Curaleaf Holdings, Inc. (CSE: CURA / OTCQX: CURLF) (“Curaleaf” or the “Company”), announced today that the Audit Committee of the Company’s Board of Directors (the “Audit Committee”), with the assistance of outside counsel and consultants and in discussion with the Company’s auditors, has been conducting, after internal review by management, a review of certain purchases and sales of products through the Company’s wholesale channel to determine whether they had commercial substance, and to confirm the timing and appropriateness of the recognition of revenue from those transactions, mainly in the last quarter of 2021 and the first and second quarters of 2022.
Further to this review, the Company has determined that it will make certain adjustments to the revenue figures reported in its previously issued (i) audited annual consolidated financial statements for the fiscal year ended December 31, 2021 (the “2021 Annual Financial Statements”) and (ii) unaudited interim consolidated financial statements for the first, second and third quarters of the fiscal year ended December 31, 2022 (collectively, the “2022 Interim Financial Statements”), as well as other related flow through adjustments.
The Company is finalizing the exact adjustments for these reported prior periods, and currently anticipates that the adjustments will result in a reduction of aggregate revenue for the full 2021 fiscal year of approximately 1.25%, and a reduction of expected aggregate revenue for the full 2022 fiscal year of approximately 0.75%.
As a result, subject to finalizing the adjustments described herein, the Company expects its revenue for the fourth quarter of 2022 to be approximately US $352 million, and its aggregate revenue for the full 2022 fiscal year to be approximately US $1.337 billion.
In light of the above Audit Committee review findings to date, the Company determined, on the Audit Committee’s recommendation and after consultation with its independent registered public accounting firms for 2021 and 2022, that Curaleaf’s previously issued 2021 Annual Financial Statements and 2022 Interim Financial Statements, each prepared in accordance with International Financial Reporting Standards (“IFRS”) as filed on SEDAR, and furnished to the U.S. Securities and Exchange Commission on Form 6-K, will be restated and reissued and should no longer be relied upon. Similarly, any previously filed or furnished reports, related earnings releases, related management’s discussion and analysis, investor presentations or similar communications of the Company describing the Company’s financial results or other financial information for the fiscal year ended December 31, 2021, or the quarters of 2022, and any previously issued forecast or guidance for the fiscal year ended December 31, 2022, should no longer be relied upon. In addition, Curaleaf determined that there were additional material weaknesses in its internal controls at the time of its prior financial statements. The Company’s 2021 Annual Financial Statements and 2022 Interim Financial Statements will be restated to effect the revenue adjustments described above, as well as other related flow through adjustments. In addition, the 2022 Interim Financial Statements will be restated to reflect the Company’s transition from IFRS to U.S. generally accepted accounting principles, as required under Canadian securities legislation.
Beginning early in the fourth quarter of 2022 under the leadership of a new executive accounting team, the Company started to implement and enhance certain procedures and controls. In consultation with the Audit Committee and its outside counsel and consultants, the Company will continue to further enhance its procedures and controls, based on information identified during the Audit Committee’s review and the restatement process.
“We are committed to accurate and transparent financial reporting,” said Ed Kremer, Curaleaf’s Chief Financial Officer. “We have begun taking a number of remediation steps and are committed to taking additional steps to enhance our controls so that this situation does not repeat in the future. We remain focused on executing on our strategies and continuing to expand our product innovations to strengthen the overall position of the Company.”
Curaleaf intends to file its audited annual consolidated financial statements for the fiscal year ended December 31, 2022 and related management’s discussion and analysis by May 1st, 2023.
The Company currently expects to release its unaudited interim consolidated financial statements for the three months ended March 31, 2023 on or about May 17, 2023.
