is continuous. substantially all of the company’s clinical research contracts consist of a single performance obligation as the promise to transfer individual services described in the contracts are not separately identifiable from other promises in the contracts, and therefore not distinct. the accounting for these contracts involves judgment, particularly as it relates to the process of estimating costs to complete a contract for the performance obligation, which includes direct costs, reimbursable out-of-pocket costs, and reimbursable investigator site payments. contract costs are recognized as incurred, and revenue recognition is based on cost incurred to date for the services provided compared to the total estimated costs to complete a contract.given the judgments necessary to estimate costs to complete a contract for the performance obligation used to recognize revenue for certain clinical research contracts over time, auditing such estimates required extensive audit effort due to the complexity of contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimates of costs to complete a contract for the performance obligation used to recognize revenue for certain clinical research contracts included the following, among others: •we tested the effectiveness of controls over revenue recognized throughout the contract term, including management’s controls over estimates of future services to be delivered and costs to be incurred under the contract. •we selected a sample of contracts and performed the following: •evaluated whether the contracts were properly included in management’s calculation of contract revenue based on the terms and conditions of each selected contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation. •compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any pricing modifications and scope changes that were agreed upon with the customers. •tested management’s identification of distinct performance obligations by evaluating whether the progress of performance completed or delivered to date compared to total services to be delivered under the terms of the arrangement. •tested the accuracy and completeness of the total contract costs incurred to date for the performance obligation. •evaluated the estimates of costs to complete a contract for the performance obligation by: •comparing costs incurred to date to the costs management estimated to be incurred to date. •evaluating management’s ability to achieve the estimates of total contract cost by performing corroborating inquiries with the company’s project managers and financial analysts, and comparing the estimates to management’s work plans and cost estimates. •comparing management’s estimates for the selected contracts to costs of similar performance obligations, when applicable. •tested the mathematical accuracy of management’s calculation of revenue for the performance obligation. •we selected a sample of contracts and evaluated management’s ability to estimate total contract costs accurately by comparing actual costs to management’s historical estimates. /s/ deloitte & touche llp cincinnati, ohio february 16, 2021we have served as the company's auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.regulatory matters – impact of rate regulation on the financial statements – refer to note 15 to the financial statements critical audit matter description the company accounts for their regulated operations in accordance with financial accounting standards board accounting standards codification topic 980, regulated operations. the provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. these actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. when this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities). 58 the company is subject to rate regulation by the missouri, alabama, and mississippi public service commissions (the “commissions”), which have jurisdiction with respect to the rates of natural gas companies within their respective geographies. the company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process. accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the company’s financial statements. there is a risk that the commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. as a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of september 30, 2020, and the judgments made by management to support their assertions about impacted account balances and disclosures. management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the commissions, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.how the critical audit matter was addressed in the audit our audit procedures related to the uncertainty of future decisions by the commissions included the following, among others: •we tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. we tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. •we evaluated the company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, in the financial statements. •we read relevant regulatory orders issued by the commissions for the company in missouri, alabama, and mississippi; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances. •we obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates.evaluation of spire storage asset impairment – refer to note 1 to the financial statements critical audit matter description the company evaluates for impairment long-lived assets classified as held and used when events or changes in circumstance indicate that the carrying value of the respective asset (asset group) may not be recoverable. the carrying value of the asset is not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. if the carrying value of the asset is not recoverable, the company recognizes an impairment charge equal to the amount of the carrying value of the asset that exceeds the fair value of the asset. 59 during the year ended september 30, 2020, the company recorded an impairment loss of $140.8 million related to their spire storage west llc (“storage”) long-lived assets (the “asset group”) after it was determined that their carrying value was not recoverable due to a revision in future business development plans. the company measured the impairment loss by estimating the fair value of the asset group using a discounted cash flow model (the “model”). the estimation of fair value required management to make assumptions and apply judgment regarding future cash flows expected to result from the use and eventual disposition of the asset group under various business development plans, future market demand, operational capabilities, and the selection of a discount rate. significant and unanticipated changes to these assumptions could require a provision for impairment in a future period. we identified the estimation of the fair value of the storage asset group as a critical audit matter due to the high degree of auditor judgment and an increased level of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions in determining the fair value, including those related to revenue forecasts and the “terminal value” used to determine estimated future cash flows under various business development plans, and the selection of a discount rate. how the critical audit matter was addressed in the audit our audit procedures related to the estimation of the fair value of the storage asset group included the following, among others: •we tested the effectiveness of management’s controls over the storage asset impairment evaluation, including those over the key assumptions used in the estimation of the fair value of the asset group, including revenue forecasts, terminal value, and selection of a discount rate. •we evaluated the reasonableness of key assumptions used by management in the fair value determination by: o comparing revenue and cash flow projections to current executed contracts, capital improvement plans, and third-party reports about future market demand, o comparing assumed operational capabilities to internal development plans and third-party reports about asset viability, o comparing the various development plans considered to internal communications to management and the board of directors, o comparing estimated terminal value to comparable precedent transactions involving external parties, and o performing sensitivity analyses of the key assumptions to evaluate the change in the fair value estimate that would result from changes in the assumptions. •we evaluated the reasonableness of management’s assumptions involving revenue forecasts by determining if the revenue forecasts were consistent with: o executed storage contracts, o third-party reports regarding future market demand, value of contracts, and operational capabilities of the storage sites, and o various business development plans communicated to management and the board of directors of spire inc. •we evaluated the reasonableness of management’s assumptions involving terminal value by determining whether the terminal value was consistent with comparable precedent transactions involving external parties. •with the assistance of our fair value specialists, we evaluated the reasonableness of the discounted cash flow model by: o testing the mathematical accuracy of the model, and o evaluating the reasonableness of the discount rate used in the model by developing a range of independent estimates and comparing those to the discount rate selected by management. /s/ deloitte & touche llp st. louis, missouri november 18, 2020 we have served as the company’s auditor since 1953.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.the impact of the company’s tax structure on its income tax provision as discussed in note 1 and note 10 to the consolidated financial statements, the company is domiciled in the netherlands and has international operations requiring the evaluation of income taxes across many tax jurisdictions. the company recorded deferred tax assets of $70 million and deferred tax liabilities of $24 million as of december 31, 2021, and income tax expense of $16 million for the year then ended.we identified the evaluation of the impact of the company’s tax structure on its income tax provision as a critical audit matter. evaluation of the identification, interpretation, and application of tax laws in the relevant jurisdictions, which can be complex and subject to change, and their impact on the company’s income tax provision required a high degree of auditor judgment and specialized skills and knowledge.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls related to the identification, interpretation and application of tax laws. we inspected the company’s legal entity organization chart to identify changes in structure. we evaluated the effects of changes in tax law by reading the company’s correspondence and agreements with relevant tax authorities, intercompany documentation, and advice and guidance from third parties. we identified certain transactions during the year involving the interpretation of tax law and evaluated the relevant accounting impact on the tax provision. we involved income tax professionals with specialized skills and knowledge who assisted in (1) assessing the company’s application of tax laws, including statutes, regulations, and case law, (2) identifying changes in tax laws in relevant jurisdictions, (3) and evaluating the impact on the tax provision of certain transactions./s/ kpmg llp we have served as the company’s auditor since 2015.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. revenue — contracts with customers— refer to note 8 to the financial statements critical audit matter description the company recognizes revenue over time for in-process production orders that have not shipped for contracts with customers for which it has an enforceable right to bill and collect consideration, inclusive of a reasonable profit, in the event the in-process orders are cancelled by the customers. this results in the company recording a corresponding contract asset as of period end for these contracts. significant judgment is exercised by the company in determining the amount of revenue to recognize for these contracts and the corresponding contract asset, specifically in estimating the point within the production cycle at which the production orders stand in relation to the company’s enforceable right within the contract. pursuant to these contracts, the contract asset associated with revenue recognized over time as of october 31, 2021, was $9.9 million.37table of contents we identified the determination of revenue recognized over time for in-process productions orders as of october 31, 2021 as a critical auditing matter because of the significant estimates and assumptions management makes in determining the amount of revenue to recognize for these contracts. this required a high degree of audit judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s determination of the progress point of in-process orders and the amount of revenue recognized over time and the corresponding contract asset as of october 31, 2021.how the critical audit matter was addressed in the audit our audit procedures related to the company’s determination of the progress point of in-process orders and resulting revenue recognized over time and corresponding contract asset as of october 31, 2021 included the following:- we tested the operating effectiveness of controls over management’s determination of the point in the production process and correlation to stated contractual rights.- we tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial statements.- we selected a sample of in-process production orders as of october 31, 2021, and performed the following procedures for each selection:- obtained and read the contract.- physically observed existence of the in-process production order.- tested management’s identification of significant contract terms and resulting revenue recognition for the in-process production order.- tested management estimate of the production point for the in-process order and corresponding revenue recognition and contract asset based on the company’s enforceable right within the contract./s/ deloitte & touche llp boston, massachusetts december 17, 2021we have served as the company’s auditor since 1991.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.impairment evaluation for equity method investments in affiliates as described in notes 1 and 10 to the consolidated financial statements, the company’s consolidated equity method investments in affiliates balance was $2,195.6 million as of december 31, 2019. management periodically evaluates its equity method investments in affiliates for impairment by performing assessments to determine if fair value may have declined below related carrying value for a period that they consider to be other-than-temporary. where management believes that such decline may have occurred, they make judgments to determine the fair value of an investment and use valuation techniques, including discounted cash flow analyses that require assumptions such as growth rates of assets under management, client attrition, asset and performance based fee rates, expenses, tax benefits, tax rates and discount rates. the principal considerations for our determination that performing procedures relating to the impairment evaluation for equity method investments in affiliates is a critical audit matter are; (i) there was significant judgment by management to evaluate the significant assumptions used in the discounted cash flow analysis to determine the fair value of the investment which was used to determine the amount that fair value had declined below its related carrying value for a period considered to be other-than-temporary, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures related to the growth rates of assets under management and discount rates used in the impairment evaluation, and (ii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s impairment evaluation for equity method investments in affiliates, including controls over the discounted cash flow analysis and significant assumptions used to determine the fair value of equity method investments in affiliates. these procedures also included, among others, testing management’s process for determining the fair value of its equity method investments in affiliates, including evaluating the appropriateness of the discounted cash flow analysis, testing the completeness and accuracy of the underlying data used in the discounted cash flow analysis, and evaluating the reasonableness of the significant assumptions used by management in developing the fair value measurement, including the growth rates of assets under management and discount rates. evaluating the reasonableness of the growth rates of assets under management involved considering (i) the consistency with external market and industry data, (ii) the consistency with past performance of the affiliate, and (iii) whether the growth rates were consistent with evidence obtained in other areas of the audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the discount rates used to determine whether the fair value of the equity method investment had declined below its carrying value for a period considered to be other-than-temporary./s/ pricewaterhouse coopers llp boston, massachusetts february 28, 2020 we have served as the company’s auditor since 1993.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or 103disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.u.s. pharmaceutical rebate reserves – managed care, medicare and medicaid as described in note 1 to the consolidated financial statements, the company recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied. rebates and discounts provided to customers are accounted for as variable consideration and recorded as a reduction in sales. the liability for such rebates and discounts is recognized within accrued rebates, returns, and promotions on the consolidated balance sheet. a significant portion of the liability related to rebates is from the sale of pharmaceutical goods within the u.s., primarily the managed care, medicare and medicaid programs, which amounted to $7.7 billion as of january 2, 2022. for significant rebate programs, which include the u.s. managed care, medicare and medicaid rebate programs, rebates and discounts estimated by management are based on contractual terms, historical experience, patient outcomes, trend analysis, and projected market conditions in the u.s. pharmaceutical market. the principal considerations for our determination that performing procedures relating to u.s. pharmaceutical rebate reserves - managed care, medicare and medicaid is a critical audit matter are the significant judgment by management due to the significant measurement uncertainty involved in developing these reserves and the high degree of auditor judgment, subjectivity and audit effort in performing procedures and evaluating the assumptions related to contractual terms, historical experience, patient outcomes, trend analysis, and projected market conditions in the u.s. pharmaceutical market. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to u.s. pharmaceutical rebate reserves - managed care, medicare and medicaid, including controls over the assumptions used to estimate these rebates. these procedures also included, among others, (i) developing an independent estimate of the rebates by utilizing third party information on price and market conditions in the u.s. pharmaceutical market, the terms of the specific rebate programs, and the historical experience and trend analysis of actual rebate claims paid; (ii) testing rebate claims processed by the company, including evaluating those claims for consistency with the contractual and mandated terms of the company’s rebate arrangements; and (iii) comparing the independent estimates to management’s estimates.litigation contingencies – talc as described in notes 1 and 19 to the consolidated financial statements, the company records accruals for loss contingencies associated with legal matters, including talc, when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. to the extent adverse awards, judgments, or verdicts have been rendered against the company, management does not record an accrual until a loss is determined to be probable and can be reasonably estimated. for these matters, management is unable to estimate the possible loss or range of loss beyond the amounts accrued. amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. the ability to make such estimates and judgments can be affected by various factors, including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous parties involved. management continues to believe that the company has strong legal grounds to contest the talc verdicts it has appealed. notwithstanding management’s confidence in the safety of the company’s talc products, in certain circumstances the company has settled cases. in october 2021, johnson & johnson consumer inc. (old jjci), a wholly-owned subsidiary of johnson & johnson, implemented a corporate restructuring and created a subsidiary, ltl management llc (ltl), which became solely responsible for the talc-related liabilities, and another subsidiary, new jjci, which became responsible for the remaining business of old jjci. ltl filed a voluntary petition, seeking relief under chapter 11 of the bankruptcy code. as a result of the ltl bankruptcy case, the court entered a temporary restraining order staying all litigation against ltl and old jjci. on november 15, 2021, the north carolina bankruptcy court confirmed the scope of the stay, issuing a preliminary injunction (pi) prohibiting and enjoining the commencement and prosecution of talc-related claims against ltl, old jjci, new jjci, johnson & johnson, other of their corporate affiliates, identified retailers, insurance companies, and certain other parties. claimants have filed a motion to dismiss the ltl bankruptcy case. the court commenced a hearing on february 14, 2022 regarding the motion to dismiss and on whether the pi should be extended. the company has agreed to provide funding to ltl for the payment of amounts the bankruptcy court determines are owed by ltl through the establishment of a $2 billion trust in furtherance of this purpose. the company has established a reserve for approximately $2 billion in connection with the aforementioned trust. the parties have not yet been able to reach a resolution of all matters related to talc, and while certain amounts under various scenarios have recently been referred to in testimony as part of the ltl bankruptcy proceedings, the company is unable to estimate the possible loss or range of loss beyond the amount accrued. 104the principal considerations for our determination that performing procedures relating to the talc litigation is a critical audit matter are the significant judgment by management when assessing the likelihood of a loss being incurred and when determining whether a reasonable estimate of the loss or range of loss for the future and existing talc claims can be made, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assessment of the loss contingencies associated with this litigation.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s evaluation of the talc litigation, including controls over determining whether a loss is probable and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures. these procedures also included, among others, (i) gaining an understanding of the company’s process around the accounting and reporting for the talc litigation; (ii) discussing the status of significant known actual and potential litigation and the ongoing ltl bankruptcy proceedings with the company’s in-house legal counsel, as well as external counsel when deemed necessary; (iii) obtaining and evaluating the letters of audit inquiry with internal and external legal counsel for significant litigation; (iv) evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable; and (v) evaluating the sufficiency of the company’s litigation contingencies disclosures.litigation – opioids as described in notes 1 and 19 to the consolidated financial statements, the company records accruals for loss contingencies associated with legal matters, including opioids, when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. to the extent adverse awards, judgments, or verdicts have been rendered against the company, management does not record an accrual until a loss is determined to be probable and can be reasonably estimated. for these matters, management is unable to estimate the possible loss or range of loss beyond the amounts accrued. amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. the ability to make such estimates and judgments can be affected by various factors, including, among other things, whether damages sought in the proceedings are unsubstantiated or indeterminate; matters present legal uncertainties; there are significant facts in dispute; procedural or jurisdictional issues; the uncertainty and unpredictability of the number of potential claims; ability to achieve comprehensive multi-party settlements; complexity of related cross-claims and counterclaims; and/or there are numerous parties involved. the company has been named in numerous lawsuits brought by certain state and local governments, including tribal governments, related to opioids matters. in october 2019, the company announced a proposed agreement in principle that would include the company paying $4 billion as settlement of the matters. in october 2020, the company agreed to contribute up to an additional $1 billion to an all-in settlement amount that would resolve opioid lawsuits filed and future claims by states, cities, counties and tribal governments, for a total of $5 billion. in july 2021, the company announced that the terms of the agreement to settle the state and subdivision claims have been finalized, depending upon the level of participation by the various parties. the terms provide a period of time for states to elect to participate in the agreement and, thereafter, a period for the subdivisions of the participating states to opt-in. the subdivision opt-in period expired in january 2022. the company retains the right to opt-out of the agreement until late february 2022 if, in its sole discretion, there is insufficient participation. the principal considerations for our determination that performing procedures relating to the opioids litigation is a critical audit matter are the significant judgment by management when determining whether a reasonable estimate of the range of loss for the agreement to settle the opioids litigation can be made, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s assessment of the loss contingencies associated with this litigation.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s evaluation of the opioid litigation, including controls over determining whether a loss is probable and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures. these procedures also included, among others, (i) gaining an understanding of the company’s process around the accounting and reporting for the opioids litigation; (ii) discussing the status of significant known actual and potential litigation and ongoing settlement negotiations with the company’s in-house legal counsel, as well as external counsel when deemed necessary; (iii) obtaining and evaluating the letters of audit inquiry with internal and external legal counsel for significant litigation; (iv) evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable; and (v) evaluating the sufficiency of the company’s litigation contingencies disclosures. /s/ pricewaterhouse coopers llp florham park, new jersey february 17, 2022we have served as the company’s auditor since at least 1920.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. impairment assessment of investments in hotel properties as described in notes 2 and 3 to the consolidated financial statements, management assesses the carrying value of its investments in hotel properties whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. as of december 31, 2020, investments in hotel properties totaled $4.5 billion and for the year ended december 31, 2020 there were no impairment losses. hotel property recoverability is measured by comparing the carrying amount to management’s projected undiscounted future cash flows expected to be generated from the operations and the eventual disposition of the hotel properties over the estimated hold period, which takes into account current market conditions and management’s intent with respect to holding or disposing of the hotel properties. if management’s analysis indicates that the carrying value is not recoverable on a projected undiscounted cash flow basis, the company will recognize an impairment loss for the amount by which the carrying value exceeds the fair value. the projected undiscounted future cash flows include assumptions that are consistent with a market participant’s future expectations for the travel industry and the economy in general, including sales proceeds in the reversion year, average daily rates, occupancy rates, operating expenses and capital expenditures, and management’s intent with respect to holding or disposing of the underlying hotel properties.the principal considerations for our determination that performing procedures relating to the impairment assessment of investments in hotel properties is a critical audit matter are (i) the significant judgments used by management to identify events or changes in circumstances indicating that the carrying amounts may not be recoverable and to develop the projected undiscounted future cash flows; and (ii) a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence related to management’s identification of events or changes in circumstances indicating that the carrying amounts may not be recoverable and to the aforementioned significant assumptions.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s impairment assessment of investments in hotel properties, including controls over the identification of events or changes in circumstances indicating that the carrying amounts may not be recoverable and the development of projected undiscounted future cash flows. these procedures also included, among others, testing management’s process for identifying investments in hotel properties to be evaluated for impairment and developing the projected undiscounted future cash flows. testing management’s process included (i) evaluating the appropriateness of the projected undiscounted future cash flow model; (ii) testing the completeness and accuracy of underlying data used in the model; and (iii) evaluating the reasonableness of the significant assumptions related to sales proceeds in the reversion year, average daily rates, occupancy rates, operating expenses and capital expenditures, and management’s intent with respect to holding or disposing of the hotel properties. evaluating the reasonableness of the significant assumptions involved considering (i) the current and past performance of the hotel properties; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit./s/ pricewaterhouse coopers llp mc lean, virginia february 26, 2021we have served as the company’s auditor since 2001.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.valuation of certain level 3 debt investments developed using significant unobservable inputs utilized in the income approach as described in note 5 to the consolidated financial statements, the company held $3,271 million of total level 3 investments at fair value as of december 31, 2021, with debt investments representing approximately 97% of this total. for $2,613 million or 82% of those level 3 debt investments, the fair values were determined by management using the income approach. the significant unobservable inputs used in the income approach are the discount rate or market yield used to discount the estimated future cash flows expected to be received from the underlying investment. included in the consideration and selection of discount rates or market yields is risk of default, rating of the investment, call provisions and comparable company investments.the principal considerations for our determination that performing procedures relating to the valuation of certain level 3 debt investments developed using significant unobservable inputs utilized in the income approach is a critical audit matter are the significant judgment and estimation by management to determine the fair value of these investments due to the development of the discount rate or market yield. this in turn led to a high degree of auditor judgment, subjectivity and effort to perform procedures and to evaluate the audit evidence obtained related to the valuation of certain level 3 debt investments. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the valuation of certain level 3 debt investments, including controls over the development of significant unobservable inputs used in the income approach, related to the discount rate or market yield. these procedures also included, among others, either (i) testing management’s process for determining the fair value estimate, which included evaluating the appropriateness of the discounted cash flow technique; testing the completeness, accuracy, and relevance of the underlying data used in the technique; and evaluating the significant unobservable inputs used by management, related to the discount rate or market yield, by considering the consistency of the unobservable inputs with external market and industry data and evidence obtained in other areas of the audit; or (ii) the involvement of professionals with specialized skill and knowledge to assist in developing an independent fair value estimate range for certain level 3 debt investments and comparison of management’s estimate to the independently developed range of fair value estimates. developing the independent range involved developing independent significant unobservable inputs for the discount rate or market yield in order to evaluate the reasonableness of management’s fair value estimate of these certain level 3 debt investments using a range of available market information. /s/ pricewaterhouse coopers llp boston, massachusetts february 24, 2022we have served as the auditor of one or more investment companies in the following group of business development companiessince 2012

critical audit matters in the report of our independent registered public accounting firm. such changes may result in us being subject to new or changing accounting and reporting standards. in addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. these changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. in some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements.we are subject to potential claims and litigation pertaining to our fiduciary responsibilities.some of the services we provide, such as wealth management services, require us to act as fiduciaries for our customers and others. from time to time, third parties make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities. if these claims and legal actions are not resolved in a manner favorable to us, we may be exposed to significant financial liability and/or our reputation could be damaged. either of these results may adversely impact demand for our products and services or otherwise have a harmful effect on our business and, in turn, on our financial condition and results of operations.we have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.the financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. in addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market area. we may experience operational challenges as we implement these new technology enhancements, or seek to implement them across all of our offices and business units, which could result in us not fully realizing the anticipated benefits from such new technology or require us to incur significant costs to remedy any such challenges in a timely manner.many of our larger competitors have substantially greater resources to invest in technological improvements. as a result, they may be able to offer additional or superior products to those that we will be able to offer, which would put us at a competitive disadvantage. accordingly, a risk exists that we will not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers.real estate market volatility and future changes in our disposition strategies could result in net proceeds that differ significantly from our other real estate owned fair value appraisals.as of december 31, 2019, we had $6.7 million of other real estate owned. our other real estate owned portfolio consists of properties that we obtained through foreclosure or through an in-substance foreclosure in satisfaction of loans. properties in our other real estate owned portfolio are recorded at the lower of the recorded investment in the loans for which the properties previously served as collateral or the “fair value,” which represents the estimated sales price of the properties on the date acquired less estimated selling costs.in response to market conditions and other economic factors, we may utilize alternative sale strategies other than orderly disposition as part of our other real estate owned disposition strategy, such as immediate liquidation sales. in this event, as a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from such sales transactions could differ significantly from appraisals, comparable sales and other estimates used to determine the fair value of our other real estate owned properties.23table of contents nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future.our nonperforming assets adversely affect our net income in various ways. we do not record interest income on nonaccrual loans or other real estate owned, thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs and adversely affecting our efficiency ratio. when we take collateral in foreclosure and similar proceedings, we are required to mark the collateral to its then-fair market value, which may result in a loss. these nonperforming loans and other real estate owned also increase our risk profile and the level of capital our regulators believe is appropriate for us to maintain in light of such risks. the resolution of nonperforming assets requires significant time commitments from management and can be detrimental to the performance of their other responsibilities. if we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets and equity.we depend on the accuracy and completeness of information provided by customers and counterparties.in deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information. we also may rely on representations of customers and counterparties as to the accuracy and completeness of that information. in deciding whether to extend credit, we may rely upon our customers’ representations that their financial statements conform to u.s. generally accepted accounting principles (“gaap”) and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. we also may rely on customer representations and certifications, or other audit or accountants’ reports, with respect to the business and financial condition of our clients. our financial condition, results of operations, financial reporting and reputation could be negatively affected if we rely on materially misleading, false, inaccurate or fraudulent information.we face strong competition from financial services companies and other companies that offer banking, mortgage, leasing, and wealth management services and providers of fha financing and servicing, which could harm our business.our operations consist of offering banking and mortgage services, and we also offer commercial fha financing, trust, wealth management and leasing services to generate noninterest income. many of our competitors offer the same, or a wider variety of, banking and related financial services within our market areas. these competitors include national banks, regional banks and other community banks. we also face competition from many other types of financial institutions, including savings and loan institutions, finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. in addition, a number of out-of-state financial intermediaries have opened production offices or otherwise solicit deposits in our market areas. additionally, we face growing competition from so-called “online businesses” with few or no physical locations, including online banks, lenders and consumer and commercial lending platforms, and fin tech companies, as well as automated retirement and investment service providers. increased competition in our markets may result in reduced loans, deposits and commissions and brokers’ fees, as well as reduced net interest margin and profitability. ultimately, we may not be able to compete successfully against current and future competitors. if we are unable to attract and retain banking, mortgage, leasing and wealth management customers, we may be unable to continue to grow our business and our financial condition and results of operations may be adversely affected.consumers and businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our business and results of operations.technology and other changes are allowing consumers and businesses to complete financial transactions that historically have involved banks through alternative methods. for example, the wide acceptance of internet-based commerce has resulted in a number of alternative payment processing systems and lending platforms in which banks play only minor roles. customers can now maintain funds in prepaid debit cards or digital currencies, and pay bills and transfer funds directly without the direct assistance of banks. the diminishing role of banks as financial intermediaries has resulted and could continue to result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. the loss of these revenue streams and the potential loss of lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations.24table of contents if we violate u.s. department of housing and urban development (“hud”) lending requirements or if the federal government shuts down or otherwise fails to fully fund the federal budget, our commercial fha origination business could be adversely affected.we originate, sell and service loans under fha insurance programs, and make certifications regarding compliance with applicable requirements and guidelines. if we were to violate these requirements and guidelines, or other applicable laws, or if the fha loans we originate show a high frequency of loan defaults, we could be subject to monetary penalties and indemnification claims, and could be declared ineligible for fha programs. any inability to engage in our commercial fha origination and servicing business would lead to a decrease in our net income.in addition, disagreement over the federal budget has caused the u.s. federal government to shut down for periods of time in recent years. federal governmental entities, such as hud, that rely on funding from the federal budget, could be adversely affected in the event of a government shut-down, which could have a material adverse effect on our commercial fha origination business and our results of operations.risks related to the business environment and our industry legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations.compliance with the dodd-frank act and its implementing regulations has resulted, and may continue to result, in additional operating and compliance costs that could have a material adverse effect on our business, financial condition, results of operations and growth prospects.in addition, new proposals for legislation may continue to be introduced in the u.s. congress that could further substantially change regulation of the bank and non-bank financial services industries and impose restrictions on the operations and general ability of firms within the industry to conduct business consistent with historical practices. federal and state regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied. legislation and regulations may be impacted by the political ideologies of the executive branches of the u.s. government as well as the heads of regulatory and administrative agencies, which may change as a result of elections. certain aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, if enacted or adopted, may impact the profitability of our business activities, require more oversight or change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans and achieve satisfactory interest spreads and could expose us to additional costs, including increased compliance costs. these changes also may require us to invest significant management attention and resources to make any necessary changes to operations to comply and could have an adverse effect on our business, financial condition and results of operations.as a result of the dodd-frank act and subsequent rulemaking, we are subject to stringent capital requirements, and failure to comply with these requirements may impact dividend payments and limit our activities.the failure to meet applicable regulatory capital requirements of the basel iii rule could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could affect customer and investor confidence, our costs of funds and fdic insurance costs, our ability to pay dividends on our common stock, our ability to make acquisitions, and our business, results of operations and financial conditions, generally.monetary policies and regulations of the federal reserve could adversely affect our business, financial condition and results of operations.in addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the federal reserve. an important function of the federal reserve is to regulate the money supply and credit conditions. among the instruments used by the federal reserve to implement these objectives are open market purchases and sales of u.s. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. these instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. their use also affects interest rates charged on loans or paid on deposits.25table of contents the monetary policies and regulations of the federal reserve have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future. the effects of such policies upon our business, financial condition and results of operations cannot be predicted.interest rates on the company’s and the bank’s financial instruments might be subject to change based on developments related to libor, which could adversely impact the company’s revenue, expenses, and value of those financial instruments.in july 2017, the financial conduct authority, the authority regulating libor, along with various other regulatory bodies, announced that libor would likely be discontinued at the end of 2021. libor makes up the most liquid and common interest rate index in the world and is commonly referenced in financial instruments. we have exposure to libor in various aspects through our financial contracts. instruments that may be impacted include loans, securities, and derivatives, among other financial contracts and subordinated notes indexed to libor and that mature after december 31, 2021.while there is no consensus on what rate or rates may become accepted alternatives to libor, the alternative reference rates committee, a steering committee comprised of u.s. financial market participants, selected by the federal reserve bank of new york, started in may 2018 to publish the secured overnight financing rate (“sofr”) as an alternative to libor. sofr is a broad measure of the cost of overnight borrowings collateralized by treasury securities that was selected by the alternative reference rate committee due to the depth and robustness of the u.s. treasury repurchase market. at this time, it is impossible to predict whether sofr will become an accepted alternative to libor.the market transition away from libor to an alternative reference rate, such as sofr, is complex and could have a range of adverse effects on our business, financial condition and results of operations. in particular, any such transition could:•adversely affect the interest rates paid or received on, the revenue and expenses associate with, and the value of our floating-rate obligations, loans, deposits, subordinated debentures, derivatives, and other financial instruments tied to libor rates, or other securities or financial arrangements given libor’s role in determining market interest rates globally;•prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of libor with an alternative reference rate;•result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of certain fallback language, or lack of fallback language, in libor-based securities; and•require the transition to or development of appropriate systems and analytics to effectively transition our risk management processes from libor-based products to those based on the applicable alternative pricing benchmark, such as sofr.the manner and impact of this transition, as well as the effect of these developments on our funding costs, loan and investment and trading securities portfolios, asset-liability management, and business, is uncertain.federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings.the federal reserve, the fdic and the dfpr periodically examine our business, including our compliance with laws and regulations. if, as a result of an examination, a banking agency were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate. these actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil money penalties, to fine or remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into 26table of contentsreceivership or conservatorship. any regulatory action against us could have an adverse effect on our business, financial condition and results of operations.we are subject to numerous laws designed to protect consumers, including the community reinvestment act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.the cra, the equal credit opportunity act, the fair housing act and other fair lending laws and regulations prohibit discriminatory lending practices by financial institutions. the u.s. department of justice, federal banking agencies, and other federal agencies are responsible for enforcing these laws and regulations. a challenge to an institution’s compliance with fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. private parties may also challenge an institution’s performance under fair lending laws in private class action litigation. such actions could have a material adverse effect on our business, financial condition, results of operations and growth prospects.we face a risk of noncompliance and enforcement action with the bank secrecy act and other anti-money laundering statutes and regulations.the bank secrecy act, the usa patriot act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and to file reports such as suspicious activity reports and currency transaction reports. we are required to comply with these and other anti-money laundering requirements. the federal banking agencies and financial crimes enforcement network are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the u.s. department of justice, drug enforcement administration and internal revenue service. we are also subject to increased scrutiny of compliance with the rules enforced by the office of foreign assets control. if our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans.failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects.the federal reserve may require us to commit capital resources to support the bank.as a matter of policy, the federal reserve expects a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. the dodd-frank act codified the federal reserve’s policy on serving as a source of financial strength. under the “source of strength” doctrine, the federal reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank. a capital injection may be required at times when the holding company may not have the resources to provide it and therefore may be required to borrow the funds or raise capital. any loans by a holding company to its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. in the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the institution’s general unsecured creditors, including the holders of its note obligations. thus, any borrowing that must be done by the company to make a required capital injection becomes more difficult and expensive and could have an adverse effect on our business, financial condition and results of operations.we may be adversely affected by the soundness of other financial institutions.our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. financial services companies are interrelated as a result of trading, clearing, counterparty, and other relationships. we have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, and other institutional clients. as a result, defaults by, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, have led to market-wide liquidity problems and 27table of contentscould lead to losses or defaults by us or by other institutions. these losses or defaults could have a material adverse effect on our business, financial condition, results of operations and growth prospects. additionally, if our competitors were extending credit on terms we found to pose excessive risks, or at interest rates which we believed did not warrant the credit exposure, we may not be able to maintain our business volume and could experience deteriorating financial performance.the stock market can be volatile, and fluctuations in our operating results and other factors could cause our stock price to decline.the stock market has experienced and may continue to experience, fluctuations that significantly impact the market prices of securities issued by many companies. market fluctuations could adversely affect our stock price. these fluctuations have often been unrelated or disproportionate to the operating performance of particular companies. these broad market fluctuations, as well as general economic, systematic, political and market conditions, such as recessions, loss of investor confidence, interest rate changes, or international currency fluctuations, may negatively affect the market price of our common stock. moreover, our operating results may fluctuate and vary from period to period due to the risk factors set forth herein. as a result, period-to-period comparisons should not be relied upon as an indication of future performance. our stock price could fluctuate significantly in response to our quarterly or annual results, annual projections and the impact of these risk factors on our operating results or financial position. item 1b – unresolved staff comments none. item 2 – properties our corporate headquarters office building is located at 1201 network centre drive, effingham, illinois, 62401. we own our corporate headquarters office building, which was built in 2011 and also houses our primary operations center. we have additional operations centers located in st. louis, missouri and rockford, illinois, supporting our banking and wealth management businesses. love funding’s headquarters are located in washington, d.c. at december 31, 2019, the bank operated a total of 67 banking centers, including 56 located in illinois and 11 located in the st. louis metropolitan area. of these facilities, 52 were owned, and we leased 15 from unaffiliated third parties.we believe that the leases to which we are subject are generally on terms consistent with prevailing market terms. none of the leases are with our directors, officers, beneficial owners of more than 5% of our voting securities or any affiliates of the foregoing. we believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future. item 3 – legal proceedings in the normal course of business, we are named or threatened to be named as a defendant in various lawsuits, none of which we expect to have a material effect on the company. however, given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business (including laws and regulations governing consumer protection, fair lending, fair labor, privacy, information security, anti-money laundering and anti-terrorism), we, like all banking organizations, are subject to heightened legal and regulatory compliance and litigation risk. there are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the company or any of its subsidiaries is a party or of which any of their property is the subject.item 4 – mine safety disclosures not applicable.28table of contents part ii item 5 – market for registrant’s common equity, related stockholder matters and issuer of purchases of equity securities shareholders as of february 18, 2020, the company had 1,020 common stock shareholders of record, and the closing price of the company’s common stock, traded on the nasdaq global select market (“nasdaq”) under the ticker symbol msbi, was $26.58 per share. stock performance graph the following graph compares the cumulative total shareholder return on the company's common stock from may 24, 2016 (the date of the company’s initial public offering and listing on nasdaq) through december 31, 2019. the graph compares the company's common stock with the nasdaq composite index and the nasdaq bank index. the graph assumes an investment of $100.00 in the company's common stock and each index on may 24, 2016 and reinvestment of all quarterly dividends. measurement points are may 24, 2016 and the last trading day of the second quarter and fourth quarter of each subsequent year through december 31, 2019. there is no assurance that the company's common stock performance will continue in the future with the same or similar results as shown in the graph. 29table of contents issuer purchases of equity securities the following table sets forth information regarding the company’s repurchase of shares of its outstanding common stock during the fourth quarter of 2019. total number approximate of shares dollar value of total average purchased as shares that may number price part of publicly yet be purchased of shares paid per announced plans under the plans period purchased (1) share or programs or programs (2)october 1 - 31, 2019 86,290 $ 25.70 85,146 $ 20,980,832november 1 - 30, 2019 15,442 27.93 - 20,980,832december 1 - 31, 2019 264 28.22 - 20,980,832total 101,996 $ 26.05 85,146 $ 20,980,832(1)represents shares of the company’s common stock repurchased under the employee stock purchase program, shares withheld to satisfy tax withholding obligations upon the vesting of awards of restricted stock and/or pursuant to a publicly announced repurchase plan or program, as discussed in footnote 2 below.(2)on august 6, 2019, the board of directors of the company approved a stock repurchase program authorizing the company to repurchase up to $25.0 million of its common stock. stock repurchases under the program may be made from time to time on the open market, in privately negotiated transactions, or in any manner that complies with applicable securities laws, at the discretion of the company. the program will be in effect until june 30, 2020, with the timing of purchases and the number of shares repurchased under the program dependent upon a variety of factors including price, trading volume, corporate and regulatory requirements and market condition. the repurchase program may be suspended or discontinued at any time without notice. as of december 31, 2019, $4.0 million, or 156,749 shares of the company’s common stock, had been repurchased under the program.unregistered sales of equity securities none. item 6 – selected financial data the following consolidated selected financial data is derived from the company’s audited consolidated financial statements as of and for the five years ended december 31, 2019. this information should be read in connection with our audited consolidated financial statements, and related notes in item 8 of this form 10-k and “management’s discussion and analysis of financial condition and results of operations” in item 7 of this form 10-k. as of and for the years ended december 31, (dollars in thousands) 2019 2018 2017 2016 2015 balance sheet data: total assets $ 6,087,017 $ 5,637,673 $ 4,412,701 $ 3,233,723 $ 2,884,824 total loans, gross 4,401,410 4,137,551 3,226,678 2,319,976 1,995,589 allowance for loan losses (28,028) (20,903) (16,431) (14,862) (15,988) loans held for sale 16,431 30,401 50,089 70,565 54,413 investment securities 655,054 660,785 450,525 325,011 324,148 deposits 4,544,254 4,074,170 3,131,089 2,404,366 2,367,648 short-term borrowings 82,029 124,235 156,126 131,557 107,538 fhlb advances and other borrowings 493,311 640,631 496,436 237,518 40,178 subordinated debt 176,653 94,134 93,972 54,508 61,859 trust preferred debentures 48,288 47,794 45,379 37,405 37,057 preferred shareholders’ equity - 2,

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.44table of contents regulatory matters — impact of rate regulation on the financial statements — refer to notes 3, 6 and 7 to the financial statements critical audit matter description the company’s regulated operating subsidiaries are subject to rate regulation by the federal energy regulatory commission (the “regulatory agency”). management has determined it meets the requirements under accounting principles generally accepted in the united states of america to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. the company’s rates are subject to regulatory rate-setting processes through a formula rate with a true-up mechanism, including an authorized return on equity. regulatory decisions can have an impact on rates, recovery of certain costs, including the costs of transmission assets and regulatory assets, conditions of service, accounting, financing authorization and operating-related matters, the timely recovery of costs and the return on equity. accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant, and equipment; regulatory assets and liabilities; operating revenues and expenses; and income taxes. we identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about impacted account balances and disclosures and the high degree of subjectivity involved in assessing the potential impact of future regulatory orders on the financial statements. management judgments include assessing the likelihood of recovery of costs incurred or potential refunds to customers. while the company has indicated they expect to recover costs from customers through regulated rates, there is a risk that the formula inputs remain subject to legal challenge at the regulatory agency. the company uses the formula to calculate annual revenue requirements unless the regulatory agency determines the resulting rates to be unjust and unreasonable. auditing these judgments required especially subjective judgment and specialized knowledge of accounting for rate regulation and the rate-setting process due to their inherent complexities.how the critical audit matter was addressed in the audit our audit procedures related to the uncertainty of future decisions by the regulatory agency included the following, among others:•we evaluated the effectiveness of controls over the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. •we assessed relevant regulatory orders, regulatory statutes and interpretations, as well as procedural memorandums, utility and intervener filings, and other publicly available information to evaluate the likelihood of recovery in future rates or of future reduction in rates and the ability to earn a reasonable return on equity.•for regulatory matters in process, we inspected the annual formula rate filings and open complaints for any evidence that might contradict management’s assertions. we obtained an analysis from management, regarding cost recoveries or potential future reduction in rates.•we evaluated the company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments. /s/ deloitte & touche llp detroit, michigan february 11, 2021 we have served as the company's auditor since 2001.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.goodwill valuation - sensia reporting unit - refer to note 3 to the financial statements critical audit matter description the company performed an impairment evaluation of the goodwill for the sensia reporting unit by comparing the estimated fair value of the reporting unit to its carrying value. in order to estimate the fair value of the reporting unit, management is required to make significant estimates and assumptions related to the discount rate and forecasts of future revenues and earnings before interest taxes depreciation & amortization (“ebitda”) margins. changes in these assumptions could have a significant impact on the fair value of the reporting unit, the amount of any goodwill impairment charge, or both. the goodwill balance was $3,625.9 million as of september 30, 2021, of which $315.5 million related to the sensia reporting unit. the company tests for goodwill impairment during the second quarter of each year. as of the annual measurement date, the company determined that the fair value of the sensia reporting unit exceeded its carrying value and therefore no impairment was recognized. we identified the impairment evaluation of goodwill for the sensia reporting unit as a critical audit matter because of the inherent subjectivity involved in management’s estimates and assumptions related to the discount rate and forecasts of future revenues and ebitda margins. the audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the selection of the discount rate and forecasts of future revenues and ebitda margins required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. how the critical audit matter was addressed in the audit our audit procedures related to the selection of the discount rate and forecasts of future revenues and ebitda margins for the sensia reporting unit included the following, among others:•we tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the selection of the discount rate and management’s development of forecasts of future revenues and ebitda margins. •we evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the board of directors, and (3) forecasted information included in analyst and industry reports for the company and its peer companies, including the impact of economic factors on sensia’s oil & gas customers. •we evaluated the impact of changes in management’s forecasts from the annual measurement date to september 30, 2021. •with the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by (1) testing the source information underlying the determination of the discount rate; (2) testing the mathematical accuracy of the calculations; and (3) developing a range of independent estimates and comparing those to the discount rate selected by management.acquisitions — plex systems (valuation of customer relationship and developed technology assets) — refer to note 4 to the financial statements critical audit matter description in august 2021, the company completed the acquisition of plex systems, inc. (“plex”). the company accounted for the acquisition under the acquisition method of accounting for business combinations. accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $531.4 million, of which $276.4 million related to customer relationships and $232.8 million related to developed technology. management estimated the fair value of the customer relationships asset using an income approach. the fair value determination of the customer relationships asset required management to make significant estimates and assumptions related to forecasted cash flows attributable to the existing customers, the customer attrition rate, and discount rate. the fair value determination of the developed technology required management to make significant estimates and assumptions related to forecasted revenue growth rates, the obsolescence factor, royalty rate, and discount rate.we identified the purchase accounting valuations of the customer relationships and developed technology intangible assets as a critical audit matter due to subjective judgment required to evaluate the significant estimates made in determining fair value, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s key assumptions and estimates related to the customer attrition rate, obsolescence factor, royalty rate, and discount rate. how the critical audit matter was addressed in the audit our audit procedures related to the fair value of the intangible assets for plex included the following, among others:•we tested the effectiveness of controls over the valuation of the customer relationships and developed technology intangible assets, including management’s controls over the development of key judgments including forecasts of future cash flows attributable to existing customers and revenue growth rates, customer attrition rate, royalty rate, obsolescence factor, and discount rates. •we assessed the reasonableness of management’s forecasts of future cash flows and revenue growth rates by comparing the projections to (1) historical results, (2) industry data, and (3) certain peer companies. •with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology; (2) customer attrition rate by testing the mathematical accuracy of the rate used; and testing the completeness and accuracy of the underlying data supporting the attrition rate assumption; (3) royalty rate and obsolescence factor by testing the mathematical accuracy of the rate and comparing it to market observations; and (4) discount rates, which included testing the source information underlying the determination of the discount rate, testing the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management. /s/ deloitte & touche llp milwaukee, wisconsin november 9, 2021 we have served as the company’s auditor since 1967.

critical audit matters in the auditor’s report on the financial statements.in addition, the jobs act provides that an egc may take advantage of an extended transition period for complying with new or revised accounting standards. this allows an egc to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. we have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not eg cs.we are also a smaller reporting company, and we will remain a smaller reporting company until the fiscal year following the determination that our voting and non-voting common shares held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common shares held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter. similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations, such as an exemption from providing selected financial data and an ability to provide simplified executive compensation information and only two years of audited financial statements. we have elected to take advantage of certain of the reduced reporting obligations. investors may find our common stock less attractive as a result of our reliance on these exemptions. if some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. our stock price can be volatile and investors may have difficulty selling their shares. our common stock is currently listed on the nasdaq capital market under the symbol “cue.” the price of our common stock may fluctuate significantly in response to market and other factors, some of which are beyond our control, including those listed in this “item 1a. risk factors” section and other, unknown factors. our stock price may also be affected by: •setbacks with respect to our research and development programs; 68•announcements of therapeutic innovations or new products by us or our competitors; •adverse actions taken by regulatory agencies with respect to our clinical trials; •any adverse changes to our relationship with collaborators; •results of internal and external studies and clinical trials; •result of our business development efforts; •variations in the level of expenses related to our existing drug product candidates or preclinical and clinical development programs; •any intellectual property infringement actions in which we may become involved; •variations in our results of operations; •press reports, whether or not true, about our business; •additions to or departures of our management; •release or expiry of lock-up or other transfer restrictions on our common stock; •sales or perceived potential sales of additional shares of our common stock; •sales of our common stock by us, our executive officers and directors or our stockholders in the future; and •general economic and market conditions and overall fluctuations in the u.s. equity markets. any of these factors may result in large and sudden changes in the volume and trading price of our common stock. in addition, the stock market, in general, and small pharmaceutical and biotechnology companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. broad market and industry factors beyond our control may negatively affect the market price of our common stock, regardless of our actual operating performance, and cause the price of our common stock to decline rapidly and unexpectedly. we may be subject to securities litigation, which is expensive and could divert management attention. the price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of their common stock have been subject to an increased incidence of securities class action litigation. we may be the target of this type of litigation in the future. securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business. if securities or industry analysts do not publish research reports about our business, or if they issue an adverse opinion about our business, the price of our securities and trading volume could decline. the trading market for our securities is influenced by the research and reports that industry or securities analysts publish about us or our business. there can be no assurance that existing analysts will continue to cover us or that new analysts will begin to cover us. there is also no assurance that any covering analyst will provide favorable coverage. although we have obtained analyst coverage, if one or more of the analysts who cover us issues an adverse opinion about our company, the price of our securities would likely decline. if one or more of these analysts ceases research coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the price of our securities or trading volume to decline. we have not paid dividends in the past and have no immediate plans to pay dividends. we plan to reinvest all of our earnings, to the extent we have earnings, in order to further develop our technology and potential products and to cover operating costs. we do not plan to pay any cash dividends with respect to our securities in the 69foreseeable future. we cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend. in addition, our ability to pay cash dividends is currently restricted by the terms of the loan agreement, and future debt financing arrangements may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.our ability to use net operating loss carryforwards and research tax credits to reduce future tax payments may be limited or restricted.we have generated significant net operating loss carryforwards, or no ls, and research and development tax credits, or r&d credits, as a result of our incurrence of losses and our conduct of research activities since inception. we generally are able to carry no ls and r&d credits forward to reduce our tax liability in future years. however, our ability to utilize the no ls and r&d credits is subject to the rules of sections 382 and 383 of the internal revenue code of 1986, as amended, or the code, respectively. those sections generally restrict the use of no ls and r&d credits after an “ownership change.” an ownership change occurs if, among other things, the stockholders (or specified groups of stockholders) who own or have owned, directly or indirectly, 5% or more of a corporation’s common stock or are otherwise treated as 5% stockholders under section 382 of the code and the united states treasury department regulations promulgated thereunder increase their aggregate percentage ownership of that corporation’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these stockholders over the applicable testing period. in the event of an ownership change, section 382 imposes an annual limitation on the amount of taxable income a corporation may offset with nol carry forwards and section 383 imposes an annual limitation on the amount of tax a corporation may offset with business credit (including the r&d credit) carry forwards.we may have experienced an “ownership change” within the meaning of section 382 in the past and there can be no assurance that we will not experience additional ownership changes in the future. as a result, our no ls and business credits (including the r&d credit) may be subject to limitations and we may be required to pay taxes earlier and in larger amounts than would be the case if our no ls or r&d credits were freely usable. we incur significant costs as a result of being a public company that reports to the securities and exchange commission and our management is required to devote substantial time to meet compliance obligations. as a public company reporting to the securities and exchange commission, or the sec, we incur significant legal, accounting and other expenses. we are subject to reporting requirements of the exchange act and the sarbanes-oxley act, as well as rules subsequently implemented by the sec that impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. in addition, there are significant corporate governance and executive compensation-related provisions in the dodd-frank wall street reform and protection act that increase public companies’ legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on personnel, systems and resources. our management and other personnel devote a substantial amount of time to these compliance initiatives. in addition, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. as a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. our charter documents and delaware law may inhibit a takeover that stockholders consider favorable. provisions of our amended and restated certificate of incorporation, or the certificate of incorporation, and our amended and restated bylaws, or the bylaws, and applicable provisions of delaware law may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. the provisions in our certificate of incorporation and bylaws:•authorize our board of directors to issue preferred stock without stockholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our common stock and could include terms that may deter an acquisition of us;•limit who may call stockholder meetings;•do not provide for cumulative voting rights;•provide that all vacancies may be filled only by the affirmative vote of a majority of directors then in office, even if less than a quorum;70•provide that stockholders must comply with advance notice procedures with respect to stockholder proposals and the nomination of candidates for director;•provide that stockholders may only amend our certificate of incorporation and bylaws upon a supermajority vote of stockholders; and•provide that the court of chancery of the state of delaware will be the exclusive forum for certain legal claims. in addition, section 203 of the delaware general corporation law may limit our ability to engage in any business combination with a person who beneficially owns 15% or more of our outstanding voting stock unless certain conditions are satisfied. this restriction lasts for a period of three years following the share acquisition. these provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. this potential inability to obtain a control premium could reduce the price of our common stock. our certificate of incorporation provides, subject to certain exceptions, that the court of chancery of the state of delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders. our certificate of incorporation provides, subject to limited exceptions, that the court of chancery of the state of delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (3) any action asserting a claim against us, any director or our officers and employees arising pursuant to any provision of the delaware general corporation law, our certificate of incorporation or our bylaws, or as to which the delaware general corporation law confers exclusive jurisdiction on the court of chancery; or (4) any action asserting a claim against us, any director or our officers or employees that is governed by the internal affairs doctrine. the choice of forum provisions will not apply to claims arising under the securities act, the exchange act, or any other claim for which federal courts have exclusive jurisdiction. any person or entity purchasing or otherwise acquiring any interest in shares of our common stock shall be deemed to have notice of and to have consented to the provisions of our certificate of incorporation described above. this choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders which may discourage lawsuits with respect to such claims. alternatively, if a court were to find the choice of forum provision that will be contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition and results of operations. if we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities may decrease. as a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. section 404 of the sarbanes-oxley act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting. until such time as we are no longer an “emerging growth company,” our auditors will not be required to attest as to our internal control over financial reporting. if we are unable to comply with the requirements of section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or, once required, provide an attestation report from our independent registered public accounting firm, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease. we could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the sec or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions or other remedies. item 1b. unresolved staff comments not applicable.71 item 2. properties our principal office is located in cambridge, massachusetts. we currently lease approximately 19,900 square feet of office and laboratory space. we use this space as our principal executive offices and for general office, research and development, and laboratory uses. in october 2021, the term of the lease was extended from june 2022 to march 2024 . the monthly rental rate is currently $375,000 until june 2022 and will increase to $388,000 for the remainder of the term. we also lease additional laboratory space consisting of three procedure and holding rooms. the monthly payments due under this lease agreement will be approximately $61,000 for the remainder of the lease term which expires in june 2022. item 3. legal proceedings we are not currently a party to any pending legal proceedings that we believe will have a material adverse effect on our business or financial conditions. we may, however, be subject to various claims and legal actions arising in the ordinary course of business from time to time. item 4. mine safety disclosures not applicable.72part ii item 5. market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities common stock our shares of common stock have been listed on the nasdaq capital market under the symbol “cue” since january 2, 2018. prior to that date, there was no public trading market for our common stock. as of march 7, 2022, there were approximately 51 registered holders of our common stock.dividend policy we have never paid cash dividends on our securities and we do not anticipate paying any cash dividends on our shares of common stock in the foreseeable future. in addition, our ability to pay cash dividends is currently restricted by the terms of the loan agreement, and future debt financing arrangements may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. we intend to retain any future earnings for reinvestment in our business. any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as our board of directors deems relevant.item 6. [reserved] 73item 7. management’s discussion and analysis of financial condition and results of operations the following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this annual report on form 10-k.overview we are a clinical-stage biopharmaceutical company engineering a novel class of injectable biologics to selectively engage and modulate targeted t cells directly within the patient’s body. we believe our proprietary immuno-stat™ (selective targeting and alteration of t cells) platform, as described below, will allow us to harness the potential of the patient’s intrinsic immune repertoire to fully exploit its potential to fight cancer and restore health while avoiding the deleterious side effects of broad immune activation. in addition to the highly selective modulation of t cell activity, we believe the core features of immuno-sta ts offer competitive differentiation, including modularity, manufacturability, and convenient administration that allows for versatility to treat a broad range of disease.while we have demonstrated the potential application of our protein designed immuno-stat platform in preclinical studies in cancer, chronic infectious disease, and autoimmune disease, we are currently prioritizing and strategically focusing on drug product candidates for treating cancer in our cue-100 series, which exploits rationally engineered interleukin 2, or il-2, in context of the core immuno-stat framework for selective activation of targeted tumor-specific t cells. we are actively seeking third party support through partnerships and collaborations, or alternative funding structures, to further develop our programs outside of oncology, including our cue-200, cue-300 and cue-400 series.our drug product candidates are in various stages of clinical and preclinical development, and while we believe that these candidates hold significant potential value, our activities are also subject to significant risks and uncertainties. we have not yet commenced any commercial revenue-generating operations, have limited cash flows from operations, and will need to access additional capital to fund our growth and ongoing business operations.the covid-19 pandemic the continuing covid-19 pandemic has prompted governments and regulatory bodies throughout the world to issue “stay-at-home” or similar orders, and enact restrictions on the performance of “non-essential” services, public gatherings and travel. beginning in march 2020, we undertook precautionary measures intended to help minimize the risk of virus transmission to our employees, including the establishment of remote working standards, pausing all non-essential travel worldwide for our employees, and limiting employee attendance at industry events and in-person work-related meetings, to the extent those events and meetings are continuing. we also established policies and procedures for all personnel who enter our company premises. the policies and procedures we implemented are consistent with the rules and guidelines recommended by the centers for disease control and prevention, the commonwealth of massachusetts and the city of cambridge. however, these actions or additional measures we may undertake may ultimately delay progress of our developmental goals or otherwise negatively affect our business. in addition, third-party actions taken to contain the spread of the novel coronavirus, sars-co v-2, and mitigate public health effects may negatively affect our business. we do not believe any of these actions or disruptions have had a significant impact on our productivity or our operations. we continue to have many of these policies and procedures in place in 2021.to date, we have experienced supply chain disruptions for lab supplies used in our preclinical research. in addition, january 2021, we were notified by our contract manufacturing organization, or cmo, that the manufacture of our gmp material for the cue-102 drug product candidate would be delayed by approximately six weeks due to the invocation of the defense production act, or dpa, which gives priority to the manufacture of vaccines and other drug products used to prevent or treat covid-19. the delay in the manufacturing of our cue-102 gmp batch has impacted the expected filing date of the cue-102 ind that was planned for the fourth quarter of 2021. the cue-102 ind is now expected to be filed by the end of the first quarter of 2022 based on the revised cue-102 gmp manufacturing date provided by our cmo.plan of operation our technology is in the development phase. we believe that our licensed platforms have the potential for creating a diverse pipeline of promising drug product candidates addressing multiple medical indications. we intend to maximize the value and probability of commercialization of our immuno-stat drug product candidates by focusing on researching, testing, optimizing, conducting pilot studies, performing early stage clinical development and potentially partnering, where appropriate, for more extensive, later stages of clinical development, as well as seeking extensive patent protection and intellectual property development.74since we are a development-stage company, the majority of our business activities to date and our planned future activities will be devoted to furthering research and development. a fundamental part of our corporate development strategy is to establish one or more strategic partnerships with leading pharmaceutical or biotechnology organizations that will allow us to more fully exploit the potential of our technology platform, such as those described below under the headings “collaboration agreement with merck” and “collaboration agreement with lg chem”. critical accounting policies and significant judgments and estimates our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the united states, or u.s. gaap. the preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, and the reported revenue and expenses during the reported periods. we evaluate these estimates and judgments, including those described below, on an ongoing basis. we base our estimates on historical experience, known trends and events, contractual milestones and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. actual results may differ from these estimates under different assumptions or conditions. while the company’s significant accounting policies are more fully described in note 2 to our consolidated financial statements appearing elsewhere in this form 10-k, we believe that the estimates, assumptions and judgments involved in the following accounting policies may have the greatest potential impact on the financial statements, so we consider these to be our critical accounting policies and estimates. there were no material changes to our critical accounting policies and estimates as of december 31, 2021.revenue recognition we follow the provisions of accounting standards codification, or asc, 606, revenue from contracts with customers. we generate revenue solely through collaboration arrangements with strategic partners for the development and commercialization of drug product candidates. the core principle of asc 606 is that an entity should recognize revenue to depict the transfer of promised goods and/or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and/or services. to determine the appropriate amount of revenue to be recognized for arrangements that we determine are within the scope of asc 606, we perform the following steps: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) each performance obligation is satisfied.we recognize collaboration revenue under certain of our license or collaboration agreements that are within the scope of asc 606. our contracts with customers typically include promises related to licenses to intellectual property and research and development services. if the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. for licenses that are bundled with other promises, we utilize judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. we measure the transaction price based on the amount of consideration to which we expect to be entitled in exchange for transferring the promised goods and/or services to the customer. we utilize the “most likely amount” method to estimate the amount of variable consideration, to predict the amount of consideration to which we will be entitled for our two open contracts. amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. at the inception of each arrangement that includes development and regulatory milestone payments, we evaluate whether the associated event is considered probable of achievement and estimates the amount to be included in the transaction price using the most likely amount method. currently, we have one contract with an option to acquire additional goods and/or services in the form of additional research and development services for additional drug product candidates. 75research and development costs research and development expenses consist primarily of compensation costs, fees paid to consultants, outside service providers and organizations (including research institutes at universities), facility costs, and development and clinical trial costs with respect to our drug product candidates.research and development expenses incurred under contracts are expensed ratably over the life of the underlying contracts, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different pattern of expense recognition is more appropriate. other research and development expenses are charged to operations as incurred. payments made pursuant to research and development contracts are initially recorded as research and development contract advances in our balance sheet and then charged to research and development expenses in our consolidated statements of operations and comprehensive loss as those contract services are performed. expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in our balance sheet, with a corresponding charge to research and development expenses in our consolidated statements of operations and comprehensive loss.nonrefundable advance payments for future research and development activities pursuant to an executory contractual arrangement are recorded as advances as described above. nonrefundable advance payments are recognized as an expense as the related services are performed. we evaluate whether we expect the services to be rendered at each quarter end and year end reporting date. if we do not expect the services to be rendered, the advance payment is charged to expense. to the extent that a nonrefundable advance payment is for contracted services to be performed within 12 months from the reporting date, such advance is included in current assets; otherwise, such advance is included in non-current assets.we evaluate the status of our research and development agreements and contracts, and the carrying amount of the related assets and liabilities, at each quarter end and year end reporting date, and adjusts the carrying amounts and their classification on the balance sheet as appropriate.stock-based compensation we periodically issue stock-based awards to officers, directors, employees, scientific and clinical advisory board members, non-employees and consultants for services rendered. such issuances vest and expire according to terms established at the issuance date.stock-based payments to officers, directors, members of our scientific and clinical advisory board, non-employees and outside consultants and employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values. stock option grants, which are generally time-vested, are measured at the grant date fair value and charged to operations on a straight-line basis over the service period, which generally approximates the vesting term. we also grant performance-based awards periodically to our officers. we recognize compensation costs related to performance awards over the requisite service period if and when we conclude that it is probable that the performance condition will be achieved. the fair value of stock options a

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. income taxes description of the matter as discussed in notes 2 and 11 to the consolidated financial statements, the company operates in multiple jurisdictions through a complex operating structure and is subject to applicable tax laws, treaties or regulations in each jurisdiction where it operates. the company’s provision for income taxes is based on the tax laws and rates applicable in each jurisdiction. the company recognizes tax benefits they believe are more likely than not to be sustained upon examination by the taxing authorities based on the technical merits of the position.auditing management’s provision for income taxes and related deferred taxes was complex because of the company’s multi-national operating structure. in addition, a higher degree of auditor judgment was required to evaluate the company’s deferred tax provision as a result of the company’s interpretation of tax law in each jurisdiction across its multiple subsidiaries.- 43 -table of contents how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s income tax provision process, including controls over management’s review of the identification and valuation of deferred income taxes and changes in tax laws and regulations that may impact the company’s deferred income tax provision.our audit procedures also included, among others, (i) obtaining an understanding of the company’s overall tax structure, evaluating changes in the company’s tax structure that occurred during the year as well as changes in tax law, and assessing the interpretation of those changes under the relevant jurisdiction’s tax law; (ii) utilizing tax resources with appropriate knowledge of local jurisdictional laws and regulations; (iii) evaluating the completeness and accuracy of deferred income taxes, and (iv) assessing the reasonableness of the company’s valuation allowance on deferred tax assets, including projections of taxable income from the future reversal of existing taxable temporary differences. equity-method investment in orion holdings (cayman) limited description of the matter as discussed in notes 2 and 4, the company recorded an impairment loss of $37 million associated with its equity-method investment in orion holdings (cayman) limited (orion) upon determination that the carrying amount of its investment exceeded the estimated fair value and that the impairment was other than temporary. at december 31, 2021, the aggregate carrying amount of the company’s equity-method investment in orion was $57 million.auditing management’s equity-method investment valuation was complex and judgmental due to the estimation required in determining the fair value of the investment. in particular, the fair value estimate of the equity-method investment in orion was sensitive to significant assumptions such as the discount rate, future demand and supply of harsh environment floaters, rig utilization, revenue efficiency and dayrates.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s process to determine the fair value of the investment in orion, including controls over management’s review of the significant assumptions described above as well as over the underlying data used in the fair value determination.to test the estimated fair value of the company’s equity-method investment in orion, we performed audit procedures that included, among others, assessing the valuation methodologies utilized by management and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the company in its analysis. we involved a valuation specialist to assist in our evaluation of the company's model, valuation methodology and significant assumptions. we reviewed for contrary evidence related to the determination of the fair value of the equity-method investment, including reviewing relevant market data and internal company forecasts./s/ ernst & young llp we have served as the company’s auditor since 1999.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.the development of estimated proved reserves used in the calculation of depletion, depreciation and amortization expense and evaluation of full cost ceiling impairment under the full cost method of accounting as described further in note 1 to the financial statements, the company accounts for its oil and gas properties using the full cost method of accounting which requires management to make estimates of proved reserve volumes and future net revenues to record depletion, depreciation and amortization expense and assess its oil and gas properties for potential full cost ceiling impairment. to estimate the volume of proved reserves and future net revenue, management makes significant estimates and assumptions including forecasting the production decline rate of producing properties and forecasting the timing and volume of production associated with the company’s development plan for proved undeveloped properties. in addition, the estimation of proved reserves is also impacted by management’s judgments and estimates regarding the financial performance of wells associated with proved reserves to determine if wells are expected with reasonable certainty to be economical under the appropriate pricing assumptions required in the estimation of depletion, f-2table of contentsdepreciation and amortization expense and potential full cost ceiling impairment assessment. we identified the estimation of proved reserves of oil and gas properties as a critical audit matter.the principal consideration for our determination that the estimation of proved reserves is a critical audit matter is that changes in certain inputs and assumptions, which require a high degree of subjectivity, necessary to estimate the volume and future net revenues of the company’s proved reserves could have a significant impact on the measurement of depletion, depreciation and amortization expense and potential full cost ceiling impairment. in turn, auditing those inputs and assumptions required subjective and complex auditor judgment.our audit procedures related to the estimation of proved reserves included the following, among others.●we tested the design and operating effectiveness of controls relating to management’s estimation of proved reserves for the purpose of estimating depletion, depreciation and amortization expense and assessing the company’s oil and gas properties for potential full cost ceiling impairment.●we evaluated the independence, objectivity, and professional qualifications of the company’s reserve engineers, made inquiries of those specialists regarding the process followed and judgments made to estimate the company’s proved reserve volumes, and read the reserve report prepared by the company’s specialists. f-3table of contents●to the extent key inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from the company’s accounting records, including, but not limited to: historical pricing differentials, operating costs, estimated capital costs, and ownership interests, we tested management’s process for determining the assumptions, including examining the underlying support on a sample basis. specifically, our audit procedures involved testing management’s assumptions by performing the following:o we compared the estimated pricing differentials used in the reserve report to prices realized by the company related to revenue transactions recorded in the current year and examined contractual support for the pricing differentialso we tested models used to estimate the future operating costs in the reserve report and compared amounts to historical operating costso we evaluated the method used to determine the estimated future development costs used in the reserve report and compared management’s estimates to amounts expended for recently drilled and completed wellso we tested the working and net revenue interests used in the reserve report by inspecting land and division order records;o we evaluated evidence supporting the amount of proved undeveloped properties reflected in the reserve report by examining historical conversion rates and support for the company’s ability to fund and intent to develop the proved undeveloped properties; ando we applied analytical procedures to production forecasts in the reserve report by comparing to historical actual results./s/ grant thornton llp we have served as the company’s auditor since 2021.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.57table of contents joint venture consolidation assessment description of the matter the company accounted for certain investments in real estate joint ventures under the equity method of accounting and consolidated certain other investments in real estate joint ventures. at december 31, 2020, the company’s investments in unconsolidated joint ventures was $3.8 billion and noncontrolling interests in consolidated other partnerships was $26 million. as discussed in note 2 to the consolidated financial statements, for each joint venture, the company evaluated the rights provided to each party in the venture to assess the consolidation of the venture.how we addressed the matter in our audit auditing management’s joint venture consolidation analyses was complex and highly judgmental due to the subjectivity in assessing which activities most significantly impact a joint venture’s economic performance based on the purpose and design of the entity over the duration of its expected life and assessing which party has rights to direct those activities. we tested the company’s controls over the assessment of joint venture consolidation. for example, we tested controls over management's review of the consolidation analyses for newly formed ventures as well as controls over management's identification of reconsideration events which could trigger modified consolidation conclusions for existing ventures.to test the company’s consolidation assessment for real estate joint ventures, our procedures included, among others, reviewing new and amended joint venture agreements and discussing with management the nature of the rights conveyed to the company through the joint venture agreements as well as the business purpose of the joint venture transactions. we reviewed management’s assessment of the activities that would most significantly impact the joint venture’s economic performance and evaluated whether the joint venture agreements provided participating or protective rights to the company. we also evaluated transactions with the joint ventures for events which would require a reconsideration of previous consolidation conclusions.impairment of commercial real estate properties (retail)description of the matter at december 31, 2020, the company’s commercial real estate properties, at cost totaled approximately $5.4 billion. as described in note 2 to the consolidated financial statements, real estate properties are periodically reviewed for impairment when circumstances indicate that the carrying value of a property may not be recoverable. for the year ended december 31, 2020, the company recognized $60.5 million of depreciable real estate reserves and impairments.auditing the company’s accounting for impairment of commercial real estate properties (retail) was especially challenging and involved a high degree of subjectivity as a result of the assumptions and estimates inherent in the determination of estimated future cash flows expected to result from the property’s use and eventual disposition and the estimated fair value of the property. in particular, management’s assumptions and estimates included estimated revenue and expense growth rates, discount rates and capitalization rates, which were sensitive to expectations about future operations, market or economic conditions, demand and competition.how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s commercial real estate properties impairment process. this included testing of controls over management's review of the significant assumptions and data inputs utilized in the estimation of expected future cash flows and the determination of fair value.to test the company's accounting for impairment of commercial real estate properties, we performed audit procedures that included, among others, evaluating the methodologies applied and testing the significant assumptions discussed above and the underlying data used by the company in its impairment analyses. we held discussions with management about the current status of potential transactions and about management’s judgments to understand the probability of future events that could affect the holding period and other cash flow assumptions for the properties. in certain cases, we involved our valuation specialists to assist in performing these procedures. we compared the significant assumptions used by management to historical data and observable market-specific data. we also assessed management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in estimated future cash flows that would result from changes in the assumptions. in addition, we assessed information and events subsequent to the balance sheet date to corroborate certain of the key assumptions utilized by management.58table of contents /s/ ernst & young llp we have served as the company‘s auditor since 1997.

critical audit matters the critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. revenue recognition assessment as described in note 1 to the consolidated financial statements, the company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the company expects to receive in exchange for those goods or services. we identified the revenue recognition assessment as a critical audit matter. a high degree of auditor judgment was required in assessing the reasonable assurance for collection of payment from inventory transfer. the following are the primary procedures we performed to address this critical audit matter. · we inquired the company’s collection policy for its account receivable. · we reviewed collection of accounts receivable from sales in prior years. in addition, we also reviewed subsequent receipt after end of 2020 for transactions of inventory transfer in 2020. · besides goods transfer, we accessed other transactions between the company and certain customer. yichien yeh, cpa we have served as the company’s auditor since 2021.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.regulatory matters – impact of rate regulation on the financial statements – refer to note 15 and note 18 to the financial statements critical audit matter description the company accounts for their regulated operations in accordance with financial accounting standards board accounting standards codification topic 980, regulated operations. the provisions of this accounting guidance require, among other things, that financial statements of a rate-regulated enterprise reflect the actions of regulators, where appropriate. these actions may result in the recognition of revenues and expenses in time periods that are different than non-rate-regulated enterprises. when this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses when those amounts are reflected in rates. also, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for recovery of costs that are expected to be incurred in the future (regulatory liabilities). 56 the company is subject to rate regulation by the missouri, alabama, and mississippi public service commissions (the “commissions”), which have jurisdiction with respect to the rates of natural gas companies within their respective geographies. the company has stated that all regulatory assets and regulatory liabilities are recoverable or refundable through the regulatory process. accounting for the economics of rate regulation affects multiple financial statement line items, including property, plant, and equipment; regulatory assets and liabilities; operating revenues; and depreciation expense, and affects multiple disclosures in the company’s financial statements. there is a risk that the commissions will not approve full recovery of the costs of providing utility service or recovery of all amounts invested in the utility business and a reasonable return on that investment. as a result, we identified the impact of rate regulation as a critical audit matter due to the high degree of subjectivity involved in assessing the impact of current and future regulatory orders on events that have occurred as of september 30, 2019, and the judgments made by management to support its assertions about impacted account balances and disclosures. management judgments included assessing the likelihood of (1) recovery in future rates of incurred costs or (2) refunds to customers or future reduction in rates. these judgments included assessing the likelihood and amount of potential refunds that may be required by the missouri public service commission related to previously recovered capital investments as a result of the november 2019 missouri western district court rulings. given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the commissions, auditing these rate-impacted account balances and disclosures, and the related judgments, requires specialized knowledge of accounting for rate regulation due to the inherent complexities associated with the specialized rules related to accounting for the effects of cost-based regulation.how the critical audit matter was addressed in the audit our audit procedures related to the uncertainty of future decisions by the commissions included the following, among others: •we tested the effectiveness of management’s controls over evaluating the likelihood of (1) the recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory assets, and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. we tested the effectiveness of management’s controls over the initial recognition of amounts as property, plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates. •we evaluated the company's disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments, in the financial statements. •we read relevant regulatory orders issued by the commissions for the company in missouri, alabama, and mississippi; regulatory statutes, interpretations, procedural memorandums, and filings made by interveners; and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedents of the commissions’ treatment of similar costs under similar circumstances. •we obtained from management the regulatory orders that support the probability of recovery, refund, and/or future reduction in rates for regulatory assets and liabilities and assessed management’s assertion that amounts are probable of recovery, refund, or a future reduction in rates. •we evaluated management’s assessment of the probability that the missouri public service commission will order refunds of certain revenues previously collected from customers as a result of the november 2019 rulings issued by the missouri western district court of appeals. we evaluated the amount of the regulatory liability management recorded as a result of these rulings, evaluated management’s assessment of potential future refunds, and evaluated management’s disclosures regarding these rulings. /s/ deloitte & touche llp st. louis, missouri november 26, 201957 we have served as the company’s auditor since 1953.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.impairment of income producing properties as described in note 1 to the consolidated financial statements, the company reviews its income producing properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the property may not be recoverable. these changes in circumstances include, but are not limited to, changes in occupancy, rental rates, tenant sales, net operating income, real estate values, and expected holding periods.the principal consideration for our determination that the evaluation of impairment of income producing properties is a critical audit matter is that it involves a high degree of subjectivity in evaluating management's judgments regarding impairment indicators. based on the subjectivity in identifying events and changes in circumstances indicating that the carrying amounts of properties may not be recoverable, the related audit procedures involve a high degree of auditor judgment.f-4our audit procedures related to the evaluation of impairment of income producing properties included the following, among others. we tested the design and operating effectiveness of management’s internal controls over the identification of potential impairments of income producing properties, such as controls over the company’s quarterly analysis of occupancy and financial and operating performance trends, as well management review controls to identify potential events which could indicate impairment. we examined the company’s evaluation of impairment indicators and evaluated whether all properties were included in the analysis and whether the information regarding financial and operating performance included in the analyses was complete and accurate. additionally, we evaluated management’s process for identifying impairment indicators to determine if the events and changes in circumstances that management deems representative of impairment indicators were reasonable and appropriate in the context of the applicable authoritative guidance for long-lived asset impairment, industry practice for similar entities, and relevant metrics of financial and operating performance of an income producing shopping center. finally, we evaluated the more subjective components of the impairment indicator analyses, such as holding periods and re-leasing absorption periods, in comparison with historical transactions and performance. our evaluation also considered whether such components were consistent with evidence obtained in other areas of the audit.joint venture equity method investment as described in note 6 to the consolidated financial statements, in december 2019, the company entered into a joint venture agreement, r2g venture llc (“r2g”), which owns and operates five shopping centers, with an unrelated third party whereby the company owns 51.5% of the equity in the joint venture. the company is responsible for the day-to-day management of the properties as well as sourcing future acquisitions for the joint venture, and the company receives property management, construction management and leasing fees from r2g as consideration for these management services. the company and the joint venture partner have joint approval rights for major decisions, including those regarding property operations, and the company cannot make significant decisions without the joint venture partner’s approval. accordingly, the company accounts for its interest in r2g using the equity method. we identified the investment in r2g as a critical audit matter.the principal consideration for our determination that the investment in r2g is a critical audit matter is that it involves a high degree of subjectivity in evaluating management's conclusions that the company does not have a controlling financial interest, as defined in asc topic 810 consolidation, in r2g, and thus does not consolidate r2g in its consolidated financial statements.our audit procedures related to the evaluation of the r2g joint venture equity method investment included the following, among others. we tested the design and operating effectiveness of management’s internal controls over the accounting for investments in affiliates, including controls over the evaluation and application of the appropriate accounting principles. we examined the joint venture operating agreements and evaluated the relevant provisions to assess the appropriateness of the company’s conclusion that the company and the unrelated third party exercise joint control of r2g through their equity investments, and that both parties have substantive participating rights in significant financial and operating decisions of r2g that are made in the ordinary course of business. we assessed management’s conclusions regarding which significant financial and operating decisions made in the ordinary course of business are important in determining that r2g is jointly controlled by the company and the unrelated third party./s/ grant thornton llp we have served as the company's auditor since 2005.

critical audit matters in the auditor’s report on the financial statements; and•be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.in addition, section 107 of the jobs act provides that an emerging growth company can use the extended transition period provided in section 7(a)(2)(b) of the securities act for complying with new or revised accounting standards. this permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. we have elected to use this extended transition period and, as a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies.we cannot predict if investors will find our class a common stock less attractive as a result of our decision to take advantage of some or all of the reduced disclosure requirements above. if some investors find our class a common stock less attractive as a result, there may be a less active trading market for our class a common stock and our stock price may be more volatile.because we have no current plans to pay regular cash dividends on our class a common stock, you may not receive any return on investment unless you sell your class a common stock for a price greater than that which you paid for it.go health, inc.2020 form 10-k 41we do not anticipate paying any regular cash dividends on our class a common stock. any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, general and economic conditions, our results of operations and financial condition, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, and such other factors that our board of directors may deem relevant. in addition, our ability to pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur, including under our credit facilities. therefore, any return on investment in our class a common stock is solely dependent upon the appreciation of the price of our class a common stock on the open market, which may not occur.our amended and restated certificate of incorporation provides that the court of chancery of the state of delaware is the sole and exclusive forum for certain stockholder litigation matters and the federal district courts of the united states are the exclusive forum for the resolution of any complaint asserting a cause of action arising under the securities act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.our amended and restated certificate of incorporation provides (a) (i) any derivative action or proceeding brought on behalf of the company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, other employee or stockholder of the company to the company or the company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the dgcl, our amended and restated certificate of incorporation or our amended and restated bylaws (as either may be amended or restated) or as to which the dgcl confers jurisdiction on the court of chancery of the state of delaware or (iv) any action asserting a claim governed by the internal affairs doctrine of the law of the state of delaware shall, to the fullest extent permitted by law, be exclusively brought in the court of chancery of the state of delaware or, if such court does not have subject matter jurisdiction thereof, the federal district court of the state of delaware; and (b) the federal district courts of the united states shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the securities act. notwithstanding the foregoing, the exclusive forum provision shall not apply to claims seeking to enforce any liability or duty created by the exchange act. the choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition. any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation.our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” does not apply with respect to any director or stockholder who is not employed by us or our subsidiaries.the doctrine of corporate opportunity generally provides that a corporate fiduciary may not develop an opportunity using corporate resources, acquire an interest adverse to that of the corporation or acquire property that is reasonably incident to the present or prospective business of the corporation or in which the corporation has a present or expectancy interest, unless that opportunity is first presented to the corporation and the corporation chooses not to pursue that opportunity. the doctrine of corporate opportunity is intended to preclude officers or directors or other fiduciaries from personally benefiting from opportunities that belong to the corporation. our amended and restated certificate of incorporation provides that the doctrine of “corporate opportunity” does not apply with respect to any director or stockholder who is not employed by us or our subsidiaries. any director or stockholder who is not employed by us or our subsidiaries, therefore, has no duty to communicate or present corporate opportunities to us, and has the right to either hold any corporate opportunity for their (and their affiliates’) own account and benefit or to recommend, assign or otherwise transfer such corporate opportunity to persons other than us, including to any director or stockholder who is not employed by us or our subsidiaries.as a result, certain of our stockholders, directors and their respective affiliates are not prohibited from operating or investing in competing businesses. we, therefore, may find ourselves in competition with certain of our stockholders, directors or their respective affiliates, and we may not have knowledge of, or be able to pursue, transactions that could potentially be beneficial to us. accordingly, we may lose a corporate opportunity or suffer competitive harm, which could negatively impact our business, operating results and financial condition.we are subject to the nasdaq rules and the rules and regulations established from time to time by the sec regarding our internal control over financial reporting. if we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner.we are subject to the nasdaq rules and the rules and regulations established from time to time by the sec. these rules and regulations require, among other things, that we establish and periodically evaluate procedures with respect to our internal go health, inc.2020 form 10-k 42control over financial reporting. reporting obligations as a public company are likely to place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel.in addition, as a public company we are required to document and test our internal control over financial reporting pursuant to section 404 of the sarbanes-oxley act so that our management can certify as to the effectiveness of our internal control over financial reporting by the time our second annual report is filed with the sec and thereafter, which will require us to document and make significant changes to our internal control over financial reporting. likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting at such time as we cease to be an “emerging growth company,” as defined in the jobs act, and we become an accelerated or large accelerated filer. as described above, we could potentially qualify as an “emerging growth company” until as late as the fifth anniversary of the completion of our ipo.we expect to incur costs related to implementing an internal audit and compliance function in the upcoming years to further improve our internal control environment. if we identify future deficiencies in our internal control over financial reporting or if we are unable to comply with the demands that will be placed upon us as a public company, including the requirements of section 404 of the sarbanes-oxley act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the sec. we also could become subject to sanctions or investigations by the sec or other regulatory authorities. in addition, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our stock price may be adversely affected.we incur significant costs as a result of operating as a public company.we are subject to the reporting requirements of the exchange act, the sarbanes-oxley act, the dodd–frank wall street reform and consumer protection act of 2010 (“dodd-frank act”), the listing requirements of the nasdaq and other applicable securities laws and regulations. the expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. we expect these rules and regulations to continue to increase our legal and financial compliance costs and to make some activities more difficult, time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. being a public company and being subject to new rules and regulations also makes it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. these laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our class a common stock, fines, sanctions and other regulatory action and potentially civil litigation. these factors may, therefore, strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our class a common stock to decline.the sale of shares of our class a common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our class a common stock. these sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.as of december 31, 2020, we have outstanding a total of 84,196 shares of class a common stock. of the outstanding shares, the 43,500 shares sold in the ipo are freely tradable without restriction or further registration under the securities act, other than any shares held by our affiliates. in addition, the shares of class a common stock issued to the blocker shareholders in the transactions are eligible for resale pursuant to rule 144 without restriction or further registration under the securities act, other than affiliate restrictions under rule 144. any shares of class a common stock held by our affiliates are eligible for resale pursuant to rule 144 under the securities act, subject to the volume, manner of sale, holding period and other limitations of rule 144.certain of our employees who hold performance units, including certain of our executive officers, entered into lock-up agreements with the underwriters prior to our ipo pursuant to which each of these persons, subject to certain exceptions, may not, without the prior written consent of any two of goldman sachs & co. llc, bof a securities, inc. and morgan stanley & co. llc, (1) offer, sell, contract to sell, pledge, grant any option to purchase, lend or otherwise dispose of any shares of our class a common stock, or any options or warrants to purchase any shares of our class a common stock, or any securities convertible into or exchangeable for or that represent the right to receive shares of our class a common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the rules and regulations of the sec and securities which may be issued upon exercise of a stock option or warrant); (2) engage in any hedging or other transaction or arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) which is designed to, or which reasonably could be expected to lead to, or result in, a sale, loan, pledge or other disposition of shares of our class a common stock or such other go health, inc.2020 form 10-k 43securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of class a common stock or such other securities, in cash or otherwise; or (3) make any demand for or exercise any right with respect to the registration of any shares of our class a common stock or any security convertible into or exercisable or exchangeable for our common stock. one-third of such vested performance units were subject to such terms that ended 180 days after the date of our final prospectus in connection with the ipo, and the remaining two-thirds of the vested performance units are subject to lock-up terms with similar restrictions, but which terms will end eighteen months after the consummation of our ipo.in addition, certain of our employees who hold performance units, including certain of our executive officers, entered into lock-up agreements in substantially the same form as the lock-up agreements with the underwriters.in addition, any class a common stock that we issue under the 2020 incentive award plan or other equity incentive plans that we may adopt in the future would dilute the percentage ownership held by the investors who purchase class a common stock.as restrictions on resale end or if these stockholders exercise their registration rights, the market price of our shares of class a common stock could drop significantly if the holders of these shares sell them or are perceived by the market as intending to sell them. these factors could also make it more difficult for us to raise additional funds through future offerings of our shares of class a common stock or other securities.in the future, we may also issue securities in connection with investments, acquisitions or capital raising activities. in particular, the number of shares of our class a common stock issued in connection with an investment or acquisition, or to raise additional equity capital, could constitute a material portion of our then-outstanding shares of our class a common stock. any such issuance of additional securities in the future may result in additional dilution to you, or may adversely impact the price of our class a common stock.general risks from time to time we are subject to various legal proceedings which could adversely affect our business, financial condition or results of operations.we are involved in various litigation matters from time to time. such matters can be time-consuming, divert management’s attention and resources and cause us to incur significant expenses. our insurance and indemnities may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. if we are unsuccessful in our defense in these litigation matters, or any other legal proceeding, we may be forced to pay damages or fines, enter into consent decrees or change our business practices, any of which could adversely affect our business, financial condition or results of operations.if we fail to manage future growth effectively, our business, operating results and financial condition would be harmed.we have expanded our operations significantly and anticipate that further expansion will be required in order for us to grow our business. our growth has placed and will continue to place increasing and significant demands on our management, our operational and financial systems and infrastructure and our other resources. if we do not effectively manage our growth, the quality of our services could suffer, which could harm our business, operating results and financial condition. in order to manage future growth, we will need to hire, integrate and retain highly skilled and motivated employees. we may not be able to hire new employees quickly enough to meet our needs. if we fail to effectively manage our hiring needs and successfully integrate our new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business, operating results and financial condition could be harmed. we will also be required to continue to improve our existing systems for operational and financial management, including our reporting systems, procedures and controls. these improvements may require significant capital expenditures and will place increasing demands on our management. we may not be successful in managing or expanding our operations or in maintaining adequate financial and operating systems and controls. if we do not successfully implement improvements in these areas, our business, operating results and financial condition will be harmed.changes in our provision for income taxes or adverse outcomes resulting from examination of our income or other tax returns or changes in tax legislation could adversely affect our business, operating results and financial condition.our provision for income taxes is subject to volatility and could be adversely affected by a number of factors, including earnings differing materially from our projections, changes in the valuation of our deferred tax assets and liabilities, expected timing and amount of the release of any tax valuation allowances, tax effects of share-based compensation, outcomes as a result of tax examinations or by changes in tax laws, regulations, accounting principles, including accounting for uncertain tax positions, or interpretations thereof.to the extent that our provision for income taxes is subject to volatility or adverse outcomes as a result of tax examinations, our operating results could be harmed. significant judgment is required to determine the recognition and measurement attribute prescribed in u.s. gaap relating to accounting for income taxes. in addition, we are subject to examinations of our income tax go health, inc.2020 form 10-k 44returns by the internal revenue service, or irs, and other tax authorities. we assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. there may be exposure that the outcomes from these examinations will have an adverse effect on our business, operating results and financial condition.on march 27, 2020, in response to the covid-19 pandemic, the coronavirus aid, relief, and economic security act (“cares act”) was signed into law. the cares act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. we continue to evaluate the applicability of the cares act to us; however, the cares act currently does not have a material impact on our business, and we will continue to monitor impacts in the future but do not expect them to be material.we may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business.third parties may be able to successfully challenge, oppose, invalidate, render unenforceable, dilute, misappropriate or circumvent our trademarks, copyrights and other intellectual property rights. our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. however, we may not be aware that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third parties may bring claims alleging such infringement, misappropriation or violation.actions we may take to enforce our intellectual property rights may be expensive and divert management’s attention away from the ordinary operation of our business, and our inability to secure and protect our intellectual property rights could materially and adversely affect our brand and business, operating results and financial condition. furthermore, such enforcement actions, even if successful, may not result in an adequate remedy. in addition, many companies have the capability to dedicate greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. if a third-party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology for any infringing aspect of our business, we would be forced to limit or stop sales of our products and platform capabilities or cease business activities related to such intellectual property.although we carry general liability insurance, our insurance may not cover potential claims of this type and may not be adequate to indemnify us for all liability that may be imposed. we cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations. such claims could subject us to significant liability for damages and could result in our having to stop using technology found to be in violation of a third party’s rights. further, we might be required to seek a license for third-party intellectual property, which may not be available on reasonable royalty or other terms. alternatively, we could be required to develop alternative non-infringing technology, which could require significant effort and expense. if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit our services, which could affect our ability to compete effectively. any of these results would harm our business, operating results and financial condition.unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.we are subject to taxes by the u.s. federal, state, local and foreign tax authorities. our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:•allocation of expenses to and among different jurisdictions;•changes in the valuation of our deferred tax assets and liabilities;•expected timing and amount of the release of any tax valuation allowances;•tax effects of stock-based compensation;•costs related to intercompany restructurings;•changes in tax laws, tax treaties, regulations or interpretations thereof; or•lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.go health, inc.2020 form 10-k 45in addition, we may be subject to audits of our income, sales and other taxes by u.s. federal, state, and local and foreign taxing authorities. outcomes from these audits could have an adverse effect on our operating results and financial condition.an active, liquid trading market for our class a common stock may not be sustained, which may cause our class a common stock to trade at a discount from the price you paid and make it difficult for you to sell the class a common stock you purchase.we cannot predict the extent to which investor interest in us will lead to a trading market being sustained or how active and liquid that market may remain. if an active and liquid trading market does not continue, you may have difficulty selling any of our class a common stock that you purchase at a price above the price you purchase it or at all. the failure of an active and liquid trading market to continue would likely have a material adverse effect on the value of our class a common stock. you may not be able to sell your shares of our class a common stock at or above the price you paid for them, or at all. an inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.if securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, or if there is any fluctuation in our credit rating, our stock price and trading volume could decline.the trading market for our class a common stock relies in part on the research and reports that industry or financial analysts publish about us or our business. we do not control these analysts. if one or more of the analysts who do cover us stops covering us or fails to publish reports on us regularly, we could lose visibility in the market, which, in turn, could cause our stock price or trading volume to decline. furthermore, if one or more of the analysts who do cover us downgrade our stock or our industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our stock could decline.additionally, any fluctuation in the credit rating of us or our subsidiaries may impact our ability to access debt markets in the future or increase our cost of future debt, which could have a material adverse effect on our operations and financial condition, which in return may adversely affect the trading price of shares of our class a common stock.our stock price may change significantly, and you may not be able to resell shares of our class a common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result.you may not be able to resell your shares at or above the price which you paid for them due to a number of factors included herein, including the following:•results of operations that vary from the expectations of securities analysts and investors;•results of operations that vary from those of our competitors;•changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors;•technology changes, changes in consumer behavior or changes in merchant relationships in our industry;•security breaches related to our systems or those of our merchants, affiliates or strategic partners;•changes in economic conditions for companies in our industry;•changes in market valuations of, or earnings and other announcements by, companies in our industry;•declines in the market prices of stocks generally, particularly those of global payment companies;•strategic actions by us or our competitors;•announcements by us, our competitors or our strategic partners of significant contracts, new products, acquisitions, joint marketing relationships, joint ventures, other strategic relationships, or capital commitments;•changes in general economic or market conditions or trends in our industry or the economy as a whole and, in particular, in the consumer spending environment;•changes in business or regulatory conditions;•future sales of our class a common stock or other securities;go health, inc.2020 form 10-k 46•investor perceptions of the investment opportunity associated with our class a common stock relative to other investment alternatives;•the public’s response to press releases or other public announcements by us or third parties, including our filings with the sec;•announcements relating to litigation or governmental investigations;•guidance, if any, that we provide to the public, any changes in this guidance, or our failure to meet this guidance;•the development and sustainability of an active trading market for our stock;•changes in accounting principles; and•other events or factors, including those resulting from system failures and disruptions, natural disasters, war, acts of terrorism, an outbreak of highly infectious or contagious diseases, such as covid-19, or responses to these events.furthermore, the stock market may experience extreme volatility that, in some cases, may be unrelated or disproportionate to the operating performance of particular companies. these broad market and industry fluctuations may adversely affect the market price of our class a common stock, regardless of our actual operating performance. in addition, price volatility may be greater if the public float and trading volume of our class a common stock is low.in the past, following periods of market volatility, stockholders have instituted securities class action litigation. if we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of management from our business regardless of the outcome of such litigation.go health, inc.2020 form 10-k 47item 1b. unresolved staff comments not applicable.item 2. properties the following table presents the location, approximate square footage and primary use of each of the principal physical properties we occupied as of december 31, 2020.location approximate square footage primary use chicago, illinois30,052corporate headquarters, marketing and advertising, technology and software development, and general and administrative chicago, illinois42,000customer care and enrollment charlotte, north carolina97,599customer care and enrollment lindon, utah69,631customer care and enrollment slovakia14,598technology and software development we believe our existing properties, which are used by all reportable segments, are in good operating condition and are suitable for the conduct of our business.item 3. legal proceedings refer to note 12, “commitments and contingencies,” of the notes to consolidated financial statements for information about legal proceedings.item 4. mine safety disclosures none.information about our executive officers and directors the following table provides information regarding our executive off

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.acquisition of benefit street partners l.l.c. - fair value of indefinite-lived investment management contract intangible assets as described in notes 1 and 3 to the consolidated financial statements, in february 2019, the company completed its acquisition of benefit street partners, l.l.c. for a purchase consideration of $720.1 million in cash, which resulted in management recording $280.1 million of indefinite-lived investment management contract intangible assets. fair values of acquired indefinite-lived investment management contract intangible assets are based on the net present value of estimated future cash flows attributable to the contracts, which include significant assumptions about forecasts of the assets under management (“aum”) growth rate, pre-tax profit margin, average effective fee rate, effective tax rate and discount rate. the principal considerations for our determination that performing procedures relating to the fair value of indefinite-lived investment management contract intangible assets from the acquisition of benefit street partners l.l.c. is a critical audit matter are there was significant judgment by management when developing the estimated fair value of indefinite-lived investment management contract intangible assets. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions within the estimated future cash flows, including aum growth rate and discount rate. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the fair value of indefinite-lived investment management contract intangible assets in the acquisition of benefit street partners, l.l.c., including controls over development of the significant assumptions within the estimated future cash flows, specifically, aum growth rate and discount rate. these procedures also included, among others, (i) identifying the acquired contracts by reading the purchase agreement, (ii) testing management’s process for estimating the fair value of the acquired indefinite-lived investment management contract intangible assets, (iii) testing the completeness, accuracy, and relevance of underlying data used in the model and (iv) evaluating management’s significant assumptions within the estimated future cash flows, including aum growth rate and discount rate. professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the company’s discounted cash flow model and the reasonableness of the discount rate. the discount rate was evaluated by developing an independent discount rate considering the cost of capital of comparable benchmark rates and other industry factors. evaluating the reasonableness of the aum growth rate involved considering the past performance of the acquired business, the consistency with external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit.assessment of investment products for consolidation as described in notes 1 and 11 to the consolidated financial statements, the company consolidates various mutual and other investment funds, limited partnerships and similar structures (collectively, “investment products”) when the company owns a majority of the voting interest in a voting interest entity (“voe”) or is the primary beneficiary of a variable interest entity (“vie”). as of september 30, 2019, the assets of consolidated investment products were $2,557.1 million. as disclosed by management, the assessment of whether an investment product is a voe or vie involves management’s judgment and analysis on a structure-by-structure basis and considers factors such as the investment product’s legal organization and capital structure, the rights of the equity investment holders and the company’s contractual involvement with and ownership interest in the investment product. if the investment product is determined to be a vie, assessment of the primary beneficiary of a vie requires management to exercise judgment to evaluate whether the company has the power to direct the activities that 60table of contentsmost significantly impact the vie’s economic performance and the obligation to absorb losses of or the right to receive benefits from the vie that could potentially be significant to the vie.the principal considerations for our determination that performing procedures relating to the assessment of investment products for consolidation is a critical audit matter are there was significant judgment by management in determining whether the investment product is a voe or vie, and if determined to be a vie, whether the company is the primary beneficiary of the vie. this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures relating to management’s application of consolidation accounting, and significant auditor judgment in evaluating the audit evidence obtained relating to the legal organization and capital structure, the rights of the equity investment holders and the company’s ability to direct the activities that impact the vie through contractual involvement with and ownership interest in the investment products.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the assessment of investment products for consolidation, including controls addressing the completeness of the company’s investment products evaluated for consolidation, as well as controls over the judgments and factors used to reach consolidation conclusions regarding these investment products. these procedures also included, among others, testing the completeness of the investment products subject to the analysis, and, for a sample of investment products, (i) evaluating the legal and capital structures of each investment product, including the rights of the equity investment holders, (ii) evaluating management’s assessment of each investment product as a voe or vie and (iii) evaluating the company’s contractual involvement with and ownership interest in each investment product and management’s determination of whether a vie is consolidated./s/ pricewaterhouse coopers llp san francisco, california november 12, 2019 we have served as the company’s auditor since 1974.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.impairment of long-lived assets – refer to notes 1 and 5 to the financial statements critical audit matter description the company assesses the potential impairment of long-lived assets, principally property and equipment and operating lease right-of-use assets, whenever events or changes in circumstances indicate that the carrying value of the restaurant asset group may not be fully recoverable. the company reviews its long-lived assets, principally property and equipment and lease rou assets, for impairment at the restaurant level. in addition to considering management's plans, known regulatory or governmental actions and damage due to acts of god (hurricanes, tornadoes, etc.), the company considers a triggering event to have occurred related to a specific restaurant if the restaurant's cash flows, exclusive of operating lease payments, for the last twelve months are less than a minimum threshold or if consistent levels of cash flows for the remaining lease period are less than the carrying value of the restaurant's assets. if an indicator of impairment exists for any of its assets, an estimate of undiscounted future cash f-1flows, exclusive of operating lease payments, over the life of the primary asset for each restaurant is compared to that long-lived asset group's carrying value, excluding operating lease liabilities. if the carrying value is greater than the undiscounted cash flow, the company then determines the fair value of the asset and if an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. this process of assessing fair values requires the use of estimates and assumptions, including the company’s ability to sell or reuse the related assets and market conditions and, for right-of-use lease assets, current market lease rent and discount rates, which are subject to a high degree of judgment. there is uncertainty in the projected undiscounted future cash flows used in the company's impairment review analysis. property and equipment, net as of january 3, 2021 was $161.1 million and operating lease right-of-use assets was $261.3 million. during the year ended january 3, 2021 the company recorded impairment charges of $8.4 million. given the judgment used by the company to evaluate whether there are impairment indicators for long-lived assets as well as judgment in determining the undiscounted future cash flows when an impairment indicator has been identified and the fair value of the asset, auditing management’s judgments regarding indicators of potential impairment, estimated future cash flows and the fair value of assets involved especially subjective audit judgment.how the critical audit matter was addressed in the audit our audit procedures in connection with identification of impairment indicators, recoverability of asset groups, determination of fair value of assets, and impairment charges included the following, among others•we tested the effectiveness of controls over the evaluation for impairment of long-lived assets•we evaluated the impairment indicators considered by management and evaluated whether management had contemplated other potential factors that may be an indicator of impairment. •we evaluated the reasonableness of management’s estimated future cash flows by comparing them to: •historical actual cash flows for the restaurant being evaluated•strategic business plans and actions planned by the company to support estimated future revenue•chain and fast food restaurants industry reports•with the assistance of our fair value specialists, we evaluated current market lease rent and discount rate assumptions utilized in evaluating right-of-use assets for potential impairment./s/ deloitte & touche llp dallas, texas march 4, 2021we have served as the company's auditor since 2011.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the company’s audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. adoption of accounting standards update no. 2016-13, financial instruments-credit losses critical audit matter description as described in note 3 to the financial statements, on january 1, 2020, the company adopted accounting standards update (asu) no. 2016-13, financial instruments-credit losses, which introduces a current expected credit losses (cecl) model to estimate credit losses over the remaining expected life of the company’s loan portfolio, rather than the incurred loss model applied in prior periods. estimates of expected credit losses under the cecl model are based on relevant information about past events, current conditions, and reasonable and supportable forward-looking forecasts regarding the collectability of the loan portfolio. to estimate expected loan credit losses, the company implemented new credit loss systems aligned with the cecl model and determined: •the method of calculation to be used; •the role of peer loss data and the appropriate peer group;103 •the economic factor(s) indicative of expected losses; •the length of the reasonable and supportable forecast period; •estimated loan cash flows and corresponding expected duration of loans; •the method of determining and applying qualitative factors.we determined that performing procedures relating to these aspects of the company’s adoption of asu 2016-13 is a critical audit matter. the principal considerations for our determination are (i) the application of significant judgment and estimation on the part of management, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence obtained, and (ii) significant audit effort was necessary in evaluating management’s methodology, significant assumptions and calculations. how the critical audit matter was addressed in the audit addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. these procedures included, among others: •tests of the design and operating effectiveness of management’s controls covering the key assumptions and judgments of its cecl estimation model, and the selection and application of new accounting policies; •tests of the company’s methodology for the determination of its peer group and the completeness and accuracy of information included in peer group data and how it is used in the company’s allowance for credit loss calculation; •tests of the model loan cash flow and qualitative factor determinations. allowance for credit losses – qualitative factors critical audit matter description as described in notes 2 and 7 to the financial statements, the company has recorded an allowance for credit losses for its loan portfolio in the amount of $36.0 million as of december 31, 2020, representing management’s estimate of credit losses over the remaining expected life of the company’s loan portfolio as of that date. management determined this amount, and corresponding provision for credit loss expense, pursuant to the application of accounting standards codification topic 326, financial instruments – credit losses which was adopted by the company on january 1, 2020. the company’s methodology to determine its allowance for credit losses incorporates qualitative assessments of current loan portfolio and economic conditions and the application of forecasted economic conditions. we determined that performing procedures relating to these components of the company’s methodology is a critical audit matter. the principal considerations for our determination are (i) the application of significant judgment and estimation on the part of management, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence obtained, and (ii) significant audit effort was necessary in evaluating management’s methodology, significant assumptions and calculations. how the critical audit matter was addressed in the audit addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. these procedures included testing the effectiveness of controls relating to the company’s determination of qualitative factors and forecasted economic conditions. these procedures also included, among others, testing management’s process for determining the qualitative reserve component, evaluating the appropriateness of management’s methodology relating to the qualitative reserve component and testing the completeness and accuracy of data utilized by management. /s/ wolf & company, p.c. boston, massachusetts march 15, 2021 we have served as the company’s auditor since 2020.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit mattersdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.valuationof assets and liabilities assumed in the acquisitions of accountable healthcare america inc.(“aha”), ahp management inc.(“ahp”),and procare health, inc.(procare) descriptionof the matter duringthe year ended december 31, 2021 the company completed the acquisitions of three businesses, accountable healthcare america inc.(“aha”),ahp management inc.(“ahp”), and procare health, inc.(procare) for net aggregate consideration of approximately $29.2 million,$39.1 million, and $2.9 million respectively.accountable healthcare america inc.asdiscussed in note 1 to the consolidated financial statements, the company completed its acquisition of aha for $29.2 million on february26, 2021. the company accounted for this transaction under the acquisition method of accounting for business combinations. accordingly,the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, including identifiedintangible assets of $2.2 million and resulting goodwill of $22.8 million. the company, with the assistance of a third party valuationspecialist, estimated the fair values of the identified intangible assets using valuation models. such valuation models require significantassumptions.the company estimated the fair value of the intangible assets using the developed technology royalty rates (valuation method),which is a specific discounted cash flow method that required management to make significant estimates and assumptions related to futurecash flows and the selection of implied rate of return and discount rates.ahp management inc.asdiscussed in note 1 to the consolidated financial statements, the company completed its acquisition of ahp for $39.1 million on february26, 2021. the company accounted for this transaction under the acquisition method of accounting for business combinations. accordingly,the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, including identifiedintangible assets of $6.9 million and resulting goodwill of $33.5 million. the company, with the assistance of a third party valuationspecialist, estimated the fair values of the identified intangible assets using valuation models. such valuation models require significantassumptions. the company estimated the fair value of the intangible assets using the multi-period excess earnings methodology (memberrelationships) and relief from royalty methodology (trade name/trademarks), which is a specific discounted cash flow method that requiredmanagement to make significant estimates and assumptions related to future cash flows and the selection of implied rate of return anddiscount rates.procare health, inc.asdiscussed in note 1 to the consolidated financial statements, the company completed its acquisition of procare for $2.9 million on october15, 2021. the company accounted for this transaction under the acquisition method of accounting for business combinations. accordingly,the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, including identifiedintangible assets of $2.1 million and resulting goodwill of $0.9 million. the company, with the assistance of a third party valuationspecialist, estimated the fair values of the identified intangible assets using valuation models. such valuation models require significantassumptions. the company estimated the fair value of the intangible assets using the multi-period excess earnings methodology (management contracts) and relief from royalty methodology (trademarks), which is a specific discounted cash flow method that required managementto make significant estimates and assumptions related to future cash flows and the selection of implied rate of return and discount rates.how we addressed the matter in our audit auditingmanagement’s assessment of fair value of the acquired assets and assumed liabilities is highly subjective and judgmental. furtherchanges in either the assumptions or method utilized may have a material impact on the fair value assigned to the acquired assets andliabilities assumed in the acquisitions. this required a high degree of auditor judgment and an increased extent of effort, includingthe need to involve our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’skey assumptions used in developing the fair value estimates, such as: (i) forecasted revenue growth rates (ii) future cash flows and(iii) weighted-average cost of capital (wacc) and (iv) discount rate.our auditprocedures included, amongst others:•we evaluated the reasonableness of management’s forecasts of future revenue growth rates and cash flows by comparing the projections to historical results and certain peer companies.•we compared the company’s (1) forecasted revenue growth rates and ebitda margins to each acquired company’s historical actual results to assess reasonableness of the company’s forecasts.•with the assistance of our valuation specialists, we evaluated the reasonableness of the valuation methodology and discount rates by using sensitivity analysis and ensuring the inputs to the valuations were reasonable for the methodology. /s/marcum llp marcum llp we haveserved as the company’s auditor since 2020.

critical audit matters the critical audit matters communicated beloware matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicatedto the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and(2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alterin any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. going concern the accompanying consolidated financial statements have been preparedassuming that the company will continue as a going concern. as discussed in note 1 to the consolidated financial statements, the companyhas a working capital deficiency, accumulated deficit from recurring net losses and significant short-term debt obligations maturing inless than one year as of december 31, 2020. the company has contractual obligations such as commitments for purchases of equipment, buildingconstructions cost, payable, capital injection to subsidiaries and short-term loan (collectively “obligations”). currentlymanagement’s forecasts and related assumptions illustrate their ability to meet the obligations through management of expendituresand, if necessary, obtaining additional debt financing, loans from existing directors and shareholders and private placements of capitalstock for additional funding to meet its operating needs. should there be constraints on the ability to access such financing, the companycan manage cash outflows to meet the obligations through reductions in capital expenditures and other operating expenditures. we identified management’s assessment ofthe company’s ability to continue as a going concern as a critical audit matter. management made judgments to conclude that itis probable that the company’s plans will be effectively implemented and will provide the necessary cash flows to fund the company’sobligations as they become due. specifically, the judgments with the highest degree of impact and subjectivity in determining it is probablethat the company’s plans will be effectively implemented included the revenue growth and gross margin assumptions underlying itsforecast operating cash flows, its ability to reduce capital expenditures and other operating expenditures, its ability to access fundingfrom the capital market and its ability to obtaining loans from existing directors and shareholders. auditing the judgments made by managementrequired a high degree of auditor judgment and an increased extent of audit effort. addressing the matter involved performing proceduresand evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these proceduresincluded the following, among others: (i) testing key assumptions underlying management’s forecast operating cash flows, includingrevenue growth and gross margin assumptions; (ii) evaluating the probability that the company will be able to access funding from thecapital market; (iii) evaluating the probability that the company will be able to reduce capital expenditures and other operating expendituresif required and (iv) evaluating the probability that the company will be able to obtain the loan from existing directors and shareholders. inventory write-down as described in note 2 of the consolidated financialstatements, inventories are stated at the lower of cost or net realizable value, with cost determined on a weighted average cost method.write-down of potential obsolete or slow moving inventories is recorded based on management’s assumptions about future demandsand market conditions. for the year ended december 31, 2020, the company recorded inventory impairment charges of $1.5 million. inventoriesinclude items that have been written down to the company’s best estimate of their realizable value, which includes considerationof various factors. we identified the inventory write-down as a criticalaudit matter. the company’s determination of future markdowns is subjective. specifically, there was a high degree of subjectiveauditor judgment in evaluating how the company’s merchandising strategy and related inventory markdown assumptions affected therealizable value of inventory. f-3 addressing the matter involved performing proceduresand evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these proceduresincluded the following, among others: (i) observing the physical condition of inventories during inventory counts; (ii) evaluating theappropriateness of management’s process for developing the estimates of net realizable value; (iii) testing the reasonablenessof the assumptions about quality, damages, future demand, selling prices and market conditions by considering with historical trendsand consistency with evidence obtained in other areas of the audit; and corroborating the assumptions with individuals within the productteam; and (iv) assessing the company’s adjustments of inventory costs to net realizable value for slow-moving and obsolete inventoriesby (1) comparing the historical estimate for net realizable value adjustments to actual adjustments of inventory costs, and (2) analyzingsales subsequent to the measurement date. assessment of impairmentof long-lived assets as discussed in note 2 to the consolidated financial statements, the company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of these assetsmay not be recoverable. recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount ofan asset to the estimated undiscounted future cash flows expected to be generated by the asset. if the carrying amount of an asset exceedsits estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the assetexceeds the fair value of the asset. fair value is generally measured based on either quoted market prices, if available, or discountedcash flow analyses. based upon the analysis performed, the company recognized impairment losses for long-lived assets of $4.3 millionfor the year ended december 31, 2020. we identified the assessment of impairment oflong-lived assets as a critical audit matter because of the significant estimates and assumptions management used in the projectionsof future cash flows, including the expected production and sales volumes, production costs, operating expenses and discount rates appliedto these forecasted future cash flows. performing audit procedures to evaluate the reasonableness of these estimates and assumptionsrequired a high degree of auditor judgment and an increased extent of effort. addressing the matter involved performing proceduresand evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these proceduresincluded the following, among others: (i) comparing the methodology used by the company, that is, recoverable amount calculations basedon future discounted cash flows, to industry practice and testing the completeness and accuracy of the underlying data used in the projections;(ii) assessing the reasonableness of the significant assumptions used in the calculations, which comprised of, amongst others, expectedproduction and sales volumes, production costs, operating expenses and discount rates, by comparing them to external industry outlookreports from a number of sources and by analyzing the historical accuracy of management’s estimates; and (iii) involving our valuationspecialists to assist us with assessing the appropriateness of the valuation methodologies and the reasonableness of assumptions used,including the discount rates. assessment of allowancesfor doubtful accounts as discussed in note 2 to the consolidated financialstatements, the allowance for doubtful accounts is the company’s best estimate of the amount of probable credit losses in the company’sexisting trade accounts receivable. the company determines the allowance based on historical write-off experience, customer specificfacts and economic conditions. outstanding accounts receivable balances are reviewed individually for collectability. account balancesare charged off against the allowance after all means of collection have been exhausted and the potential for recovery is consideredremote. based upon the analysis performed, the company recognized a provision for doubtful accounts of $0.7 million for the year ended december 31, 2020. we identified the assessment of allowances fordoubtful accounts as a critical audit matter. specifically, the specific allowance is an estimate that involved assessing the likelihoodof collection of a customer’s accounts receivable by considering various factors such as the nature of any dispute, communicationsfrom the customer, historical collections, and number of days accounts receivables have been outstanding. subjective auditor judgmentwas involved in evaluating the relevance and reliability of the evidence obtained in evaluating these factors. addressing the matter involved performing proceduresand evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these proceduresincluded the following, among others: (i) investigating significant fluctuations in the specific allowance as compared to net accountsreceivable and the prior year specific allowance; (ii) inquiring of company personnel to evaluate the rationale for establishing a specificallowance for certain customers; (iii) assessing the company’s estimate of the specific customer allowance by evaluating the underlyingcontractual documents, historical collection trends, communications with customers and other additional factors; and (iv) evaluatingsubsequent collections occurring after the balance sheet date and considered the impact of potential subsequent events on the estimateof the specific allowance. /s/ centurion zd cpa & co. centurion zd cpa & co. we have served as the company’s auditorsince 2016.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.allowance for loan losses – loans collectively evaluated for impairment.as described in note 1 and note 4 to the consolidated financial statements, the company’s allowance for loan losses is the amount that management believes will be adequate to absorb probable incurred losses on existing loans. the allowance for loan losses was $20.9 million at december 31, 2020, which consists of two components: specific valuation allowances related to loans individually evaluated for impairment, representing $1.5 million and general valuation allowances related to loans collectively evaluated for impairment, representing $19.4 million.the general valuation covers non-impaired loans and is based on historical loss experience adjusted for current factors. loans not impaired but classified as substandard and special mention use a historical loss factor on a rolling five-year history of net losses. for all other unclassified loans, the historical loss experience is determined by portfolio class and is supplemented with other qualitative factors based on the risks present for each portfolio class. these qualitative factors include considerations of the following: (1) lending policies and procedures, including underwriting standards and collection, charge-off and recovery policies, (2) national and local economic business conditions and developments, including the condition of various market segments and more recently the expected impact of covid-19 on various portfolio segments, (3) loan volume, (4) the experience, ability, and depth of lending management and staff, (5) the volume and severity of past due, classified and watch-list loans, non-accrual loans, troubled debt restructurings, and other modifications (6) the quality of the bank’s loan review system and the degree of oversight by the bank’s board of directors, (7) collateral related issues: secured vs. unsecured, type, declining valuation environment and trend of other related factors (8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations, (9) the effect of external factors, such as competition and legal and regulatory f-1requirements, on the level of estimated credit losses in the bank’s current portfolio and (10) the impact of the global economy, including the impact of covid 19.we identified the allowance for loan losses for loans collectively evaluated for impairment as a critical audit matter because of the necessary judgment applied by us to evaluate management’s significant estimates and subjective assumptions relating to: 1) the classification of loans subject to an adjusted loss history, and 2) the determination of the aggregate effect of the qualitative factors on the allowance for loan losses.the primary procedures we performed to address this critical audit matter included:•testing the effectiveness of controls over the evaluation of the allowance related to loans collectively evaluated for impairment, including addressing:◦grading of loans from independent loan review and management’s annual credit reviews.◦management’s judgments related to the qualitative and quantitative assessment of the data used in the determination of qualitative factors and the resulting allocation to the allowance•substantively testing management’s process, including evaluating their judgments and assumptions, for developing the allowance related to loans collectively evaluated for impairment, which included:◦evaluation of loan grades of the commercial portfolio to ensure proper inclusion in pass categories or criticized and classified categories.◦evaluation of the data used as a basis for the adjustments relating to qualitative factors.◦evaluation of the reasonableness of management’s judgments related to the qualitative and quantitative assessment of the data used in the determination of qualitative factors and the resulting allocation to the allowance◦evaluation of the reasonableness of general allocation component, including its directional consistency from year to year.goodwill impairment evaluation as described in notes 1 and 7 to the consolidated financial statements, goodwill is the excess of the purchase price over the fair value of the net assets of the business acquired and is periodically evaluated for impairment. the company’s goodwill balance was $21.8 million at december 31, 2020, which is allocated to the company’s core banking segment.goodwill is tested for impairment at the reporting unit level, defined by management as the segment level, at least annually in the fourth quarter or more frequently whenever events or circumstances occur that indicate that it is more-likely-than-not that an impairment loss has occurred. the quantitative impairment analysis requires a comparison of a reporting unit’s fair value to its’ carrying value to identify potential impairment. goodwill impairment exists when a reporting unit’s carrying value exceeds its fair value. management engaged a third-party valuation specialist and significant judgement is applied in determining the fair value of a reporting unit. this judgment includes the selection of appropriate discount rates, the identification of relevant market comparable transactions and control premium, and the development of prospective financial information about the company. the selection and weighting of the various fair value methodologies may result in a higher or lower fair value. judgement is also applied in determining the weightings applied to the different methodologies that are most representative of fair value.we identified the goodwill impairment assessment of the company as a critical audit matter. the principal considerations for this determination was the need for usage of a auditor employed specialist, combined with the degree of auditor judgment in performing procedures over the key assumptions, which include discounted cash flows, discount rate, prospective financial information, and weighting allocation to valuation methodologies.the primary procedures we performed to address this critical audit matter included:•substantively testing management’s estimate, including evaluating their judgements and assumptions, for estimating fair value the company which included:◦testing of management’s methodology, including the reasonableness and accuracy of data supporting cash flow projections and the weighting of each valuation methodology.◦utilization of an auditor employed valuation specialist to evaluate appropriateness of valuation methodologies, discount rate, control premium, and to conduct a shadow calculation.we have served as the company's auditor since 2006.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.evaluation of general reserve portion of the allowance for loan losses - evaluation of the qualitative adjustments as described in notes 1 and 7 to the consolidated financial statements, management determines the general reserve portion of the allowance for loan losses using actual historical loss experience for each individual loan category, as well as evaluating whether qualitative adjustments are necessary. as of december 31, 2019, the allowance for loan losses was $62.09 million on total loans, net of unearned income. in evaluating whether qualitative adjustments are necessary, management considers general economic and business conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, the findings of internal and external credit reviews, results from external bank regulatory examinations, and other macro environmental factors such as changes in unemployment rates, employment rates, debt per capita, home price indices, and trends in real estate value indices. the principal considerations for our determination that performing procedures relating to the evaluation of qualitative adjustments used in the determination of the general reserve portion of the allowance for loan losses is a critical audit matter are there was significant judgment by management when evaluating the qualitative adjustments, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating audit evidence relating to the qualitative adjustments. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the company’s allowance for loan losses estimation process, including controls over evaluating the qualitative adjustments used in the determination of the general reserve portion of the allowance for loan losses. our procedures also included, among others, testing management’s process for evaluating qualitative adjustments by (i) evaluating the appropriateness of the methodology management used in evaluating the qualitative adjustments, (ii) testing the inputs used in the estimate of qualitative adjustments, including the completeness and accuracy of underlying historical loss data, and (iii) evaluating the reasonableness of the qualitative adjustments given current macroeconomic trends and portfolio characteristics. /s/ pricewaterhouse coopers llp atlanta, georgia february 27, 2020we have served as the company’s auditor since 2013.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.reserves for losses and loss adjustment expenses as described in note 2 - summary of significant accounting policies and note 15 - losses and loss adjustment expenses to the consolidated financial statements, the company’s reserves for losses and loss adjustment expenses (lae) reported in the consolidated balance sheet were $237.2 million at december 31, 2021. reserves for losses and lae reflect management’s best estimate regarding the company’s ultimate losses, resulting in a liability for claims that have been incurred, but not yet paid, and claims that have been incurred but not yet reported. the reserves are based on the application of actuarial techniques and other projection methodologies, taking into consideration other facts and circumstances known at the balance sheet date. the methods used by management in determining the reserves for losses and lae are complex and subjective with various key inputs and assumptions. judgement is required to determine the inputs and assumptions used and these can significantly impact the reserves recognized. the most significant judgments include the choice of the appropriate standard actuarial reserving methods, the selection of loss development factors that place reliance on actual historical loss experience, current claim trends, and the prevailing social, economic and legal environments, and reserves derived specific to catastrophe events.36 the principal considerations for our determination of the reserves for losses and lae as a critical audit matter are the complexity and subjectivity of the judgments, estimates and assumptions that management utilized in determining their ultimate loss estimates. this required a high degree of effort and judgment in selecting the auditor procedures to evaluate management’s estimates and assumptions as it relates to the reserves for losses and lae, including the use of an auditor's specialist.the primary procedures we performed to address this critical audit matter included:•we obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to management’s determination of the reserves for losses and lae, including controls over the actuarial methods and assumptions utilized to support the reserve calculations, and controls over the completeness and accuracy of historical loss data utilized in the reserve calculations.•we tested the completeness and accuracy of the historical loss data used in the development of the reserves. •we performed analytical procedures over the company’s recorded reserves in relation to the company’s consulting actuary’s range of reserve estimates.•we engaged an actuary as an auditor’s specialist to independently assess the company’s consulting actuary’s selection of actuarial methods and assumptions and the resulting reserve ranges and point estimates.valuation of limited partnership investments as described in note 2 - summary of significant accounting policies and note 5 - investments to the consolidated financial statements, the company’s limited partnership investments reported in the consolidated balance sheet were $28.1 million at december 31, 2021. for the investments with ownership interest at five percent or less, the company uses the net asset value method to estimate the fair value of these investments. due to a reporting lag, the company may record an adjustment to the company’s most recent share of net asset value when the amount can be reasonably estimated and a significant adverse impact on the net asset value is expected as a result of a major economic event. the methods used by management in determining if an adjustment to the company’s most recent share of net asset value is necessary are complex and subjective based on the judgement that is required to determine the key inputs and assumptions which can significantly impact the adjustments recognized.the principal considerations for our determination of the valuation of limited partnership investments as a critical audit matter are the subjectivity of the inputs and assumptions that management utilized in determining the adjustment to the company’s most recent share of net asset value. this required a high degree of effort and judgment in selecting the auditor procedures to evaluate management’s estimates and assumptions as it relates to the valuation of limited partnership investments, including the use of an auditor's specialist.the primary procedures we performed to address this critical audit matter included:•we obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the valuation of limited partnership investments, including controls over management’s estimate of the adjustment to the company’s most recent share of net asset value of the limited partnership investments.•we tested the completeness and accuracy of the data utilized by management and evaluated the reasonableness of management’s assumptions used to develop an estimate of fair value.•we engaged a specialist to develop an independent estimate of fair value of the limited partnership investments and comparison of management’s estimate to the independently developed estimate of fair value.valuation of stock-based compensation denominated in subsidiary shares as described in note 2 - summary of significant accounting policies and note 22 - stock-based compensation to the consolidated financial statements, the company recognized $3.2 million of compensation expense related to stock-based awards denominated in shares of the company’s subsidiary, typ tap insurance group, inc., for the year ended december 31, 2021. at december 31, 2021, there was $11.2 million of unrecognized compensation expense related to nonvested restricted stock and stock options denominated in subsidiary shares. the company accounts for stock-based compensation for all stock-based awards made to employees and directors based on estimated fair values. the methods used by management in determining the fair value of stock-based awards by its subsidiary to its employees at the grant date are complex and subjective with various key inputs and assumptions, including the fair value of the 37 subsidiary’s common shares on the grant date, volatility, and expected term. judgement is required to determine the appropriate fair value model and the inputs and assumptions used in calculating the fair value of stock-based awards.the principal considerations for our determination of the valuation of stock-based compensation denominated in subsidiary shares as a critical audit matter are the subjectivity of the inputs and assumptions that management utilized in determining the fair value of the stock-based awards. this required a high degree of effort and judgment in selecting the auditor procedures to evaluate management’s estimates and assumptions as it relates to the valuation of stock-based compensation denominated in subsidiary shares, including the use of an auditor’s specialist.•we obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the valuation of stock-based compensation denominated in subsidiary shares, including controls over management’s determination of the fair value of stock-based awards.•we tested the completeness and accuracy of the data utilized by management and evaluated the reasonableness of management’s assumptions used to develop an estimate of fair value.•we involved an internal specialist to test the company’s estimated fair value of stock-based compensation denominated in subsidiary shares, including the methods, assumptions and inputs of the valuation model./s/ dixon hughes goodman llp we have served as the company’s auditor since 2013.

critical audit matters the critical audit matters communicatedbelow are matters arising from the current period audit of the consolidated financial statements that were communicated or requiredto be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidatedfinancial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical auditmatters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicatingthe critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosuresto which they relate. f-1 evaluationof the fair value of earnout liabilities related to business acquisitions descriptionof the matter asdiscussed in note 6 to the consolidated financial statements, the company makes certain assumptions and judgment in determiningfair value measurements for business acquisitions. during the year ended december 31, 2020, the company consummated two businessacquisitions. the acquisitions resulted in the recognition of earnout liabilities totaling $889,200, subsequently revalued at$2,444,000. weidentified the evaluation of the fair value of the earnout liabilities related to the acquired businesses as a critical auditmatter. evaluating the fair value involved a high degree of assumptions used within the valuation models including forecasts ofprojected revenues, customer attrition rate and volatility rates. in addition, changes in these assumptions could have a significantimpact on the fair value of the earnout liabilities. how we addressed the matter in our audit weobtained an understanding and evaluated the design of internal control over the company’s process for determining the fairvalue of earnout liabilities related to the business acquisitions, specifically related to the determination of the key assumptions.we evaluated the forecasts of projected revenues and customer attrition rate assumptions used by the company by comparing theassumptions to the acquirees’ historical performance and to the growth rates of peer companies. we also compared the forecastsof projected revenue assumptions to industry data. we also involved a valuation professional with specialized skills and knowledgewho assisted in evaluating certain forecasts of projected revenues used by the company to value the earnout liabilities by independentlydeveloping these rates based on publicly available market data and comparing the results to rates used by the company. going concern descriptionof the matter asdescribed further in note 3 to the consolidated financial statements, the company has incurred losses each year from inceptionthrough december 31, 2020. however, management believes, based on the company’soperating plan, that capital resources, including cash and cash equivalents, along with funds expected to be generated from ouroperations will be sufficient to meet the company’s anticipated cash needs, including for working capital, earnout liabilitypayments for previous transactions, capital spending and debt service commitments as they come due for at least one year fromthe consolidated financial statement issuance date. wedetermined the company’s ability to continue as a going concern is a critical audit matter due to the estimation and executionuncertainty regarding the company’s future cash flows and the risk of bias in management’s judgments and assumptionsin estimating these cash flows. how we addressed the matter in our audit weobtained an understanding and evaluated the design of internal controls over the company’s preparation of forecasted information,including management’s assessment of the assumptions and data underlying the forecasted information and considerations ofthe company’s obligations. we tested the completeness, accuracy and relevance of underlying data for forecasted revenue,operating expenses, and uses and sources of cash used in management’s assessment of whether the company has sufficient liquidityto fund operations for at least one year from the financial statement issuance date. this testing included inquiries with management,comparison of prior period forecasts to actual results, consideration of positive and negative evidence impacting management’sforecasts, the company’s financing arrangements in place as of the report date, market and industry factors and considerationof the company’s relationships with its financing partners. additionally, we evaluated the adequacy of the company’sdisclosure of these circumstances in the consolidated financial statements. /s/ gbq partners llc we have served as the company’s auditor since 2012.

critical audit matters the critical audit matters communicated beloware matters arising from the current period audit of the financial statements that were communicated or required to be communicated tothe audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved ourespecially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinionon the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinionson the critical audit matters or on the accounts or disclosures to which they relate. allowance for loan losses as described in note 4 to the company’s financialstatements, the company has a loan portfolio, net of deferred fees of approximately $863.7 million and related allowance for loan lossesof approximately $11.2 million as of december 31, 2021. as described by the company in note 2, the evaluation of the allowance for loanlosses is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.the allowance for loan losses is evaluated on a regular basis and is based upon the company’s review of the collectability of theloans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’sability to repay, estimated value of any underlying collateral, and prevailing economic conditions. we identified the company’s estimate of theallowance for loan losses as a critical audit matter. the principal considerations for our determination of the allowance for loan lossesas a critical audit matter related to the high degree of subjectivity in the company’s judgments in determining the qualitativefactors. auditing these complex judgments and assumptions by the company involves especially challenging auditor judgment due to the natureand extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed. the primary procedures we performed to address this critical audit matterincluded the following: ·we evaluated the relevance and the reasonableness of assumptions relatedto evaluation of the loan portfolio, current economic conditions, and other risk factors used in development of the qualitative factorsfor collectively evaluated loans. ·we validated the completeness and accuracy of the underlying data usedto develop the factors. ·we validated the mathematical accuracy of the calculation. ·we evaluated the reasonableness of assumptions and data used by the companyin developing the qualitative factors by comparing these data points to internally developed and third-party sources, as well as otheraudit evidence gathered. ·analytical procedures were performed to evaluate the directional consistencyof changes that occurred in the allowance for loan losses for loans collectively evaluated for impairment. /s/ elliott davis, llc firm id: 149 we have served as the company’s auditor since 2006.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 58at&t inc. description of the matter discount rates used in determining pension and postretirement benefit obligations at december 31, 2019, the company’s pension benefit obligation was $59,873 million and exceeded the fair value of defined benefit pension plan assets of $53,530 million, resulting in an unfunded benefit obligation of $6,343 million. additionally, at december 31, 2019, the company’s postretirement benefit obligation was $16,041 million and exceeded the fair value of postretirement plan assets of $4,145 million, resulting in an unfunded benefit obligation of $11,896 million. as explained in note 15 to the consolidated financial statements, the company updates the assumptions used to measure the defined benefit pension and postretirement benefit obligations, including discount rates, at december 31 or upon a remeasurement event. the company determines the discount rates used to measure the obligations based on the development of a yield curve using high-quality corporate bonds selected to yield cash flows that correspond to the expected timing and amount of the expected future benefit payments. the selected discount rate has a significant effect on the measurement of the defined benefit pension and postretirement benefit obligations. auditing the defined benefit pension and postretirement benefit obligations was complex due to the need to evaluate the highly judgmental nature of the actuarial assumptions made by management, primarily the discount rate, used in the company’s measurement process. auditing the discount rates associated with the measurement of the defined benefit pension and postretirement benefit obligations was complex because it required an evaluation of the credit quality of the corporate bonds used to develop the discount rate and the correlation of those bonds’ cash inflows to the timing and amount of future expected benefit payments. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of certain controls over management’s review of the determination of the discount rates used in defined benefit pension obligation and postretirement benefit obligation calculations. to test the determination of the discount rate used in the calculation of the defined benefit pension and postretirement benefit obligations, we performed audit procedures that focused on evaluating, with the assistance of our actuarial specialists, the determination of the discount rates, among other procedures. for example, we evaluated the selected yield curve used to determine the discount rates applied in measuring the defined benefit pension and postretirement benefit obligations. as part of this assessment, we considered the credit quality of the corporate bonds that comprise the yield curve and compared the timing and amount of cash flows at maturity with the expected amounts and duration of the related benefit payments. as part of this assessment, we compared the company’s current projections to historical projected defined benefit pension obligation cash flows, and compared the current-year benefits paid to the prior-year projected cash flows. description of the matter uncertain tax positions as discussed in note 14 to the consolidated financial statements, at december 31, 2019 the company had recorded unrecognized tax benefits of $13,687 million for uncertain tax positions. uncertainty in a tax position may arise as tax laws are subject to interpretation. the company uses judgment to (1) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (2) measure the amount of tax benefit that qualifies for recognition within the financial statements. changes in facts and circumstances, such as changes in tax laws, new regulations issued by taxing authorities and communications with taxing authorities may affect the amount of uncertain tax positions and, in turn, income tax expense. estimated tax benefits related to uncertain tax positions that are not more likely than not to be sustained are reported as unrecognized income tax benefits. auditing the measurement of uncertain tax positions was challenging because the measurement is based on interpretations of tax laws and legal rulings. each tax position involves unique facts and circumstances that must be evaluated, and there may be many uncertainties around initial recognition and de-recognition of tax positions, including regulatory changes, litigation and examination activity. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s accounting process for uncertain tax positions. this included controls over identification and measurement of the benefits of the uncertain tax positions, including management’s review of the inputs and calculations of unrecognized income tax benefits, both initially and on an ongoing basis. we involved our tax professionals to assist us in assessing significant uncertain tax positions, including an evaluation of the technical merits of individual positions, the determination of whether a tax position was more-likely-than-not to be sustained, and the company’s measurement of its uncertain tax positions, including the computation of interest and penalties, among other procedures. for significant new positions, we assessed the company’s filing position, correspondence with the relevant tax authorities and third-party advice obtained by the company, as appropriate. for existing positions, we assessed changes in facts and law, as well as settlements of similar positions for any impact to the recognized liability for the positions. we analyzed the company’s assumptions and data used to determine the amount of tax benefit to recognize and tested the accuracy of the calculations. we also evaluated the adequacy of the company’s financial statement disclosures related to uncertain tax positions included in note 14.59at&t inc. description of the matter evaluation of goodwill and indefinite-lived intangible assets for impairment at december 31, 2019, the company’s goodwill balance was $146,241 million and its total indefinite-lived intangible assets were $101,392 million. the company’s indefinite-lived intangible assets consist of wireless licenses, orbital slots and trade names. as discussed in note 9 to the consolidated financial statements, reporting unit goodwill and indefinite-lived intangible assets are tested for impairment at least annually. this involves estimating the fair value of the reporting units and indefinite-lived intangible assets, which are determined using discounted cash flow models and a market multiples valuations approach. these fair value estimates are sensitive to significant assumptions, such as cash flow projections, operating margin, discount rates, terminal values, subscriber growth and churn, royalty rates and capital investment. the company also considers market multiples for peer companies which offer comparable services to its reporting units. these assumptions are affected by expectations about future market and economic conditions. auditing management’s annual impairment tests for goodwill and indefinite-lived intangible assets was complex because of the significant judgment required to evaluate the management assumptions described above used to determine the fair value of the reporting units and other assets. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company’s goodwill and indefinite-lived intangible assets impairment review processes. this included controls over management’s review of the valuation models and the significant assumptions noted above, utilized in both the discounted cash flow and market valuation approaches. to test the estimated fair value of the company’s reporting units and indefinite-lived intangible assets, we involved our valuation specialists to assist us in performing our audit procedures. our procedures included, among others, testing the valuation methodology used and the significant assumptions within the valuation methodology. for example, we compared the significant assumptions to current industry, market and economic trends, and other guideline companies in the same industry and to other factors. where appropriate, we evaluated whether changes to the company’s business model, customer base and other factors would affect the significant assumptions. we also assessed the historical accuracy of management’s estimates, tested the clerical accuracy of the valuation calculations, and performed independent sensitivity analyses. in addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the company. /s/ ernst & young llp we have served as the company’s auditor since 1999.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.46revenue recognition – measuring variable consideration description of the matter as described in note 2 to the consolidated financial statements, the company's sales contracts provide certain distributors with credits for price protection and rights of return, which results in variable consideration. during 2020, sales to distributors were $3.2 billion net of expected price protection discounts and rights of return for which the liability balance as of october 31, 2020 was $229.8 million.auditing the company's measurement of variable consideration under distributor contracts involved especially challenging judgment because the calculation involves subjective management assumptions about estimates of expected price protection discounts and returns. for example, estimated variable consideration included in the transaction price reflects management's evaluation of contractual terms, historical experience and assumptions about future economic conditions. changes in those assumptions can have a material effect on the amount of variable consideration recognized.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company's process to calculate the variable consideration. for example, we tested controls over the appropriateness of assumptions management used as well as controls over the completeness and accuracy of the data underlying estimates of expected price protection discounts and returns.our audit procedures included, among others, inspecting contractual terms in distributor agreements and testing the underlying data used in management’s calculation for completeness and accuracy as well as evaluating the significant assumptions used in the estimation of variable consideration. we evaluated the company’s methods and assumptions used in the estimates, which included comparing the assumptions to historical trends. we inspected and tested the results of the company's retrospective review analysis of actual returns and price protection discounts claimed by distributors, evaluated the estimates made based on historical experience and performed sensitivity analyses of the company’s significant assumptions to assess the impact on the variable consideration. we also evaluated whether the company appropriately considered new information that could significantly change the estimated future price protection discounts or returns.goodwill – quantitative impairment assessment description of the matter the company’s consolidated goodwill balance was $12.3 billion as of october 31, 2020. as described in note 2 to the consolidated financial statements, the company evaluates goodwill for impairment at the reporting unit level annually and performed a quantitative goodwill impairment assessment for each of its eight reporting units. the quantitative impairment assessment involves the comparison of the fair value of each reporting unit to its respective carrying amount. the company used a weighting of the income and market approaches to determine the fair value of each reporting unit. auditing management's quantitative goodwill impairment test involved a high degree of auditor judgment due to the significant estimation required to determine the fair value of each reporting unit. in particular, the fair value estimate for one of the eight reporting units was sensitive to significant assumptions, such as forecasted revenues, gross profit margins, operating income margins, long-term discount rate, perpetual growth rate, identification of comparable publicly traded companies and estimated valuation multiples, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions as outlined above, used in determining the fair value of this reporting unit.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the company's quantitative goodwill impairment assessment process. for example, we tested controls over management's review of the valuation model and the significant assumptions used.to test the estimated fair value of the reporting unit, our audit procedures included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the company in its analysis. we tested significant assumptions by comparing them to current and forecasted industry and economic trends, analyst reports, and forecasted peer company information. we evaluated management’s ability to accurately forecast by comparing actual results to historical forecasts. we also performed sensitivity analyses of certain assumptions to evaluate changes in the fair value that would result from changes in the assumptions. with the assistance of our valuation specialists, we evaluated the selection of the long-term discount rate and perpetual growth rate, including testing the underlying source information and the mathematical accuracy of the calculations by developing a range of independent estimates and comparing those to the rates selected by management. we also involved our valuation specialists to evaluate the market approach, including evaluating the reasonableness of the selected comparable publicly traded companies and the resulting market multiples calculation. 47/s/ ernst & young llp we have served as the company’s auditor since 1967.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. fair value of real estate acquired as described further in note 4 to the consolidated financial statements, during 2020, the company acquired two multi-tenant income properties and two single-tenant income properties for a total acquisition cost of $185.7 million. as described further in note 2 to the consolidated financial statements, the acquisition cost of real estate acquired with in-place leases is allocated to the acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, the value of in-place leases, and the value of leasing costs, based in each case on their relative fair values. in allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values f-2table of contentsare recorded as other assets or liabilities based on the present value. we identified the evaluation of the fair value of real estate acquired with in-place leases as a critical audit matter. the principle considerations for our determination that the evaluation of the fair value of real estate acquired subject to in-place leases was a critical audit matter is that auditing the estimates of fair values of the acquired tangible assets and identified intangible assets and liabilities was complex due to the significant assumptions being sensitive to changes, including discount rates, terminal rates, and market rental rates that can be impacted by expectations about future market or economic conditions.our audit procedures related to the evaluation of the fair value of real estate acquired with in-place leases included the following among others.●we evaluated the design and tested the operating effectiveness of the key controls relating to the company’s process to account for real estate acquisitions, including those addressing the development of the significant assumptions, including discount rates, terminal rates and market rental rates. ●we involved internal valuation professionals who assisted in comparing the discount rates, terminal rates and market rental rates to independently developed ranges. /s/ grant thornton llp we have served as the company’s auditor since 2012.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 48 table of contents allowance for loan losses – loans collectively evaluated for impairment – qualitative factors description of the matter as described in note 1 (nature of banking activities and significant accounting policies) and note 4 (allowance for loan losses) to the consolidated financial statements, the company establishes an allowance for loan losses that represents an amount that, in management’s judgment, will be adequate to absorb any losses on existing loans that may become uncollectible. the company’s allowance for loan losses consists of specific and general components. the general component covers loans that are not considered impaired and is based on historical loss experience adjusted for qualitative factors. at december 31, 2020, the general component represented $5,262,000 of the total allowance for loan losses of $7,485,000. the qualitative factors are assigned by management by loan type based on delinquencies and asset quality, national and local economic trends, effects of changes in the value of underlying collateral, trends in the volume and nature of loans, effects of changes in lending policy, experience and depth of management, concentrations of credit, quality of the loan review system, and effect of external factors such as competition and regulatory requirements. qualitative factors can change from period to period based on management’s assessment and the relative weights given to each factor. management exercised significant judgment when assessing the qualitative factors in estimating the allowance for loan losses. we identified the assessment of the qualitative factors as a critical audit matter as auditing the qualitative factors involved especially complex and subjective auditor judgment in evaluating management’s assessment of the inherently subjective estimates. how we addressed the matter in our audit the primary audit procedures we performed to address this critical audit matter included:•obtain an understanding of controls over the evaluation of qualitative factors, including management's development and review of the data inputs used as the basis for the allocation factors and management's review and approval of the reasonableness of the assumptions used to develop the qualitative adjustments.•substantively testing management’s process, including evaluating their judgments and assumptions for developing the qualitative factors, which included: •evaluating the completeness and accuracy of data inputs used as a basis for the qualitative factors. •evaluating the reasonableness of management’s judgments related to the determination of qualitative factors. •evaluating the qualitative factors for directional consistency and for reasonableness. •testing the mathematical accuracy of the allowance calculation, including the application of the qualitative factors. /s/ yount, hyde & barbour, p.c. we have served as the company's auditor since 1988.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.income taxes - legal entity reorganization - refer to note 8 to the financial statements critical audit matter description the company completed a reorganization of its intercompany financing and associated legal entity ownership in response to the changing global tax environment, resulting in a $26.2 million current tax expense and a $239.0 million deferred income tax benefit. the reorganization involved the interpretation of multi-jurisdictional tax laws and regulations, supported by third-party tax opinions. interpretation of tax laws can be inherently uncertain and can be subject to potential challenges by the relevant tax authorities, both of which were considered in assessing its reserves for uncertain tax positions.we identified the income taxes associated with the legal entity reorganization as a critical audit matter because of the significant judgments made by management and the complex nature of the reorganization, particularly related to the interpretation of multi-jurisdictional tax laws and regulations. this required a high degree of auditor judgment and an increased extent of effort, including the 77need to involve our tax specialists when performing audit procedures to evaluate the company’s interpretation of tax laws and regulations for multiple jurisdictions. how the critical audit matter was addressed in the audit our audit procedures related to the income taxes associated with the legal entity reorganization included the following, among others:•we tested the effectiveness of management’s controls over income taxes, including those over the legal entity reorganization and the interpretation of tax laws and regulations.•with the assistance of our tax specialists, we evaluated the income taxes associated with the legal entity reorganization by performing the following:–obtaining management and third-party tax opinions or memoranda regarding the analysis of relevant tax laws and regulations and evaluating whether the analysis was consistent with our interpretation.–evaluating the appropriateness of management’s conclusions with respect to reserves for uncertain tax positions associated with the legal entity reorganization. –testing the underlying calculations and allocations supporting the tax expense and benefit recorded.commitments and contingencies - opioid litigation settlement - refer to notes 19 and 24 to the financial statements critical audit matter description on february 25, 2020, the company announced that it has reached an agreement in principle on the terms of a global settlement that would resolve all opioid-related claims against the company and its subsidiaries (“litigation settlement”) for $1,600.0 million in cash payments over eight years and the issuance of warrants to purchase ordinary shares of the company that would represent approximately 19.99% of the company’s fully diluted outstanding shares. the litigation settlement contemplates the filing of voluntary petitions under chapter 11 of the u.s. bankruptcy code (“chapter 11”) by certain subsidiaries of mallinckrodt plc operating the specialty generics business (the “specialty generics subsidiaries”). the litigation settlement payments and the issuance of warrants are effective upon the emergence from the contemplated chapter 11 process and are conditioned upon, among other things, bankruptcy court approval of the bankruptcy plan effectuating the litigation settlement, the emergence of the specialty generics subsidiaries from bankruptcy and other material terms. the company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. as a result of the litigation settlement, the company recorded an accrual of $1,600.0 million related to the cash payments and $43.4 million related to the warrants in the consolidated balance sheet as of december 27, 2019, with a corresponding non-cash charge to the consolidated statement of operations as a component of operating expenses. we identified the opioid-related litigation settlement liability and disclosures as a critical audit matter because of the significant judgments made by management to assess the complex terms of the litigation settlement in order to determine the measurement and recognition of the estimated loss. this required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s conclusions.how the critical audit matter was addressed in the audit our audit procedures related to the opioid-related litigation settlement liability and disclosures included the following, among others:•we tested the effectiveness of controls over the litigation settlement, which included review and approval of the accounting and related disclosures.•we requested and received written responses from the company’s external legal counsel regarding opioid litigation and the litigation settlement.•we evaluated the company’s conclusions regarding the recognition and measurement of the opioid-related litigation settlement by obtaining management’s documented accounting treatment and evaluating the accounting based on the terms of the litigation settlement and the applicable accounting principles generally accepted in the united states of america.•we evaluated the company’s disclosures for consistency with our knowledge of the litigation settlement./s/ deloitte & touche llp st. louis, missouri february 25, 2020we have served as the company’s auditor since 2011.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.revenue recognition – estimating measure of progress for clinical research services as described in notes 1 and 20 to the consolidated financial statements, revenue of the research & development solutions segment for the year ended december 31, 2020, is $5,760 million, the majority of which relates to service contracts for clinical research that represent a single performance obligation. the company recognized revenue for these contracts over time using a cost-based input method. revenue was recognized based on progress on the performance obligation, which was measured by the proportion of actual costs incurred to the total costs expected to complete the contract. costs included in the measure of progress include direct labor and third-party costs (such as payments to investigators and other pass through expenses for the company’s clinical monitors). this cost-based method of revenue recognition required management to make estimates of costs to complete its projects on an ongoing basis. the principal considerations for our determination that performing procedures relating to revenue recognition - estimating measure of progress for clinical research services is a critical audit matter are the high degree of auditor judgment, subjectivity, and effort in performing audit procedures and evaluating audit evidence related to the cost estimates made by management, due to significant judgment by management when determining the total expected costs to complete its contracts, specifically the estimation of direct labor and third-party costs.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the estimation of the total cost to complete clinical research service contracts. these procedures also included, among others, testing management’s process for determining the estimate of total costs to complete its contracts, which included evaluating the reasonableness of significant assumptions made by management including direct labor and third party-costs, evaluating the appropriateness of changes to management’s estimate of total costs to complete throughout the duration of the contract, testing actual direct costs incurred, and evaluating management’s ability to reasonably estimate the total expected costs to complete contracts, which included performing a comparison of management’s prior period cost estimates to final actual costs./s/ pricewaterhouse coopers llp raleigh, north carolina february 12, 2021we have served as the company’s auditor since 2002.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. share-based compensation as discussed in note 6 to the financial statements, on march 31, 2020, the company issued two million shares of series a preferred stock as compensation for their two board members. the preferred shares were valued at $158 million based on the market price of the company’s common stock of $0.79 on the measurement date, given such preferred stock can be converted into 100 shares of common stock, and has dividend and voting rights as through converted into common stock. auditing management’s calculation of fair value for the restricted preferred stock can be a significant judgment, given the fact that the company’s common stock is a thinly traded security listed on the u.s. otc market. to evaluate the appropriateness and accuracy of the fair value determined by management, we examined the closing price on the date of issuance and the preceding weekly and monthly average closing prices, as discussed in the sec staff accounting bulletin no. 107. we also reviewed the underlying accounting codifications for this accounting treatment applied by management. in addition, we evaluated the company’s disclosure in relation to this matter included in note 6 to the financial statements. /s/ bf borgers cpa pc we have served as the company’s auditor since 2017.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.capitalized software development costs as described in note 2 to financial statements, the company capitalizes certain labor costs related to internally developed software. management determines the amount of internal software costs to be capitalized based on the amount of time spent by developers on projects in the application stage of development. there is judgment involved in estimating time allocated to a particular project in the application stage. the gross balance of capitalized software development costs was $12.9 million as of december 31, 2021. related accumulated amortization and the net carrying amount of capitalized software was approximately $11.5 million and $1.4 million, respectively, as of december 31, 2021.we identified the estimate of time and related costs eligible for capitalization as capitalized software development costs as a critical audit matter due the significant judgment by management when determining the amount of time to capitalize for projects. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s determination of capitalized costs and management’s judgment related to the amount of time incurred by developers on projects in the application stage. f-1addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included gaining an understanding of the controls relating to capitalized software development costs, testing management’s process for determining the time and related costs eligible for capitalization in the current year, evaluating whether the time and related costs were eligible for capitalization, testing the completeness and accuracy of underlying data used in management’s estimate of eligible time and related costs, and evaluating the reasonableness of significant assumptions used by management in estimating eligible time and related costs. evaluating management’s assumptions related to eligible software development time for capitalization involved performing inquiries with management and with a sample of individual software developers regarding the nature, timing and extent of time worked on development activities./s/ eisner amper, llp we have served as the company’s auditor since 2021.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matter does not alter in any way our opinion on the consolidated 38table of contentsfinancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.assessment of uncertain tax positions as discussed in notes 1 and 13 to the consolidated financial statements, as of april 1, 2022 the company recognized uncertain tax positions. the company recognizes tax benefits from uncertain tax positions when there is more than a 50% likelihood that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. as of april 1, 2022, the company has recorded a liability for gross unrecognized tax benefits, of $527 million.we identified the assessment of uncertain tax positions as a critical audit matter. complex auditor judgment, including the involvement of tax professionals with specialized skills and knowledge, was required to evaluate the company’s interpretation and application of tax law globally across its multiple subsidiaries.the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s uncertain tax positions process, including controls related to the interpretation of tax law, its application in the liability estimation process, and determination of the final uncertain tax position. we involved tax professionals with specialized skills and knowledge, who assisted in:● obtaining an understanding of the company’s overall tax structure across multiple subsidiaries and assessing the company’s compliance with tax laws globally,● evaluating changes in tax law, and assessing the interpretation under the relevant jurisdictions’ tax law,● inspecting settlements with taxing authorities to assess the company’s determination of its tax positions and having more than a 50% likelihood to be sustained upon examination, and● performing an assessment of the company’s tax positions and comparing the results to the company’s assessment.in addition, we evaluated the company’s ability to accurately estimate its gross unrecognized tax benefits by comparing historical gross unrecognized tax benefits to actual outcome upon conclusion of tax examinations./s/ kpmg llp we have served as the company’s auditor since 2002.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. deferred amusement revenue for unused game play credits as discussed in notes 1 and 4 to the consolidated financial statements, the company defers a portion of amusement revenues for the estimated unfulfilled performance obligations related to unused game play credits which they believe their customers will utilize in the future. the company recorded deferred amusement revenue of $93.0 million as of january 30, 2022, which is included in accrued liabilities on the consolidated balance sheet f-4 table of contents and disclosed as deferred amusement revenue. this balance includes deferred revenue related to unused game play credits. the deferral is based on an estimated rate of future use by customers. the company applies judgment to determine the estimated rate of future use by customers using information about game play credits outstanding and historical customer utilization patterns. we identified the evaluation of the estimated rate of future use assumption used to determine deferred amusement revenue for unused game play credits as a critical audit matter. subjective auditor judgment was required to evaluate the effect of historical customer usage patterns on the estimated rate of future use assumption, including consideration of the impacts of customer usage patterns during the covid-19 pandemic on management’s assumption. the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s deferred amusement revenue process, including controls related to the development of the estimated rate of future use assumption. we evaluated historical periods’ game play credit activity for indication of significant changes in customer behavior and to determine whether changes in the historical activity were consistent with changes in the company’s business that impact the estimated rate of future usage assumption, including changes in customer usage patterns during the covid-19 pandemic. we compared trends of customers’ historical use patterns to the company’s estimated rate of future use assumption. we assessed the outstanding game play credit data utilized by the company to derive the estimated rate of future use assumption by comparing it to relevant underlying documentation. deferred amusement revenue for unredeemed tickets as discussed in notes 1 and 4 to the consolidated financial statements, the company defers a portion of amusement revenue for the material right provided to customers to redeem tickets in the future for prizes. the company recorded deferred amusement revenue of $93.0 million as of january 30, 2022, which is included in accrued liabilities on the consolidated balance sheet and disclosed as deferred amusement revenue. this balance includes deferred revenue related to the material right to redeem tickets in the future. the deferral is based on an estimated redemption rate of outstanding tickets that will be redeemed in subsequent periods. the company applies judgment to determine the redemption rate assumption using information about tickets outstanding and historical customer utilization patterns. we identified the evaluation of the estimated redemption rate assumption used to determine deferred amusement revenue for unredeemed tickets as a critical audit matter. subjective auditor judgment was required to evaluate the effect of historical customer usage patterns on the estimated rate of future use assumption, including consideration of the impacts of customer usage patterns during the covid-19 pandemic on management’s assumption. the following are the primary procedures we performed to address this critical audit matter. we evaluated the design and tested the operating effectiveness of certain internal controls over the company’s deferred amusement revenue process, including controls related to the development of the redemption rate assumption. we evaluated historical periods’ ticket redemption activity for indication of significant changes in customer behavior and to determine whether changes in the historical activity were consistent with changes in the company’s business that impact the estimated redemption rate assumption, including changes in customer redemption patterns during the covid-19 pandemic. we compared trends of customers’ historical redemption patterns to the company’s estimated redemption rate assumption. we assessed the outstanding ticket data utilized by the company to derive the redemption rate assumption by comparing it to relevant underlying documentation. /s/ kpmg llp we have served as the company’s auditor since 2010.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.34revenue recognition - estimated total cost at completion on fixed-price contracts as described in note 1 to the consolidated financial statements, approximately 57% of total net sales of $2,188.0 million are from fixed-price revenue contracts for the year ended december 31, 2021. these contracts present the risk of unreimbursed cost overruns, potentially resulting in lower than expected contract profits and margins. the company recognizes revenue as each performance obligation is satisfied. the majority of the company’s aerospace and defense performance obligations are satisfied over time either as the service is provided, or as control transfers to the customer. transfer of control is evidenced by the company’s contractual right to payment for work performed to date plus a reasonable profit on contracts with highly customized products that have no alternative use to the company. management measures progress on substantially all its performance obligations using the cost-to-cost method, which management believes best depicts the transfer of control of goods and services to the customer. under the cost-to-cost method, management records revenues based upon costs incurred to date relative to the total estimated cost at completion. recognition of revenue and profit on long-term contracts requires the use of assumptions and estimates related to the total contract value, the total cost at completion, and the measurement of progress towards completion for each performance obligation. due to the nature of the programs, developing the estimated total contract value and total cost at completion for each performance obligation requires the use of significant judgment. as described in note 1, factors considered in estimating the work to be completed include, but are not limited to, labor productivity, the nature and technical complexity of the work to be performed, availability and cost volatility of materials, subcontractor and vendor performance, warranty costs, volume assumptions, anticipated labor agreements, inflationary trends, schedule and performance delays, availability of funding from the customer, and the recoverability of costs incurred outside the original contract included in any estimates to complete. the principal considerations for our determination that performing procedures relating to revenue recognition - estimated total cost at completion on fixed-price contracts is a critical audit matter are the significant judgment by management when estimating the total cost at completion for such contracts; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate significant assumptions used in management’s estimated total cost at completion for fixed-price contracts related to labor productivity, the nature and technical complexity of the work to be performed, availability and cost volatility of materials, subcontractor and vendor performance, and schedule and performance delays. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the development of estimated total cost at completion on fixed-price contracts. these procedures also included, among others, testing management’s process for the estimate of its total cost at completion for a sample of contracts, which included testing inception-to-date actual costs, and evaluating the reasonableness of significant assumptions related to labor productivity, the nature and technical complexity of the work to be performed, availability and cost volatility of materials, subcontractor and vendor performance, and schedule and performance delays. evaluating the reasonableness of significant assumptions involved assessing management’s ability to reasonably estimate the total cost to complete on fixed-price contracts by (i) performing a comparison of estimated labor and material costs to complete to agreements with third parties or actual costs incurred on the sampled contract or similar completed contracts, (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated total cost to complete, and (iii) testing management’s process for identifying and estimating risks that could result in schedule or performance delays. /s/ pricewaterhouse coopers llp sacramento, california february 18, 2022we have served as the company’s auditor since 2006.

critical audit matter. basis for opinion these consolidated financial statements are the responsibility of the company's management. our responsibility is to express an opinion on the company’s consolidated financial statements based on our audits. we are a public accounting firm registered with the pcaob and are required to be independent with respect to the company in accordance with the u.s. federal securities laws and the applicable rules and regulations of the securities and exchange commission and the pcaob. we conducted our audits in accordance with the standards of the pcaob. those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. we believe that our audits provide a reasonable basis for our opinion. critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our 40table of contentsopinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. estimate of workers’ compensation and general liability reserves description of the matter the company records expenses and reserves for workers’ compensation matters related to alleged work-related employee accidents and injuries, as well as general liability matters related to alleged non-employee incidents and injuries. at january 31, 2020, the company’s reserves for self-insurance risks were $240.6 million, which includes workers’ compensation and general liability reserves. as discussed in note 1 of the consolidated financial statements, the company retains a significant portion of risk related to its workers’ compensation and general liability exposures. accordingly, provisions are recorded for the company’s estimates of such losses. the undiscounted future claim costs for the workers’ compensation and general liability exposures are estimated using actuarial methods. auditing management’s assessment of the recorded self-insurance exposure reserves was complex and judgmental due to the significant assumptions required in projecting the exposure on incurred claims (including those which have not been reported to the company). in particular, the estimate was sensitive to significant assumptions such as loss development factors, trend factors, pure loss rates, and projected claim counts. how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s accounting for these self-insurance exposures. for example, we tested controls over the appropriateness of the assumptions management used in the calculation and the completeness and accuracy of the data underlying the reserves. to test the company’s determination of the estimated required self-insurance reserves, we performed audit procedures that included, among others, assessing the actuarial valuation methodologies utilized by management, testing the significant assumptions discussed above, testing the completeness and accuracy of the underlying data used by the company in its evaluation, and testing the mathematical accuracy of the calculations. we also compared the significant assumptions used by management to industry accepted actuarial assumptions, reassessed the accuracy of management’s historical estimates utilized in prior period evaluations, and utilized an actuarial valuation specialist to assist in assessing the valuation methodologies and significant assumptions used in the valuation analysis, as well as to compare the company’s recorded reserve to an independently developed range of actuarial reserves. 41table of contents adoption of new lease accounting standard description of the matter as described above and in note 1 to the consolidated financial statements, the company adopted asu 2016-02, leases (asc 842), on february 2, 2019. the adoption of asc 842 resulted in the recognition of right-of-use operating lease assets and lease liabilities of approximately $8.0 billion as of february 2, 2019. the cumulative effect of adopting the standard resulted in an adjustment to retained earnings of $28.8 million at the same date. among the elements of management estimation in connection with the adoption was the determination of incremental borrowing rates (“ibr”) which were used to calculate its operating right-of-use assets and lease liabilities. management estimates certain adjustments to observed borrowing rates in order to derive the ib rs that are representative of the rate the lessee would have to borrow on a collateralized basis over a similar term as the subject lease. auditing the company’s adoption of asc 842 was complex and involved subjective auditor judgement because the company is party to a significant number of lease contracts, and certain aspects of adopting asc 842 required management to exercise significant judgment in applying asc 842 to its portfolio of lease contracts. in particular, auditing management’s estimate of the ib rs used to determine the operating right-of-use assets and lease liabilities was especially challenging and required the evaluation of the significant assumptions utilized by management including the selection of appropriate yield curves and adjustments for collateralization. how we addressed the matter in our audit we obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the company’s accounting for the adoption of asc 842. for example, we tested controls over management’s review of the application of accounting policy elections to its portfolio of leases and over management’s review of the estimation of the ib rs. to test the company’s adoption of asc 842, we performed audit procedures that included, among others, evaluating the completeness of the population of contracts that meet the definition of a lease under asc 842, testing the accuracy of lease terms by agreement of such terms to the original lease contract, and testing the accuracy of the company’s calculations of initial right-of-use assets and lease liabilities. we involved our specialist to assist in our evaluation of the company’s methodology, model and significant assumptions utilized in developing the ib rs. we also compared the company’s ib rs to ranges developed by our specialists based on independently observed data. /s/ ernst & young llp we have served as the company’s auditor since 2001.

critical audit matters the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. valuation of reserve for losses and loss adjustment expenses as described in notes 1 and 3 to the consolidated financial statements, the company maintains reserves equal to the estimated ultimate liability for losses and loss adjustment expense for reported and unreported claims for both the insurance and reinsurance businesses. the company’s reserve for losses and loss adjustment expenses as of december 31, 2019 was $13.6 billion. reserves are based on estimates of ultimate losses and loss adjustment expenses by underwriting or accident year. management uses a variety of statistical and actuarial techniques to monitor reserve adequacy over time, evaluate new information as it becomes known and adjust reserves as warranted. management considers many factors when setting reserves including (1) exposure base and projected ultimate premium; (2) expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (3) actuarial methodologies and assumptions which analyze loss reporting and payment experience, reports from ceding companies and historical trends, such as reserving patterns, loss payments and product mix; (4) current legal interpretations of coverage and liability; and (5) economic conditions. the principal considerations for our determination that performing procedures relating to the valuation of reserve for losses and loss adjustment expenses is a critical audit matter are there was significant judgment by management when developing their estimate. this in turn led to a high degree of auditor subjectivity, judgment and effort in evaluating the audit evidence relating to the actuarial methodologies which included significant assumptions related to expected loss ratios and historical trends, such as reserving patterns, loss payments and product mix. also, the audit effort included the involvement of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained. f-3 addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to the company’s valuation of reserves for losses and loss adjustment expenses, including controls over the selection of actuarial methodologies and development of significant assumptions. these procedures also included, among others, testing the completeness and accuracy of data provided by management and the involvement of professionals with specialized skill and knowledge to assist in performing procedures for a sample of products and lines of business including: (1) evaluating management’s actuarial methodologies and assumptions related to expected loss ratios and historical trends, such as, reserving patterns, loss payment and product mix used for determining reserves for losses and loss adjustment expenses; and (2) developing an independent estimate of the reserve for losses and loss adjustment expenses and comparing the independent estimate to management’s actuarial determined reserves. /s/ pricewaterhouse coopers llp new york, new york march 2, 2020we have served as the company’s or its predecessor's auditor since 1996.

critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.assessment of the assumptions underlying the breakage rates for certain customer programs as discussed in notes 2 and 8 to the consolidated financial statements, the company recorded allowances totaling $194,703 thousand as of march 31, 2020 for various cooperative marketing arrangements (marketing development funds and cooperative advertising arrangements), customer incentive and pricing programs, together known as customer programs. the company estimates the percentage of customer programs which will not be claimed or will not be earned by customers, which is commonly referred to as "breakage". the length of time between when the company recognizes revenue and when customers make claims under these customer programs can be as long as one year. this requires the company to use judgment to estimate breakage rates. we identified the assessment of the assumptions underlying the breakage rates for certain customer programs as a critical audit matter. the determination of the period in which the claims are expected to be submitted by the customers, historical customer claim experience and historical trend of claims submitted after the expected period are considered the significant assumptions around the breakage rates estimate. the testing of such assumptions required a high degree of auditor judgment due to the inherent uncertainties related to the relevance of historical collection experience to the determination of the breakage rates estimate.the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s revenue process, including controls over the significant assumptions identified above. we assessed the underlying information related to the expected periods that a customer claim will be submitted and the historical claim experience rate for customer incentive and pricing programs and marketing development funds, by analyzing the trend in the customers’ historical claims and accruals information. in addition, we evaluated the company’s ability to estimate the breakage rates by comparing the estimated breakage from fiscal 2019 against actual subsequent breakage.logitech international s.a. | fiscal 2020 form 10-k | 74table of contents assessment of the accruals for sales returns and certain customer programs as discussed in notes 2 and 8 to the consolidated financial statements, the company recorded accruals of $30,267 thousand for sales returns and $130,220 thousand for customer programs as of march 31, 2020. the company records these accruals as a reduction of revenue at the time of sale. the company estimated these accruals based on historical data or future commitments that are planned and controlled by the company. the company uses judgment in analyzing historical trends, inventories owned by and located at the customers, products sold by the direct customers to end customers or resellers, known product quality issues and other relevant customer and product information, such as stage of product life cycle which are expected to experience unusually high discounting or returns. we identified the assessment of the accruals for sales returns and certain customer programs as a critical audit matter. historical experience being predictive of future returns and customer programs’ earned amounts is the key assumption used to estimate the accrual for sales returns and customer programs. due to the inherent uncertainties related to the relevance of the predictive historical experience to the determination of the estimate, the testing required a high degree of auditor judgment.the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company’s accrual process, including controls over the assumption discussed above. we assessed the historical experience used in estimating the accrual for sales returns and certain customer programs using a combination of company internal historical information of sales, returns and customer programs’ earned amounts, third-party contracts, and relevant and reliable third-party channel inventory and sell-through data. we confirmed selected customer contracts to assess the terms and conditions related to sales returns and certain customer programs. we analyzed channel data trends by product and by region comparing fiscal 2020 quarterly ratios to prior fiscal years. in addition, we evaluated the company’s ability to estimate the accruals for sales returns and certain customer programs by comparing recorded accruals from fiscal 2019 to actual subsequent returns and customer programs’ earned amounts.assessment of unrecognized tax benefit resulted from the tax reform in switzerland as discussed in note 7 to the consolidated financial statements, the company recorded gross unrecognized tax benefits of $71.1 million, excluding associated interest and penalties, for uncertain tax positions taken during fiscal year ended march 31, 2020. the gross unrecognized tax benefits include an uncertain tax position in switzerland as a result of the enactment of the federal act on tax reform and ahv financing ("traf") on march 10, 2020 in the canton of vaud.we identified the assessment of the unrecognized tax benefit associated with a tax position taken upon the enactment of traf as a critical audit matter. complex auditor judgment was required to evaluate the company’s interpretation and application of traf and estimate of the ultimate resolution of the tax position.the primary procedures we performed to address this critical audit matter included the following. we tested certain internal controls over the company's unrecognized tax benefit determination process, which relates to the interpretation of traf and its application in the assessment of the uncertain tax position process. since the application of traf measures is complex and subject to interpretation, we involved swiss tax professionals with specialized skills and knowledge, who assisted in:•evaluating the company's interpretation of traf and its potential impact on the unrecognized tax benefit; •assessing the company's determination of its tax positions having more than a 50% likelihood to be sustained upon examination, and •performing an independent assessment of the company's uncertain tax position taken upon the enactment of traf and comparing the results to the company's evaluation.logitech international s.a. | fiscal 2020 form 10-k | 75table of contents/s/ kpmg llp we have served as the company’s auditor since 2014.

critical audit matters the critical audit matters communicated below are matters arising from the current year audit of the financial statements that were communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.43table of contents senior secured convertible note agreement (including embedded derivatives)critical audit matter description as disclosed in note 5 to the financial statements, on june 8, 2020, the company issued $17.5 million in principal amount of an 8% senior secured convertible note due april 1, 2025 (the high trail note) to high trail investments sa llc for $14 million. in addition, 15,000,000 warrants were issued in connection with the issuance of the high trail note.the high trail note contained embedded features which were required to be bifurcated upon issuance and recorded at fair value and remeasured with the changes in fair value recognized in other income (expense), net in the company’s consolidated statements of operations and comprehensive loss. these embedded features include conversion features that allow for a change in the conversion rate in connection with certain equity issuances, payments based on a fundamental change and certain events of defaults. we identified the high trail note as a critical audit matter. auditing the embedded features involved complex accounting for derivatives which required specialized skills and knowledge to assess the fair value and reasonableness of the inputs used to value the derivatives.how we addressed the matter in our audit the primary procedures we performed to address this critical audit matter included:•obtaining an understanding of the company’s process to account for the issuance of the convertible note and warrants.•reviewing the convertible note and warrant agreement.•evaluating management's memorandum for accounting treatment and management specialist’s valuation on the embedded derivatives.•testing the underlying data and estimates used as inputs in the valuation model. •with the assistance of our valuation specialist, evaluating the valuation methodology used by the company and significant assumptions used in the valuation model by evaluating individual assumptions used by management.settlement agreement with high trail critical audit matter description as disclosed in note 5 to the financial statements, on september 13, 2019, the company and high trail entered into the term sheet for a common stock and senior secured convertible note financing, setting forth the terms of a proposed transaction between the company and high trail. subsequently, the company and high trail investments sa llc (high trail) entered into a settlement agreement dated march 17, 2020 (settlement agreement) whereby the company agreed to grant high trail a warrant to purchase 2,000,000 shares of its common stock and exercise price of $0.70 per share. we identified the settlement agreement with high trail as a critical audit matter. auditing the multiple elements of the transaction involved complex accounting for the notes and warrant which required specialized skills and auditor judgement to assess the fair value and reasonableness of the inputs used in the company’s fair value measurement.how we addressed the matter in our audit the primary procedures we performed to address this critical audit matter included:•obtaining an understanding of the company’s process to account for the issuance of the warrant.•reviewing the settlement agreement and warrant agreement.•evaluating management's memorandum for accounting treatment and valuation of the warrant.•testing the completeness and accuracy of the underlying data used in the valuation models by tracing to terms contained in the settlement and warrant agreement and outside third-party data.44table of contents asset transfer agreement & software licensing agreement critical audit matter description as disclosed in note 2 of the financial statements, in august 2020, the company entered into an asset transfer agreement and a software license agreement with a data communications provider (the purchaser), pursuant to which the purchaser agreed to purchase various property and equipment and a software license related to a mobile virtual network enabler solution for total cash consideration of $12.3 million. the purchaser paid $4.7 million in august 2020 and the remainder in december 2020 upon the completion of the transfer to the purchaser. the company recorded a gain on sale of assets of $10.7 million for the difference between the book value of the property and equipment and the software license. we identified the asset transfer agreement & software licensing agreement as a critical audit matter. auditing the elements of this transaction involved especially challenging due to the nature and extent of audit effort required, the interaction of contracts that constituted the collective agreement and the level of auditor judgment involved to determine the appropriate accounting treatment.how we addressed the matter in our audit the primary procedures we performed to address this critical audit matter included:•obtaining an understanding of the company’s process to account for the asset transfer and software license agreements.•reviewing the terms of the agreements including payments, terminations, and obligation fulfillments and testing the components.•evaluating management's memorandum for accounting treatment of the asset transfer and software license agreements under the applicable accounting guidance.•testing the appropriateness of the resultant journal entries. series c redeemable preferred stock financing (including embedded derivatives and exchange agreements)critical audit matter description as disclosed in note 5 to the financial statements, on december 24, 2019, the company issued 105 shares of 8% series c redeemable preferred stock. in a series of transactions from february 21, 2020 through august 18, 2020, the company issued an additional 112 shares of series c redeemable preferred stock. the series c redeemable preferred stock requires mandatory redemption one year after issuance at the stated value together with the 8% dividend and a 12.5% premium. such redemption dates ranged from december 24, 2020 through august 18, 2021. redemption terms were subsequently modified by the series c exchange agreements on various dates from july 17, 2020 through october 29, 2020 (exchange agreements) which extended the mandatory redemption date and added an exchange feature.as a result of modifying certain provisions of the series c redeemable preferred stock, which was classified as a liability prior to the dates of the exchange agreements, the company accounted for the modification as an extinguishment since the exchange feature is substantive. due to the changes in the terms of the exchange agreements, the company has reclassified the series c redeemable preferred stock from a liability to temporary equity outside of permanent equity in its consolidated balance sheet as of december 31, 2020.we identified the series c redeemable preferred stock as a critical audit matter. auditing the valuation of the embedded features involved complex accounting for derivatives which required specialized skills and knowledge to assess the fair value and reasonableness of the inputs used to value the derivatives. additionally, accounting for the modification as an extinguishment that was classified as temporary equity which required specialized skills and knowledge to assess the fair value and reasonableness of the inputs used to value the derivatives and determine the balance sheet classification. how we addressed the matter in our audit the primary procedures we performed to address this critical audit matter included:•obtaining an understanding of the company’s process to account for the issuance of the series c redeemable preferred stock.•reviewing the series c redeemable preferred stock agreements.•evaluating management's memorandum for accounting treatment and management specialist’s valuation on the embedded derivatives.45table of contents•testing the completeness and accuracy of the underlying data used in the valuation models by tracing to terms contained in the initial series c redeemable preferred stock agreements and the exchange agreements.•with the assistance of our valuation specialist, evaluating the valuation methodology used by the company and significant assumptions used in the valuation model by evaluating individual assumptions used by management./s/ baker tilly us, llp we have served as the company’s auditor since 2014.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.134valuation of level 3 investments as described in notes 2 and 3 to the consolidated financial statements, the company's consolidated investments at fair value were $6,202 million as of june 30, 2021. the company’s investment portfolio is primarily comprised of privately held equity and debt instruments in portfolio companies, collateralized loan obligations (“clo”) and real estate properties, substantially all of which have been classified as level 3 investments. the company’s determination of fair value for these level 3 investments involves valuation techniques as outlined in note 2 and requires management to make judgments on the utilization of inputs that are unobservable and significant to the entire fair value measurement. the fair value of investments in equity and debt instruments is determined on a quarterly basis by the board of directors based on input from third-party valuation firms, management and the audit committee. the third-party valuation firms prepare independent valuations with a range of values for each investment based on their independent assessments.we identified the valuation of level 3 investments as a critical audit matter. the principal considerations for our determination are the use of complex models to value these investments and the use of significant unobservable inputs in the valuation models, which are inherently uncertain and subjective, including revenue and earnings before interest, taxes, depreciation, and amortization (“ebitda”) multiples, discount rates and market yields for portfolio companies, discount rates for cl os, and capitalization rates for real estate properties. performing audit procedures to evaluate the reasonableness of management’s assumptions involved a high degree of auditor judgment and specialized skills and knowledge needed.the primary procedures we performed to address this critical audit matter included: utilizing personnel with specialized knowledge and skill in valuation to assist in evaluating the reasonableness of management’s fair value estimates and performing the following procedures for a selection of investments:•assessing the appropriateness of valuation models, such as the market or income approach for portfolio companies, including discounted cash flow models for portfolio companies and cl os or net asset value (“nav”) analysis for real estate properties; •evaluating whether significant unobservable inputs used were reasonable including (a) historical or forecasted revenue or ebitda multiples, discount rates, and market yields for portfolio companies, (b) discount rates for cl os, and (c) capitalization rates for real estate properties;•recalculating the fair value estimates for portfolio companies and real estate properties; and•performing independent fair value calculations for cl os from independently derived assumptions./s/ bdo usa, llpbdo usa, llp we have served as the company’s auditor since 2005.

critical audit matter the critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. - 39 - table of contents valuation of intangible assets associated with the exalenz acquisition as described further in note 2 to the consolidated financial statements, the company completed its acquisition of exalenz bioscience ltd. (“exalenz”) for net cash consideration of $51.3 million, which resulted in the identification and recognition of $55.2 million of intangible assets. intangible assets consisted primarily of customer relationships, technology and trade name (collectively “the identifiable intangible assets”), with the remainder allocated to goodwill. the company used a discounted cash flow model to measure the customer relationship intangible asset and a relief from royalty model to measure the technology and trade name intangible assets. we identified the valuation of identifiable intangible assets associated with the exalenz acquisition as a critical audit matter. the principal consideration for our determination that the valuation of the identifiable intangible assets is a critical audit matter is the complexity associated with auditing the company’s preliminary valuation of identifiable intangible assets due to the high degree of management subjectivity in the related fair value estimates. the high degree of management subjectivity is primarily due to the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired business. the significant assumptions used to estimate the fair value of the identifiable intangible assets included certain assumptions that form the basis of the future net cash flows (e.g., assumed growth rates, discount rate, economic lives, royalty rates and margin percentages). these significant assumptions are forward looking and consider anticipated market conditions. our audit procedures related to the preliminary valuation of intangible assets included the following, among others. • we tested the design and operating effectiveness of controls relating to the valuation report and allocation of purchase price, which included management’s review of the preliminary valuation report for the completeness and mathematical accuracy of the data, and evaluating the reasonableness of assumptions used in the calculations, such as assumed growth rates, discount rate, economic lives, royalty rates and margin percentages, as compared to industry/market data. • we tested the significant assumptions used within the discounted cash flow model to estimate the fair value of the identifiable intangible assets which included certain assumptions such as assumed growth rates, economic lives, and margin percentages as compared to industry/market data. • we utilized a valuation specialist to assist in evaluating the appropriateness of the company’s selection of valuation methodology for the identifiable intangible assets and evaluating the reasonableness of certain significant assumptions used, including discount rate, economic lives, and royalty rates. • we evaluated whether assumptions used were reasonable by considering past performance of similar assets, industry data, current market forecasts, and whether such assumptions were consistent with evidence obtained in other areas of the audit. /s/ grant thornton llp we have served as the company’s auditor since 2005.

critical audit matter the critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.merchandise inventories — refer to note 2 to the financial statements critical audit matter description merchandise inventories are stated at the lower of cost or net realizable value using the first-in, first-out (“fifo”) method. factors considered in determining if inventory is properly stated at the lower of cost or net realizable value include, among others, recent sale prices, the length of time merchandise has been held in inventory, quantities of 42 various styles held in inventory, seasonality of merchandise, expected consideration to be received from vendors and current and expected future sales trends. the company reduces the value of inventory to its estimated net realizable value where cost exceeds the estimated future selling price. given the significant judgments made by management to estimate the net realizable value of inventory, such as expected consideration to be received from vendors and current and expected future sales trends, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment. how the critical audit matter was addressed in the audit our audit procedures related to the significant judgments made by management to determine net realizable value of inventory included the following procedures, among others: •we tested the effectiveness of the company’s internal control over the valuation of inventory, including the review and determination of the anticipated net realizable value of merchandise inventories compared to the cost value of inventory on-hand. •we tested the recorded inventory reserve by developing an expectation based on the prior year inventory reserve balance relative to the merchandise inventory balance at the prior year balance sheet date and compared it to the actual reserve recorded in the current year. •we evaluated the reasonableness of management’s determination of the net realizable value of inventory by: •testing the accuracy of source data used in the calculation, including inventory on hand, aging of inventory, historical losses by product category, sales prices and consideration received from vendors. •evaluating terms and supporting documentation for consideration expected to be received from vendors. •recalculating the projected loss for inventory on hand based on the source data used in the calculation. •making inquiries of management, including merchandise buyers, regarding current and expected future sales trends, and evaluating external communications by analysts. •evaluating management’s ability to accurately forecast future sales trends by comparing actual results to management’s historical forecasts. •we evaluated management’s ability to accurately project inventory losses by comparing actual results to management’s historical estimates. /s/ deloitte & touche llp indianapolis, indiana march 26, 2021 we have served as the company's auditor since 1988.

critical audit matters thecritical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicatedor required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financialstatements and (2) involved our especially challenging, subjective or complex judgments. the communication of critical audit mattersdoes not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical auditmatters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. f-1 fair value of common stock used in the purchase of intangible assets asdiscussed in note 5 to the financial statements, on october 2, 2020, the company purchased skincare assets for an aggregate purchaseprice of $1,944,689, which included cash consideration of $44,413 and the issuance of common stock, which was valued at $1,900,546. atthe time of the transaction, the company was a private company. thevaluation of private company common stock requires significant judgment in weighting the various indicators of fair value. the principalsand considerations to be applied include: ●indicators of value are those comparable transactions between informed, willing, buyers and sellers;●comparable transaction must be orderly and not in a distressed situation;●maximize the weight of observable inputs, where possible;●securities issued as the indicator of value must be similar or identical to the securities being valued;●timing of comparable transactions must be close to the valuation date●consideration as to whether the valuation of the technology is more indicative of the fair value of the assets acquired in comparison to the consideration paid. dueto the significance of the intangible assets to the company’s financial statements and the inherent judgment necessary to estimatethe valuation of the common stock, we determined that the fair value of common stock used in the purchase of intangible assets was acritical audit matter, which required significant auditor judgment and specialized skill and knowledge. howthe critical audit matter was addressed in the audit addressingthe matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidatedfinancial statements. these procedures included, but were not limited to, the following: ●we evaluated management’s process for the selection of the valuation methodology and the methods and significant assumptions used by management; ●with the assistance of our valuation specialists, we evaluated the reasonableness of the valuation methodology used; ●we evaluated the reasonableness of the inputs subject to assumptions and verified the accuracy and completeness of those inputs to the underlying transaction data utilized in the valuation of the common stock and verified; and ●we performed sensitivity analyses of the significant assumptions used in the valuation model to evaluate the change in fair value resulting from changes in the significant assumptions. /s/ marcum llp marcum llp wehave served as the company’s auditor since 2018.

critical audit matters the critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.income taxes — refer to notes 1 and 9 to the consolidated financial statements critical audit matter description the company operates in many different geographic locations, including several foreign, state and local tax jurisdictions. determining the provision for income taxes, the realizability of deferred tax assets and the recognition and measurement of tax positions requires management to make assumptions and judgments regarding the application of complex tax laws and regulations as well as projected future operating results, eligible carry forward periods, and tax planning opportunities.the company recorded an income tax benefit of $4.7 million for the year ended december 31, 2021 and net deferred tax assets of $107.6 million, net of a valuation allowance of $201.7 million, and unrecognized tax benefits and related interest and penalties of $23.4 million as of december 31, 2021. accounting for income taxes requires management to make assumptions and judgments. performing audit procedures to evaluate the reasonableness of management’s assumptions and judgments required a high degree of auditor judgment and an increased extent of effort, including the need to involve our income tax specialists.how the critical audit matter was addressed in the audit our audit procedures related to the provision for income taxes, the realizability of deferred tax assets and the recognition and measurement of tax positions included the following which were performed with the assistance of our income tax specialists, among others: •we tested the effectiveness of controls over the company’s determination of the provision for income taxes, the realizability of deferred tax assets and the recognition and measurement of tax positions.•we tested the provision for income taxes, including the effective tax rate reconciliation, permanent and temporary differences and uncertain tax positions, by evaluating communications with tax advisors and regulators, and testing the underlying data for completeness and accuracy.98•we evaluated the significant assumptions used by management in establishing and measuring tax-related assets and liabilities, including the application of recent tax laws and regulations, as well as forecasted taxable income, eligible carry forward periods and tax planning opportunities supporting the realizability of deferred tax assets.•we evaluated the application of relevant tax laws and regulations and the reasonableness of management’s assessments of whether certain tax positions are more-likely than not of being sustained.goodwill impairment analysis — refer to notes 1 and 3 to the consolidated financial statements critical audit matter description the company conducts its annual goodwill impairment test in the fourth quarter of each year, as well as whenever adverse events or changes in circumstances indicate a possible impairment. fair value of each reporting unit is estimated based on a combination of discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of each reporting unit. these calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate discount and long-term growth rates.as a result of the company’s annual goodwill impairment test for the driveline reporting unit in the fourth quarter of 2021, no impairment was identified. the consolidated goodwill balance was $183.8 million as of december 31, 2021 which is attributed entirely to the driveline reporting unit (driveline). the impairment test requires management to make assumptions to estimate the fair value of the reporting unit. performing audit procedures to evaluate the reasonableness of management’s assumptions related to market comparables, future cash flows, and discount and long-term growth rates required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. how the critical audit matter was addressed in the audit our audit procedures related to market comparables, future cash flows and discount and long-term growth rates included the following, among others: •we tested the effectiveness of controls over the company’s goodwill impairment test and determination of related assumptions, including those over market comparables, future cash flows and discount and long-term growth rates. •we evaluated management’s ability to accurately forecast future cash flows within the goodwill impairment test, by comparing actual reporting unit results to management’s historical forecasts. •we evaluated the reasonableness of management’s forecast of future cash flows by comparing the projected cash flows to (1) historical results, (2) internal communications to management and the board of directors, and (3) forecasted information included in company press releases, analyst and industry reports of the company and companies in its peer group. with the assistance of our fair value specialists, we tested the underlying source information, and the mathematical accuracy of the forecasted cash flows within the fair value calculations. •with the assistance of our fair value specialists, we evaluated the market comparables and discount and long-term growth rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developed a range of independent estimates and compared those to the rates selected by management./s/ deloitte & touche llp detroit, michigan february 11, 2022 we have served as the company's auditor since 1998.

critical audit matters the critical audit matters communicatedbelow are matters arising from the current period audit of the financial statements that were communicated or required to be communicatedto the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involvedour especially challenging, subjective, or complex judgments. the communication of critical audit matters does not alter in anyway our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. accounting for asset acquisition description of the matter as discussed in note 5 to the financialstatements, the company completed its acquisition of soluna callisto during 2021 for merger consideration of approximately $33.0million, including contingent consideration measured at $33.0 million and treated as equity. this transaction was accounted foras an asset acquisition. we identified the assessment of the accountingfor the soluna callisto transaction as a critical audit matter because interpretation and application of the relevant accountingliterature required significant auditor judgment. specifically, the accounting for the transaction as an asset acquisition versusbusiness combination, and the accounting for the particular terms of contingent consideration and their impact on the classification.furthermore, auditing the company's accounting for its acquisition of soluna callisto was complex due to its identification andvaluation of acquired assets as well as the significant estimates required in its estimate of the fair value of contingent consideration,which comprises the cost of the identified strategic pipeline contract intangible asset of $36.5 million, including direct transactioncosts. the determination of the contingent consideration’s fair value required management to make significant judgments,including the appropriateness of the valuation model and the reasonableness of estimates and assumptions included in the forecastsof future mega watt targets and the company’s share price. changes in these estimates and assumptions could have a significantimpact on the fair value of the contingent consideration. auditing these elements involved especially challenging auditor judgmentdue to the subjectivity and the nature and extent of audit effort required to address the matter, including the extent of specializedskills or knowledge needed. the significant estimation was primarilydue to sensitivity of the fair value to underlying assumptions about future mega watt targets and the company’s volatile shareprice used in the company’s valuation model used to measure the contingent consideration, which is the basis for strategicpipeline contract intangible asset. these significant assumptions included the likelihood of various scenarios, the change in the company share price and estimated volatility, and the discount rate. how we addressed the matter in our audit we gained an understanding of certain internalcontrols over the company’s process to account for the sci transaction, including controls related to the company’saccounting considerations for asset purchases versus business combinations, and the contingent consideration. for example, we gainedan understanding of controls over the estimation process supporting the recognition and measurement of the strategic pipeline contractintangible asset, which included controls over management’s review of assumptions used in its contingent consideration valuationmodel. we assessed the accounting treatment ofthe soluna callisto transaction through: ●evaluating the company’s accountingmemoranda and other documentation, including application of the relevant accounting guidance; ●comparing the underlying terms of therelevant documents and agreements to the company’s accounting memoranda; and ●independently interpreting and applyingthe accounting literature to the transaction, considering alternative accounting treatments and evaluating the relative meritsof the possible alternatives. to test the estimated fair value of thecontingent consideration, we performed audit procedures that included, among others, evaluating the valuation methodology and thesignificant assumptions used by the company's valuation specialist, and evaluating the completeness and accuracy of the underlyingdata supporting the estimated fair value. we utilized our firm’s valuation specialists to assist with the evaluation of themethodology used by management and significant assumptions included in the fair value estimate, including testing the likelihoodof various scenarios, the growth rate of the company share price and estimated volatility, and the discount rate. for example,we compared the significant assumptions to current industry, market and economic trends, to assumptions used to value similar assetsin other acquisitions, to the historical results of the acquired assets, and to the company’s budgets and forecasts. we performeda sensitivity analysis over these assumptions. we also evaluated the adequacy of the company’s disclosures included in note5 and note 15 in relation to this transaction. assessment of the measurement offair value of the warrants description of the matter as discussed in note 9 to the financialstatements, the company entered into a securities purchase agreement for an aggregate financing of $15.0 million with certain accreditedinvestors by issuing secured convertible notes of $16.3 million and class a, b, and c common stock purchase warrants (the “warrants”).the fair value of the warrants, as of the issuance date, was $7.0 million and is recorded as equity with the offset recorded asdebt discount against the net proceeds. the company uses option pricing models to estimate the fair value of the warrants usingvarious market-based inputs. we identified the assessment of the measurementof fair value of the warrants as a critical audit matter. specifically, there was a high degree of subjectivity and judgment inevaluating the determination of the expected volatility inputs used in the option pricing models for the warrants. historical,implied, and peer group volatility levels provide a range of possible expected volatility inputs and the fair value estimates forthe warrants are sensitive to the expected volatility inputs. how we addressed the matter in our audit the primary procedures we performed toaddress this critical audit matter included gaining an understanding of certain internal controls over the company’s processto measure the fair value of the warrants. this included controls related to the evaluation of observable market information usedin the determination of the expected volatility inputs. we also involved our firm’s valuation professionals with specializedskills and knowledge, who assisted in: ●evaluating the expected volatility inputsby comparing them against a volatility range that was independently developed in consideration of historical, implied, and peergroup volatility information; and ●developing an estimate of the warrants’fair value using the independently developed volatility range and comparing it to the value calculated by the company. realizability of deferred tax assets description of the matter as described in note 7 to the financialstatements, the company's deferred tax asset balance was approximately $469,000, net of valuation allowances as of december 31,2021. the ultimate realization of deferred tax assets is dependent upon generating sufficient future taxable income during theperiods in which the temporary differences become deductible or before net operating loss and tax credit carryforwards expire.the company records a valuation allowance to reduce deferred tax assets to an amount that is "more likely than not" tobe realized. evaluating the need for and quantifying the valuation allowance often requires significant judgment and extensiveanalysis of all the weighted positive and negative evidence available to the company in order to determine whether all or someportion of the deferred tax assets will not be realized. in performing this analysis, the company's forecasted income, and theexistence of potential prudent and feasible tax planning strategies that would enable the company to utilize some or all of itsdeferred tax assets, are taken into consideration. we identified the evaluation of the company’sassessment on the realizability of the deferred tax assets is a critical audit matter due to the significant judgment used by managementwhen evaluating the estimates and assumptions used in the projection of future taxable income. this led to a high degree of auditorjudgment and subjectivity in performing procedures on management's assessment of the tax planning strategies to enable utilizationof deferred tax assets. the evaluation of audit evidence available to support the realizability of tax loss and tax credit carryforwardswas complex and subjective, and therefore required significant auditor judgment. how we addressed the matter in our audit we gained an understanding of certain internalcontrols over the company’s tax provision process, including controls related to the interpretation of tax law, its applicationin the liability estimation process, and the review of activity that could result in changes to the company’s deferred taxassets. since tax law is complex and often subject to interpretations, we involved our firm’s tax professionals with specializedskills and knowledge, who assisted in: ●evaluating the reasonableness of management'sassessment of tax planning strategies and the amount that is "more likely than not" to be realized; ●testing the completeness and accuracyof tax loss and tax credit carryforwards; ●evaluating the appropriateness of therealizability of net operating loss and credit carryforwards relevant to the deferred tax assets recognized; and ●evaluating the completeness, accuracyand sufficiency of disclosures. /s/uhy llp (1195) wehave served as the company’s auditor since 2021.