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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. purchase price accounting as described in notes 2 and 3 to the consolidated financial statements, during the year ended december 31, 2019, the company acquired eight operating properties in asset acquisitions for an aggregate purchase price of $382.6 million. when the company acquires properties, management allocates the purchase price to numerous tangible and intangible components. management allocates the purchase price of properties based on the estimated fair value of the assets acquired and liabilities assumed, which generally consists of land, building, tenant improvements, and intangible assets and liabilities, which include in-place leases, leasing commissions and above and below market leases. management’s process for determining the allocation requires many estimates and assumptions, including (i) market land, rental, discount and capitalization rates; (ii) leasing and tenant improvement costs associated with the remaining term of acquired leases; (iii) assumptions used in determining the in-place lease and if-vacant value including the rental rates, period of time that it would take to lease vacant space and estimated tenant improvement and leasing costs; (iv) renewal probabilities; and (v) allocation of the if-vacant value between land and building. the principal considerations for our determination that performing procedures relating to purchase price accounting is a critical audit matter are (i) there was significant judgment and estimation by management when developing the purchase price allocation, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate management’s estimates and significant assumptions, (ii) significant audit effort was necessary in evaluating significant assumptions, such as discount rates, capitalization rates, market rental rates, market land rates, leasing costs, tenant improvement costs, and the period of time that it would take to lease vacant space, (iii) significant auditor judgment was necessary in evaluating audit evidence related to such assumptions, and (iv) the audit effort included the involvement 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 purchase price accounting, including controls over the assumptions used such as discount rates, capitalization rates, market rental rates, market land rates, leasing costs, tenant improvement costs, and the period of time that it would take to lease vacant space to determine the fair value of the assets acquired and liabilities assumed and allocate the purchase price to the tangible and intangible components. these procedures also included, among others, reading the purchase agreements for a sample of acquisitions and testing management’s process by evaluating the appropriateness of methods used to determine fair value of assets acquired and liabilities assumed, testing the significant inputs and evaluating the reasonableness of the significant assumptions utilized by management in developing the purchase price allocation, such as discount rates, capitalization rates, market rental rates, market land rates, leasing costs, tenant improvement costs, and the period of time that it would take to lease vacant space. assessing the assumptions involved evaluating the consistency of the assumptions used with external market data and with evidence obtained in other areas of the audit. in conjunction with certain purchase price allocations, professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of certain significant assumptions utilized by management, as appropriate. /s/ pricewaterhouse coopers llp boston, massachusetts february 25, 2020we have served as the company’s or its predecessor's auditor since 2014.

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 – pr ana reporting unit – refer to notes 2 and 7 of the notes to consolidated financial statements critical audit matter description the company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. the company used a combination of discounted cash flow analysis and market-based valuation methods, which requires management to make significant estimates and assumptions related to projected sales, income, cash flows, discount rates, market-based multiples, and other operating performance measures. changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, if any, or both. the goodwill balance was $68.6 million as of december 31, 2019, of which $54.2 million was allocated to the pr ana reporting unit (“pr ana”). 31table of contents given pr ana’s historical performance as compared to projections, auditing management’s estimates and assumptions related to projected sales, income, cash flows, discount rates, market-based multiples, and other operating performance measures for pr ana involved especially subjective judgment.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimates and assumptions related to projected sales, income, cash flows, discount rates, market-based multiples, and other operating performance measures for the pr ana goodwill impairment analysis included the following, among others:•we tested the effectiveness of internal controls over the pr ana goodwill impairment analysis, including those over the forecasts for sales, income, cash flows, and other operating performance measures, and the selection of the discount rate and market-based multiples.•we evaluated management’s ability to accurately forecast sales, income, cash flows, and other operating performance measures by comparing actual results to management’s historical forecasts.•we evaluated the reasonableness of management’s sales, operating margin, income, and cash flows forecasts by comparing the forecasts to:◦historical sales, operating margins, income, and cash flows.◦forecasted information included in company press releases as well as in analyst and industry reports for the company and certain of its peer companies.•we evaluated the impact of changes in management’s forecasts from the october 31, 2019 annual measurement date to december 31, 2019.•to evaluate the reasonableness of the discount rate, we:◦developed a range of independent estimates of the discount rate and compared those to the discount rate selected by management to assess the appropriateness of the discount rate assumption.◦tested the inputs and source information underlying the determination of the discount rate by comparing to reputable third-party data or industry information and tested the mathematical accuracy of the calculation.•we evaluated the reasonableness of the multiple management applied to the projected sales as part of their market-based valuation method through comparison to valuation multiples for guideline public companies.intangible assets, net – pr ana trademark– refer to notes 2 and 7 of the notes to consolidated financial statements critical audit matter description the company has trademarks and trade names (“trademarks”) that are indefinite-lived intangible assets. as of december 31, 2019, the carrying value of the intangible assets was $123.6 million, of which $88.0 million was attributed to pr ana’s trademark. the company used the relief from royalty method to estimate fair value, which requires management to make significant estimates and assumptions related to projected sales, royalty rates and discount rates to estimate the net present value of future pr ana cash flows relating to the trademark.given pr ana’s historical performance as compared to projections, auditing management’s estimates and assumptions related to projected sales, royalty rates, and discount rates for pr ana involved especially subjective judgment.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimates and assumptions related to projected sales, royalty rates, and discount rates for the pr ana trademark valuation included the following, among others:•we tested the effectiveness of controls over intangible assets, including those over the forecasts of future sales, and the selection of the discount rate and royalty rate.•we evaluated management’s ability to accurately forecast future sales by comparing actual results to management’s historical forecasts.•we evaluated the reasonableness of management’s sales forecasts by comparing the forecasts to:◦historical sales.32table of contents◦forecasted information included in company press releases as well as in analyst and industry reports for the company and certain of its peer companies.•we evaluated the impact of changes in management’s forecasts from the october 31, 2019 annual measurement date to december 31, 2019.•to evaluate the reasonableness of the (1) discount rate and (2) royalty rate, we:◦developed a range of independent estimates of the discount rate and compared those to the discount rate selected by management to assess the appropriateness of the discount rate assumption.◦tested the inputs and source information underlying the determination of the discount rate by comparing to reputable third-party data or industry information and tested the mathematical accuracy of the calculation.◦compared the royalty rate selected by management to rates from royalty agreements in the outdoor apparel industry for comparable companies and the company’s own contract royalty rates./s/ deloitte & touche llp portland, oregon february 27, 2020we have served as the company’s auditor since at least 1994;

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 judgements. 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. goodwill – hcn reporting unit – refer to notes 2 and 7 to the financial statements critical audit matter description in connection with the company’s november 1, 2013 acquisition of hondros college of nursing (hcn), the company recorded $38.6 million of goodwill, representing the excess of the purchase price over the amount assigned to the new assets acquired and the fair value assigned to identified intangible assets.the company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. management performs its annual impairment analysis for goodwill on its elected assessment date of october 31, or more frequently, if certain events or circumstances indicate that goodwill might be impaired. in 2020, management performed its annual assessment as of october 31, 2020. the company concluded that the fair value of the hcn reporting unit exceeded its carrying value by $13.7 million, or 37.1%. given the significant estimates and assumptions made by management to estimate the fair value of the hcn reporting unit, and the sensitivity of the estimated fair value to changes in those estimates and assumptions, performing audit procedures to 100evaluate the reasonableness of management's estimates and assumptions utilized in its impairment analyses, particularly the revenue growth rates and the selection of discount 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 the revenue growth rates and the selection of discount rates and valuation multiples for the hcn reporting unit included the following, among others: •we tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of hcn, such as controls related to management’s revenue growth rates and the selection of the discount rates and valuation multiples. •we evaluated the reasonableness of management’s growth rates by comparing management’s rates with: ◦historical results;◦prior forecasts;◦internal communications to the company’s management and the board of directors; and◦forecasted information included in the company’s press releases as well as in analyst and industry reports of the company and companies in its peer group.•we considered the impact of changes in the regulatory environment on management’s forecasts. we also considered the impact of the covid-19 global pandemic and inquired of the effects of the pandemic on the company’s enrollments and forecasts.•we evaluated the impact of changes in management’s forecasts from the october 31, 2020 annual measurement date to december 31, 2020.•with the assistance of our fair value specialists, we evaluated the valuation methodology and discount rates used, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate selected by management. /s/ deloitte & touche llp mclean, va march 9, 2021we have served as the company's auditor since 2018.

critical audit matters the critical audit matters communicated below arematters arising from the current-period audit of the financial statements that were communicated or required to be communicated to theaudit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) are 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 auditmatters or on the accounts or disclosures to which they relate. revenue recognition – refer to note3 of the consolidated financial statements description of the matter the company’s revenue is generated pursuantto written contractual arrangements to design, develop, manufacture and/or modify complex products, and to provide related engineeringand other services according to the specifications of the customers. the majority of the company’s performance obligations underthese contractual agreements are satisfied at a point in time when the customer obtains control of the product, which is generally uponacceptance by the customer and shipment of the goods. for contracts with multiple performance obligations, the company allocates the contract’stransaction price to each performance obligation using its observable standalone selling price for products and services. given the judgment necessary to make reasonablydependable estimates of revenues associated with such contracts, auditing management’s evaluation of contracts with customers requiredextensive audit effort due to analyzing the terms and conditions of the company’s various customer contracts given that such termsand conditions are nonstandard. this included the identification and determination of the performance obligations and the timing of revenuerecognition. f-2 how the critical audit matter was addressedin the audit our audit procedures included obtaining an understandingof the company’s revenue recognition process, among others: ●we reviewed management’s assessment of the terms and conditions of contracts with customers which included an analysis of the distinct performance obligations and a review of the conclusion as to whether revenue from such performance obligations should be recognized over time or at a point in time. ●we reviewed management’s conclusions over completeness of the contract reviews and appropriateness of the accounting conclusions. ●we selected a sample of contracts with customers and performed the following: o compared the transaction price to the consideration expected to be received based on current rights and obligations under the contracts and any modification that were agreed upon with the customers. o tested the completeness and accuracy of the company’s contract summary documentation, specifically related to the identification and determination of distinct performance obligations and the timing of revenue recognition. inventories, net – refer to note 3of the consolidated financial statements description of the matter the company records inventory at the lower of costor net realizable value. the company periodically evaluates the carrying value of inventory, which requires management to make significantestimates and assumptions related to sales patterns and expected future demand in order to estimate the amount necessary to adjust tonet realizable value as a result of slow moving or obsolete inventory. changes in the assumptions could have a significant impact on thevaluation of inventory. we identified the adjustment to net realizablevalue of the inventory as a critical audit matter. auditing such estimates required a high degree of subjective auditor judgment and anincreased extent of effort when performing audit procedures and evaluating the results of those procedures. how the critical audit matter was addressedin the audit our audit procedures used to address the adjustmentto net realizable value of inventories included the follow: ●we tested the company’s raw materials and hardware inventory by evaluating the number of days transpiring from the date the inventory was originally received and/or from the last date of movement, and reviewing the historical sales of the inventory. ●we selected a sample of finished goods and performed the following: o we tested the finished goods inventory report for any finished goods with no movement in the last two years. o reviewed the transaction history detail reports, which display all types of movement of that particular part. o evaluated the accuracy and completeness of the valuation reserve by selecting a sample of inventory items and obtaining supporting documentation regarding current and historical sales patterns. ●we tested the accuracy of the company’s material burden rate calculations to determine proper application of manufacturing overhead costs applied to the cost of work in process and finished goods. we have served as the company’s auditors 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 (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.inventory valuation - adjustments for excess or obsolete inventories as described in notes 2 and 4 to the consolidated financial statements, the company has inventories with a carrying value of $5.7 million as of january 2, 2021. the company’s inventories are stated at the lower of cost or net realizable value. cost is determined on a standard cost basis which approximates actual cost on a first-in, first-out (“fifo”) method. lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration, and other factors. adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence or impaired inventory and are charged to cost of revenues. the company’s inventories include demonstration units (“demos”) to facilitate the sale of products to prospective customers and loaners for existing customers to use while their product is under repair.the principal considerations for our determination that performing procedures relating to net realizable value adjustments to inventories is a critical audit matter are the significant amount of judgement by management in developing the assumptions of the forecasted changes in demand, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues, which in turn led to significant auditor judgement, subjectivity, and effort in performing audit procedures and evaluating audit evidence relating to these factors. additionally, for certain new product launches there may be limited historical data with which to evaluate forecasts.43 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 obtaining an understanding of the company’s inventory reserve review process, including the assumptions and data underlying the excess and obsolete inventory valuation. the procedures also included, among others, testing management’s process for developing the estimate of the adjustments for excess or obsolete inventories, testing the completeness and accuracy of the underlying data used in the estimate, and evaluating management’s assumptions of forecasted product demand. evaluating management’s demand forecast for reasonableness involved considering historical sales by product, comparing prior period estimates to actual results, and determining whether the demand forecast used was consistent with evidence obtained in other areas of the audit. /s/ bpm 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) 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. going concern assessment the accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. as disclosed in note 1 to the consolidated financial statements, the company has suffered recurring losses from operations, negative operating cash flow, has a net accumulated deficit and expects to continue to incur losses for at least the next twelve months. this matter is also described in the “emphasis of matter – substantial doubt about the company’s ability to continue as a going concern” section of our report. we identified management’s judgments and assumptions used to assess the company’s ability to continue as a going concern as a critical audit matter due to inherent complexities and uncertainties related to the company’s projections of operations. auditing these judgments and assumptions involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters. how the critical audit matter was addressed the primary procedures we performed to address this critical audit matter included the following: (1) evaluating management’s assessment and assessing the reasonableness of key assumptions underlying management’s conclusion, (2) evaluating the probability that the company will be able to reduce note payable obligations and other operating expenditures if required, (3) assessing management’s plans in the context of other audit evidence obtained during the audit to determine whether it supported or contradicted the conclusions reached by management. /s/ uhy 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 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 evaluation of real estate investments for impairment the company’s real estate investments and related intangible assets were $717,547,000 and $6,246,000, respectively, as of december 31, 2021. as described in note 2, the company performs impairment testing on a quarterly basis or whenever events or changes in circumstances indicate the carrying amount of its real estate investments may not be recoverable. as part of the company’s impairment indicator analysis, management considers numerous potential indicators of impairment of operating properties. these indicators could include a substantial decline in or continued low occupancy rate, continued difficulty in leasing space, significant financially troubled tenants, a change in plan to sell a property prior to the end of its useful life or holding period, a significant decrease in market price not in line with general market trends, and any other quantitative or qualitative events or factors deemed significant by the trust’s management or board of trustees. the company identified indicators of impairment for certain real estate investments and, in such cases, further assessed the assets for recoverability by comparing the net carrying value to estimated future cash flows on an undiscounted basis. 52table of contents we identified the determination of the existence of impairment indicators for the company’s real estate investments and related intangible assets as a critical audit matter because of the significant judgments made by management, including the evaluation of the impact of the factors described above. auditing management’s judgments used in the determination of impairment indicators involved a high degree of auditor judgment and increased audit effort. further, auditing the company’s undiscounted cash flow model required a high degree of auditor judgment and increased audit effort as estimates underlying the calculation, including growth rates and terminal capitalization rates, were based on assumptions affected by expected future market and economic conditions. our audit procedures related to the company’s evaluation of real estate investments for impairment included the following, among others. ●we tested the underlying data used in management’s analysis for completeness and accuracy and evaluated management’s conclusions around potential indicators of impairment. ●we evaluated the accuracy of management’s conclusions around potential indicators of impairment by developing an independent expectation of potential impairment indicators on a property by property basis, considering information such as historical trends, current year property level operating performance, and changes in expected hold periods, among others, and compared our expectation to management’s analysis. ●for the company’s real estate investments that were assessed by management using an undiscounted cash flow model, we inspected relevant industry and market outlook data to consider market conditions. further, we tested that the significant assumptions utilized in estimating property undiscounted cash flows, such as growth rates and terminal capitalization rates, were within an observable market range. /s/ rsm us llp we have served as the company’s auditor since 2021.

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 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. f-2 impairment of leased merchandise as discussed in note 2 to the consolidatedfinancial statements, the company had $42,822,340 of lease merchandise at december 31, 2020. the company evaluates leasemerchandise for impairment based upon the payment history of the individual customer. when a customer falls within certainthresholds of payment performance, the company will record an impairment charge against the corresponding lease merchandise. historicaltrends and current conditions are considered when determining the appropriate time to record an impairment of lease merchandise. we identified management’s leasedmerchandise impairment assessment as a critical audit matter due to the significant amount of judgment required by management indetermining the timing and estimated amount of impairment. this in turn resulted in significant effort and a high degree of subjectivityin performing our audit procedures and in evaluating audit evidence relating to the impairment of lease merchandise made by management. addressing the matter involved performingprocedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. our procedures included, among others, (i) obtaining an understanding of management’s process and evaluating the design ofcontrols related to the impairment assessment; (ii) verifying that the company appropriately impaired assets in accordance withits policies; (iii) testing a sample of leases to ensure that an impairment charge was recorded when appropriate; and (iv) evaluatingthe company’s thresholds for determining impairment. collectability of accounts receivable as discussed in note 2 to the consolidatedfinancial statements, the company recognized $31,930,714 of bad debt expense during the year ended december 31, 2020 with a correspondingreduction to lease revenue and fees. at december 31, 2020, the company had an allowance for doubtful accounts of $22,138,541. the company determines the amount of allowance for doubtful accounts to recognize as a portion of its regular customer billings basedupon historical and current payment trends, as well as taking into consideration the status of the related lease. we identified management’s estimateof the allowance for doubtful accounts as a critical audit matter due to the significant amount of judgment required by managementin determining its estimates for bad debt expense. this in turn resulted in significant effort and a high degree of subjectivity,in performing our audit procedures and in evaluating audit evidence relating to the collectability of accounts receivable madeby management. addressing the matter involved performingprocedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. our procedures included, among others, (i) obtaining an understanding of management’s process and evaluating the design ofcontrols related to the allowance for doubtful accounts; (ii) verifying that for a sample of leases, the company had correctlyapplied payments to the appropriate lease; and (iii) independently recalculating the company’s analysis of bad debt for itslease portfolio on a historical and current basis including a review of payment trends subsequent to december 31, 2020 and comparingthat result against the company’s calculations for reasonableness. /s/ eisner amper llp we have served as the company’s auditorsince 2014.

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. accounting for acquisitions description of the matter as described in note 3 to the financial statements, the company completed five acquisitions during 2019. the most significant of these were the acquisition of med equities realty trust, inc. and the acquisition of the encore portfolio. auditing the company's accounting for its acquisitions was complex due to the significant estimation uncertainty in the company’s determination of the fair value of the acquired assets and liabilities, including the acquired properties and assumed leases. the significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to the underlying significant assumptions utilized in the measurement of the fair value of the acquired properties and leases. the company used discounted cash flow analyses, market comparable data, and replacement cost data, to estimate the fair value of the acquired properties and assumed leases. the significant assumptions used to estimate the fair value of the acquired properties and assumed leases included lease coverage ratios, lease yields, market rents, land values per acre, discount rates, and replacement costs of furniture, fixtures, and equipment. certain of these significant assumptions include consideration of future economic and market conditions.f-1table of contents how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the company’s accounting for acquisitions. for example, we tested controls over the measurement of the acquired properties and assumed leases, including management’s review of the appropriateness of the valuation methodology and assumptions used in the valuation models. to test the estimated fair value of the acquired properties and assumed leases, we involved our valuation specialists and performed procedures including, among others, evaluating the company’s valuation methodology and testing the significant assumptions. for example, we compared the significant assumptions used to independent third-party data and the company’s recent lease and acquisition transactions. additionally, we tested the completeness and accuracy of the underlying data supporting the significant assumptions and estimates including through comparison to the related lease agreements. collectability of future lease payments description of the matter the company recognized rental income of $804 million during 2019. as described in note 2 to the consolidated financial statements, the timing and pattern of rental income recognition for operating leases is affected by the company’s determination as to whether the collectability of lease payments is probable. auditing the company's accounting for rental income is complex due to the judgment involved in the company’s determination of the collectability of future lease payments from its operators. the determination involves consideration of the lessee’s payment history and recent payment trends, an assessment of the financial strength of the lessees and guarantors, where applicable, future contractual rents, historical and projected operating results of the lessees in such properties, and the timing of expected payments.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of the company's controls over the recognition of rental income, including controls over management’s assessment of the collectability of future lease payments. for example, we tested controls over management’s consideration of the factors used in assessing collectability and controls over the completeness and accuracy of the data used in management’s analyses. to test the rental income recognized, we performed audit procedures that included, among others, evaluating the collectability of lease payments. for example, we assessed the operators’ historical operating results in the properties, the financial condition of the operators and payment trends for a sample of operators. we also considered whether other information obtained throughout the course of our audit procedures corroborated or contradicted management’s analysis. in addition, we tested the completeness and accuracy of the data that was used in management’s analyses. /s/ ernst & young llp we have served as the company’s auditor since 1992.

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 - cinch connectivity solutions europe (“ccs”), power solutions & protection europe (“psp”), and cui power (“cui”) reporting units – refer to notes 1 and 4 to the financial statements critical audit matter description the company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. the company estimates the fair value of its reporting units using a weighting of fair values derived from income and market approaches, which requires management to make significant estimates and assumptions related to the weighted-average cost of capital (“wacc”), long-term growth rates, forecasts of future revenues and profitability measures, and valuation multiples. changes in these assumptions could have a significant impact on the fair value. the company performed their annual impairment assessment of its ccs, psp and cui reporting units as of october 1, 2020. ccs and psp’s operations are sensitive to changes in the european economy, while cui’s operations are sensitive to changes in the north america economy. 31 the goodwill balance was $24.0 million as of december 31, 2020, of which $7.9 million was related to ccs, $5.2 million was related to psp, and $10.9 million relating to cui. the company determined that the fair value of these reporting units exceeded their carrying value. given the significant judgments made by management to estimate the fair value of its reporting units, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to wac cs, long-term growth rates, forecasts of future revenues and profitability measures, and valuation multiples, specifically due to the sensitivity of the company’s operations to changes in the global economy, 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 wac cs, long-term growth rates, forecasts of future revenue and profitability measures, and valuation multiples to determine the fair value of the company’s ccs, psp and cui reporting units included the following, among others: • we tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of ccs, psp and cui, such as controls related to management’s selection of the wac cs, long-term growth rates, forecasts of future revenues and profitability measures, selection of guideline public companies, valuation multiples, and application of company specific risk premiums. • we evaluated management’s ability to accurately forecast future revenues and profitability measures by comparing actual results to management’s historical forecasts. • we evaluated the reasonableness of management’s revenue and profitability forecasts by comparing the forecasts to (1) internal communications to management and the board of directors and (2) forecasted information included in company press releases as well as in analyst and industry reports for the company and certain of its peer companies. • with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) selected wac cs, (3) long-term growth rates and (4) market related assumptions including guideline public companies and valuation multiples by testing the source information underlying the determination of the wac cs, long-term growth rates and market related assumptions and the mathematical accuracy of the calculation. indefinite-lived intangible assets – cinch, connectivity solutions and cui trademarks — refer to notes 1 and 4 to the financial statements critical audit matter description the company’s evaluation of indefinite-lived intangible assets for impairment involves the comparison of the fair value of each indefinite-lived intangible asset to its carrying value. the company estimates the fair value of its trademark intangible assets using the relief-from-royalty approach, which requires management to make significant estimates and assumptions related to the wac cs, royalty rates, and long-term growth rates. changes in these assumptions could have a significant impact on the fair value. the company performed their annual impairment assessment of its trademarks as of october 1, 2020. 32 the trademark intangible asset balance as of december 31, 2020 was $17.0 million, of which the cinch connectivity solutions trademark was $10.4 million, and the cui trademark intangible asset was $5 million. the company determined that the fair value of these trademarks exceeded their carrying value. given the fair value determination of trademark intangibles requires management to make significant estimates and assumptions related to wac cs, royalty rates, and long-term growth rates, performing audit procedures to evaluate the reasonableness of these assumptions 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 wac cs, royalty rates, and long-term growth rates for the trademark intangibles included the following, among others: • we tested the effectiveness of controls over the valuation of trademark intangible assets, including management’s controls over forecasts of projected revenue, and selection of wac cs, royalty rates, long-term growth rates and other valuation assumptions. • we assessed the reasonableness of management’s forecasts of future revenues by comparing the projections to historical results and certain peer companies. • with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) selected wac cs, (3) royalty rates, and (4) long-term growth rates by testing the source information underlying the determination of the wac cs, royalty rates and long-term growth rates and testing the mathematical accuracy of the calculation. • we evaluated whether the estimated projected revenues and long-term growth rates were consistent with evidence obtained in other areas of the audit. /s/ deloitte & touche llp new york, new york march 12, 2021 we have served as the company's auditor since 1983.

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.revenue recognition description of the matter as described in note 2 to the consolidated financial statements, the company’s contracts with customers sometimes contain multiple performance obligations, which are accounted for separately if they are distinct. in such cases, the transaction price is then allocated to the distinct performance obligations on a relative standalone selling price basis and revenue is recognized when control of the distinct performance obligation is transferred. for example, license revenue is recognized at the time of hardware shipment or delivery of software license, and subscription and service revenues are recognized over time as the services are performed.auditing the company’s revenue recognition was challenging, specifically related to the identification and determination of the distinct performance obligations and the timing of revenue recognition. for example, certain arrangements required judgment to determine the distinct performance obligations and the appropriate timing of revenue recognition.73table of contents how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of the company’s process and controls to determine the distinct performance obligations and the timing of revenue recognition. among the procedures we performed to test the determination of the distinct performance obligations and the timing of revenue recognition, we read executed contracts and purchase orders to understand the rights and obligations conveyed in the contractual arrangement, evaluated management’s assessment of the performance obligations and whether they were distinct, and tested the timing of revenue recognition for a sample of individual sales transactions. we evaluated the accuracy of the company’s accounting conclusions, specifically related to the identification and determination of distinct performance obligations and the timing of revenue recognition. uncertain tax positions description of the matter as described in note 11 to the consolidated financial statements, the company recorded an accrual of $20.8 million related to its uncertain tax position from an intra-group transfer of certain intellectual property rights (the “ip”). auditing the tax accrual resulting from the intra-group transfer of ip was complex and highly judgmental due to the significant uncertainty in determining the tax basis fair value of the intellectual property transferred. the fair value estimate was sensitive to the significant judgments and estimates management made based on their interpretation and application of tax laws in the applicable jurisdiction.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 measure tax accruals related to the determination of the uncertain tax position. to test the company’s measurement of the uncertain tax accrual related to the intra-group transfer, we involved our tax professionals to assess the appropriateness of the range of estimates reached based on the interpretation and application of tax laws in the applicable jurisdiction. for example, we compared the company’s accrual estimate based on the methodology utilized by management to alternative methodologies. we also verified our understanding of the relevant facts by reading the company’s correspondence documenting the relevant third-party advice obtained by the company. in addition, we used our knowledge of international and local income tax laws in the applicable jurisdictions to evaluate the appropriateness of the company’s measurement of the uncertain tax position related to the intra-group transfer./s/ ernst & young llp we have served as the company’s auditor since 2013.

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 (i) relates to accounts or disclosures that are material to the 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 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. measurement of equity in net income attributable to ab unitholders - performance-based fees as described in notes 1, 2 and 4 to the financial statements, the company’s principal source of income and cash flow is attributable to its investment in alliance bernstein l.p. (ab) limited partnership interests. the equity in net income attributable to ab unitholders was $266.3 million for the year ended december 31, 2019. the company records its investment in ab using the equity method of accounting. the company’s investment is increased to reflect its proportionate share of income of ab, decreased to reflect its proportionate share of losses of ab and cash distributions made by ab to its unitholders and adjusted to reflect its proportionate share of certain capital transactions of ab. the company’s proportionate share of income of ab includes performance-based fees recognized by ab. the transaction price for the asset management performance obligation for certain hedge fund and alternative investment advisory contracts, provide for a performance-based fee, in addition to the base advisory fee, which is calculated as either a percentage of absolute investment results or a percentage of investment results in excess of a stated benchmark over a specified period of time. the performance-based fees are forms of variable consideration and are therefore excluded from the transaction price until it becomes probable that there will not be significant reversal of the cumulative revenue recognized. constraining factors impacting the amount of variable consideration included in the transaction price include the contractual claw-back provisions to which the variable consideration is subject, the length of time to which the uncertainty of the consideration is subject, the number and range of possible consideration amounts, the probability of significant fluctuations in the fund’s market value and the level at which the fund’s value exceeds the contractual threshold required to earn such a fee. with respect to the constraining factors related to the fund’s market value, management measures assets under management (aum) using established market-based valuation methods and fair valuation (non-observable market) methods. as disclosed by management, fair valuation methods, including discounted cash flow models and other methods, are used only where aum cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities. the principal considerations for our determination that performing procedures relating to the measurement of equity in net income attributable to ab unitholders - performance-based fees is a critical audit matter are that there was significant judgment by management in assessing the probability that there will not be a significant reversal of the cumulative revenue recognized and in determining the fund’s market value where fair valuation methods are used. this in turn led to significant auditor judgment, subjectivity and effort in performing procedures relating to performance-based fees, including evaluating evidence related to the constraining factors impacting the amount of variable consideration. the audit effort also included the involvement of professionals with specialized skill and knowledge to assist in evaluating management’s estimate of the funds’ market value where fair valuation methods are used. 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 equity in net income attributable to ab unitholders, including controls relating to ab’s revenue recognition process for performance-based fees, including controls over the assessment of constraining factors and the valuation of aum. these procedures included, among others, testing management’s process for determining performance-based fees, including evaluating the appropriateness of the methods used, testing the contractual claw-back provisions to which the variable consideration is subject and, on a sample basis, evaluating the reasonableness of management’s assumptions related to the length of time to which the uncertainty of the consideration is subject, the number and range of possible consideration amounts and the probability of significant fluctuations in the funds’ market value. in evaluating management’s estimates of the funds’ market value, procedures included the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of prices for a sample of securities used in determining the underlying funds’ market value where fair valuation methods are used, and comparison of management’s estimate of the securities’ fair value to the independently developed ranges. developing the independent estimate of securities’ fair value involved testing the completeness and accuracy of data provided by management and independently developing the significant assumptions for the sampled securities. 64table of contents/s/ pricewaterhouse coopers llp new york, new york february 12, 2020we 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 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. reverse asset acquisition accounting as described in note 1 and 7 to the financial statements, the company entered into an agreement and plan of merger and reorganization, as amended (“merger”), with privately-held histogen, inc. and chinook merger sub, inc., a wholly-owned subsidiary of the company, which was completed on may 26, 2020. the accounting for the merger is impacted by the determination of whether the merger represents an asset acquisition or a business combination. goodwill or a bargain purchase gain is recognized in a business combination, however, is not recognized in an asset acquisition. we identified the evaluation of whether the merger represented a business combination or an asset acquisition as a critical audit matter. f-2 the principal considerations for our determination that the evaluation of the merger as an asset acquisition or business combination was a critical audit matter is the significant judgements required on the part of management, to evaluate whether the accounting acquiree meets the definition of a business in accordance with accounting standard codification 805, business combinations, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating management’s conclusions related to the proper accounting model.the primary procedures we performed to address this critical audit matter included: •evaluating evidence and assumptions used by management in determining whether the fair value of the assets acquired were concentrated in a group of similar non-financial assets, and whether the acquired assets had outputs or employees. •performing an independent determination of whether the accounting acquiree met the definition of a business at the time of the merger, with considerations given to the fair value of the assets acquired, whether the fair values of acquired assets were a single asset or a group of similar assets and or whether an integrated set of activities and assets were acquired, and comparing those to the management’s conclusions. stock-based compensation – fair value of market conditions as described in note 10 to the financial statements, the company issued stock options to the chief executive officer through an award agreement, which was modified on january 28, 2020 to include vesting provisions based on the overall market capitalization of the company (the “market condition stock options”), which is a future market condition. as the impact of the market condition is required to be included in the estimate of fair value, the company estimated the grant date fair value of the market condition stock options using a monte carlo option pricing model, which required management to make a number of assumptions, of which the most significant was the probability of achievement of the market condition. the principal consideration for our determination that the estimate of grant date fair value is a critical audit matter was the degree of judgment required to estimate the probability of achievement of the market conditions on the part of management and the complexity of the valuation model used, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating management’s option pricing model and the related assumptions. the primary procedures we performed to address this critical audit matter included: •evaluating the assumptions used in the option pricing model, including the assumptions used to determine the probability of attaining the market capitalization vesting provisions. •testing the mathematical accuracy of the option pricing model. •involving valuation professionals with specialized skills and knowledge to assess the option pricing model used by the company for consistency with generally accepted business valuation standards and the requirements of gaap. 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.durable medical equipment revenue recognition – variable consideration as described further in notes 2 and 3 to the financial statements, and disclosed in the consolidated statement of operations, the company recorded $60.9 million of total revenues for the year ended june 30, 2021, of which $57.6 million related to the durable medical equipment operating segment.the company’s revenue is recorded based on the amount that the company expects to receive in exchange for the goods or services provided, which consists of the transaction price net of estimates for variable consideration. actual amounts of consideration ultimately received may differ from the company’s initial estimates. we identified the estimation of the variable consideration within the durable medical equipment revenue streams as a critical audit matter.f-2the principal considerations for our determination that variable consideration is a critical audit matter are (i) the significant judgment exercised by the company in estimating variable consideration and (ii) the volume and variability of information necessary to evaluate of the initial amounts recorded that are subject to the company’s estimate of variable consideration.our audit procedures related to variable consideration included the following, among others: •for a sample of revenue transactions, we (i) performed detailed transaction testing by agreeing the amount recognized to source documentation, which included fee schedules, explanation of benefits, or cash payments, as available and (ii) evaluated the rate of adjustment from our sample relative to the company’s incremental constraints for variable consideration •tested management’s process for determining the reasonableness of constraints for variable consideration, including testing of the inputs to the calculation and reperformance of management’s analysis to evaluate the reasonableness of rates applied to those inputs 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.interim indefinite-lived impairment assessment - garlock trademark as described in notes 1 and 9 to the consolidated financial statements, the company’s consolidated indefinite-lived trademarks balance was $53.4 million as of december 31, 2020, of which a portion relates to the garlock trademark. intangible assets with indefinite lives are subject to at least annual impairment testing, conducted each year as of october 1, which compares the fair value of the intangible asset with its carrying amount using the relief from royalty method. interim tests may be required if an event occurs or circumstances change that would more likely than not reduce the fair value below the carrying value or change the useful life of the asset. in the third quarter of 2020, a triggering event was identified for the indefinite-lived trademarks within the sealing technologies segment, which includes the garlock trademark. based on the results of the interim impairment analysis, the company recorded a $16.1 million impairment of indefinite-lived trademarks in the third quarter of 2020. projecting discounted future cash flows requires management to make significant estimates regarding projected revenues and profit margins, discount rates, royalty rates, and tax rates. the principal considerations for our determination that performing procedures relating to the interim impairment assessment of the garlock trademark is a critical audit matter are (i) the significant judgment by management when determining the fair value estimate of the garlock trademark; (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenues and the discount 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 management’s indefinite-lived trademarks impairment assessment, including controls over the valuation of the garlock trademark. these procedures also included, among others, (i) testing management’s process for determining the fair value estimate; (ii) evaluating the appropriateness of the relief from royalty method; (iii) testing the completeness and accuracy of the underlying data used in the fair value estimate; and (iv) evaluating the reasonableness of the significant assumptions used by management related to projected revenues and discount rate. evaluating management’s assumption related to projected revenues involved evaluating whether the assumption was reasonable considering (i) current and past performance; (ii) the consistency with external market and industry data; and (iii) whether this assumption was 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 relief from royalty method and (ii) the reasonableness of the significant assumption related to the discount rate.61provision for income taxes - completeness and accuracy of data as described in note 5 to the consolidated financial statements, the company recorded a consolidated provision for income taxes from continuing operations of $3.5 million for the year ended december 31, 2020. as disclosed by management, the completeness and accuracy of the consolidated provision for income taxes is dependent on the completeness and accuracy of input data used in the calculation, including information received from foreign subsidiaries, including adjustments to the foreign subsidiaries’ year-end tax packages made as part of consolidation. the principal considerations for our determination that performing procedures relating to the completeness and accuracy of data used in the provision for income taxes is a critical audit matter are (i) the high degree of auditor subjectivity and effort in performing procedures and evaluating the audit evidence related to accounting for the provision for income taxes; and (ii) the audit effort involved the use of professionals with specialized skill and knowledge. 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 testing the effectiveness of controls relating to management’s provision for income taxes, including controls over the completeness and accuracy of data used in the provision for income taxes. these procedures also included, among others, (i) testing the provision for income taxes, including the rate reconciliation and certain return to provision adjustments; (ii) evaluating the completeness and accuracy of the underlying input data used in the calculation of the income tax provision, including certain information received from foreign subsidiaries; and (iii) evaluating permanent and temporary differences. professionals with specialized skill and knowledge were used to assist in evaluating the company’s foreign provision for income taxes.acquisition of alluxa, inc. - valuation of definite-lived intangible assets as described in notes 1 and 3 to the consolidated financial statements, in 2020, the company completed the acquisition of alluxa, inc. for $238.4 million, net of cash acquired, plus rollover equity. identifiable intangible assets acquired as part of the acquisition were $132.3 million, consisting of definite-lived intangible assets, including customer relationships, proprietary technology, trade names, and non-competition agreements. the fair value of intangible assets associated with acquisitions is determined using an income valuation approach. projecting discounted future cash flows requires management to make significant estimates regarding projected revenues and profit margins, projected capital expenditures, changes in working capital, discount rates, attrition rates, royalty rates, obsolescence rates, and tax rates. the principal considerations for our determination that performing procedures relating to the valuation of definite-lived intangible assets from the alluxa, inc. acquisition is a critical audit matter are (i) the significant judgment by management when determining the fair value estimates of the acquired definite-lived intangible assets; (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenues and profit margins, discount rate, attrition rate, royalty rate, and obsolescence 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 business combinations, including controls over management’s valuation of definite-lived intangible assets. these procedures also included, among others, (i) reading the purchase agreement; (ii) testing management’s process for determining the fair values of the definite-lived intangible assets; (iii) evaluating the reasonableness of the income valuation approach; (iv) testing the completeness and accuracy of the underlying data used in the fair value estimates; and (iv) evaluating the reasonableness of the significant assumptions used by management related to projected revenues and profit margins, discount rate, attrition rate, royalty rate, and obsolescence rate. evaluating management’s assumptions related to projected revenues and profit margins involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of alluxa, inc.; (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 evaluating (i) the appropriateness of the income valuation approach and (ii) the reasonableness of the significant assumptions related to the discount rate, attrition rate, royalty rate, and obsolescence rate.goodwill impairment assessments - technetics reporting unit as described in notes 1 and 9 to the consolidated financial statements, the company’s consolidated goodwill balance was $621.8 million as of december 31, 2020. goodwill is subject to annual impairment testing conducted each year as of october 1. interim tests may be required if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. the goodwill asset impairment test involves comparing the fair value of a 62reporting unit to its carrying amount. management would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. as a result of the business segment realignments, management tested the technetics reporting unit for impairment before the allocation of goodwill, as well as on the annual date. after the transfer, the technetics reporting unit was allocated $67.7 million of goodwill and the newly formed semiconductor reporting unit was allocated $180.1 million of goodwill. to estimate the fair value of the reporting units, management uses both a discounted cash flow and market valuation approach. the key assumptions used for the discounted cash flow and market valuation approaches include projected revenues and profit margins, projected capital expenditures, changes in working capital, discount rates, tax rates, and market multiples. the principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the technetics reporting unit is a critical audit matter are (i) the significant judgment by management when determining the fair value estimates of the reporting unit; (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenues and profit margins, discount rate, and market 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 goodwill impairment assessments, including controls over the valuation of the technetics reporting unit. these procedures also included, among others, (i) testing management’s process for determining the fair value estimates; (ii) evaluating the appropriateness of the discounted cash flow and market valuation approaches; (iii) testing the completeness and accuracy of the underlying data used in the fair value estimates; and (iv) evaluating the reasonableness of the significant assumptions used by management related to projected revenues and profit margins, discount rate, and market multiples. evaluating management’s assumptions related to projected revenues and profit margins involved evaluating whether the assumptions were reasonable considering (i) current and past performance; (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 evaluating (i) the appropriateness of the discounted cash flow and market valuation approaches and (ii) the reasonableness of the significant assumptions related to the discount rate and market multiples./s/ pricewaterhouse coopers llp charlotte, north carolina march 1, 2021we have served as the company’s auditor since 2004.

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.early plant retirements - nuclear — refer to notes 4 and 13 to the financial statements critical audit matter description pseg’s wholly-owned subsidiary pseg power llc (pseg power) owns and operates nuclear plants in new jersey and has recorded associated asset retirement obligations (aro) for their eventual decommissioning. in april 2019, the new jersey board of public utilities (bpu) awarded zero emission certificates (zec) to pseg power’s salem 1, salem 2 and hope creek nuclear plants for an initial period of approximately three years through may 2022. the initial zec award has been appealed by the new jersey rate counsel and pseg power cannot predict the outcome of this matter. in october, 2020, pseg power filed its application for the second eligibility period beginning in june 2022. in the event that (i) the zec program is overturned or is otherwise materially adversely modified through legal process; (ii) the amount of zec payments that may be awarded or other terms and conditions of the second zec eligibility period proposed by the bpu in its final decision differ from those of the current zec period; or (iii) any of the salem 1, salem 2 and hope creek plants is not awarded zec payments by the bpu and does not otherwise experience a material financial change, pseg power has disclosed that it will take all necessary steps to cease to operate these nuclear plants. this would result in material charges 64 table of contentsassociated with accelerated depreciation and amortization, impairment charges, and accelerated asset retirement costs, among other costs. we identified the potential early retirement of the nuclear plants as a critical audit matter because of the significant estimates and assumptions management made in determining the useful lives of the nuclear plants and in evaluating the recorded investments in the nuclear plants for potential impairment. further, management’s estimates used in recording the aro included a number of assumptions, including the timing of cash flows associated with the eventual decommissioning of the nuclear plants following the retirement of the assets. auditing each of these assumptions required a high degree of auditor judgment.how the critical audit matter was addressed in the audit our audit procedures related to the potential early retirement of the nuclear plants and the related impact on the recorded investments in the nuclear plants and the related aro included the following, among others:•we tested the effectiveness of controls over the evaluation of potential impairment indicators, including management’s consideration of legal and regulatory matters related to ze cs.•we tested the effectiveness of controls over the evaluation of retirement date assumptions used in the calculation of the aro, including the probability weighting of the various cash flow scenarios.•we evaluated management’s judgments over the probability of early retirement of the nuclear plants and impairment triggers including considerations of regulatory matters for the second zec eligibility period.•we evaluated management’s assumptions over the weighted-probability of early retirement of the nuclear plants used in calculating the recorded nuclear aro balance.•we requested and received a written response from internal counsel and external legal firms representing pseg and evaluated the legal conclusions for consistency with those used in management’s accounting judgments and disclosures.•we obtained written representations from management regarding their intent to cease to operate the nuclear plants in the event that certain legal, regulatory, and economic matters are not favorably resolved.•we evaluated the related disclosures for consistency with our understanding.asset dispositions - potential sale of non-nuclear assets – impairment tests — refer to note 4 to the financial statements critical audit matter description in july 2020, pseg power announced that it is exploring strategic alternatives for its non-nuclear generating fleet, which includes more than 6,750 mw of fossil generation located in new jersey, connecticut, new york and maryland. as a result, pseg power performed impairment tests for its portfolio of assets in the pjm, nyiso and nepool regions. the assessments included probability weightings assigned to undiscounted cash flow scenarios of retaining the assets through their estimated useful lives and a potential disposition of the assets. as of december 31, 2020, the estimated undiscounted future cash flows of each of the asset groups exceeded the carrying amount and no impairment was identified. we identified the impairment tests over the pjm, nyiso and nepool asset groupings as a critical audit matter because of the significant management judgements and estimates related to asset grouping conclusions, the probability weighting of the outcomes of various scenarios, and the significant inputs utilized in the impairment test to determine the estimated undiscounted cash flows. those inputs include estimated forward power prices, fuel costs and dispatch rates as well as estimates of fair value to be received upon any disposition of assets. auditing these estimates and assumptions required a high degree of auditor judgment and the involvement of our fair value specialists.how the critical audit matter was addressed in the audit our audit procedures related to the impairment tests over the pjm, nyiso and nepool asset groupings included the following, among others:•we tested the effectiveness of controls over management’s impairment tests including considerations of asset groupings, the significant inputs utilized to determine estimated undiscounted cash flows, and the weighted probabilities assigned to the outcome of various scenarios.65 table of contents•we evaluated management’s conclusions regarding the asset groupings utilized for the purposes of the impairment tests.•with the assistance of our fair value specialists, we evaluated the significant inputs utilized within management’s impairment tests including forward power prices, fuel costs, dispatch rates and estimates of the fair value to be received upon any disposition of assets.•we evaluated management’s assumptions related to the weighted probabilities assigned to the outcome of various scenarios.•we evaluated the related disclosures for consistency with our understanding.regulatory assets and liabilities - income taxes—refer to notes 1, 7 and 22 to the financial statements critical audit matter description pseg’s subsidiary, public service electric and gas company (pse&g), is an electric and gas transmission and distribution utility regulated by the bpu and the federal energy regulatory commission. management believes that pse&g’s transmission and distribution businesses continue to meet the accounting requirements for rate-regulated entities, and pse&g’s financial statements reflect the economic effects of cost-based rate regulation. through the rate-making process, pse&g’s rates to customers also include the recovery of income tax expense associated with pse&g’s electric and gas distribution and electric transmission operations. pse&g has recorded regulatory liabilities for excess accumulated deferred income taxes (adit) which will be refunded to customers in future periods. pse&g’s most recent electric and gas distribution base rate case, concluded in 2018, established the tax adjustment credit (tac) that provides for the refund of these excess adit regulatory liabilities as well as the flow through to customers of historical and current accumulated deferred income taxes for tax-deductible repairs. the flow through of the tax benefits results in lower revenues and lower income tax expense, as well as the recognition of a regulatory asset, as management believes it is probable that the accumulated tax benefits, treated as a flow-through item to pse&g customers, will be recovered from customers in the future. we identified the accounting for the tac as a critical audit matter due to the complexity in accounting for the impact of rate regulation on income tax expense. auditing management’s assertion that the tac regulatory assets are probable of future recovery, and that the accounting for the tac is accurately recorded and reported, requires auditor judgment and specialized knowledge of accounting matters specific to rate regulation. further, the determination of the estimated benefit of current tax-deductible repairs under the internal revenue code, and the resulting impacts on the tac regulatory asset and income tax expense recorded in the financial statements is complex and required a high degree of auditor judgment and the involvement of our income tax specialists.how the critical audit matter was addressed in the audit our audit procedures to evaluate the accounting for the tac and the associated regulatory assets, regulatory liabilities, and income tax expense included the following, among others:•we tested the effectiveness of controls over the calculation of the amounts refunded through the tac, including controls over the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering the tac regulatory assets in future rates.•we evaluated management’s analysis over the assertion that the tac regulatory assets are probable of recovery. •we evaluated relevant regulatory orders related to the ratemaking treatment of income taxes.•with the assistance of our income tax specialists, we tested the accuracy of income tax expense, regulatory assets and regulatory liabilities associated with the tac.•we evaluated the financial statement presentation and related disclosures for consistency with our understanding. commitments and contingent liabilities - passaic river environmental liability—refer to note 15 to the financial statements critical audit matter description as described in note 15, the u.s. environmental protection agency (epa) has designated a 17-mile stretch of the lower passaic river (lower passaic river study area (lprsa)) in new jersey as a “superfund” site requiring environmental remediation and has identified certain potentially responsible parties (pr ps), including pseg. the epa has released a record of decision (rod) for the lprsa’s lower 8.3 miles that requires the removal of sediments at an estimated cost of $2.3 billion 66 table of contents(rod remedy). an epa-commenced process to allocate the associated costs to the pr ps is underway, and pseg cannot predict the outcome. additionally, one of the pr ps has filed suit against pseg and others seeking cost recovery and contribution under the federal comprehensive environmental response, compensation and liability act of 1980, but has not quantified alleged damages. the litigation is ongoing and pseg cannot predict the outcome. as of december 31, 2020, pseg recorded an environmental liability of $65 million for its estimated share of the remediation of the environmental contamination, a portion of which has been deferred as a regulatory asset based on pseg’s assessment that pse&g will recover such costs in future rates.the outcome of this matter is uncertain, and pseg cannot predict this matter’s ultimate impact on its financial statements. it is possible that pseg will record additional costs beyond what it has accrued, and that such costs could be material, but pseg cannot at the current time estimate the amount or range of any additional costs.we identified the accounting for the passaic river environmental liability as a critical audit matter due to the uncertainties inherent in estimating pseg’s liability. auditing pseg’s estimated share of the remediation cost, the environmental liability recorded, and the evaluation of future recovery of the regulatory asset recorded required a high degree of auditor judgment and the involvement of our environmental specialists. how the critical audit matter was addressed in the audit our audit procedures related to the passaic river environmental liability included the following, among others:•we tested the effectiveness of controls over the passaic river environmental liability, including those over the evaluation of recent events and changes in circumstances that have or may give rise to a change in pseg’s estimated share of the total remediation costs.•we tested the effectiveness of controls over the passaic river regulatory asset, including controls over the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering the passaic river regulatory asset in future rates.•with the assistance of our environmental specialists, we evaluated publicly available information regarding the status of the passaic river superfund site, including planned remediation techniques and associated estimated costs, and compared this to information used in management’s estimate of the environmental liability.•we evaluated the assumptions used by management to estimate pseg’s share of the environmental obligation, including consideration of publicly available information.•we requested and received a written response from internal counsel and external legal firms representing pseg and evaluated the legal conclusions for consistency with those used in management’s accounting judgments and disclosures.•we evaluated management’s analysis over the assertion that the passaic river regulatory asset is probable of recovery. •we evaluated the related disclosures for consistency with our understanding./s/ deloitte & touche llp parsippany, new jersey february 26, 2021we have served as the company's auditor since 1934.

critical audit matters the critical audit matter communicated belowis matter arising from the current period audit of the consolidated financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financialstatements 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, bycommunicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts ordisclosures to which they relate. f-2 evaluation of the carrying value of goodwill in the canadian and jingshan sanhe reporting units as discussed in note 2 to the consolidated financialstatements, the company performs a goodwill impairment test on an annual basis or whenever events or changes in circumstances indicatethat the carrying value of a reporting unit might exceed its fair value. the discount rate applied to projected cash flows is importantelements used by the company in determining the fair value of the reporting unit and the amount of goodwill impairment losses. in thelast quarter of 2021, the company performed an annual goodwill impairment test in response to the decline in current market conditionsas a result of the covid-19 pandemic. the goodwill was determined to be impaired, and impairment losses of $3.26 million was recorded. we identified the evaluation of the discount rateapplied to projected cash flows used in the assessment of the carrying value of goodwill for the reporting unit, for which such assumptionsare used by the company in the determination of goodwill impairment losses, as a critical audit matter. specifically, the evaluation ofthese assumptions required the application of subjective auditor judgment because changes to these assumptions may have a substantialimpact on the determination of fair value of the reporting unit. we gathered data and evidence to performed sensitivity analyses to determinethe significance of the assumptions used to determine the fair value of the reporting unit, which required a higher degree of auditorjudgment. addressing the matter involved evaluating the company’s assessment of the value of the reporting unit under the discounted cash flow method. we gathered data and evidence, performedindependent analysis, and exercised professional judgment during our evaluation process. /s/ wwc, p.c.wwc, p.c.certified public accountants pcaob id: 1711 we have served as the company’s auditor since 2007

critical audit matters the critical audit matter communicated below isa matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicatedto 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 alterin any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical auditmatter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. f-2 unsecured convertible notes – related party as described in notes 9 and 12 to the consolidatedfinancial statements, on august 11, 2021, the company entered into an amendment of notes agreement (the “amendment agreement”)with trinad capital pursuant to which the maturity date of all of the trinad notes was extended to may 31, 2023, and in considerationof such extension, the company issued to trinad capital 33,654 shares of its common stock. in accounting for the amendment agreement,the company concluded that the amendment was required to be accounted for as an extinguishment under asc 470-50, debt – modificationsand extinguishment, and recorded the amended debt instrument at fair value and recorded a loss on extinguishment of approximately $4.3million for the year ended march 31, 2022. in addition, the company recorded approximately $4.2 million to additional paid in capitalas a result of the excess fair value of the amended debt instrument over the principal and accrued interest outstanding at the time ofextinguishment. we have identified the accounting evaluation ofthe amendment agreement and the related estimation of the fair value of the amended debt instrument as a critical audit matter. accountingfor the amendment agreement required significant management judgment in evaluating the key contract terms and the application of the relevantaccounting guidance as well as the estimation of the market yield used in the valuation of the amended debt instrument. auditing theseelements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters,including the extent of specialized skills and knowledge needed. the primary procedures we performed to address this critical auditmatter included: ●utilizingprofessionals with specialized knowledge and experience in technical accounting to assist in: (i) evaluating the relevant contract termsand features of the amendment agreement, and (ii) assessing the reasonableness of conclusions reached by management with respect to theaccounting for the amendment agreement.●utilizingprofessionals with specialized knowledge and skill in valuation to assist in assessing the reasonableness of the valuation model utilizedby management to determine the fair value of the amended debt instrument and assessing the reasonableness of assumptions incorporatedinto the valuation model including market yield. /s/ bdo usa, llp we have served as the company’s auditorsince 2018.

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.goodwill — food distribution reporting unit — refer to notes 1 and 4 to the financial statements critical audit matter description the company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to their carrying value. the company has three reporting units, which are the same as the company’s reportable segments. the goodwill balance was $181 million as of january 1, 2022, all of which was allocated to the food distribution reporting unit (“food distribution”). the estimate of the fair value of food distribution is primarily based on the income approach using a discounted cash flow model and also incorporates the market approach using observable comparable company information. the principal factors used in the discounted cash flow analysis requiring management judgment are the determination of the weighted average cost of capital (“wacc”), revenue growth rates, and forecasted operating profits. under the market approach, the company compared the results of the discounted cash flow model to observable comparable company market multiples to support the appropriateness of the fair value estimates. the company’s goodwill impairment analysis also includes a comparison of the estimated fair value of the enterprise as a whole to the company’s total market capitalization. the company evaluates goodwill for impairment annually, and more frequently if circumstances indicate the possibility of impairment. the company concluded that the fair value of food distribution was substantially in excess of its carrying value and, therefore, no impairment was recognized.-34- given the significant judgments made by management to estimate the fair value of food distribution, performing audit procedures to evaluate the reasonableness of management’s judgments and assumptions utilized in the impairment evaluation, particularly the determination of the wacc, revenue growth rates, and forecasted operating profits, 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 revenue growth rates, forecasted operating profits, and the selection of the wacc used by management to estimate the fair value of food distribution included the following, among others: •we tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of food distribution, such as controls related to the determination of revenue growth rates and forecasted operating profits, and the selection of the wacc. •we evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts. •we evaluated the reasonableness of management’s determination of revenue growth rates and forecasted operating profits for food distribution by comparing the growth rates and forecasts to: –historical revenue growth rates and operating profits. –internal communications to management and the board of directors. –forecasted information included in company press releases as well as in analyst and industry reports for the company and certain of its peer companies. •with the assistance of our fair value specialists, we evaluated the wacc for food distribution, which included testing the underlying source information and the mathematical accuracy of the calculations and developing a range of independent estimates and comparing those to the wacc selected by management. •with the assistance of our fair value specialists, we evaluated the market approach for food distribution, which included evaluating the reasonableness of the selected guideline public companies and the resulting market multiples calculation, as well as benchmarking the selected multiple for food distribution against these guideline public companies. /s/ deloitte & touche llp grand rapids, michigan march 2, 2022 we have served as the company's auditor since at least 1970;

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 – over-time basis – refer to note 2 to the financial statements critical audit matter description the company recognizes revenue when control of a promised good and/or service is transferred to a customer. the company identifies a performance obligation for each promise in a contract to transfer a distinct good or service to the customer. contracts that qualify for over-time revenue recognition are generally associated with the design, development, and manufacture of highly engineered industrial products used in commercial and defense applications and generally span between 2-5 years in duration. the company uses over-time revenue recognition based on the utilization of an input measure used to measure progress of performance obligations, such as costs incurred to date relative to total estimated costs. application of an over-time revenue recognition method requires the use of reasonable and dependable estimates of costs that will be incurred to complete production of goods or provision of services. as of december 31, 2020, revenue was $2.391 billion, of which 52% relates to over-time revenue. certain of the company’s contracts have limited amount of historical data available requiring the company to make judgments to estimate future costs that will be incurred for these contracts. related to these contracts, auditing these estimates required 75both extensive audit effort due to a high degree of auditor judgment, especially given the limited historical data for certain contracts, 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 total costs that will be incurred for certain of the contracts (as discussed above) included the following: •we tested the effectiveness of controls over the long-term contract revenue, including those over the estimates of total costs for the performance obligation.•we performed the following: ◦evaluated the appropriateness and consistency of the methods and assumptions used by management to develop the estimates of future costs that will be incurred for contracts with limited historical experience.◦evaluated management’s ability to achieve the estimates of costs that will be incurred by performing corroborating inquiries with the company’s project managers and engineers, and comparing the estimates to management’s work plans, engineering specifications, and supplier contracts.◦tested the accuracy and completeness of the costs incurred to date.◦compared the actual costs incurred to date to management’s estimated costs to be incurred to date. ◦due to the limited historical data available for certain contracts, we tested changes in management’s total cost estimates. ◦tested the mathematical accuracy of management’s estimates of future costs to be incurred.◦tested the mathematical accuracy of management’s calculation of revenue for the contract./s/ deloitte & touche llp parsippany, new jersey february 25, 2021 we have served as the company's auditor since 2003.

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. f-2 valuation of the 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 insurance and reinsurance businesses. the company’s reserve for losses and loss adjustment expenses as of december 31, 2021 was $13.1 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 (i) exposure base and projected ultimate premium; (ii) expected loss ratios by product and class of business, which are developed collaboratively by underwriters and actuaries; (iii) 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; (iv) current legal interpretations of coverage and liability; and (v) economic conditions. the principal considerations for our determination that performing procedures relating to the valuation of the reserve for losses and loss adjustment expenses is a critical audit matter are the significant judgment by management when developing their estimate; this in turn led to a high degree of auditor subjectivity, judgment and effort in performing procedures and evaluating the audit evidence relating to the methodologies and the significant assumptions related to expected loss ratios and historical trends, such as reserving patterns, loss payments and product mix, and 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 valuation of the reserve for losses and loss adjustment expenses, including controls over the selection of 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: (i) evaluating management’s 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 (ii) developing an independent estimate of the reserve for losses and loss adjustment expenses and comparing the independent estimate to management’s actuarially determined reserves. /s/pricewaterhouse coopers llp new york, new york march 28, 2022we have served as the company’s auditor since 1996.

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.liability for errors and omissions — refer to notes 1 and 16 to the financial statements critical audit matter description the company is subject to a significant number of claims, lawsuits and proceedings in the ordinary course of business. such claims and lawsuits consist principally of alleged errors and omissions (“e&o”) in connection with the performance of professional services. these claims may seek damages, including punitive and treble damages, in amounts that could be significant. the company uses case level reviews performed by inside and outside counsel, internal actuarial analysis and other methods to estimate potential losses resulting from reported and unreported claims.given that the determination of the liability for e&o requires management to make significant estimates and assumptions in projecting ultimate settlement values of reported and unreported claims, performing audit procedures to evaluate the reasonableness of such estimates and assumptions required a high degree of auditor judgment, including the need to involve our actuarial specialists.115how the critical audit matter was addressed in the audit our audit procedures related to the determination of the liability for e&o included the following, among others: •we tested the effectiveness of internal controls related to the determination of the liability for e&o, including controls over the projection of ultimate settlement values of reported and unreported claims determined through internal actuarial analyses, management’s review of the appropriateness of the assumptions used and calculation of case loss estimates, and management’s independent review of case level estimates provided by inside and outside counsel, as applicable.•for selected e&o matters, we evaluated the reasonableness of management’s case loss estimates and, as applicable, made inquiries of the company’s inside and outside counsel regarding the status of these matters and likelihood of settlement. •we compared total incurred losses and current case estimates as of the balance sheet date to amounts reported in prior periods to evaluate trends and developments in reported cases. •with the assistance of our actuarial specialists, we evaluated the reasonableness of the assumptions and methodologies involved in the development of the liability for e&o by:–testing the underlying data that served as the basis for the actuarial analysis, including historical claims and case loss estimates, to evaluate whether the inputs to the actuarial estimate were reasonable.–comparing management’s prior-year assumptions of expected development and ultimate loss to actual amounts incurred during the current year to identify potential bias in the determination of the liability for e&o.–developing a range of independent estimates and comparing those to the liability for e&o recorded by the company./s/ deloitte & touche llp new york, new york february 16, 2022 we have served as the company’s auditor since 1989.

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. excess inventory reserve f-2table of contents description of the matter as described in note 9 to the consolidated financial statements, the company had net inventories of $176.1 million as of december 31, 2019, which included materials of $108.5 million, work-in-progress of $42.7 million, and finished goods of $24.9 million. the valuation of certain of the company’s inventory is subject to risks associated with supply and demand. as described in note 2 to the consolidated financial statements, the company maintains reserves for excess and obsolete inventory equal to the difference between the cost of inventory and its estimated net realizable value based upon assumptions about historical and future demand for the company’s products and market conditions. auditing management’s estimate of the excess and obsolete inventory reserve was subjective and required significant judgment as the excess and obsolete inventory reserve is sensitive to changes in the company’s operations and assumptions used to estimate the reserve including management’s assumptions with regards to product life-cycles, product demand and market conditions, which includes historical usage, expected future usage, on-hand quantities of individual materials, and anticipated engineering design changes or advancements. 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 excess and obsolete inventory reserve process, including those over the validity and reasonableness of the data and assumptions used in estimating the excess and obsolete inventory reserve. to test the adequacy of the company’s excess and obsolete inventory reserve, we performed audit procedures that included, among others, assessing methodologies and assumptions used, testing the completeness and accuracy of the underlying data used by management in its analysis including the usage of historical materials, considering potential product obsolescence, observing physical inventory on-hand and inspecting historical gross margins to assess whether any items are being sold at a loss or lower margins that may need to be included in the reserve. we assessed the historical accuracy of management’s estimated excess and obsolete inventory reserve and performed sensitivity analyses to evaluate changes in the estimate that result from changes in the company’s significant assumptions. accounting for acquisition of nanometrics incorporated description of the matter in october 2019, rudolph technologies, inc. (rudolph) completed its acquisition of nanometrics incorporated (nanometrics) for net consideration of $890.1 million, including identified intangible assets of $374.9 million, which principally consisted of developed technology, in-process research and development and customer relationships, as disclosed in note 3 to the consolidated financial statements. the transaction was accounted for as a business combination with rudolph as the accounting acquirer. auditing the fair value of intangible assets was complex due to the sensitivity of the respective fair values to the significant underlying assumptions. the company engaged a specialist that used an income approach which is based on a discounted cash flow model to measure the intangible assets. the significant assumptions used to estimate the fair value of the intangible assets included discount rates and revenue growth rates. these significant assumptions are forward looking and could be affected by future economic and market conditions. the determination of the accounting acquirer is a subjective determination where management applied judgment in evaluating the relevant criteria to make this determination. how we addressed the matter in our audit we tested the company’s controls over its accounting for the nanometrics acquisition. our tests included controls over the determination of the accounting acquirer and the estimation process supporting the recognition and measurement of the intangible assets, including the significant assumptions used. to test the estimated fair value of the intangible assets, we performed audit procedures that included, among others, evaluating the company’s use of the income approach and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data. we involved our valuation specialists to assist with our evaluation of the methodology used by the company and significant assumptions included in the fair value estimates. for example, we compared the significant assumptions to current industry, market and economic trends; to the assumptions used to value similar assets in the marketplace; and to the historical results of the acquired business and to other guidelines used by companies within the same industry. to test the determination of the accounting acquirer, we performed audit procedures that included, among others, inspecting the analysis prepared by the company on this topic and evaluating the accuracy of the information and the judgments made by management considering historical information, the merger agreement and other relevant information relating to the terms of the merger and the prospective plans of the company after the merger. /s/ ernst & young llp we have served as the company’s auditor since 2008.

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.as discussed in note 2 to the consolidated financial statements, the company has determined that revenue is recorded at the amount expected to be collected. the company’s performance obligations are specific to the services included within each revenue contract which requires subjective judgment regarding the satisfaction of the performance obligation criteria for revenue recognition. performance obligations are satisfied over time and as study data is transmitted to the customer. revenue from the company's discovery services is recognized using the time elapsed method and at a point in time as the company delivers study results to the customers. we identified management’s determination of when the satisfaction of the performance obligation was met on the contracts as a critical audit matter. the primary procedures we performed to address this critical audit matter included the following: •tested the completeness of the contracts’ population as of year-end; 48table of contents•obtained an understanding of the company’s revenue recognition process, including processes over the determination of performance obligations for contract arrangements; •read the contracts to obtain an understanding of the contractual requirements and deliverables; •bifurcated the population of total contracts and performed additional audit procedures for open contracts; and•inspected correspondence between the company and the customer regarding actual and expected contract performance to date and compared to the estimate to complete its performance obligations. /s/ marcum llp marcum llp we have served as the company’s auditor since 2019.

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 the 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 separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. f-3 valuation of indefinite-lived intangible assets description of the matter at december 31, 2021, the company’s indefinite-lived intangible assets related to the acquired brands from the 2019 func foods acquisition were $3.2m. as discussed in note 2 to the consolidated financial statements, intangibles with indefinite lives are tested for impairment on an annual basis, or more frequently if the company believes indicators of impairment exist. the company measured the fair value of these indefinite-lived intangible assets using a relief from royalty method. auditing the company's annual impairment test related to these indefinite-lived intangible assets was complex due to the estimation uncertainty in determining their fair values. the significant assumptions used to estimate the fair value of these intangible assets included forecasted sales, discount rates and royalty rates. these significant assumptions are forward-looking and could be affected by future economic and market conditions, which can vary significantly and depend on market forces and events outside of the company’s control. how we addressed the matter in our audit to test the estimated fair value of these indefinite-lived intangible assets, our audit procedures included, among others, evaluating the valuation methodology used, the significant assumptions discussed above, and the underlying data used by the company. such data includes historical sales, future business plans, as well as data from comparable companies. we compared the significant assumptions to current industry or economic trends, the company’s business model, and other relevant factors. we involved our valuation specialists to assist in our procedures to test the discount rate, which included comparison of the selected discount rate to the weighted average cost of capital of the company and other comparable companies and the risk associated with the projected cash flows, and the royalty rate, which included comparing management’s selected royalty rate to royalty rates for similar intangible assets in the company’s industry. in addition, we assessed the historical accuracy of management’s estimates by comparing them to actual operating results and performed sensitivity analyses of the significant assumptions described above to evaluate the impact on the fair value of these indefinite-lived intangible assets. /s/ ernst & young llp 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.stock warrants - remeasurement and reclassification - refer to note c to the financial statements critical audit matter description in conjunction with a lease incentive agreement entered into with a customer on december 20, 2018, the company conditionally granted to the customer warrants to purchase company common stock, which vest as additional aircraft leases are executed. in may 2020, the customer agreed to lease 12 additional aircraft from the company. the first of these leases began in the second quarter of 2020 with the remaining 11 delivered in 2021. pursuant to the 2018 investment agreement, as a result of leasing 12 aircraft, the customer was issued warrants for 7.0 million common shares, all of which have vested.stock warrant liabilities are remeasured and reclassified to paid-in-capital once all the vesting conditions are satisfied for a single unit of account (a “warrant tranche”), and the total notional amount of the warrants becomes fixed and exercisable for that warrant tranche. in december 2021, upon execution of the twelfth and final aircraft lease of the may 2020 commitment, warrants for 7.0 million shares were remeasured, and their fair value of $82.4 million was reclassified from balance sheet liabilities to paid-in-capital. we identified the remeasurement and reclassification of stock warrant liabilities to paid-in-capital as a critical audit matter because (1) the remeasurement was material to the financial statements, and (2) it involved a high degree of 45auditor judgment and an increased extent of effort to audit and evaluate the significant inputs and valuation methodology used, including the need to involve fair value specialists.how the critical audit matter was addressed in the audit our audit procedures related to the remeasurement and reclassification of stock warrant liabilities to paid-in-capital included: •we tested the effectiveness of management’s controls over the valuation of the stock warrant liabilities remeasurement and reclassification, which included a control over the significant inputs.•we evaluated each warrant tranche to test that vesting conditions were satisfied prior to reclassification to paid-in-capital. •we assessed the consistency by which management has applied assumptions to the significant inputs.•with the assistance of our fair value specialists, we evaluated the reasonableness of (1) the valuation methodology, which included testing the mathematical accuracy of the calculation; (2) the expected volatility, which included developing an independent estimate and comparing that to the expected volatility selected by management; and (3) the risk-free interest rate, which included testing the mathematical accuracy of management's risk-free interest rate assumptions. /s/ deloitte & touche llp cincinnati, ohio march 1, 2022 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.right of use asset and leasehold improvements impairment operating lease right-of-use asset and property and equipment totaled approximately $3.0 million and $0.5 million as of december 31, 2020, respectively. as described in note 2 to the company’s consolidated financial statements, the company reviews long-lived assets, including the right-of-use asset and leasehold improvements, for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived assets may not be recoverable. if such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value as estimated based on projected discounted net cash flow. during the year ended december 31, 2020, as a result of uncertainty surrounding a sublease tenant’s ability to repay the remaining sublease rental payments and the continued uncertainties due to the covid-19 pandemic on the real estate market, the company recorded an impairment charge against the operating lease right-of-use asset and leasehold improvements of $5.8 million. f-2we identified management’s assessment of the fair value of the right-of-use asset and leasehold improvements as a critical audit matter. the estimation of fair value requires management to make certain subjective assumptions related to expected real estate market rates, the time needed to sub-lease the property, the appropriate discount rate, and the impacts of the covid-19 pandemic on these assumptions. auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the involvement of professionals with specialized skills in valuation.the primary procedures we performed to address this critical audit matter included: •assessing management’s estimation of future net undiscounted cash flows expected to be generated from future sub-lease income by evaluating management’s assumptions regarding changes in general economic conditions caused by the covid-19 pandemic, including changes to market rent, the estimated period of time to sub-lease the property and discount rate. •utilizing professionals with specialized skills in valuation to assist in evaluating the reasonableness of estimated future market rents, the discount rate estimated by management, and the valuation methodology used to determine the fair value of the subleased property.revenue recognition - collaboration and license agreement as described in notes 2 and 5 to the company’s consolidated financial statements, on november 6, 2020 the company entered into a collaboration and license agreement which resulted in revenue of $5.7 million for the year ended december 31, 2020 and $6.3 million of deferred revenue as of december 31, 2020. the company identified two performance obligations within the arrangement; (i) a license to intellectual property, and (ii) research and development services. the transaction price was allocated between the performance obligations based on their relative standalone selling prices, which were estimated using a discounted cash flow approach and an expected cost plus a margin approach. the company recognizes revenue upon transfer of control of the license and research and development services to its collaboration and licensing partner.we identified the determination of distinct performance obligations and the estimation of their standalone selling prices as a critical audit matter. accounting for the collaboration and license agreement required management to apply significant judgment in (i) evaluating whether each promised good or service is distinct individually or distinct when combined with other promised goods or services in the arrangement, and (ii) determining the methodology and assumptions used in valuation, including, but not limited to discount rates, probabilities of future milestone and royalties, and estimated costs of research and development services. auditing these elements involved a high degree of auditor judgment and significant audit effort to address these matters, including the involvement of professionals with specialized technical skills.the primary procedures we performed to address this critical audit matter included: •evaluating the identified performance obligations by (i) involving professionals with specialized skills in technical accounting to evaluate appropriateness of management’s interpretation of key contract terms and application of authoritative accounting guidance, and (ii) assessing the reasonableness of management’s assumption regarding the collaboration and licensing partner’s ability to benefit from the license and research and development services either on its own or together with other resources that are readily available. •assessing management’s estimation of the standalone selling price for each performance obligation by (i) utilizing professionals with specialized skills in valuation to assess the appropriateness of the valuation model used and certain assumptions applied by management, and (ii) testing the accuracy and completeness of data used in valuation. /s/ bdo usa, llp we have served as the company's auditor since 2018.

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 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.49allowance for loan and lease losses (alll)management describes their accounting policies related to the alll in note a of the consolidated financial statements (allowance for loan and lease losses (alll)). management also provides additional disclosure regarding the alll in note e to the consolidated financial statements. general reserves for collective impairment are based on historical loss rates for each loan class by credit quality indicator and may be adjusted through a qualitative assessment to reflect current economic conditions and portfolio trends. the models utilized by management in determining the alll are highly complex with various key inputs and assumptions. judgment is required to determine the inputs and assumptions used and these can significantly impact the provision recognized. the most significant judgments include the loss rates which comprise the length of the historical charge-off period used, estimates of the probability of default, losses incurred given default, and loss emergence period applied, as well as qualitative reserves relating to changes in the nature and volume of the portfolio. overall, there is a significant judgment required by management in developing these models.the alll represents a significant critical accounting estimate and management’s estimation of probable credit losses within the loan and lease portfolio at the balance sheet date. the amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the loan portfolio, credit concentrations, adequacy of collateral, debt service capacity, trends in historical loss experience, economic conditions, and specific impaired loans. the principal considerations for our determination of the alll as a critical audit matter are the complexity and subjectivity of the estimates and assumptions that management utilized in determining the loss rates and qualitative factors, particularly the nature and volume of the portfolio. this required a high degree of judgment in selecting the auditor procedures to evaluate management’s estimate and assumptions as it relates to the alll.the primary procedures we performed to address this critical audit matter included:•we tested the design and operating effectiveness of controls relating to management’s determination of the alll, including controls over the allowance models and the inputs utilized to support the reserve calculations. controls tested around the model include review of the model calculations and analysis by management, monitoring over key performance indicators and other ratios, as well as the evaluation of factors impacting the qualitative assessment, such as changes in the factor related to the nature and volume of the portfolio. additionally, we tested controls around the appropriateness of the loan grading policy and the consistency of application, including risk grade changes, as it relates to the loss factors and calculation of the quantitative reserve.•we evaluated the reasonableness of management’s judgment in determining qualitative loss factors, which included evaluating portfolio composition changes, economic factors, and other adjustments, and analyzing whether these inputs were appropriately applied based on available data. •we tested management’s assumptions in setting the qualitative factors, including the changes in the nature and volume of the loan portfolio, comparing trends in key performance indicators to changes in the components of the alll reserve for reasonableness.•we evaluated the appropriateness of inputs and assumptions used by management in determining the loss rates, such as historical charge-offs, loss frequencies used in calculating the probability of default, historical loan migration to charge-off experience, and delinquencies rates, assessing whether such factors were reasonable for the purpose used./s/ dixon hughes goodman llp we have served as the company’s auditor since 2004.

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. goodwill impairment assessment - insulation reporting unit as described in notes 1 and 6 to the consolidated financial statements, the company’s consolidated goodwill balance was $1,932 million as of december 31, 2019, and the goodwill associated with the insulation reporting unit was $1,479 million. management tests goodwill for impairment as of october 1 of each year, or more frequently should circumstances change or events occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. management estimates fair value using a discounted cash flow approach from the perspective of a market participant. management’s determination of fair value included the use of significant assumptions in the discounted cash flow approach which are the revenue growth rates and earnings before interest and taxes (“ebit”) margins used in estimating the discrete period cash flow forecasts of the reporting unit, the discount rate, and the long-term revenue growth rate and ebit margin used in estimating the terminal business value.the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the insulation reporting unit is a critical audit matter are there was significant judgment used 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 in evaluating management’s significant assumptions, including the revenue growth rates and ebit margins used in estimating the discrete period cash flow forecasts, the discount rate, and the long-term revenue growth rate and ebit margins used in estimating the terminal business value. 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 management’s goodwill impairment assessment, including controls over the review of significant assumptions used in the valuation of the insulation reporting unit. these procedures also included, among others, testing management’s process for developing the fair value estimate of the insulation reporting unit, evaluating the appropriateness of the discounted cash flow approach, and evaluating the significant assumptions used by management, including the revenue growth rates and ebit margins used in estimating the discrete period cash flow forecasts, the discount rate, and the long-term revenue growth rate and ebit margin used in estimating the terminal business value. evaluating management’s assumptions related to discrete period revenue growth rates, and ebit margins used in estimating both the discrete period cash flow forecasts and terminal business value 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 approach and certain significant assumptions, including the discount rate and long-term revenue growth rate. /s/ pricewaterhouse coopers llp toledo, ohio february 19, 2020we 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 (i) relates to accounts or disclosures that are material to the 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 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 interest rate-related derivatives and hedged items as described in notes 14 and 15 to the financial statements, the fhl bank uses derivatives to reduce funding costs and to manage its exposure to interest rate risks. the total notional amount of derivatives as of december 31, 2020 was $79 billion, of which 45% were designated as hedging instruments, and the fair value of derivative assets and liabilities as of december 31, 2020 was $3 million and $12 million, respectively. the fair values of interest rate-related derivatives and hedged items are estimated using internally developed discounted cash flow models that use market-observable inputs, such as swap rates and volatility assumptions.the principal considerations for our determination that performing procedures relating to the valuation of interest rate-related derivatives and hedged items is a critical audit matter are the significant audit effort in evaluating the swap rates and volatility assumptions used to fair value these derivatives and hedged items, and 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 financial statements. these procedures included testing the effectiveness of controls relating to the valuation of interest rate-related derivatives and hedged items, including controls over the models, data and assumptions. these procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of prices for a sample of interest rate-related derivatives and hedged items and comparison of management’s estimate to the independently developed ranges. developing the independent range of prices involved testing the completeness and accuracy of data provided by management and independently developing the swap rates and volatility assumptions./s/ pricewaterhouse coopers llp san francisco, california march 12, 2021 we have served as the fhl bank’s auditor since 1990.

critical audit matter the critical audit matter communicated below isa matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicatedto 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 alterin any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical auditmatter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. investment valuation as described in notes 2 and 3 to the consolidatedfinancial statements, the company’s consolidated investments total $2,999,000 at june 30, 2021. investments include the common stockof publicly traded companies that are considered thinly traded. 25 we identified the valuation of thinly traded securitiesas a critical audit matter. some of the company’s investments represent shares that materially exceed the average daily tradingvolume of the thinly traded securities, thus the company must consider a discount due to the lack of liquidity and marketability. the company uses a 3rd party specialist to perform the discount analysis for financial statement reporting purposes in order to comply withthe guidelines set forth in financial accounting standards board (fasb) accounting standards codification (asc) topic 320, investments– debt and equity securities and fasb accounting standards update (asu) no. 2016-01, financial instruments – overall(subtopic 825-10) recognition and measurement of financial assets and financial liabilities. the discount analysis is derived usinga two-part approach. the first analysis uses a protective put model to estimate the discount for lack of liquidity and marketability.the second analysis is a time-adjusted analysis based on restricted stock studies, which is used to adjust the discount to reflect thedribble-out period associated with the securities. the determination of the discount involves significant judgment by management. auditingmanagement’s judgments regarding the appropriate discount involves a high degree of subjectivity. the primary procedures we performed to addressthis critical audit matter included: ·reviewed of the qualifications, independence,and objectives and scope of the third-party specialist. ·used historical average daily trading volumesin conjunction with the estimated shares that can be transacted per day in order to determine the average expected days to sell securities,and whether that classifies them as thinly traded. ·with the assistance of an internal valuationspecialist we tested the methodology and assumptions used in the valuation. this includes testing of the black-sholes model that was usedto determine the value of the protective put model. specific assumptions that were tested in the black sholes model include the stockprice of the securities, strike price of the option, volatility of the securities, the risk-free rate of interest, and the time-to-maturityof the option. the assumptions used in the time-adjusted analysis include the evaluation of the restricted stock studies, including theadjustments made to reflect the characteristics of the company’s holdings, and historical trading data. ·comparison of the methods and assumptions usedwith those used in preceding periods. ·testing proper classification of investment valuationswithin the fair value hierarchy as set forth in asc 820. we tested management’s analysis of the securities, which considered the company’s holdings relative to the average daily trading volume of the securities over a period of time to determine whether theinvestment is thinly traded. /s/ moss adams llp moss adams llp irvine, california september 9, 2021 we have served as the company’s auditor since 2003.

critical audit matters the critical audit matters communicated below are matters arising from the current period audits 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. going concern as described further in note b to the financial statements, the company has incurred losses each year from inception through november 30, 2020 and expects to incur additional losses in the future. we determined the company’s ability to continue as a going concern is a critical audit matter due to the estimation and uncertainty regarding the company’s future cash flows and the risk of bias in management’s judgments and assumptions in estimating these cash flows. our audit procedures related to the company’s assertion on its ability to continue as a going concern included the following, among others:we reviewed the company’s working capital and liquidity ratios and forecasted revenue, operating expenses, and uses and sources of cash used in management’s assessment of whether the company has sufficient liquidity to 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’s forecasts, the company’s financing arrangements in place as of the report date, market and industry factors and consideration of the company’s relationships with its financing partners.going concern the accompanying financial statements have been prepared assuming the company will continue as a going concern. as discussed in note b to the financial statements, although the company has limited operations it has yet to attain profitability. this raises substantial doubt about its ability to continue as a going concern. management’s plan in regard to these matters is also described in note b. the financial statements do not include any adjustments that might result from the outcome of this uncertainty. basis for opinion these financial statements are the responsibility of the company’s management. our responsibility is to express an opinion on the company’s financial statements based on our audit. we are a public accounting firm registered with the public company accounting oversight board (united states) (pcaob) and are required to be independent with respect to the company in accordance with the u.s. federal securities laws and the applicable rules and regulations of the securities and exchange commission and the pcaob.we conducted our audits in accordance with the standards of the pcaob. those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. the company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. as part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. accordingly, we express no such opinion.our audit 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 audit 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 audit provide a reasonable basis for our opinion. /s/ michael gillespie & associates, pllc 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 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. goodwill impairment assessment - multipro and rx reporting units as described in notes 1 and 4 to the consolidated financial statements, management evaluates goodwill for impairment annually or whenever events or changes in circumstances indicate the carrying amount of the goodwill may be impaired. as disclosed in the consolidated financial statements, the carrying amounts of multipro and rx goodwill as of december 28, 2019 was $606 million and $373 million, respectively. the fair value for the multipro reporting unit was estimated based on an ebitda market multiple and discounted cash flows. the fair value for the rx reporting unit was estimated based on a sales market multiple and discounted cash flows. the determination of fair value using discounted cash flows required significant management judgment and assumptions. the significant assumptions used to determine the fair value of the multipro reporting unit included the forecasted net sales growth and gross margin. the significant assumption used to determine the fair value of the rx reporting unit was the forecasted net sales growth. the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the multipro and rx reporting units 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 multipro and rx reporting units due to the significant judgment by management when determining the fair value of the multipro and rx reporting units, (ii) significant audit effort was necessary in performing procedures and evaluating significant assumptions, including forecasted net sales growth and gross margin, and (iii) 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 annual goodwill impairment test, including controls over the valuation of the multipro and rx reporting units. these procedures also included, among others, testing management’s process for developing the fair value estimate of the multipro and rx reporting units, 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 reasonableness of the significant assumptions used by management, including the forecasted net sales growth and gross margin. evaluating the reasonableness of management’s assumptions related to the forecasted net sales growth and gross margin 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 evaluating the company’s discounted cash flow models. /s/ pricewaterhouse coopers llp detroit, michigan february 24, 2020 we have served as the company’s auditor since at least 1937.

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. notes payable as discussedin note 4, the company borrows funds through the use of convertible notes payable that contain a conversion price that fluctuates withthe stock price. due to the fluctuation of the conversion price, the embedded conversion feature requires bifurcation from the host contractand is recorded as a liability subject to market adjustments as of each reporting period. significant judgment is exercised by the companyin determining derivative liability values for these convertible note agreements, including the use of a specialist engaged by management. f-2 we evaluatedmanagement’s conclusions regarding their derivative liability and reviewed support for the significant inputs used in the valuationmodel, as well as assessing the model for reasonableness. convertible preferred stock asdiscussed in note 5, the company has issued and outstanding certain preferred shares that contain a fixed value and convertible into avariable number of common stock on the date of conversion. auditing management’s evaluation of the convertible preferred sharesinvolves significant judgements and estimates in determining the proper classification of the preferred shares that include both debtand equity qualities. to evaluate the appropriateness and accuracy of the classification of the convertible preferred shares, we evaluatedmanagement’s assessment of the debt and equity like characteristics.we evaluatedmanagement’s appropriateness and accuracy of the classification of the convertible preferred shares and evaluated management’sassessment of the debt and equity like characteristics. /s/ m&k cpas, pllc we have served as the company’s auditor since 2017.

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.63 valuation of goodwill description of the matter at december 31, 2019, the company’s goodwill balance was $607 million. as discussed in note 2 of the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level. auditing management’s annual goodwill impairment test was complex and highly judgmental due to the significant estimation required in determining the fair value of the reporting units. in particular, the fair value estimate was sensitive to significant assumptions such as the weighted average cost of capital, projections of revenue and expenses, and terminal value, which are based on internal projections and external sources. 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 impairment review process, including controls over management’s review of the significant assumptions described above. to test the estimated fair value of the company’s reporting units, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the company in its analysis. we compared the significant assumptions used by management to current industry and economic trends, changes to the company’s business model and other relevant factors. we assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. in addition, we reviewed the reconciliation of the aggregate fair value of the reporting units to the market capitalization of the company. lastly, we involved a valuation specialist to assist in the evaluation of the methodologies used, assumptions underlying the fair value measurement and recalculation of fair value measurement. business combination description of the matter during 2019, the company completed its acquisition of chesapeake lodging trust (“chesapeake”) for total consideration of approximately $2 billion as disclosed in note 3 to the consolidated financial statements. the transaction was accounted for as a business combination. auditing the purchase price allocation for this acquisition was complex and highly judgmental as a result of the magnitude of total assets acquired and liabilities assumed and the significant assumptions involved in determining the fair value of the acquired assets and assumed liabilities. for this acquisition, such assumptions include the identification of market data for similar assets when assessing the fair value of land, air rights intangibles, and above or below market lease intangibles, evaluation of replacement cost when assessing the fair value of buildings, and expected future cash flows, inclusive of estimates of future income growth, discounted at risk-adjusted rates when assessing the fair value of the acquired properties taken as a whole. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the purchase price allocation for the business combination, including controls over management’s review of the significant assumptions described above. our testing of the company’s purchase price allocation for the business combination included, among others, reading the purchase agreements, evaluating the measurement of the consideration, and evaluating the significant assumptions and methods used in developing the fair value estimates. with the assistance of our valuation specialists, we evaluated, among other things, whether (1) assets and liabilities were properly identified, and (2) the significant assumptions, including the replacement cost of buildings, market data for similar assets, expected future cash flows of the properties, discount rates, and capitalization rates, used in valuing the assets acquired and liabilities assumed were supportable. for example, we compared estimates of future income growth, discount rates and capitalization rates used in the discounted cash flow models to market data. in addition, we compared assumed land values to comparable land sales. we compared the company’s estimated fair values of acquired properties to independent estimates developed by our valuation specialist. /s/ ernst & young llp we have 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: (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 relative fair value allocation in an asset acquisition as discussed in notes 2 and 5 to the consolidated financial statements, the company acquired a real estate property recorded as an asset acquisition during the year ended december 31, 2020. the purchase price in an asset acquisition is allocated to the assets acquired and liabilities assumed using their relative fair values. we identified the assessment of the relative fair value allocation in an asset acquisition, specifically the land, buildings, improvements, and furniture, fixtures, and equipment as a critical audit matter. there is a high degree of subjective auditor judgment in evaluating the results of procedures over the relevance of comparable land sales and replacement cost of the buildings, improvements, and furniture, fixtures, and equipment used by the company to determine the fair value of these assets.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 asset acquisition allocation process, including controls to identify and select publicly available and comparable land sales and replacement costs of the buildings, improvements, and furniture, fixtures, and equipment. we involved valuation professionals with specialized skills and knowledge, who assisted in the following procedures for the company’s asset acquisition: •compared the consideration paid by the company to acquire the property to comparable market transactions based on the price per apartment unit acquired •compared the company’s estimated fair value of land to independently developed estimates based on publicly available and comparable land sales •compared the cost inputs used in the company’s replacement cost analysis of buildings, improvements and furniture, fixtures, and equipment to market data, such as data included in industry recognized guides used for developing replacement, reproduction, and insurable value costs. evaluation of real estate investments for impairment as discussed in note 2 to the consolidated financial statements, the company evaluates the recoverability of its real estate investments whenever events or changes in circumstances indicate that the carrying amount of a property may not be recoverable. the company evaluates the recoverability of such real estate investments based on estimated undiscounted future cash flows and the estimated liquidation value of such real estate investments based on the expected period the company will hold the rental property, and provide for impairment if such estimated undiscounted cash flows, inclusive of the estimated liquidation value, are insufficient to recover the carrying amount of the real estate investment. as disclosed in note 5 to the consolidated financial statements, the company had $1.8 billion in real estate investments as of december 31, 2020.we identified the evaluation of real estate investments for impairment as a critical audit matter. identifying events or changes in circumstances that indicate the carrying value of a real estate investment may not be recoverable involves a high degree of subjective auditor judgment. in addition, evaluating how identified events or changes in circumstances impact the expected period the company will hold the rental property, net operating income, and the estimated capitalization rate for each respective property requires subjective auditor judgment. f-3 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 process to identify and evaluate events or changes in circumstances that indicate the carrying amount of a real estate investment may not be recoverable, including controls over determining the period the company will hold the rental property, net operating income, and the estimated capitalization rate for each respective real estate investment. we compared the estimated undiscounted cash flows, inclusive of the estimated liquidation value, based on the expected period the company will hold the rental property, of each real estate investment to its carrying value and assessed the sensitivity to changes in assumptions on the recoverability of each property. we performed independent evaluations considering third-party market reports for (1) indications of a decrease in the fair value of similar real estate investments and (2) decreases in current and projected operating performance of the real estate investments of the company. we inquired of company officials and inspected documents, such as meeting minutes of the board of directors, to identify company strategies that might indicate it was more-likely-than not that a property will be sold before the end of the expected period the company planned to hold the property. /s/ kpmg llp we have served as the company’s auditor since 2014.

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 – u.s. implantation product sales as described in note 2 to the consolidated financial statements, product sales where the company’s sales representative delivers the product at the point of implantation at the hospital or medical facilities represent the majority of the company's consolidated revenue. the company’s consolidated revenue was $90.2 million for the year ended december 31, 2021, of which, $82.7 million is related to the u.s. management recognizes the revenue from these sales upon completion of the procedure and authorization by the customer, net of rebates and price discounts. this represents the majority of the company’s consolidated revenue.the principal consideration for our determination that performing procedures relating to revenue recognition, u.s. implantation product sales is a critical audit matter is the high degree of auditor effort in performing procedures related to the company’s revenue recognition.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 recording of product sales upon completion of the procedure and authorization by the customer. these procedures also included, among others, (i) evaluating revenue transactions by testing the issuance and settlement of invoices and credit memos, (ii) tracing transactions not settled to a detailed listing of accounts receivable, (iii) confirming a sample of outstanding customer invoice balances at year end and obtaining and inspecting source documents, including invoices, sales contracts, proof of implantation, and subsequent cash receipts, where applicable, for confirmations not returned, and (iv) testing the completeness and accuracy of data provided by management./s/pricewaterhouse coopers llp san jose, california march 1, 2022 we have served as the company's auditor since 2013.

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.acquisition of cardtronics plc - valuation of certain direct customer relationships and technology – software as described in notes 1 and 3 to the consolidated financial statements, the company completed the acquisition of cardtronics plc for total purchase consideration of $2.7 billion on june 21, 2021. the fair value of consideration transferred was allocated to the identifiable intangible assets acquired and liabilities assumed based upon their estimated fair value which resulted in the recognition of $864 million of intangible assets. identifiable intangible assets primarily consist of direct customer relationships of $373 million and technology – software of $441 million. in determining the fair value, management utilized various forms of the income, cost, and market approaches depending on the asset. the estimation of fair value required significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables, and other factors. inputs were generally determined using historical data supplemented by current and anticipated market conditions, and growth rates. direct customer relationships and technology - software were valued using an excess earnings method. significant assumptions used in the discounted cash flow analysis for (i) direct customer relationships were the revenue growth rate, customer attrition rate, and discount rate, and (ii) technology - software were the revenue growth rate, earnings before interest, taxes, depreciation, and amortization (“ebitda”) margins, and discount rate. the principal considerations for our determination that performing procedures relating to the acquisition of cardtronics plc - valuation of certain direct customer relationships and technology – software is a critical audit matter are (i) the significant judgment by management when developing the fair value estimates of the intangible assets acquired; (ii) the significant auditor judgment, subjectivity, and effort in performing procedures evaluating management’s estimates of the fair value of the direct customer relationships and technology – software and significant assumptions related to the revenue growth rate, customer attrition rate, and discount rate used in the valuation of direct customer relationships and the revenue growth rate, ebitda margins, and discount rate used in the valuation of technology - software; 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 certain controls relating to the valuation of the acquired intangible assets, including controls over management’s valuation of direct customer relationships and technology – software and controls over the development of significant assumptions related to the revenue growth rate, customer attrition rate, and ebitda margin used in the valuation of direct customer relationships and the revenue growth rate, ebitda margins, and discount rate used in the valuation of technology – software. these procedures also included, among others (i) reading the purchase agreement and (ii) testing management’s process for estimating the fair value of certain direct customer relationships and technology – software. testing management’s process included evaluating the appropriateness of the excess earnings method, testing the completeness and accuracy of data used by management, and evaluating the reasonableness of significant assumptions used by management related to the revenue growth rate, customer attrition rate, and discount rate used in the valuation of the direct customer relationships and the revenue growth rate, ebitda margins, and discount rate used in the valuation of technology - software. evaluating the reasonableness of management’s significant assumptions related to the revenue growth rate and customer attrition rate used in the valuation of the direct customer relationships and revenue growth rate and ebitda margins used in the valuation of the technology – software involved considering (i) the past performance of the acquired business, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of 52table of contentsthe audit. professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the company’s excess earnings method and the reasonableness of the customer attrition rate and discount rate significant assumptions. /s/ pricewaterhouse coopers llp atlanta, georgia february 25, 2022 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 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 — impairment of performance materials reporting unit goodwill – refer to note 2 and note 9 to the consolidated financial statements critical audit matter description the company's annual evaluation of goodwill for impairment involves management performing an assessment of each reporting unit to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying value. on the annual testing date of october 1, management elected to perform a quantitative approach (step 1) to evaluate the performance materials reporting unit for impairment. as of october 1, 2020, the goodwill balance of the performance materials reporting unit was $7.9 million. in performing step 1 management compared the fair value of the performance materials reporting unit to its carrying value. the company determined the fair value of its performance materials reporting unit using a discounted cash flow model with consideration of market comparisons. the determination of the fair value using the discounted cash flow model required management to make significant estimates and assumptions related to expected revenue growth rates, expected earnings before interest, taxes and depreciation ("ebitda"), and discount rates. changes in these assumptions could have a significant impact 49on either the fair value, the amount of any goodwill impairment charge, or both. during fiscal 2020, the company recognized $1.1 million goodwill impairment charge, as the fair value of this reporting unit was lower than its carrying value.we identified the goodwill impairment at the performance materials reporting unit as a critical audit matter because of the significant amount of goodwill recorded at this reporting unit, the decrease in the fair value in the current year due to declines in economic conditions impacting the reporting unit, and the significant estimates and assumptions management made to estimate the fair value of this reporting unit. this required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to the expected revenue growth rates, expected ebitda, and the selection of the discount rate.how the critical audit matter was addressed in the audit our audit procedures related to goodwill impairment included the following, among others:•we evaluated management's ability to accurately forecast by comparing historical results to management's historical forecasts.•we evaluated the reasonableness of management's forecasts of expected revenue and expected growth rates and ebitda by comparing management's forecasts with: •historical cash flow and trends.•underlying business strategies and growth plans.•internal communications to management and the board of directors.•information included in company external communications, independent industry reports, and forecasted information from selected companies in the reporting unit's peer group.•with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) company's valuation methodologies and (2) discount rate by:•testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.•developing an independent range of the discount rate and comparing it to the discount rate selected by management. allowance for loan losses — refer to note 2 and note 7 to the consolidated financial statements critical audit matter description the allowance for loan losses ("alll") is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. loan losses are charged against the allowance when management believes the uncollectability of a loan or receivable balance has been confirmed. the allowance consists of specific and general components. the specific component relates to loans that are classified as doubtful, substandard, or loss. the general component covers non-classified loans and is based on historical loss experience and is adjusted for qualitative factors to cover uncertainties that could affect management's estimate of probable losses. the most significant component of the alll is the general component of the allowance. in determining the amount of the general valuation allowance, management considers qualitative factors such as asset quality trends, the effect of changes in the nature and volume of the portfolio, the existence and effect of any portfolio concentrations, changes in lending policies and underwriting policies, national economic business conditions and other macroeconomic adjustments, regional and local economic business conditions and other qualitative risk factors both internal and external to the company. as of december 31, 2020, the company's alll was $27.1 million.we identified the general valuation allowance for loan losses as a critical audit matter due to the significant amount of judgment required by management when determining the adjustment to the historical loss experience for economic and qualitative factors. this requires 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 the alll included the following, among others:•we evaluated the appropriateness and relevance of the economic and qualitative factors and related quantitative measures by comparing to external sources.•we tested the computational accuracy of the company's allowance models.50•we tested the accuracy of the historical charge offs.•we obtained an understanding of management's process to develop assumptions and assessed the reasonableness of the assumptions used in the allowance calculation through the development of an independent expectation based on historical performance, peer data, and aging and performance of the current portfolio.•we evaluated management's ability to accurately estimate the losses inherent in the portfolio by comparing management's historical estimates to actual losses incurred./s/ deloitte & touche llp new york, new york april 13, 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 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 – gross versus net recognition of sales of third-party software – refer to note 1 to the financial statements critical audit matter description the company is typically the principal in sales of third-party software. sales are recognized on a gross basis with the selling price to the customer recorded as sales and the acquisition cost of the product recognized as cost of sales. the company recognizes revenue from these sales at the point in time that control passes to the customer, which is typically upon delivery of the software to the customer. the company is also the agent in sales of third-party maintenance, software support, and services as the third-party controls the service until it is transferred to the customer. similarly, the company is the agent in sales of third-party software and accompanying third-party support when the third-party software benefits the customer only in conjunction with the accompanying support. in these sales, the company considers the third-party software and support as inputs to a single performance obligation. in all these sales where the company is the agent, the company recognizes sales on a net basis at the point that their customer and vendor accept the terms and conditions of the arrangement.f-2table of contents auditing the company’s determination of gross or net recognition of third-party software and support sales involved a high degree of subjectivity as it required the evaluation of whether the third-party software benefits the customer only in conjunction with the accompanying support. when the support is determined to be critical or essential to the software, the transaction is viewed as one combined performance obligation, and revenue is recognized net of related costs.how the critical audit matter was addressed in the audit our audit procedures related to management’s conclusion related to the recognition of sales of third-party software included the following, among others:●we tested the design and operating effectiveness of management’s controls over the determination of gross or net recognition of third-party software and support sales.●for a selection of contracts, we performed the following procedures:–inspected the customer invoice and purchase order to determine whether the sale represented a valid transaction with a customer.–compared the cost per the company’s records to the cost per the vendor invoice.–evaluated the sale to determine whether it constituted a single or multiple performance obligation(s) through inspection of the customer invoice, purchase order, and information on vendor websites accessed through third-party search engines.–evaluated the sale to determine whether there was accompanying third-party support related to the software, and whether the support was separately identifiable or essential to the functionality of the software through inspection of customer invoices, purchase orders, information on vendor websites accessed through third-party search engines and inquiries with management, as necessary.transfers of financial assets – refer to note 4 to the financial statements critical audit matter description the company enters into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for in accordance with codification topic 860. these transfers are accounted for as either a sale or as a pledge of collateral in a secured borrowing. for transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. for transfers accounted for as sales, the company derecognizes the carrying value of the asset transferred plus any liability and recognizes a net gain or loss on the sale, which are presented within net sales in the consolidated statement of operations.auditing the company’s determination of whether the transfer should be accounted for as a secured borrowing or a sale involved a high degree of subjectivity. this subjectivity stems from management’s assessment of whether the transferred assets have been isolated from the transferor.how the critical audit matter was addressed in the audit our audit procedures related to management’s conclusion related to the transfer of financial assets included the following, among others:•we tested the design and operating effectiveness of management’s controls over the transfer of financial assets, including management’s controls over the evaluation of the terms of loan documents and accompanying investor data, assignment agreements, and the calculation of the gain or loss.•for a selection of transactions, we evaluated the company’s determination of sale or secured borrowing, by evaluating, among other factors, if the transferred assets have been isolated from the company. specifically, we performed the following procedures:-obtained the executed transfer agreement and evaluated whether the company:▪assigned its rights, titles, interests, estates, claims, and demands to the third-party assignee.▪retained any rights with respect to the payments assigned to the third-party assignee or had been appropriately isolated from the assets. we evaluated opinions from outside legal counsel, when applicable.f-3table of contents–obtained and inspected the cash proceeds support from the transfer and compared the cash received to the selling price.–tested the mathematical accuracy of management’s calculation of the gain or loss based on the cash proceeds and the receivable balance as of date of sale./s/ deloitte & touche llp mclean, virginia may 21, 2020we have served as the company’s auditor since 1990.

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.goodwill impairment assessment (note 2)of the $5.2 billion of goodwill on the partnership’s consolidated balance sheet as of december 31, 2019, approximately $380.0 million is recorded in a reporting unit for which the estimated fair value exceeded the carrying value by less than 20% in the most recent quantitative test. the partnership engaged third party valuation specialists for the estimation of the fair value of this reporting unit. we identified the estimation of the fair value of the reporting unit as a critical audit matter.the principal considerations for our determination that the estimation of the fair value of the reporting unit was a critical audit matter are that the extent to which the fair value of the reporting unit exceeds its carrying value is relatively low, the estimate of the future cash flows, including projected growth rates, forecasted costs, discount rates and future market conditions requires a high degree of judgement, and the application of valuation methodologies can be complex.our audit procedures related to the estimation of the fair value of the reporting unit included the following procedures, among others. we tested the effectiveness of controls relating to management’s review of the assumptions used to develop the future cash f - 2table of contentsflows, the reconciliation of cash flows prepared by management to the data used in the third party valuation reports, the discount rates used, and valuation methodologies applied. in addition to testing the effectiveness of controls, we also performed the following:•compared the actual current results of the relevant reporting unit to the expected performance of that reporting unit based on prior period financial forecasts, as applicable.•utilized an internal valuation specialist to evaluate:◦the methodologies used and whether they were acceptable for the underlying assets or operations and being applied correctly by performing independent calculations,◦the appropriateness of the discount rates by recalculating the weighted average costs of capital, and◦the qualifications of the third party valuation specialists engaged by the partnership based on their credentials and experience.•tested the reasonableness of the projected growth rate and forecasted costs by comparing such items to historical operating results of the relevant reporting unit and by assessing the likelihood or capability of the reporting unit to undertake activities or initiatives underpinning significant drivers of growth in the forecasted period.sem group acquisition (note 3)the partnership acquired a controlling interest in sem group corporation (“sem group”) in december 2019 and the assets acquired and liabilities assumed were required to be estimated and recorded at fair value as of the transaction date, for which the partnership utilized a third party valuation specialist. we identified the estimation of the fair value of the assets acquired and liabilities assumed in the acquisition of sem group as a critical audit matter.the principal considerations for our determination that the estimation of the fair value of the assets acquired and liabilities assumed in the acquisition of sem group was a critical audit matter are that there was a high degree of estimation uncertainty due to significant judgements with respect to the selection of the valuation methodologies applied, the assumptions used to estimate the future revenues and cash flows, including revenue growth rates, forecasted costs, discount rates and future market conditions in the determination of the fair value of the intangible assets acquired, and the estimation of replacement costs of the property, plant and equipment acquired. this required an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the fair value of the assets acquired and liabilities assumed, including the need to involve our fair value specialists.our audit procedures responsive to the estimation of the fair value of the assets acquired and liabilities assumed in the acquisition of sem group included the following procedures, among others. we tested the effectiveness of controls relating to management’s review of the assumptions used to develop the future revenues and cash flows, the reconciliation of future revenues and cash flows prepared by management to the data used in the third party valuation report, the review of estimated replacement cost of property, plant and equipment as compared to current carrying values, and the valuation methodologies applied. in addition to testing the effectiveness of controls, we also performed the following:•utilized an internal valuation specialist to evaluate:◦the methodologies used and whether they were acceptable for the underlying assets or operations and being applied correctly by performing an independent calculation,◦the appropriateness of the replacement cost of property plant, and equipment, by performing an independent calculation and inspecting the estimated remaining years of service for the underlying assets based on the original acquisition dates and condition of assets,◦the appropriateness of the discount rate by recalculating the weighted average costs of capital, and◦the qualifications of the third party valuation specialist engaged by the partnership based on their credentials and experience.•tested the revenue growth rates and forecasted costs of sem group by comparing such items to the historical operating results of the acquired entity and by assessing the likelihood or capability of the acquired entity to undertake activities or initiatives underpinning significant drivers of growth in the forecasted period.environmental remediation (note 11)the partnership’s operations are subject to extensive federal, tribal, state and local environmental and safety laws and regulations that require expenditures for remediation at current and former facilities. we identified the identification, assessment and estimation of the environmental exposure associated with certain sites of etc sunoco holdings llc as a critical audit matter.the principal considerations for our determination that the identification, assessment and estimation of the environmental exposure was a critical audit matter are that there was a high estimation uncertainty due to the complexity of the actuarial methods utilized, the discount rate applied and the potential for changes in the timing and extent of remediation. this required an increased extent f - 3table of contentsof effort when performing audit procedures, related to identification, assessment and estimation of the environmental exposure, including the need to involve actuarial specialists.our audit procedures related to the identification, assessment and estimation of the partnership’s environmental exposure included the following procedures, among others. we tested the effectiveness of controls relating to the identification and review of the historical claims, payments and reserve data provided to the third party actuary specialist and the reconciliation of that data to that used in the actuary report, and the review of the discount rate and actuarial methods applied. in addition to testing the effectiveness of controls, we performed the following procedures:•utilized an external actuarial specialist to evaluate:◦the methodologies used and whether they were acceptable for the underlying operations,◦the qualifications of the third party actuary specialist engaged by the partnership based on their credentials and experience.•evaluated the appropriateness of the discount rate used by comparing it to the historical rate of return from the captive insurance company’s investment portfolio used to fund the underlying liabilities, and•evaluated the life-to-date payments, reserves, and payment patterns by agreeing the historical claims and payment amounts to the underlying claims or general ledger./s/ grant thornton llp we have served as the partnership’s auditor since 2004.

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.allowance for loan and lease losses as described in note 5 to the consolidated financial statements, the company’s consolidated allowance for loan and lease losses (alll) was $111.25 million at december 31, 2019. the company also describes in note 1 of the consolidated financial statements the “reserve for loan and lease losses” accounting policy around this estimate. the alll is an estimate of losses inherent in the loan and lease portfolio. the determination of the reserve requires significant judgment reflecting the company’s best estimate of probable loan and lease losses. the estimate consists of several key elements, which include: specific reserves for impaired loans, formula reserves for each business lending division portfolio including percentage allocations for special attention loans and leases not deemed impaired, and reserves for pooled homogenous loans and leases. the company’s evaluation is based upon a continuing review of these portfolios, estimates of customer performance, collateral values and dispositions, and assessments of economic and geopolitical events, all of which are subject to judgment and will change.the primary reason for our determination that the allowance for loan losses is a critical audit matter is that auditing the estimated allowance for loan losses involved significant judgment and complex review. there is a high degree of subjectivity in evaluating management’s estimate, such as evaluating management's assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with impaired loans and assessing the appropriateness of loan grades.our audit procedures related to the estimated allowance for loan losses included:•testing the design and operating effectiveness of internal controls, including those related to technology, over the alll including data completeness and accuracy, classifications of loans by loan segment, historical loss data, the calculation of a loss rate, the establishment of qualitative adjustments, grading and risk classification of loans and establishment of specific reserves on impaired loans and management’s review controls over the alll balance as a whole including attending internal company credit policy committee meetings and audit committee discussions and analysis;•testing clerical/computational accuracy of the formulas within the calculation spreadsheet; •testing of completeness and accuracy of the information/reports utilized in the alll, including reports used in management review controls over the alll; •computing an independent calculation of an acceptable range and comparing it to the company’s estimate;•evaluating the qualitative adjustment to the historical loss rates, including assessing the basis for the adjustments and the reasonableness of the significant assumptions; and•testing of the loan review function and the accuracy of loan grades determined. specifically, utilizing internal specialists to assist us in evaluating the appropriateness of loan grades and to assess the reasonableness of specific impairments on loans.evaluating the overall reasonableness of qualitative factors and the appropriateness of their direction and magnitude and the company’s support for the direction and magnitude compared to previous years./s/ bkd, 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 separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.63table of contents self-insurance liabilities—refer to note 1 to the financial statements critical audit matter description the company is self‑insured for workers' compensation automobile, property, and general liability. the self‑insurance liability is undiscounted and determined actuarially based on claims filed and an estimate of claims incurred but not yet reported. the company has established stop-loss amounts that limit the company’s liability. self‑insurance liabilities as of february 26, 2022, were $1,171.1 million.we identified the evaluation of the company's self‑insurance liabilities as a critical audit matter because estimating the projected settlement value of reported and unreported claims involves significant estimation by management. this required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists when performing audit procedures to evaluate whether self‑insurance liabilities were appropriately recorded as of february 26, 2022.how the critical audit matter was addressed in the audit our audit procedures related to the self-insurance liabilities included the following, among others:we tested the effectiveness of controls over management's self‑insurance process, including controls over the review of the actuarial report and evaluation of the external actuarial expert’s qualifications, competency, and objectivity and evaluation of the underlying data sent to the external actuary.we evaluated the methods and assumptions used by management to estimate the self‑insurance liability by:•reading the company’s insurance policies and comparing the coverage and terms to the assumptions used by management.•testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were accurate and complete.•involving actuarial specialists with specialized skills, industry knowledge, and relevant experience who assisted in:–comparing management's prior year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the self-insurance liability.–developing an independent expectation of the self-insurance liabilities and comparing them to the amounts recorded by management.–evaluating the key assumptions and methodologies used by management to determine the liability.–evaluating the qualifications of the company's actuaries by assessing their certifications and determining whether they met the qualification standards of the american academy of actuaries to render the statements of actuarial opinion implicit in their analyses./s/ deloitte & touche llp boise, idaho april 26, 2022 we have served as the company's auditor since 2006.

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.long-lived store asset impairment – refer to notes 1 and 3 to the financial statements critical audit matter description the company performs an analysis of the carrying value of all long-lived store assets for impairment at an individual store level whenever events or changes in circumstances indicate that the carrying value of individual store assets may not be recoverable. the company's impairment analysis determines whether projected undiscounted future cash flows from operations are sufficient to recover the carrying value of these store assets. impairment may result when the carrying value of these store assets exceeds the estimated undiscounted future cash flows over the remaining useful life. the total amount of property and equipment, including store assets, and operating lease right-of-use assets as of january 1, 2022 are $499.4 million and $898.2 million, respectively. the company's impairment analysis consists of (1) identifying stores with 62table of contentsindicators of impairment, (2) testing the identified store assets for recoverability and (3) measuring the impairment loss, if any. during the year ended january 1, 2022, the company recorded no impairment of long-lived assets. the principal considerations for our determination that performing procedures relating to the impairment of store-level long-lived assets is a critical audit matter relates to the significant judgment by management in developing the estimated future discounted cash flows expected to be generated by the asset. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the discounted cash flows, including the significant assumptions for sales growth rate and gross margin.how the critical audit matter was addressed in the audit our audit procedures related to management's judgments regarding the forecasts of future cash flows included the following, among others:•we tested the operating effectiveness of controls over management's long-lived store asset impairment evaluation, including those over future sales growth and gross margin projections•we evaluated management's ability to accurately forecast future sales growth and gross margin by comparing actual results to management's historical forecasts•we evaluated the reasonableness of management's sales growth and gross margin forecasts by comparing the forecasts to: ◦current and past sales and gross margins of the overall company and individual store level asset groups◦consistency with external market and industry data◦internal communications to management and the board of directors•we tested the completeness, accuracy, and relevance of underlying data used in the valuations/s/ deloitte & touche llp san francisco, california march 2, 2022we have served as the company's auditor since 2007.

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.f-2table of contents vehicle depreciation expense - united states risk vehicles - refer to notes 2 and 8 to the financial statements critical audit matter description the company records rental vehicles at cost, net of incentives and allowances from manufacturers. rental vehicles acquired by the company outside of manufacturer repurchase or guaranteed depreciation programs are referred to as risk vehicles and the carrying value of these risk vehicles are depreciated to the vehicles’ estimated residual market value at their expected dates of disposition. significant assumptions and judgments made by management in the company’s calculation of the estimated residual market value of risk vehicles include, but are not limited to, the anticipated age of the vehicles and market conditions for used vehicles at the time of disposal. the company regularly evaluates the reasonableness of these significant assumptions and judgments and adjusts vehicle depreciation expense rates on a prospective basis to reflect changes in the estimated residual market value of risk vehicles through their expected date of disposition.given the subjectivity in the significant assumptions and judgments made by management to calculate the estimated residual market value of risk vehicles, auditing the estimated residual market value of risk vehicles and vehicle depreciation expense related to risk vehicles required extensive audit effort to develop an independent expectation of residual market values and depreciation expense, 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 to assess the reasonableness of the estimated residual market value and vehicle depreciation expense related to risk vehicles included the following, among others: •we evaluated the appropriateness and consistency of the company’s methods, significant assumptions and judgments to calculate the estimated residual market value of risk vehicles and the expected dates of disposition.•we tested the effectiveness of controls over vehicle depreciation expense related to risk vehicles and management’s review of the significant assumptions and judgments to calculate the estimated residual market value of risk vehicles, including those over the company’s monitoring of residual market values and used vehicle market conditions. •we assessed the reasonableness of the estimated residual market value of risk vehicles by performing the following procedures on a selection of risk vehicles: •we tested the underlying historical data that served as the basis for the company’s calculation of the estimated residual market value to evaluate that the inputs were reasonable.•we tested the mathematical accuracy of the company’s calculation of the estimated residual market value and vehicle depreciation expense rates.•we tested significant assumptions and judgments used in the company’s calculation by developing an independent expectation of residual market values and compared them to the estimated residual market values calculated by the company. our independent expectation was calculated using our professional judgment by reference to third party data, information produced by the company, subsequent vehicle sales, and inquiries of management.•we searched for contradictory evidence associated with the significant assumptions and judgments made by management based on our knowledge of the industry and review of third party industry data. •we developed an independent expectation of depreciation expense based on, but not limited to, the vehicles’ age and results of our residual value testing and compared it to the amount recorded by the company as depreciation expense.f-3table of contents public liability and property damage self-insurance reserves - united states - refer to note 2 to the financial statements critical audit matter description the company is self-insured for public liability and property damage claims. these self-insurance reserves represent an estimate of the reported claims not yet paid and unreported claims and are calculated on an undiscounted basis using actuarial methods followed in the insurance industry. significant assumptions and key inputs included in the calculation of these reserves include, but are not limited to, historical loss experience and projected loss development factors. the company periodically evaluates the reasonableness of these significant assumptions and key inputs and adjusts the self-insurance reserves to reflect changes in claims experience, such as changes in volume or cost of historical claims. given the subjectivity of estimating the self-insurance reserves for reported claims not yet paid and unreported claims, performing audit procedures to evaluate whether self-insurance reserves were appropriately recorded as of december 31, 2019 required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.how the critical audit matter was addressed in the audit our audit procedures related to public liability and property damage self-insurance reserves included the following, among others: •we tested the effectiveness of controls over management’s review of significant assumptions, key inputs and methods used to calculate the estimate of the reported claims not yet paid and unreported claims.•we tested the underlying data that served as the basis for the company’s actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.•with the assistance of our actuarial specialists, we developed an independent estimate of the self-insurance reserves, including assessment of loss data and claim development factors, and compared our estimate to management’s estimate. in addition, we performed the following:•evaluated the reasonableness of the methodologies used in management’s estimate based on actuarial methods followed in the insurance industry associated with such liabilities.•evaluated the reasonableness of the assumptions used in management’s estimate by comparing prior-year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the liability./s/ deloitte & touche llp new york, new york february 20, 2020we have served as the company’s auditor since 1997.

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 the 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.assessment of equity method investment impairment description of the matter as discussed in note 4 to the consolidated financial statements, the partnership has investments in nonconsolidated entities accounted for using the equity method totaling $2.9 billion as of december 31, 2021. the carrying value of each equity method investment is evaluated for impairment when indicators of a loss in value below the carrying value exist, including a lack of sustained earnings or a deterioration of market conditions, among others.auditing the partnership’s impairment assessments of whether an impairment indicator for its equity method investments exists was complex and judgmental due to the estimation required in determining whether an investment had an indicator of impairment.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the partnership’s equity method impairment review process, including controls over the identification of factors that may indicate an equity method investment is impaired. in order to test whether an impairment was indicated, we tested the partnership’s qualitative evaluation of the presence, or lack of, impairment indicators for its equity method investments. this included, but was not limited to, an evaluation of the investments’ earnings history and sustainability under current and expected market conditions. we exercised professional judgement based on our knowledge of the industry and the investee’s business to assess the appropriateness of the management’s qualitative evaluation. for example, we performed inquiries of management, considered historical operating results of the investments being analyzed, their projected recovery periods, and current and expected market conditions affecting their results./s/ ernst & young llp houston, texas february 18, 2022 we have served as the partnership’s auditor since 2012.

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) 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 matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.f-2fair value of contingent consideration description of the matter as discussed in notes 3 and 5 to the consolidated financial statements under the caption “contingent consideration,” the company uses a discounted cash flow model to estimate the fair value of the contingent consideration liability each reporting period, which represents the present value of projected future cash flows associated with regulatory approval milestones and royalties on net sales due to the selling shareholders of viventia bio inc. fluctuations in the fair value of the liability result in a charge to earnings (or loss) during the period. as of december 31, 2021, the company estimated the fair value of the contingent consideration liability as $52.0 million and recorded the change in fair value of $56.8 million as operating income for the year ended december 31, 2021.auditing the fair value of the contingent consideration liability required significant auditor judgment due to the high degree of subjectivity in evaluating certain assumptions used to estimate the fair value. in particular, the fair value measurement was sensitive to the significant assumptions underlying the projected commercial sales of vicineum and probabilities of success and timing of certain milestone events and achievements.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the development of the significant assumptions over the company’s process to estimate the fair value of the contingent consideration liability. this included testing controls over management’s review of the significant estimation assumptions and methods used to develop the fair value estimate, the accuracy of the calculations included within the fair value model, and the underlying data used in the model.to test the estimated fair value of the contingent consideration liability, our audit procedures included, among others, assessing the terms of the arrangement, evaluating the methodology used and testing the key inputs and significant assumptions discussed above. we evaluated the significant assumptions in light of observable industry and economic trends and standards, external data sources, probability of success benchmarks, and regulatory factors. our procedures included evaluating the data sources used by management in determining its significant assumptions and included an evaluation of available information that either corroborated or contradicted management’s conclusions. in addition, we involved our valuation professionals to assess the methodology used to determine the fair value of the contingent consideration liability, which included performing corroborative fair value calculations.impairment evaluation of goodwill and indefinite-lived intangible assets description of the matter as discussed in notes 3 and 8 to the consolidated financial statements under the captions “indefinite-lived intangible assets” and “goodwill,” the company’s intangible assets consist of indefinite-lived, acquired in-process research and development (ipr&d) worldwide product rights to vicineum as a result of the acquisition of viventia in 2016. goodwill on the company's consolidated balance sheets is the result of the company’s acquisition of viventia in september 2016 and represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets acquired under the acquisition method of accounting. indefinite-lived intangible assets are quantitatively tested for impairment at least annually during the fourth quarter of the fiscal year, or more often if indicators of impairment are present. goodwill is quantitatively tested for impairment at least annually during the fourth quarter of the fiscal year, or more often if indicators of impairment are present. impairment testing of ipr&d requires management to estimate the future discounted cash flows of the underlying asset. impairment testing of goodwill requires management to estimate the future discounted cash flows of the company’s one reporting unit.auditing management’s impairment assessments required significant auditor judgment due to the high degree of subjectivity in evaluating certain assumptions used to estimate the fair value of the reporting unit for and the ipr&d. in particular, the fair value estimates of goodwill and of ipr&d were sensitive to the significant assumptions underlying the projected commercial sales of vicineum.f-3how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the development of the significant assumptions over the company’s goodwill and indefinite-lived intangible asset impairment review processes. this included testing controls over management’s review of the quantitative impairment analyses of goodwill and ipr&d, including the significant estimation assumptions and methods used, the accuracy of the calculations included within the valuation models, and the underlying data used in those models.to test the impairment evaluations over goodwill and ipr&d assets, our audit procedures included, among others, evaluating the methodology and valuation models used and testing the key inputs and significant assumptions discussed above. we evaluated the significant assumptions in light of observable industry and economic trends and standards, external data sources, probability of success benchmarks, and regulatory factors. our procedures included evaluating the data sources used by management in determining its significant assumptions and included an evaluation of available information that either corroborated or contradicted management’s conclusions. in addition, we inspected the company’s reconciliation of the fair value of the reporting unit to the market capitalization of the company and assessed the results. we involved our valuation professionals to assess the methodology and valuation of the discounted cash flow models, including evaluating the reasonableness of certain significant assumptions./s/ ernst & young 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 requiredto 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 ofcritical 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 theaccounts or disclosures to which they relate. valuation of level 3 investments as discussed in notes 2 and 4 to the consolidated financial statements, the company measures substantially all of its investments at fair value usingunobservable inputs and assumptions as there is no readily available market value. due to the use of unobservable inputs in determining fair value, these investments are classified as level 3 within the fair value hierarchy and total$742,869 thousand as of december 31, 2020. we identified the valuation of certain level 3 investments as a critical audit matter because ofcertain significant assumptions management makes in determining the estimate, including the selected valuation techniques, revenue or ebitda multiples, and discount rates. auditing management’s valuation techniques and assumptions of revenueand ebitda multiples and the discount rate involved a high degree of auditor judgment and increased audit effort, including the use of valuation specialists, as changes in these assumptions could have a significant impact on the fair value of thelevel 3 investments. 79 table of contents our audit procedures related to the company’s valuation of level 3 investments included the following,among others: • we obtained an understanding of the relevant controls related to the company’s process to determine fairvalue of its level 3 investments, including controls over the company’s methods and selection of significant unobservable inputs, and tested such controls for operating effectiveness. • we evaluated the appropriateness of management’s valuation techniques, such as the discounted cash flow orenterprise value, and management’s asset coverage analysis. we also evaluated whether assumptions used by management, including revenue or ebitda multiples and discount rates, were reasonable by comparing these inputs to market informationobtained from external sources. for a selection of investments, we utilized valuation specialists to perform this evaluation. • for a select number of investments, we utilized the valuation specialists to develop an independent fair valueestimate which was compared to management’s estimate. • we evaluated the company’s historical ability to estimate fair value by comparing the fair value asestimated by management against sale transactions, where applicable. transfers of financial assets as discussed in note 2 to the consolidated financial statements, the company follows the appropriate accounting principles when determining if there has been asale or disposition of a portfolio investment. the fair value of the company’s level 3 investments was $742,869 thousand as of december 31, 2020 and net loss on investments was $8,123 thousand for the year ended december 31,2020. we identified the transfer of financial assets as a critical audit matter as management’s assessment of the accounting principles thatdetermine if a financial transfer occurred is complex and requires that management make significant judgments, including determining (1) if assets are legally isolated from the company, (2) if there is continuing involvement of the companyand (3) if third party constraints provide a more than trivial benefit to the company. auditing management’s determination of whether the transfer should be accounted for as a sale or secured borrowing involved a high degree of auditorjudgment and increased audit effort, including the use of subject matter experts, as changes in management’s judgments could change the conclusion reached. our audit procedures related to the company’s transfer of financial assets analysis included the following, among others: • we obtained an understanding of the relevant controls related to the company’s process to determine if atransfer of financial assets occurred and tested such controls for operating effectiveness. • we evaluated the company’s determination of sale or secured borrowing by evaluating the following factors:(1) if the transferred assets were isolated from the company, (2) if there is continuing involvement of the company, and (3) if third party constraints provide a more than trivial benefit to the company. • we inspected legal documents and correspondence with custodians, portfolio companies or agents in order toevaluate whether the criteria for sale treatment under the accounting principles was met. for selected transactions, we involved a subject matter expert to assist with this evaluation. /s/ rsm us llp we have served as the company’s auditor since 2007.

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 a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. 115 revenue recognition description of the matter the company recorded collaboration revenue of $207.1 million for the year ended december 31, 2021. as described in note 2, collaboration revenue is recognized by measuring the progress toward complete satisfaction of the performance obligations using an input measure. in order to recognize collaboration revenue over the research and development period, the company measures actual costs incurred to date compared to the overall total expected costs to satisfy the performance obligations. revenues are recognized as the program costs are incurred.auditing collaboration revenue was challenging as it involves assessing highly judgmental estimates with respect to the company’s determination of the total expected costs to satisfy the performance obligations.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the identified risks related to the company's process used to determine total expected costs to satisfy the performance obligations, including management’s controls over updates to the budget for the relevant research and development programs.to test collaboration revenue, our audit procedures included, among others, obtaining an understanding of the company’s estimated costs to satisfy the performance obligations, as well as assessing management’s updates to the budget for the relevant research and development programs. we also tested a sample of expenses recorded to the development program, evaluated the historical accuracy of management’s budget estimates for the relevant research and development programs, and inquired of company personnel directly involved with supervising the development programs.new collaboration agreement description of the matter on july 1, 2021, the company entered into a collaboration and license agreement with glaxo wellcome uk limited, a subsidiary of glaxo smith kline plc (gsk), pursuant to which alector and gsk will collaborate on the global development and commercialization of progranulin-elevating monoclonal antibodies, al001 and al101 (gsk agreement). as described in note 2, the transaction price was allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling price (ssp).auditing the company’s revenue recognition for the gsk agreement was complex and required the company to apply significant judgments, including the determination of performance obligations and transaction price, and the estimation of the standalone selling price of each identified performance obligation. the estimates of the standalone selling price for the performance obligations relating to the licenses of intellectual property reflect management’s assumptions, which may include forecasted revenues, development timelines, discount rates, and probabilities of technical and regulatory success. 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. 116 how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls addressing the risks of material misstatement relating to the accounting for the gsk agreement. for example, we tested management’s controls over the identification of performance obligations, the determination of the significant assumptions described above with respect to the estimation of the standalone selling price of the performance obligations relating to the licensed compounds, and the accuracy and completeness of underlying data used in estimating the standalone selling price and the transaction price.our audit procedures included, among others, obtaining and reading the collaboration and license agreement and evaluating the completeness of the performance obligations identified by management. we also evaluated management’s estimates of the standalone selling price for identified performance obligations. for example, we evaluated the reasonableness of the aggregate standalone selling prices in relation to the total projected cash flows under the gsk agreement and evaluated the reasonableness and consistency of significant assumptions used in the determination of standalone selling price. we also performed a sensitivity analysis to evaluate the impact that changes in the significant assumptions would have on the estimated standalone selling price of performance obligations and the resulting impact 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 certain assumptions used in the determination of the estimated standalone selling price of the performance obligations. /s/ ernst & young llp we have served as the company’s auditor since 2017.

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. revenue recognition—refer to note a to the consolidated financial statements critical audit matter description the company recognizes revenue upon transfer ofcontrol of promised products to customers in an amount that reflects the consideration the company expects to receive in exchange forthose products. the company may enter into certain customer contracts that contain unique, customer-specific terms and conditions, variableconsideration, as well as multiple performance obligations. for such contracts, significant interpretation may be required to determinethe appropriate accounting, including the identification of performance obligations, the allocation of the transaction price to performanceobligations in the arrangement, the timing of the transfer of control of promised goods for each of those performance obligations, estimatesof variable consideration and agent versus principal consideration. our assessment of managements’ evaluation of the abovereferenced matters related to proper revenue recognition is significant to our audit because the amounts are material to the financialstatements, the assessment process involves significant judgment, and the application of u.s. generally accepted accounting principlesin this area is complex. how the critical audit matter was addressed in the audit our principal audit procedures related to the company’s revenuerecognition for customer contracts included the following: ·we evaluated the appropriateness of management’s revenue recognition policies.·we tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognizedin the consolidated financial statements.·we selected a sample of revenue transactions and performed the following procedures:o obtained and read source documents for each selection, including master agreements, purchase orders and other documents that evidencedthe customer arrangement.o tested management’s identification and treatment of the key contract terms, including performance obligations and variable consideration.o assessed the terms in the customer agreement and evaluated the appropriateness of management's application of the company’saccounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. /s/ stowe & degon llc we have served as the company’s auditorsince 2008

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. impairment of long-lived assets description of critical audit matter as discussed in note 2 to the consolidated financial statements, the company evaluated the recoverability of long-lived assets, including equipment with finite lives, intangible assets subject to amortization and operating lease right-of-use assets, whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying value of an asset may not be recoverable. as of december 31, 2020, the company had working capital deficiency and accumulated deficiency. besides, the company has the recurring losses from operations and negative operating cash flows for the year ended december 31, 2020. the company considered these as indicators that certain long-lived tangible assets may be impaired as of december 31, 2020. due to challenging industry and economic conditions, the company tested its long-lived assets during the year ended december 31, 2020. the company’s evaluation of long-lived assets is primarily using estimated future undiscounted cash flows over its remaining lease term to its carrying value. in order to access there is any impairment of operating lease right-of-use assets, the company tested whether the asset can be recovered in a few aspects, including, current and future plan of utilization of the lease space, continuity of the lease and fund for the future lease payment. we identified the evaluation of the impairment analysis for long-lived assets as a critical audit matter because of the significant estimates and assumptions management used. performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. how we addressed the matter in our audit the primary procedures we performed to address these critical audit matters included the following: f-2 ●we obtained an understanding and evaluated the reasonableness of management’s process for developing the undiscounted cash flow and the assumptions of the operating lease right-of-use assets. ●we observed the current utilization of lease space and gained understanding of the management’s intention and ability of continuity of the lease. /s/ friedman llp we have served as the company’s auditor since 2019.

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 – uniquely configured contracts — refer to notes 1 and 2 to the financial statements critical audit matter description the company recognizes revenue as its contractual performance obligations are satisfied, which may be at a point in time or over time. certain of the company’s contracts are for the delivery, installation, and integration of uniquely configured audio-visual communication systems. revenue for these uniquely configured systems is recognized over time using the cost incurred input method. this input method requires management to make estimates of the costs that will ultimately be incurred at the completion of each contract. revenue is recognized based on the transaction price and the percentage of cost incurred as of the balance sheet date in relation to the total estimated inputs at completion. we identified revenue associated with uniquely configured contracts as a critical audit matter because of the significant judgments necessary for management to estimate total costs to be incurred to recognize revenue under these contracts. changes in estimated costs could have a significant impact on the timing and amount of revenue recognized. this required an increased level of auditor judgment due to the complexity of uniquely configured contracts and extent of effort when performing audit procedures to audit management’s estimate of total costs and evaluating the reasonableness of the underlying estimates.how the critical audit matter was addressed in the audit our audit procedures related to estimates of total cost used to recognize revenue for uniquely configured contracts included the following, among others:•we tested the effectiveness of controls over uniquely configured contracts, including management’s controls over the estimates of total costs.•we selected a sample of uniquely configured contracts and performed the following: •compared costs incurred to date to the costs management estimated to be incurred to date.•evaluated management’s ability to achieve the estimates of total cost by performing corroborating inquiries with the company’s project managers and engineers, and compared the estimates to management’s work plans, engineering specifications, and supplier contracts.•confirmed contractual terms with third parties. •tested the mathematical accuracy of management’s estimate of total costs.•we evaluated management’s ability to accurately estimate total costs by comparing actual costs to management’s historical estimates for uniquely configured contracts that have been fulfilled./s/ deloitte & touche llp minneapolis, minnesota june 16, 2022 36table of contents we have served as the company's auditor since 2017.

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 of claims and benefits payable reserves for short duration insurance contracts as described in notes 2 and 17 to the consolidated financial statements, the company maintains claims and benefits payable reserves for short duration insurance contracts. reserves are established using generally accepted actuarial methods and reflect judgments about expected future claim payments. the reserve liability is based on the expected ultimate cost of settling the claims. as of december 31, 2020, the company’s total liability for claims and benefits payable was $2.66 billion, which included $1.88 billion of liabilities for short duration contracts. claims and benefits payable reserves include case reserves for known claims which are unpaid as of the balance sheet date; incurred but not reported reserves for claims where the insured event has occurred but has not been reported as of the balance sheet date; and loss adjustment expense reserves for the expected handling costs of settling the claims. factors used in the calculation of the reserves include experience derived from historical claim payments and actuarial assumptions. as described by management, the best estimate of ultimate loss and loss adjustment expense is generally selected from a blend of different actuarial methods that are applied consistently each period, considering significant assumptions including projected loss development factors and expected loss ratios.the principal considerations for our determination that performing procedures relating to the valuation of claims and benefits payable reserves for short duration insurance contracts is a critical audit matter are (i) the significant judgment by management when determining their estimates, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the actuarial methods and projected loss development factors and expected loss ratio assumptions; 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 valuation of claims and benefits payable reserves for short duration insurance contracts, including controls over the selection of actuarial methods, completeness and accuracy of claims data and the development of the significant assumptions. on a test basis, these procedures also included, among others, testing the completeness and accuracy of historical claims data provided by management and the involvement of professionals with specialized skill and knowledge to assist in either (i) testing management’s process for determining the estimates by evaluating the appropriateness of management’s actuarial methods and the reasonableness of projected loss development factors and expected loss ratio assumptions; or (ii) developing an actuarially determined independent estimate utilizing actual historical data and loss development patterns, as well as industry data and other benchmarks, and comparing this independent estimate to management’s actuarially determined reserves.valuation of future policy benefits and claims and benefits payable for certain long duration insurance contracts as described in notes 2 and 17 to the consolidated financial statements, the company maintains future policy benefits and expense reserves for universal life insurance policies, variable life insurance policies and investment-type annuity contracts of the disposed and runoff businesses consisting of policy account balances before applicable surrender charges and certain deferred policy initiation fees. the company maintains future policy benefits and expense reserves for certain preneed life insurance contracts, for policies fully covered by reinsurance and certain life, annuity, group life conversion, and medical insurance policies no longer offered which are equal to the present value of future benefits to policyholders plus related expenses less the present value of future net premiums. the company also maintains claims and benefits payable for policies fully covered by reinsurance and certain life, annuity, group life conversion, and medical insurance policies no longer offered which are equal to the present value of future benefit payments and related expenses. as of december 31, 2020, the company’s total future policy benefits and expenses reserve was $10.06 billion, which included $3.48 billion of liabilities for business disposed through reinsurance and in runoff and $2.18 billion of liabilities for preneed long duration contracts estimated using traditional contracts reserving models. as of december 31, 2020, the company’s total liability for claims and benefits payable was $2.66 billion, which included $742.5 million of liabilities for long duration business disposed through reinsurance and in runoff. factors used in the calculation of the reserves include experience derived from historical claim payments, expected future premiums and actuarial assumptions. the reserve assumptions include mortality, morbidity, inflation, lapse, margin, withdrawal and discount rates for future policy benefits and expense reserves, and inflation, mortality, morbidity, and discount rates for claims and benefits payable that are based on the company’s experience. f-2the principal considerations for our determination that performing procedures relating to the valuation of future policy benefits and expenses and claims and benefits payable for certain long duration insurance contracts is a critical audit matter are (i) the significant judgment by management when determining their estimates, which led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the actuarial methods and mortality, morbidity, and discount rate assumptions; 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 valuation of future policy benefits and expenses, as well as claims and benefits payable for certain long duration contracts, including controls over the selection of actuarial methods, completeness and accuracy of data and the development of significant assumptions. on a test basis, these procedures also included, among others, testing management’s process for determining the estimates, which included testing the completeness and accuracy of historical claims data provided by management and the involvement of professionals with specialized skill and knowledge to assist in evaluating the reasonableness of management’s mortality, morbidity and discount rate assumptions for future policy benefits and expenses and claims and benefits payable. these professionals with specialized skill and knowledge also assisted in evaluating the appropriateness of the actuarial methods used, which included performing testing of the valuation models for future policy benefits and expense reserves. /s/ pricewaterhouse coopers llp new york, new york february 19, 2021we have served as the company’s auditor since 2000.

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 – estimation of standalone selling price of the freelancer material rights and the period of time over which to defer and recognize the consideration allocated to the material rights as described above and in notes 2 and 14 to the consolidated financial statements, certain of the company’s contracts with customers contain multiple performance obligations in the event management determines a material right exists. the company charges freelancers a service fee as a percentage of freelancer billings using a tiered service fee model based on cumulative lifetime billings by the freelancer to each client. the arrangements subject to tiered service fees also include contract renewal options that represent a material right. the company recorded total revenue of $300.6 million for the year ended december 31, 2019, of which $187.4 million related to revenue from freelancers. under the new revenue recognition standard, a material right is accounted for as a separate performance obligation and consequently management was required to estimate standalone selling price for the material rights. standalone selling price for a material right is estimated by determining the discount that the freelancer would obtain when exercising the option, adjusted for the likelihood that the option will be exercised. management allocates consideration to each performance obligation in contracts with material rights based on the relative standalone selling price of the performance obligation by applying the portfolio approach practical expedient. significant judgment is applied in the use of the portfolio approach which includes estimating the standalone selling price of the material rights and estimating the period of time over which to defer and recognize the consideration allocated to the material rights. specifically, management applied significant judgment in using the portfolio approach practical expedient in determining an appropriate model for the estimates, which includes selecting the appropriate methodology and relevant data inputs to estimate the likelihood and the period of time over which to defer and recognize the consideration allocated to the material rights. management utilized historical client-freelancer transaction data in developing the estimates. management recognizes revenue related to the material right based on the company’s estimate of when the material rights are exercised.the principal considerations for our determination that performing procedures relating to revenue recognition, specifically the estimation of standalone selling price of the freelancer material rights and the period of time over which to defer and recognize the consideration allocated to the material rights, is a critical audit matter are there was significant judgment by management in determining the appropriate model, methodology and relevant data inputs to estimate the stand-alone selling price, including the likelihood and period of time over which to defer and recognize the consideration allocated to the material rights. this in turn led to significant auditor judgment, subjectivity and effort in performing 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 revenue recognition process, including the determination of the appropriate model, methodology and relevant data to estimate the material rights stand-alone selling price and the period of time over which to defer and recognize the consideration allocated to the material rights. these procedures also included, among others, (i) evaluating the appropriateness of management’s model, including the reasonableness of the selected methodology and relevant data inputs used in determining the likelihood, and period of time over which, to defer and recognize the consideration allocated to the material rights, (ii) testing the completeness 72and accuracy of data inputs, and (iii) testing the mathematical accuracy of the model’s calculations and that the amount to be recorded for the material rights is completely and accurately reflected in the consolidated financial statements./s/ pricewaterhouse coopers llp san jose, california march 2, 2020we have served as the company’s auditor since 2016.

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 (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.estimated costs at completion for certain aerospace contracts as described in notes 1 and 4 to the consolidated financial statements, for long-term aerospace contracts, management generally recognizes sales and income over time because of continuous transfer of control to the customer. the company’s net sales for the year ended december 31, 2021 were $709 million, of which approximately 40% is recognized over time. revenue is generally recognized using the cost-to-cost measure of progress for its over time performance obligations because this recognition best depicts the transfer of assets to the customer which occurs as cost is incurred under the contracts. under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. the principal considerations for our determination that performing procedures relating to estimated costs at contract completion for certain aerospace contracts is a critical audit matter are the significant judgment by management when determining the estimated costs at completion for certain of these contracts; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating evidence related to the estimated costs at completion for certain of these contracts.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 revenue recognition, including controls over the determination of estimated costs at contract completion for long-term aerospace contracts. the procedures also included, among others, evaluating and testing management’s process for determining the estimated costs at contract completion for long-term aerospace contracts, which included evaluating the reasonableness of assumptions considered by management specific to each contract, and testing the accuracy of the revenue recognized based on these underlying contract estimates. evaluating the reasonableness of significant assumptions involved assessing management’s ability to reasonably estimate costs at contract completion by (i) testing the basis and underlying support for the cost estimate, (ii) evaluating the consistent application of accounting policies, and (iii) evaluating the timely identification of circumstances which may warrant a modification to a previous estimate./s/ pricewaterhouse coopers llp hartford, connecticut february 24, 2022we 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 (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 of intangible assets acquired in the wage works, inc. acquisition as described in note 3 to the consolidated financial statements, on august 30, 2019, the company closed the acquisition of wage works, inc. for $51.35 per share in cash, or approximately $2.0 billion to wage works, inc. stockholders. the acquisition resulted in $1.3 billion of goodwill and $711.5 million of intangible assets being recorded. the intangible assets were comprised of customer relationships of $598.5 million, developed technology of $96.9 million, trade names and trademarks of $12.3 million and in-process software development costs of $3.8 million. the company preliminarily valued the acquired assets utilizing the discounted cash flow method, a form of the income approach. the significant assumptions used in the discounted cash flow analyses include future revenue growth and attrition rates, projected margins, royalty rates, technological obsolescence, discount rates used to present value future cash flows, and the amount of revenue and cost synergies expected from the acquisition. the principal considerations for our determination that performing procedures relating to the valuation of intangible assets acquired in the acquisition of wage works, inc. 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 relationships, developed technology, and trade names and trademarks intangible assets acquired due to the significant judgment required by management when developing the estimate; (ii) significant audit effort was required in evaluating the significant assumptions relating to the valuation of the aforementioned intangible assets, which included the future revenue growth and discount rates for all the aforementioned intangible assets, royalty rates for the developed technology and trade names and trademarks intangible assets, attrition rates for the customer relationships intangible asset, and technological obsolescence for the developed technology intangible asset; 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 intangible assets and controls over development of significant assumptions related to the valuation of intangible assets, including future revenue growth and attrition rates, royalty rates, technological obsolescence, and discount rates. these procedures also included, among others, (i) reading the purchase agreement; (ii) testing management’s process for estimating the fair value of intangible assets; and (iii) evaluating the appropriateness of the discounted cash flow methods, testing the completeness and accuracy of the underlying data, and evaluating the reasonableness of significant assumptions, including the future revenue growth and attrition rates, royalty rates, technological obsolescence, and discount rates. evaluating the reasonableness of the future revenue growth and attrition rates, technological obsolescence, and attrition rates involved considering the past performance of the acquired business, -52-table of contentsas well as economic and industry forecasts. 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 the evaluation of the methods and certain significant management assumptions, including technology obsolescence, royalty rates, and discount rates. determination of the useful life of acquired customer relationships in the wage works, inc. acquisition as described in notes 1 and 3 to the consolidated financial statements, on august 30, 2019, the company closed the acquisition of wage works, inc. for $51.35 per share in cash, or approximately $2.0 billion to wage works, inc. stockholders. as part of the transaction, the company recorded a customer relationships intangible asset of $598.5 million. the useful life of the acquired customer relationships intangible asset was estimated based on future revenue growth and attrition. the principal considerations for our determination that performing procedures relating to the determination of the useful life of the acquired customer relationships intangible asset in the wage works, inc. acquisition is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the useful life estimate due to the significant judgment required by management when developing the estimate; and (ii) significant audit effort was required in evaluating the significant assumptions relating to the useful life estimate, which included the future revenue growth and attrition. 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 determination of the useful life of the acquired customer relationships, including controls over the development of significant assumptions relating to the useful life estimate, including future revenue growth and attrition. these procedures also included, among others (i) testing management’s process for developing the estimate of the useful life of acquired customer relationships; (ii) testing the completeness, accuracy, and relevance of underlying data used in the estimate; and (iii) evaluating the significant assumptions used by management, including the future revenue growth and attrition. evaluating the reasonableness of the future revenue growth and attrition involved considering the past performance of the acquired business, as well as economic and industry forecasts, and the consistency with other evidence obtained throughout the audit./s/ pricewaterhouse coopers llp salt lake city, utah march 31, 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 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.66table of contents the impact of proved oil and natural gas reserves on proved oil and natural gas properties, net as described in note 1 to the consolidated financial statements, the company’s property and equipment, net balance was $5.2 billion as of december 31, 2020, and depreciation, depletion, and amortization (dd&a) expense for the year ended december 31, 2020 was $1.1 billion, both of which substantially related to proved oil and natural gas properties. the company follows the successful efforts method of accounting for its oil and natural gas producing activities. under this method, all capitalized well costs and leasehold costs of proved oil and natural gas properties are depreciated by the units-of-production (uop) method based on total estimated proved developed reserves and proved reserves, respectively. as disclosed by management, estimates of oil and natural gas reserves and their values, future production rates, future development costs and commodity pricing differentials are the most significant of management’s estimates. the accuracy of any reserve estimate is a function of the quality of data available and of engineering and geological interpretation and judgment. in addition, estimates of reserves volumes may be revised based on actual production, results of subsequent exploration and development activities, recent commodity prices, operating costs and other factors. the estimates of oil and natural gas reserves have been developed by specialists, specifically petroleum engineers. the principal considerations for our determination that performing procedures relating to the impact of proved oil and natural gas reserves on proved oil and natural gas properties, net is a critical audit matter are (i) the significant judgment by management, including the use of specialists, when developing the estimates of proved oil and natural gas reserves, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence obtained related to the data, methods, and assumptions used by management and its specialists in developing the estimates of proved oil and natural gas reserves volumes and the assumptions applied to the data related to the commodity pricing differentials and future development 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 management’s estimates of proved oil and natural gas reserves. the work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the proved oil and natural gas reserve volumes. as a basis for using this work, the specialists’ qualifications were understood and the company’s relationship with the specialists was assessed. the procedures performed also included evaluation of the methods and assumptions used by the specialists, tests of the data used by the specialists, and an evaluation of the specialists’ findings. these procedures also included, among others, testing the completeness and accuracy of the data related to commodity pricing differentials and future development costs. additionally, these procedures included evaluating whether the assumptions applied to the aforementioned data were reasonable considering the past performance of the company.impairment assessment of certain proved oil and natural gas properties as described in notes 1 and 18 to the consolidated financial statements, the property and equipment, net balance was $5.2 billion as of december 31, 2020, and impairment expense for the year ended december 31, 2020 was $8.5 billion, both of which substantially related to proved oil and natural gas properties. when circumstances indicate that the carrying value of proved oil and natural gas properties may not be recoverable, management compares unamortized capitalized costs to the expected undiscounted pre-tax future cash flows for the associated assets grouped at the lowest level for which identifiable cash flows are independent of cash flows of other assets. if the expected undiscounted pre-tax future cash flows are lower than the unamortized capitalized costs, the capitalized costs are reduced to fair value. fair value is generally estimated using an income approach. the expected future cash flows used for impairment assessment and related fair value measurements are typically based on judgmental assessments of future production volumes, commodity prices, operating costs, weighted average cost of capital and capital investment plans, considering all available information at the date of assessment. the principal considerations for our determination that performing procedures relating to the impairment assessment of certain proved oil and natural gas properties is a critical audit matter are (i) the significant judgment by management, including the use of specialists, when developing the fair value measurement of proved oil and natural gas properties; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to future production volumes, commodity prices, and operating costs, as well as the weighted average cost of capital; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 67table 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 certain controls relating to management’s proved oil and natural gas properties impairment assessment. these procedures also included, among others (i) testing management’s process for developing the fair value measurement of proved oil and natural gas properties; (ii) evaluating the appropriateness of the income approach model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of significant assumptions used by management related to future production volumes, commodity prices, and operating costs, as well as the weighted average cost of capital. evaluating the reasonableness of management’s assumptions related to future commodity prices involved comparing the prices against observable market data and evaluating differentials through inspection of the underlying contracts. evaluating future operating costs involved evaluating the reasonableness of the assumptions as compared to the past performance of the company. professionals with specialized skill and knowledge were used to assist in the evaluation of the company’s income approach model and weighted average cost of capital. the work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the proved oil and natural gas reserve volumes as stated in the critical audit matter titled “the impact of proved oil and natural gas reserves on proved oil and natural gas properties, net” and the reasonableness of the future production volumes. as a basis for using this work, the specialists’ qualifications were understood and, the company’s relationship with the specialists was assessed. the procedures performed also included evaluation of the methods and assumptions used by the specialists, tests of the data used by the specialists and an evaluation of the specialists’ findings. /s/ pricewaterhouse coopers llp oklahoma city, oklahoma march 1, 2021we have served as the company’s auditor since 1992.

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 notes 2 and 8 to the consolidated financial statements, the company’s consolidated goodwill balance was $2.2 billion as of december 31, 2019. goodwill is tested for impairment by management at the reporting unit level annually in the fourth quarter, or when events or changes in circumstances indicate that goodwill might be impaired. management tests for impairment by comparing the fair value of each reporting unit to its carrying value. the fair value of each reporting unit is based equally on market multiples and the present value of discounted future cash flows. the cash flow model utilized by management in the goodwill impairment test involves significant judgments related to future growth rates and discount rates, among other considerations from the vantage point of a market participant. the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are there was significant judgment by management when developing the fair value measurement of the reporting units. this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating audit evidence relating to management’s cash flow projections, including significant assumptions for the future growth rates and the discount rates. in addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained.addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. these procedures included testing the effectiveness of controls relating to management’s 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. this included evaluating the appropriateness of the discounted cash flow model, testing the completeness, accuracy, and relevance of underlying data used in the model, and evaluating the significant assumptions used by management, including the future growth rates and the discount rates. evaluating management’s assumptions related to future growth rates 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 the 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 appropriateness of the company’s discounted cash flow model and reasonableness of certain significant assumptions used by management, including the discount rates.valuation allowance assessment of deferred tax assets as described in notes 2 and 11 to the consolidated financial statements, the company has recorded $138.4 million of deferred tax assets as of december 31, 2019, net of valuation allowance of $219.6 million. the company recognizes deferred tax assets and liabilities based on the differences between the financial statement basis and the tax basis of assets, liabilities, net operating losses and tax carryforwards. a valuation allowance is required to be recognized to reduce the recorded deferred tax asset to the amount that will more likely than not be realized. the ultimate realization of deferred tax assets is dependent upon the generation of future taxable income by jurisdiction during the periods in which those temporary differences become deductible or when carryforwards can be utilized. management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment. the principal considerations for our determination that performing procedures relating to the valuation allowance assessment of deferred tax assets is a critical audit matter are there was significant judgment by management in determining the realizability of deferred tax assets by jurisdiction, particularly as it relates to estimates of projected future taxable income, expected utilization of net operating losses, and tax carryforwards. this in turn led to a high degree of auditor judgment, subjectivity, and f-2effort in performing procedures and in evaluating audit evidence relating to management’s assessment of the realizability of deferred tax assets and assumptions relating to projected future taxable income, expected utilization of net operating losses, and tax carryforwards. 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 deferred tax assets, including controls over the determination of future taxable income by jurisdiction, expected utilization of net operating losses, and tax carryforwards. these procedures also included, among others, testing the completeness and accuracy of underlying data used by management, and evaluating management’s assessment of the realizability of deferred tax assets by jurisdiction. this included evaluating the reasonableness of management’s assumptions related to projected future taxable income, expected utilization of net operating losses, and tax carryforwards. evaluating management’s assumptions related to projected future taxable income, expected utilization of net operating losses, and tax carryforwards involved evaluating whether the assumptions used by management were reasonable considering the current and past performance of the respective entity and whether the assumptions were consistent with evidence obtained in other areas of the audit./s/ pricewaterhouse coopers llp new york, new york february 28, 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 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 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 realizability of deferred tax assets description of the matter as disclosed in note 2 to the consolidated financial statements, the company records a valuation allowance based on the assessment of the realizability of the company’s deferred tax assets. for the year ended june 30, 2021, the company had deferred tax assets before valuation allowances of $4.1 billion as disclosed in note 16.61 auditing management’s assessment of recoverability of deferred tax assets involved subjective estimation and complex auditor judgment in determining whether sufficient future taxable income will be generated to support the realization of the existing deferred tax assets.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the risks of material misstatement relating to the realizability of deferred tax assets, including controls over management’s estimates of future taxable income.among other audit procedures performed, we evaluated the significant assumptions used by the company to develop estimated future taxable income and tested the completeness and accuracy of the underlying data. for example, we evaluated management’s estimates of future taxable income by performing a look-back analysis of management’s historical estimates compared to actual results as well as compared management’s estimates to current industry and economic trends. we also performed a sensitivity analysis of future taxable income to evaluate the recoverability of deferred tax assets resulting from changes in assumptions. program rights amortization – national sports programming description of the matter as disclosed in note 2 to the consolidated financial statements, the company has programming rights, including single and multi-year contracts for broadcast rights of sports events. the costs of multi-year sports contracts at the company are primarily amortized based on the ratio of each current period’s attributable revenue for each contract to the estimated total remaining attributable revenue for each contract. auditing the amortization of the company’s national sports programming involved subjective estimation and complex auditor judgment because the analysis that the company relies upon to determine the amortization of this programming is based on estimates of future revenues from the programming. differing estimates of future revenues could materially affect the timing of sports programming amortization.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that address the risks of material misstatement relating to the amortization of the company’s national sports programming, including controls over management’s review of the analysis and the significant assumptions used to develop the estimated future revenues. we also tested management’s controls to validate that the data used in the analysis was complete and accurate.among other audit procedures performed, we evaluated the significant assumptions used by the company to develop the estimated future revenues and tested the completeness and accuracy of the underlying data used in the analysis. for example, we evaluated management’s forecasts of estimated future revenues by performing a look-back analysis of management’s historical estimates compared to actual results. we also performed a sensitivity analysis of the estimated future revenues to evaluate the change in the amortization of the company’s national sports programming resulting from changes in the assumptions. /s/ ernst & young llp we have served as the company’s auditor since 2018.

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.convertible senior notes and capped call transactions — refer to notes 2 and 10 to the financial statements critical audit matter description in september 2021, the company issued an aggregate of $750 million in principal amount of its 1.25% convertible senior notes due 2026 (the “notes”), which, upon conversion, permit the company to pay or deliver cash, shares of its common stock, or a combination of cash and shares of common stock at the company’s election. in connection with the offering of the notes, the company entered into separate capped call transactions (the “capped call transactions”), to reduce potential dilution to the company’s common stock or offset any cash payments the company may make in excess of the principal amount upon conversion of the notes. 79table of contents auditing the company’s accounting for the notes and capped call transactions was complex due to the significant accounting judgments made by management in determining the balance sheet classification of the capped call transactions, the identification of the features within the notes that may require bifurcation, and the identification of whether any derivatives that required separate accounting under applicable accounting guidance were present in the notes and capped call transactions. significant audit effort by specialized and experienced individuals was required given the complexity of the accounting guidance. how the critical audit matter was addressed in the audit our audit procedures related to accounting for the convertible senior notes and capped call transactions included the following, among others: •we read the underlying agreements and evaluated the company’s accounting analysis of the initial accounting of the notes and capped call transactions, including the determination of the balance sheet classification, identification of the features requiring bifurcation and separate accounting, and identification of any derivatives included in the arrangements.•with the assistance of professionals in our firm having expertise in convertible notes, capped call transactions, and accounting standards codification (“asc”) 815, derivatives and hedging, we evaluated the company’s conclusions regarding the accounting guidance and treatment of the notes and capped call transactions. /s/ deloitte & touche llp los angeles, california march 1, 2022we 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 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 - europe reporting unit - refer to note 8 to the company’s financial statements for the year ended december 31, 2019.critical audit matter description the company has performed its annual goodwill impairment test as of april 1, 2019. the company’s evaluation of goodwill for impairment involves the comparison of the estimated fair value of each reporting unit to its carrying value. the company performed its valuation analysis, using both income and market-based approaches, to determine the fair value of its europe reporting unit. the determination of the fair value requires management to make significant estimates and assumptions that affect the reporting unit’s expected future cash flows. these estimates and assumptions, utilizing level 3 inputs, primarily include, but are not limited to, market multiples, control premiums, the discount rate, terminal growth rates, operating income before depreciation and amortization, and capital expenditures forecasts. the goodwill balance was $9.59 billion as of december 31, 2019, of which $4.55 billion was allocated to the europe reporting unit. the fair value of the europe reporting unit exceeded its carrying value by approximately $900.0 million, or 7%, as of the measurement date and, therefore, no impairment was recognized. 73table of contents given that the europe reporting unit’s revenues are sensitive to changes in consumer demand, the approval of new product launches, the expansion of existing products into new jurisdictions (which have differentiated distribution and commercialization models throughout the region), and the impact of business development activity, auditing management’s judgments regarding forecasts of future revenues, and the selection of the discount rate and terminal growth rate 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 forecasts of future revenues (“forecasts”), and the selection of the discount rate and terminal growth rate for the europe reporting unit included the following, among others: •we tested the effectiveness of controls over the review of the goodwill impairment test, including those over the development of the business forecasts of future revenues and the selection of the discount rate and terminal growth rate. •we evaluated management’s ability to accurately forecast future revenues of the europe reporting unit by comparing actual results to management’s historical forecasts.•we evaluated the reasonableness of management’s revenue forecasts by comparing the projections to (1) historical results, (2) internal communications to management and the board of directors and (3) forecasted information included in company press releases. we also considered third party reports related to macroeconomic and industry trends, and met with various regional commercial and operations leaders to assess key inputs in the forecast assumptions.•with the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, discount rate, and terminal growth rate, including (1) testing the source information underlying the determination of the discount rate and terminal growth rate and the mathematical accuracy of the calculations, (2) developing a range of independent estimates and comparing those to the discount rate selected by management, and (3) considering third party macroeconomic reports.•we evaluated the impact of changes in management’s forecasts from the april 1, 2019 annual measurement date to december 31, 2019.net revenue provisions - chargebacks accrual at mylan pharmaceuticals inc. (“mpi”) - refer to note 3 in the company’s form 10-k for the year ended december 31, 2019.critical audit matter description the company has agreements with certain indirect customers, such as independent pharmacies, retail pharmacy chains, managed care organizations, hospitals, nursing homes, governmental agencies and pharmacy benefit managers, which establish contract prices for certain products. the indirect customers then independently select a wholesaler from which to purchase the products at these contracted prices. alternatively, certain wholesalers may enter into agreements with indirect customers that establish contract pricing for certain products, which the wholesalers provide. under either arrangement, mylan will provide credit to the wholesaler for any difference between the contracted price with the indirect party and the wholesaler’s invoice price. such credits are called chargebacks. the provision for chargebacks is the most significant and complex provision in the context of the company’s gross-to-net adjustments in the determination of net revenue. the chargeback accrual recorded at mpi represents the majority of the global chargeback reserve as of december 31, 2019. the company's recorded estimate is based on expected sell-through levels by the company’s wholesaler customers to indirect customers, as well as estimated wholesaler inventory levels. estimating the amounts to be accrued for chargebacks requires significant estimation as management’s model utilizes historical buying patterns, estimated end-user demand, estimated inventory levels in the distribution channel, contracted sales terms with customers, as well as other competitive factors. given the volume of chargebacks and the level of estimation uncertainty involved, auditing management’s judgments involved 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 the net revenue provisions - chargebacks accrual included the following, among others: •we evaluated the company’s methodology and assumptions in developing their chargeback accruals, including assessing the completeness and accuracy of the underlying data used by management in their estimates. •we tested the effectiveness of controls over the calculation of the chargebacks reserves.•we compared prior period chargebacks accruals to chargeback credits subsequently issued to evaluate management’s 74table of contentsability to accurately forecast chargeback activity. •we developed independent expectations of product-level chargeback accruals and chargeback accruals in the aggregate using the following; 1) customer contracts, 2) historical sales and chargeback activity, 3) third-party channel inventory for select wholesalers, and 4) credits subsequently issued to period end and compared those to the recorded amounts.net revenue provisions - sales returns accrual at mylan pharmaceuticals inc. (“mpi”) - refer to note 3 to the company’s financial statements for the year ended december 31, 2019.critical audit matter description the company provides customers with the ability to return product, which varies country by country in accordance with local practices, generally within a specified period prior (six months) and subsequent (twelve months) to the expiration date. the company’s estimate of the provision for returns is generally based upon historical experience with actual returns. the returns reserve at mpi represents the majority of the global sales returns reserve as of december 31, 2019.estimating the amounts to be accrued for returns requires significant estimation as management’s model utilizes historical experience with actual returns and considers levels of inventory in the distribution channel, product dating and expiration period, size and maturity of the market prior to a product launch, entrance into the market of additional competitors, and changes in the regulatory environment. given the volume of sales returns and the level of estimation uncertainty involved, auditing management’s judgments 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 the net revenue provisions - sales returns accrual included the following, among others: •we evaluated the company’s methodology and assumptions in developing their sales returns accrual model, including assessing the completeness and accuracy of the underlying data used by management in their estimates.•we tested the effectiveness of controls over the calculation of the sales returns reserve at mpi.•we compared prior period sales returns accruals to returns credits subsequently issued to evaluate management’s ability to accurately forecast sales returns activity.•we developed independent expectations of product-level sales returns accruals and sales returns accruals in the aggregate using the following: 1) historical sales and returns activity, 2) remaining shelf life information, 3) finished goods inventory on-hand at the end of the period, and 4) adjustments for known or anticipated sales return activity based on market dynamics (market prior to mylan launch, impact of competition, and overall regulatory environment) and compared those to the recorded amounts./s/ deloitte & touche llp pittsburgh, pennsylvania february 27, 2020we have served as the company's auditor since 1976.

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. 66report of independent registered public accounting firm international business machines corporation and subsidiary companies acquisition of red hat, inc.–valuation of intangible assets acquired as described in note e to the consolidated financial statements, the company completed its acquisition of red hat, inc. for total consideration of $35.1 billion during 2019, resulting in approximately $13.5 billion in intangible assets and $23.1 billion in goodwill being recorded. the intangible assets were comprised of client relationships of $7.2 billion, completed technology of $4.6 billion, and trademarks of $1.7 billion. management applied judgment in estimating the fair value of the intangible assets using a discounted cash flow model, which involved the use of significant estimates and assumptions with respect to revenue growth rates, the customer attrition rate, and discount rates.the principal considerations for our determination that performing procedures relating to the valuation of intangible assets acquired in connection with the acquisition of red hat, inc. 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 amount of judgment by management when developing the estimate; (ii) significant audit effort was required in evaluating the significant assumptions relating to the estimate, such as revenue growth rates, the customer attrition rate, and discount rates; and (iii) 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 valuation of intangible assets acquired and controls over the development of the assumptions, including the revenue growth rates, the customer attrition rate, and discount rates. these procedures also included, among others, reading the purchase agreements, and testing management’s process for estimating the fair value of intangible assets, using professionals with specialized skill and knowledge to assist in doing so. testing management’s process included evaluating the appropriateness of the discounted cash flow models, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of significant assumptions, including revenue growth rates, the customer attrition rate, and discount rates. when assessing the assumptions related to revenue growth rates and the customer attrition rate, we evaluated whether the assumptions used were reasonable considering the past performance of the acquiree as well as industry data. 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 company’s discounted cash flow models.income taxes–uncertain tax positions as described in notes a and g to the consolidated financial statements, the company is subject to income taxes in the united states and numerous foreign jurisdictions. as disclosed by management, during the ordinary course of business there are many transactions and calculations for which the ultimate tax determination is uncertain. as a result, the company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. as further described by management, these tax liabilities are recognized when, despite management’s belief that the tax return positions are supportable, management believes that certain positions may not be fully sustained upon review by tax authorities. management bases its assessment of the accruals for tax liabilities on many factors, including past experience and interpretations of tax law. this assessment relies on estimates and assumptions, and may involve a series of complex judgments about future events. as of december 31, 2019, unrecognized tax benefits were $7.1 billion.the principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are there was significant judgment by management when estimating the tax liabilities for uncertain tax positions, including applying complex tax laws, and a high degree of estimation uncertainty based on potential for significant adjustments as a result of audits by tax authorities or other forms of tax settlement. this in turn led to a high degree of auditor judgment, effort, and subjectivity in performing procedures to evaluate the timely identification and measurement of uncertain tax positions. also, the evaluation of audit evidence available to support the tax liabilities for uncertain tax positions is complex and required significant auditor judgment as the nature of the evidence is often inherently subjective, and the audit effort involved the use of professionals with specialized skill and knowledge to assist in 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 identification and recognition of the liability for uncertain tax positions, and controls addressing completeness of the uncertain tax positions, as well as controls over measurement of the liability. these procedures also included, among others, (i) testing the information used in the calculation of the liability for uncertain tax positions, including intercompany agreements, international, federal, and state filing positions, and the related final tax returns; (ii) testing the calculation of the liability for uncertain tax positions by jurisdiction, including management’s assessment of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained; (iii) testing the completeness of management’s assessment of both the identification of uncertain tax positions and possible outcomes of each uncertain tax position; and (iv) evaluating the status and results of income tax audits pending in various tax jurisdictions. professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the company’s uncertain tax positions, including evaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized. /s/ pricewaterhouse coopers llp pricewaterhouse coopers llp new york, new york february 25, 2020 we, or firms that we have ultimately acquired, have served as the company’s auditor since 1923.

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 - estimated costs at completion as described in note 19 to the consolidated financial statements, $2,851 million of the company’s total revenues for the year ended december 31, 2020 was generated from the sale of equipment contracts. sale of equipment contracts are generally comprised of a single performance obligation. revenue from sale of equipment is generally recognized over time as the company has an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use. for contracts recognized over time, revenue is recognized primarily using a cost incurred input method. costs incurred to date relative to total estimated costs at completion are used to measure progress toward satisfying performance obligations. costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer. the principal considerations for our determination that performing procedures relating to revenue recognition - estimated costs at completion is a critical audit matter are (i) the significant judgment by management when developing the estimated costs at completion for the sale of equipment contracts; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the estimated costs at completion and management’s significant assumptions related to the total estimated material and labor costs; 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 revenue recognition process, including controls over developing the estimated costs at completion for the sale of equipment contracts. these procedures also included, among others, evaluating and testing management’s process for developing the estimated costs at completion for the sale of equipment contracts, which included evaluating the reasonableness of management’s significant assumptions related to the total estimated material and labor costs. evaluating the reasonableness of management’s significant assumptions involved evaluating management’s ability to reasonably estimate costs at completion for the sale of equipment contracts on a sample basis by (i) performing a comparison of the originally estimated and actual costs incurred on similar completed equipment contracts, and (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated costs at completion, including actual costs in excess of estimates. professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of management’s estimates and significant assumptions related to the total estimated material and labor costs. /s/ pricewaterhouse coopers llp stamford, connecticut march 1, 2021we have served as the company’s or its predecessor’s auditor since 1992.

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 separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.goodwill valuation – global industrial motors & commercial air moving reporting units – refer to notes 3 and 5 to the financial statements critical audit matter description the company performed an impairment evaluation of the goodwill for the global industrial motors and commercial air moving reporting units by comparing the estimated fair value of each of these reporting units to its carrying value. in order to estimate the fair value of these reporting units, management is required to make significant estimates and assumptions related to discount rates and forecasts of future revenues and earnings before interest taxes depreciation & amortization (“ebitda”) margins. changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. the goodwill balance was $1,518 million as of january 2, 2021, of which $114.9 million and $43.8 49million related to the global industrial motors and commercial air moving reporting units, respectively. as of october 31, 2020, the company’s measurement date, the company determined that the carrying value for the global industrial motors reporting unit was in excess of fair value and recorded a $10.5 million goodwill impairment. the fair value of the commercial air moving reporting unit exceeded its carrying value and therefore no impairment was recognized. we identified the impairment evaluation of goodwill for the global industrial motors and commercial air moving reporting units as a critical audit matter because of the inherent subjectivity involved in management’s estimates and assumptions related to discount rates 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 rates and forecast of future revenues and ebitda margins required a high degree of auditor judgement 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 discount rates and forecasts of future revenues and ebitda margins for the global industrial motors and commercial air moving reporting units 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 rates 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 certain of its peer companies. •we evaluated the impact of changes in management’s forecasts from the october 31, 2020, annual measurement date to january 2, 2021.•with the assistance of our fair value specialists, we evaluated the reasonableness of the discount rates by:◦tested the source information underlying management’s determination of the discount rates.◦tested the mathematical accuracy of management’s calculations.◦developed a range of independent estimates and compared those to the discount rates selected by management./s/ deloitte & touche llp milwaukee, wisconsin march 2, 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 a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.assessment of the estimated proved oil and gas reserves on the determination of depreciation, depletion, and amortization expense related to proved oil and natural gas properties and impairment of proved oil and natural gas properties2the company’s net proved oil and natural gas properties balance was $1,235.1 million as of december 31, 2021, and the associated depreciation, depletion, and amortization (dd&a) expense for the year ended december 31, 2021 was $105.7 million. the company recorded no impairment expense for the year ended december 31, 2021. as described in note 7 to the consolidated financial statements, the company follows the successful efforts method of accounting for its oil and natural gas properties. the company’s lease acquisition costs and development costs of proved oil and natural gas properties are amortized using the units-of-production method, at the field level, based on total estimated proved oil and natural gas reserves and estimated proved developed oil and natural gas reserves, respectively. proved oil and natural gas properties are reviewed for impairment on a periodic basis. if impairment is indicated, the impairment charge reduces the carrying values to their estimated fair values. these fair value measurements are classified as level 3 measurements and include many unobservable inputs. fair value is calculated as the estimated discounted future net cash flows attributable to the assets. the company’s primary assumptions in preparing the estimated discounted future net cash flows to be recovered from oil and natural gas properties are based on (i) proved reserves, (ii) forward commodity prices and assumptions as to costs and expenses, and (iii) the estimated discount rate that would be used by potential purchasers to determine the fair value of the assets.the principal considerations for our determination that performing procedures relating to the impact of proved oil and natural gas reserves on proved net oil and natural gas properties is a critical audit matter are there was (i) significant judgment by management, including the use of specialists, when developing the fair value measurement of proved oil and natural gas reserves; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to developing those estimates, including future production amounts and costs, oil and natural gas prices, future pricing differentials, and future development costs including the company’s ability to convert proved undeveloped reserves to producing properties within five years of their initial proved booking as well as the weighted average cost of capital; 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. the procedures we performed to address this critical audit matter included:(i)testing the operating effectiveness of internal controls relating to management’s estimates of proved oil and natural gas reserves, the calculation of dd&a expense, and the impairment assessment of proved oil and natural gas properties; (ii)evaluating the significant assumptions used by management in developing these estimates, including future production, future and historical oil and gas prices, pricing differentials, and future development costs; (iii)evaluating management’s development plan for compliance with the sec rule that undrilled locations are scheduled to be drilled within five years, unless specific circumstances justify a longer time, by assessing consistency of the development projections with the company’s drill plan and the availability of capital relative to the drill plan; (iv)utilizing the work of management’s specialists to evaluate the reasonableness of the estimates of proved oil and natural gas reserves. as a basis for this work, the specialists’ qualifications and objectivity were assessed, as well as the reasonableness of methods and assumptions used by the specialists. the procedures performed also included testing the data used by the specialists and evaluating the specialists’ findings. evaluating the significant assumptions relating to the estimates of proved oil and natural gas reserves also involved obtaining evidence to support whether the assumptions used were consistent with the past performance of the company and whether they were consistent with evidence obtained in other areas of the audit; (v)testing management’s impairment assessment of proved oil and natural gas properties, including evaluating management’s cash flow analysis related to the proved oil and natural gas properties. in addition, we involved internal valuation professionals with specialized skills and knowledge, who assisted in evaluating the discount rate used in the valuation by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities;(vi)testing the inputs of and recalculating management’s dd&a calculation.3acquisition of independence resources holdings, llc and independence resources manager, llc (collectively “irm”) - valuation of proved natural gas and oil properties as described in note 3 to the consolidated financial statements, $224.1 million was allocated to proved oil and natural gas properties related to the purchase price of irm on january 7, 2021. as disclosed by management, the company accounts for business combinations under the acquisition method of accounting. accordingly, the company recognizes amounts for identifiable assets acquired and liabilities assumed equal to their estimated acquisition date fair values. the fair value estimate of proved oil and natural gas properties as of an acquisition date was based on estimated proved oil and natural gas reserves and related future net cash flows discounted using a weighted average cost of capital, including estimates and assumptions of future commodity prices and costs, the timing of development activities, projections of oil and natural gas reserves, and estimates to abandon and reclaim producing wells. as disclosed by management, the accuracy of the reserve estimates is a function of the quality of data available and of engineering and geological interpretation and judgment. in addition, estimates of reserves may be revised based on actual production, results of subsequent exploration and development activities, recent commodity prices, operating costs, and other factors. the estimates of oil and natural gas reserves have been developed by specialists, specifically petroleum engineers. the principal considerations for our determination that performing procedures relating to the allocation and valuation of proved oil and natural gas properties acquired in the irm acquisition is a critical audit matter are the (i) significant judgment by management, including the use of management’s specialists, when developing the fair value measurement of proved natural gas and oil properties; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to future production volumes and commodity prices, as well as the weighted average cost of capital; 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. the primary procedures we performed to address this critical audit matter included:(i)testing the operating effectiveness of internal controls relating to the valuation of the acquired proved natural gas and oil properties;(ii)testing management’s process for developing the fair value measurement of proved natural gas and oil properties; (iii)evaluating the appropriateness of the discounted cash flow model, which included testing the completeness and accuracy of underlying data used in the model and evaluating significant assumptions used by management related to future production volumes and commodity prices, as well as the weighted average cost of capital. the evaluation of management’s assumption related to future commodity prices involved comparing the prices against observable market data. professionals with specialized skill and knowledge were used to assist in the evaluation of the weighted average cost of capital assumption and the appropriateness of the discounted cash flow model. (iv)evaluating the professional qualifications and objectivity of the company’s engineer primarily responsible for overseeing the preparation of the reserve estimates by the internal engineering staff./s/moss adams llp houston, texas march 9, 2022we 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 trustee and that (i) relates to accounts or disclosures that are material to the 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 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 proved oil and natural gas reserves on net investment in royalty interests as described in note 2 to the financial statements, the trust’s investment in royalty interests is amortized as a single cost center on a units-of-production basis over total proved reserves. such amortization does not reduce 44distributable income, but rather it is charged directly to the trust corpus. revisions to estimated future units-of-production are treated on a prospective basis beginning on the date such revisions are known. on a quarterly basis, the trust evaluates the carrying value of the investment in royalty interests under the full cost accounting method. this quarterly review is referred to as a ceiling test. under the ceiling test, the carrying value of the investment in royalty interests may not exceed an amount equal to the sum of the present value (using a 10% discount rate) of the estimated future net revenues from proved reserves. the trust’s net investment in royalty interests balance was $11.4 million as of december 31, 2020, and amortization of investment in royalty interests for the year ended december 31, 2020 was $2.3 million. during the year ended december 31, 2020 the trust recognized impairments of $6.5 million of the royalty interests. as disclosed by management, proved reserve quantities attributable to the royalty interests are calculated by multiplying the gross reserves for each property attributable to the operator's interest by the net revenue interest assigned to the trust in each property. management applies significant judgment in developing the estimates of proved reserve volumes including estimates of oil and natural gas reserves and their values, future production rates, future development costs and commodity pricing differentials. the estimates of proved oil and natural gas reserves have been developed by specialists, specifically petroleum engineers. the principal considerations for our determination that performing procedures relating to the impact of proved oil and natural gas reserves on the net investment in royalty interests is a critical audit matter are (i) the significant judgment by management, including the use of specialists, when developing the estimates of proved oil and natural gas reserves, which in turn led to (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating the audit evidence related to the data, methods, and assumptions used by management and its specialists in developing the estimates of proved oil and natural gas reserves volumes and the assumptions applied to the data used in the ceiling test related to the commodity pricing differentials and future development costs. addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. the work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the proved oil and natural gas reserve volumes. as a basis for using this work, the specialists’ qualifications were understood and the trust’s relationship with the specialists was assessed. the procedures performed also included evaluation of the methods and assumptions used by the specialists, tests of the data used by the specialists, and an evaluation of the specialists’ findings. these procedures also included, among others, testing the completeness and accuracy of the commodity pricing differentials and future development costs data used in the ceiling test. additionally, these procedures included evaluating whether the assumptions applied to the aforementioned data were reasonable considering the past performance of the trust. /s/ pricewaterhouse coopers llp oklahoma city, oklahoma march 19, 2021 we have served as the trust’s auditor since 2011.

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.revenue contracts with multiple performance obligations as described in note 1 to the company’s consolidated financial statements, certain of the company’s revenue contracts contain multiple performance obligations primarily relating to the sale of hosted subscription and professional services. for these revenue contracts, the company accounts for the individual performance obligations separately if they are distinct. the transaction price is allocated to the performance obligations based on their relative standalone selling prices. the company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the cloud applications sold, and the number and types of users within its contracts.68we identified revenue recognition related to contracts that contain multiple performance obligations as a critical audit matter. the determination of whether multiple services within a contract are distinct performance obligations that should be accounted for separately and the estimates of the standalone selling price for each distinct performance obligation require management to exercise significant judgment that includes a high degree of subjectivity. auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters. the primary procedures we performed to address this critical audit matter included:•testing the design and operating effectiveness of certain controls relating to management’s determination of standalone selling prices for each of the performance obligations. •evaluating management’s technical accounting positions and assessing the reasonableness of management’s judgments and assumptions in the determination of whether the products and services are distinct performance obligations and the determination of the standalone selling prices for each of the performance obligations.•testing the reasonableness of the identification of distinct performance obligations and determination of the standalone selling prices through review of a sample of revenue contracts and other relevant supporting details and testing the completeness and accuracy of the underlying supporting details.convertible notes as described in note 7 to the consolidated financial statements, the company issued $230.0 million aggregate principal amount of 0.75% convertible senior notes (the “notes”) in a private placement in 2019. in accounting for the issuance of the notes, the company separated the notes into liability and equity components. the carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. the carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the notes. we identified the accounting evaluation, including the related fair value determinations, of the notes as a critical audit matter. the principal considerations for our determination were: (i) the evaluation of the potential derivatives that needed to be bifurcated, and (ii) considerations related to determination of the fair value of the notes and the conversion option including complex valuation models and assumptions utilized by management. auditing these elements involved especially challenging 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:•utilizing personnel with specialized knowledge and skill in technical accounting to assist in: (i) evaluating the relevant terms and conditions of the notes’ agreements, and (ii) assessing the appropriateness of conclusions reached by the company with respect to the accounting for the notes and identification, assessment and accounting for potential derivatives. •utilizing personnel with specialized knowledge and skill in valuation to assist in assessing the appropriateness of the complex valuation models utilized by management to determine the fair value of the notes and assessing complex assumptions incorporated into the valuation models./s/ bdo 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.revenue - on-site industrial gas customer contracts - refer to notes 1 and 3 to the financial statements critical audit matter description on-site industrial gas customer contracts involve large capital investments to construct facilities and serve customers who require large volumes of gases and have relatively constant demand. the company builds, owns and operates facilities on or near the customer’s facilities to produce and supply the customer with gases under a long-term arrangement. typically, these contracts have 15 to 20-year terms and contain fixed monthly charges and/or minimum purchase requirements. revenue associated with these contracts is generally recognized over time during the period in which the company delivers or makes available the agreed upon quantity of gases. in addition, certain on-site industrial gas contracts contain complex terms and provisions such as tolling arrangements, minimum payment requirements, variable components, and pricing provisions that are specific to a customer arrangement, which may require greater judgment in determining when contractual requirements have been met impacting the timing and amount of revenue to be recorded. we identified revenue recognition for certain on-site industrial gas customer contracts with complex terms and provisions as a critical audit matter because of the judgments necessary for management to assess complex contract terms and provisions in order to determine the amount and timing of revenue recognition. this required a high degree of auditor judgment when performing procedures to audit management’s determination of the amount and timing of revenue recognition and evaluating the results of those procedures. how the critical audit matter was addressed in the audit our audit procedures related to revenue recognition for certain on-site industrial gas customer contracts with complex terms and provisions included the following procedures, among others: •we tested the effectiveness of the company’s controls related to the amount and timing of revenue recognition, including controls over identifying and assessing complex contract terms and provisions in certain on-site industrial gas customer contracts.•we evaluated the terms included within customer contracts to assess the accounting for provisions such as tolling arrangements, minimum payment requirements, pricing provisions, and variable components that require management to apply judgment in determining revenue recognition associated with the contract. •we tested the probability of collection of variable components, including penalties, which impacts the amount of revenue to which the company is entitled.•we considered subsequent events, write-offs of customer receivables, collectability, and other factors that would impact the amount and timing of revenue recognition. /s/ deloitte & touche llp philadelphia, pennsylvania november 26, 2019we 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 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. current expected credit losses (“cecl”) allowance—estimation of economic conditions—refer to notes 2 and 4 to the financial statements critical audit matter description the company estimates its cecl allowance primarily using the weighted average remaining maturity (“warm”) method, which has been identified as an acceptable approach for computing current expected credit losses. in determining the cecl allowance, the company considers various factors including (i) historical loss experience in the commercial real estate lending market, (ii) timing of expected repayments and satisfactions, (iii) expected future funding, (iv) capital subordinate to the company when they are the senior lender, (v) capital senior to the company when they are the subordinate lender, and (vi) the company’s current and future view of the macroeconomic environment. management’s estimation of the current and future economic conditions that may impact the performance of the commercial real estate assets securing the company’s assets include the unemployment rate, commercial real estate prices, and market liquidity. the company uses projections, obtained from third-party service providers, of each factor to approximate the impact the macroeconomic outlook may have on the loss rate. we identified the macroeconomic factors within the cecl allowance as a critical audit matter because of the subjectivity, complexity and estimation uncertainty in determining the impact of the factors on the company’s loss rate. this required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate whether the macroeconomic factors determined by management reasonably and appropriately quantify the current and future macroeconomic risks associated with the company’s portfolio. how the critical audit matter was addressed in the audit our audit procedures to assess the macroeconomic factors applied by management to the cecl allowance to account for current and future economic conditions included, among others:•we tested the operating effectiveness of controls over management's review of the cecl allowance, including management's judgments involved in the determination of the macroeconomic factors applied to the loss rate. •we evaluated the reasonableness of the methodology and significant assumptions used to develop the macroeconomic factors by considering relevant industry trends and economic conditions, including whether the methodology and significant assumptions were appropriate and consistent with what market participants would use. •we tested the accuracy and completeness of quantitative data used by management to estimate the current and future view of macroeconomic conditions. cecl allowance—estimation of fair value of underlying collateral of loans exhibiting signs of financial difficulty — refer to notes 2 and 4 to the financial statements critical audit matter description the company evaluates commercial mortgage loans, subordinate loans and other lending assets typically collateralized by commercial real estate on a quarterly basis. for loans where the company deems the borrower or sponsor to be experiencing financial difficulty, the company has elected to apply a practical expedient in accordance with the cecl standard. in accordance with the practical expedient approach, the loan loss provision is calculated as the difference between the fair value of the underlying collateral and the carrying value of the loan prior to the loan loss provision. significant judgments are required in determining the loan loss provision, including assumptions regarding the value of the underlying collateral and other 59estimates. we identified the estimation of the fair value of the underlying collateral of loans as a critical audit matter because of the significant estimates and assumptions required by management to evaluate the company’s fair value analysis. this required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimate of the provision for loan loss.how the critical audit matter was addressed in the audit our audit procedures related to the determination of the fair value for those assets in which the borrower or sponsor exhibit signs of financial difficulty as part of estimation of the cecl allowance included the following, among others: •we tested the operating effectiveness of controls over management’s review of the fair value analysis including controls over management’s review of the selection of the discount rate and the inputs used within the fair value analysis. these inputs include, but are not limited to, debt service coverage ratio, occupancy, capitalization rate, and microeconomic and macroeconomic conditions that could impact the property. •we evaluated the company’s determination of fair value by performing the following:–with the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology; (2) significant assumptions made, including whether the significant inputs used in the model were appropriate and consistent with what market participants would use to value the collateral; and (3) mathematical accuracy of the overall valuation model –we tested the underlying data used to develop the fair value to determine that the information used in the analysis was accurate and complete–we performed a sensitivity analysis when deemed necessary based on results of other audit procedures performed for comparison to the company’s fair value analysis–we considered whether events or transactions that occurred after the balance sheet date but before the completion of the audit affect the conclusions reached on the fair value measures and disclosures/s/ deloitte & touche llp new york, new york february 10, 2021we have served as the company's auditor since 2009.

critical audit matter 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 account or disclosure to which they relates.139table of contents valuation of reserves for property and casualty loss and loss settlement expenses description of the matter at december 31, 2020, the company’s reserves for losses and loss settlement expenses was $1.6 billion, of which $260.4 million related to incurred but not reported (ibnr) reserves. as described in note 5 to the consolidated financial statements, liabilities for losses and loss settlement expenses reflect management's best estimates at a given point in time of what is expected to be paid for claims that have been reported and those that have been incurred but not reported, based on known facts, circumstances, and historical trends. there is significant uncertainty and subjectivity inherent in determining management’s best estimates of the ultimate cost of losses, which is used to determine ibnr reserves.auditing management’s estimate of ibnr reserves was complex due to the highly judgmental nature of management’s selection of methods and assumptions used to develop those estimates. in particular, the estimates are sensitive to assumptions and the weighting of methodologies that are used to project the ultimate cost of losses. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the reserving process, including, among others, the review and approval processes that management has in place for the methods and assumptions used in estimating the reserves and the reasonableness of the actuarially determined reserves.to test the estimated ibnr reserves we, including our actuarial specialists, performed audit procedures that included, among others, evaluating management’s selection and weighting of actuarial methods and assumptions by comparing to those used in prior periods and those used in the industry. we compared management’s best estimate of reserves to our independently calculated range of reasonable reserve estimates and assessed the development of prior year reserves. we also evaluated the results of the reserve analysis prepared by management’s independent third-party actuary for comparison to management’s best estimate.140table of contents goodwill - quantitative impairment assessment description of the matter as described in note 15 to the consolidated financial statements, the company performed a quantitative impairment analysis on its one reporting unit and recognized an impairment charge of $15.1 million for the year ended december 31, 2020. management tests goodwill for impairment annually, during the third quarter, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. the company used a weighting of the income and market approaches to determine the fair value of the 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 the reporting unit. in particular, the fair value estimate was sensitive to significant assumptions, such as forecasted revenues and loss and loss settlement expenses, discount rate, and terminal growth rate which are used in the income approach and comparable publicly traded companies and estimated valuation multiples which are used in the market approach. how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the quantitative goodwill impairment analysis, including, among others, the controls over management's review of the valuation model and the significant assumptions used.to test the estimated fair value of the reporting unit, we, with the support of our valuation specialists, performed audit procedures that included, among others, assessing methodologies, the weighting of those methodologies, and testing the significant assumptions discussed above. we tested the significant assumptions by comparing them to current and forecasted industry and economic trends, historical results, analyst reports, forecasted peer company information obtained from publicly available sources and developing an independent range of estimates and comparing that to the calculations performed by management. we also evaluated management’s selection of market multiples by comparing them to publicly available data on comparable public companies. /s/ ernst & young llp ernst & young llp 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 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.deferred tax assets and amounts payable under the tax receivable agreement as described in notes 2 and 15 to the consolidated financial statements, the company has recorded a deferred tax asset (“dta”) balance of $15.9 million as of december 31, 2020 while the amount payable to selling unit holders under the tax receivable agreement (“tra”) was $19.0 million. dt as are recognized by management for the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax basis of assets. as disclosed by management, in connection with the company’s initial public offering ("ipo"), the tra was entered into between manning & napier and the holders of manning & napier group, pursuant to which manning & napier is required to pay to such holders 85% of the applicable cash savings, if any, in u.s. federal, state, local and foreign income tax that manning & napier actually realizes, or is f-2deemed to realize in certain circumstances, as a result of (i) certain tax attributes of their units sold to manning & napier or exchanged (for shares of class a common stock) and that are created as a result of the sales or exchanges and payments under the tra and (ii) tax benefits related to imputed interest. under the tra, manning & napier generally will retain the benefit of the remaining 15% of the applicable tax savings. there is a possibility that not all of the 85% of the applicable cash savings will be paid to the selling or exchanging holder of class a units. if it is determined that all or a portion of such applicable tax savings is in doubt, payment to such holders of class a units will be the amount attributable to the portion of the applicable tax savings that are determined not to be in doubt and the payment of the remainder at such time as it is reasonably determined that the actual tax savings or that the amount is no longer in doubt. management anticipates that payments will be made annually commencing from the date of each event that gives rise to the tra benefits. as disclosed by management, the increase in tax basis, which results in a dta, as well as the actual amount and timing of any payments may vary from this estimate due to a number of factors, including the timing of exchanges by unit holders of manning & napier group, the price of class a common stock at the time of such purchases or exchanges, the portion of payments under the tra constituting imputed interest and whether the purchases or exchanges result in depreciable or amortizable basis, a material change in the relevant tax law or the company’s ability to generate future taxable income and the tax rate applicable at that time. the determination of the increase in tax basis requires management to make judgments in forecasting future taxable income to support the management’s determination that the dta is realizable.the principal considerations for our determination that performing procedures relating to the deferred tax assets and amounts payable under the tra is a critical audit matter are the significant judgment by management to determine the impact of the change in tax basis, resulting from the sales or exchanges by unit holders of manning & napier group, on the dta and amounts payable under the tra, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence related to future forecasted taxable income and management’s determination that the dta is realizable.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, testing management’s process for determining the dt as and amounts payable under the tra, including (i) recalculating components of the dta computation related to imputed interest and depreciable basis or amortizable basis, (ii) testing the completeness and accuracy of associated payments made under the tra as tax benefits and the applicable tax rate at which they were recognized, as well as factors impacting the applicable tax rate such as legislative changes, (iii) evaluating future forecasted taxable income and management's determination that the dta is realizable, (iv) testing the impact of sales or exchanges by the unit holders of manning & napier group and associated factors such as the price of the class a common stock at the time of such sales or exchanges, and (v) testing the impact of sales or exchanges of class a units on the deferred tax asset and amounts payable under tax receivable agreements./s/ pricewaterhouse coopers llp rochester, new york march 17, 2021we have served as the company’s auditor since 2007,

critical audit matters the critical audit matter communicatedbelow is a matter 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 matter below,providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. fair value of investments as discussed in note 5 to the financialstatements, the company measures substantially all of its investments at fair value using unobservable inputs and assumptions asthere is no readily available market value. as of december 31, 2020, total investments at fair value were $21,567,023. we identified the evaluation of the fairvalue of investments as a critical audit matter. assessment of the company’s judgments regarding the use of specific valuationtechniques, inputs and assumptions involved a high degree of subjective auditor judgment. changes in these techniques, inputs andassumptions could have a significant impact on the fair value of investments. in particular, the company uses both market and incomeapproaches to value certain equity and debt investments. additionally, the company makes judgments relating to credit risk andmarket yields used in yield analyses, guideline company market multiples and financial performance measures used in determiningenterprise values, and discount rates used in discounted cash flow analyses for certain equity, debt and other interest-bearinginvestments. addressingthe matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financialstatements. these procedures included, among others, either (i) testing management’s process for determining the fair valueestimate, which included evaluating the appropriateness of the market approach or income approach; testing the completeness, accuracy,and relevance of the underlying data used in the technique; and evaluating the significant unobservable inputs and assumptionsused by management, including the selected valuation multiples and discount rates or market yields, by considering the consistencyand reasonableness of the unobservable inputs relative to the performance of the subject company or assets, and the external marketand industry data and evidence obtained in other areas of the audit; or (ii) the involvement of professionals with specializedskill and knowledge to assist in developing an independent fair value estimate range for certain level 3 debt and equity investments,and comparison of management’s estimate to the independently developed range of fair value estimates. developing the independentrange involved selection of independent significant unobservable inputs for the market multiples, discount rates or market yield,in order to evaluate the reasonableness of management’s fair value estimate of these certain level 3 investments, using arange of available market information. we have served as the company's auditorsince 2015.

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 the 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 separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.f-2table of contents fair value of stock options – refer to note 4 to the consolidated financial statements critical audit matter description:the company uses the black-scholes option-pricing model to estimate the fair value of its stock options. the black-scholes option-pricing model involves the use of significant estimates, including the following:●expected dividend yield;●risk-free interest rate;●expected share price volatility; and●expected life of the award.given the significant estimates involved in estimating the fair value of stock options, the related audit effort in evaluating management’s estimates in determining the fair value of stock options was extensive and required a high degree of auditor judgment.how the critical audit matter was addressed in the audit:we obtained an understanding over the company’s process to estimate the fair value of stock options, including how the company develops each of the estimates required to utilize the black-scholes option-pricing model. we applied the following audit procedures related to testing the company’s estimates utilized in the black-scholes option-pricing model:●we performed a look-back at the company’s previously issued dividends, noting there were none. we inquired with management of the company who informed us that no future dividends were currently anticipated.●we compared the company’s risk-free interest rate used to the comparable united states treasury yield for a term comparable to the stock options’ expected term.●we recalculated the company’s historical share price volatility for a term comparable to the stock options’ expected term.●we recalculated the expected term of stock options granted to employees and non-employee directors using the simplified method, whereby, the expected term equals the average of the vesting term and the original contractual term of the option. /s/ haskell & white llp haskell & white llp we have served as the company’s auditor since 2017.

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 44communication 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 and deferred revenue – full tuition grant program—refer to notes 2 and 5 to the financial statements critical audit matter description prior to the sale of ashford on december 1, 2020, a portion of the company’s revenue was generated from students enrolled under the corporate full tuition grant (“ftg”) program. students enrolled under the ftg program were eligible to take up to ten undergraduate or eight graduate courses per 12-month grant period, but first utilized 100% of the funds awarded under their employer’s annual tuition assistance program before they could be awarded the ftg. the full tuition grants awarded under the ftg program were considered a material right, and, as such, the company recorded deferred revenue for a portion of the consideration received under these contracts. such deferred revenue was recognized as revenue at the earlier of satisfaction of the future obligation, when the student dropped from the university or contract termination. the company used certain key assumptions to calculate revenue and deferred revenue under the ftg program including the average number of courses students were expected to take over the 12-month grant period, the average number of replacement courses students received for failed courses, and the estimate for revenues other than tuition and technology fees (collectively, the “key assumptions”). for the year ended december 31, 2020, the company’s net revenue was $397.1 million, of which $50.8 million related to the ftg program.given the complexity of the company’s calculation of deferred revenue under the ftg program and the significance of the key assumptions, auditing revenue and deferred revenue attributable to the ftg program required both extensive audit effort and a high degree of auditor judgment, including the need to involve professionals in our firm having expertise in data analytics.how the critical audit matter was addressed in the audit our audit procedures related to auditing revenue and deferred revenue attributable to the ftg program included the following:•we tested the operating effectiveness of internal controls over the company’s process, including those over the key assumptions used in the calculation.•we selected sample student contracts for testing and performed the following procedures:- agreed the student’s contract terms and the student’s transactional activities to underlying supporting documents.- calculated the full tuition grant, accounts receivable, deferred revenue and student deposits for each selection and then compared with management’s calculation.•with the assistance of data analytics specialists, we tested the mathematical accuracy of management’s calculations. •we evaluated the appropriateness and consistency of the key assumptions used by management, by comparing them to actual historical data, reading documentation from quarterly operations meetings, inquiring of operations personnel, reading ftg agreements for changes in key terms, and evaluating any contradictory evidence identified.•we obtained and read meeting minutes for all audit committee meetings and disclosure committee meetings to identify any significant events discussed that would impact the assumptions used by management. /s/ deloitte & touche llp phoenix, arizona february 24, 2021we have served as the company’s auditor since 2016.

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. 49 table of contents allowance for credit losses - loans description of the matter as more fully described in notes 1 and 5 to the financial statements, the allowance for credit losses – loans (acl) is an estimate of lifetime expected credit losses for loans. the estimate of acl considers historic credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. loans that do not share risk characteristics are evaluated on an individual basis. loans evaluated individually are not included in the collective evaluation. the company measures expected credit losses of loans on a pool basis when the loans share similar characteristics. historical loss rates are analyzed and applied to their respective loan segments comprised of loans not subject to individual evaluation. the company utilizes a methodology known as vintage loss analysis for substantially all of its loan portfolio. vintage loss analysis measures impairment based on the age of the accounts and the historical asset performance of assets with similar risk characteristics. vintage loss analysis accounts for expected losses by calculating the cumulative loss rates of a given loan pool over the expected pool’s life. historical loss rates are adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition, as well as for certain known model limitations. forecast factors are developed based on information obtained from external sources, as well as consideration of other internal information, and are included in the acl model for a reasonable and supportable forecast period, with loss factors reverting back to historic loss rates. management continually re-evaluates the other subjective and forecast factors included in its acl analysis. we identified the valuation of the acl as a critical audit matter. the primary reason for our determination that the acl is a critical audit matter is that auditing the estimated acl involved significant judgment and complex review. auditing the acl involved a high degree of subjectivity in evaluating management’s estimates, such as segmentation, weighted average life calculations, assessment of economic conditions, and other environmental factors and assessment of forecast factors.how we addressed the matter in our audit we obtained an understanding of the company’s process for establishing the acl, which involves a high degree of subjectivity. we evaluated management's process to assess economic conditions and other environmental factors, adequacy of specific allowances associated with individually evaluated loans, and appropriateness of loan grades and other data used to calculate and estimate the various components of the acl.our primary audit procedures related to the acl included the following, among others:•testing the design and operating effectiveness of controls, including those related to technology, over the acl, including data completeness and accuracy; classifications of loans by loan pool; verification of historical net loss data and calculated net loss rates; the establishment of qualitative and economic forecast adjustments, loan grades, and risk classification of loans; and establishment of specific allowances associated with individually evaluated loans;•testing of completeness and accuracy of the data utilized in the acl;•testing the model's computational accuracy; •evaluating the relevance and reliability of data and assumptions used in the estimate;•evaluating the qualitative and economic forecast adjustments to the historical loss rates, including assessing the basis for the adjustments and the reasonableness of the significant assumptions;•testing the internal loan review function and evaluating the reasonableness of loan grades and specific allocations, if any;•assessing the reasonableness of specific allocations associated with individually evaluated loans. we have served as the company's auditor since 2013.

critical audit matters the critical audit mattercommunicated 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 arematerial 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, andwe 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 the joint venture as described in note 16to the financial statements, the company entered into a joint venture with tri arm therapeutics, ltd., to launch eden bio cell, ltd., to lead clinical development and commercialization of certain sleeping beauty-generated car-t therapies. the companycontributed certain intellectual property in exchange f-1 table of contentsfor 10,000,000 ordinary shares of eden bio cell. as a result of the design and purpose of eden bio cell, management applied significant judgment in determining that eden bio cell was considered avariable interest entity, or vie. they , and concluded the equity interest in eden bio cell would be accounted for under the equity method of accounting as the company was not the primary beneficiary of the vie as it did not have the power to directthe activities of the vie that most significantly impact its performance. the company determined that the contribution of certain intellectual property should be accounted for as a transfer on nonfinancial assets recognized at fair value. managementdetermined the intellectual property had a de minimis fair value as a result of the early stage of the technology and the likelihood of clinical success. we identified the company’s accounting for the joint venture as a critical audit matter because auditing management’s judgment around the properaccounting for the transaction required significant audit effort and a high degree of auditor judgment. our audit procedures related to the company’s accounting for the joint venture included the following, among others: • we obtained and read the joint venture agreement, gained an understanding of the purpose and nature of the jointventure and the rights and control provided under the agreement, and evaluated management’s documentation. • we obtained an understanding of the relevant internal controls related to the accounting for the joint ventureand tested such internal controls for design and operating effectiveness, including management review controls related to the proper application of the accounting guidance. • we evaluated the company’s application of relevant accounting guidance and the consistency ofmanagement’s methods and assumptions used in determining whether eden bio cell is an equity method investment and whether the company has control over the joint venture and the fair value determination for the equity method investment. we have served as the company’s auditor since 2010.

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.sales revenue (amounts deferred for lifetime warranty) – refer to note 2 to the financial statements critical audit matter description the company offers a lifetime warranty for direct-to-consumer sales of its oxygen concentrators. for a fixed price, the company agrees to provide a fully functional oxygen concentrator for the remaining life of the patient. lifetime warranties are only offered to patients upon the initial sale of oxygen concentrators directly from the company and are non-transferable. lifetime warranties are considered to be a distinct performance obligation that are accounted for separately from its sale of oxygen concentrators with a standard warranty of three years.the revenue is allocated to the distinct lifetime warranty performance obligation based on a relative stand-alone selling price (ssp) method. the company has vendor-specific objective evidence of the selling price for its equipment. to determine the selling price of the lifetime warranty, the company uses its best estimate of the ssp for the distinct performance obligation as the lifetime warranty is neither separately priced nor is the selling price available through third-party evidence. to estimate the selling price associated with the lifetime warranties, management considers the profit margins of service revenue, the average estimated cost of lifetime warranties and the price of extended warranties. revenue from the distinct lifetime warranty is deferred after the delivery of the equipment and recognized based on an estimated mortality rate over five years, which is the estimated performance period of the contract based on the average patient life expectancy. total deferred revenue related to the lifetime warranty performance obligation totaled $18.0 million at december 31, 2021. f-2 determining the estimated ssp requires significant judgment by management, which is informed by considering company specific and external data. the service period used to amortize the deferred revenue also requires significant management judgment as the company has limited historical experience and the determination of patient life expectancy is subjective in nature. given the lack of stand-alone transactions together with the limited amount of historical data available for such offering, performing audit procedures to evaluate the estimated ssp and the service period for lifetime warranty required 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 judgments regarding the stand-alone selling price and deferred revenue service period included the following, among others: •we tested the effectiveness of controls over deferred revenue for the lifetime warranty, including controls over the underlying data utilized and the selection of the stand-alone selling price and the deferred revenue service period. •we evaluated the methodology used by management to develop the stand-alone selling price and independently estimated the stand-alone selling price selected by management. in performing these procedures, we compared the stand-alone selling price selected by management to the independent estimate, which utilized external evidence of similar term extended warranties for oxygen concentrators and the company’s profit margins. •we evaluated the reasonableness of the deferred revenue service period by comparing to patient average life expectancy in medical and other industry publications. we further evaluated the realization of deferred revenue by evaluating the appropriateness of the underlying mortality data. /s/ deloitte & touche llp los angeles, california february 24, 2022 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.goodwill impairment tests - crude gathering and eastern gathering and processing reporting units as described in notes 1 and 14 to the consolidated financial statements, the company’s consolidated goodwill balance was $7,657 million as of december 31, 2020, which includes goodwill associated with the crude gathering reporting unit of $1.1 billion. as disclosed by management, the company recorded an impairment charge of $1,814 million in the first quarter of 2020 related to the eastern gathering and processing reporting unit, which brought the amount of goodwill recorded within this reporting unit to zero. management annually evaluates goodwill for impairment as of november 30, as well as whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit with goodwill is less than its carrying amount. during the first quarter of 2020, management performed an interim impairment assessment as a result of the overall deterioration in the economy and the environment in which mplx and its customers operate, as well as a sustained decrease in the mplx unit price. the fair value of each reporting unit is determined based on applying both a discounted cash flow method, or income approach, as well as a market approach. the significant assumptions that were used to develop the estimates of the fair values under the discounted cash flow method included management’s best estimates of the discount rate, as well as estimates of future cash flows, which are impacted primarily by producer customers’ development plans, which impact future volumes and capital requirements.the principal considerations for our determination that performing procedures relating to the goodwill impairment tests of the company’s crude gathering and eastern gathering and processing reporting units is a critical audit matter are the significant judgment by management when estimating the fair value of the reporting units, which led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to future volumes.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 tests, including controls over the estimation of the fair value of the crude gathering and eastern gathering and processing reporting units. these procedures also included, among others, testing management’s process for developing the fair value estimates; evaluating the appropriateness of the income and market approaches used; testing the completeness and accuracy of underlying data used by management in the approaches; and evaluating the reasonableness of the significant assumption related to future volumes. professionals with specialized skill and knowledge were utilized to assist in evaluating the appropriateness of the company’s income and market approaches. evaluating the assumption related to future volumes involved (i) considering whether the assumption used was reasonable considering past performance of each reporting unit, producer customers’ historical and future production volumes, and industry outlook reports, and (ii) considering whether the assumption was consistent with evidence obtained in other areas of the audit. equity method investment impairment test - mark west utica emg, l.l.c.as described in notes 1 and 5 to the consolidated financial statements, the company’s consolidated equity method investment balance was $4,036 million as of december 31, 2020, which included a balance of $698 million related to mark west utica emg, l.l.c. during the first quarter of 2020, the company recorded an impairment charge of $1,251 million related to mark west utica emg, l.l.c. as disclosed by 99table of contentsmanagement, equity method investments are assessed for impairment whenever factors indicate an other than temporary loss in value. the overall deterioration in the economy and the environment in which mplx and its customers operate were considered triggering events, and management performed an impairment test in the first quarter of 2020, in which there was a reduction in forecasted volumes processed by the systems operated by mark west utica emg, l.l.c. the fair value of the investment is determined using a discounted cash flow method, an income approach. significant assumptions used to estimate the fair value include management’s best estimates of the expected future cash flows, including prices and volumes, the weighted average cost of capital and the long-term growth rate.the principal considerations for our determination that performing procedures relating to the impairment test of the company’s equity method investment in mark west utica emg, l.l.c. is a critical audit matter are the significant judgment by management when estimating the fair value of the investment, which led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to future volumes.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 equity method investment impairment test, including controls over the estimation of the fair value of the investment in mark west utica emg, l.l.c. these procedures also included, among others, testing management’s process for developing the fair value estimate; evaluating the appropriateness of the discounted cash flow method; testing the completeness and accuracy of underlying data used by management in the method; and evaluating the reasonableness of the significant assumption related to future volumes. evaluating the assumption related to future volumes involved (i) considering whether the assumption used was reasonable considering past performance of mark west utica emg, l.l.c., producer customers’ historical and future production volumes, and industry outlook reports, and (ii) considering whether the assumption was consistent with evidence obtained in other areas of the audit. /s/ pricewaterhouse coopers llp toledo, ohio february 26, 2021we have served as the company’s auditor since 2012.

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 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 these critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. -67-realizability of deferred tax assets as described in note 13 to the consolidated financial statements, the company has recorded $66.6 million in gross deferred tax assets as of december 31, 2020 and recorded a valuation allowance of $32.0 million. management applies significant judgment in assessing the projections of future taxable income in the determination of the amount of deferred tax assets that are more-likely-than-not to be realized in the future. in assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.we identified assessing the realizability of deferred tax assets as a critical audit matter. the principal consideration for our determination is the significant judgment required by management in formulating the forecast of taxable income over the net operating loss expiration periods, to determine the amount of deferred tax assets that were more-likely-than-not to be realized in the future. auditing these forecasts involved especially challenging auditor judgment, including the need for specialized knowledge and skill in assessing these elements.the primary procedures we performed to address this critical audit matter included:•evaluating the positive and negative evidence in assessing whether the deferred tax assets are more-likely-than-not to be utilized, including evaluating the trends of historical financial results, projected sources of taxable income in future periods, and market information, such as interest yield curves. •assessing the reasonableness of management’s historical ability to make forecasts of future taxable income, by performing a retrospective review of the prior year’s estimates.•utilizing personnel with specialized knowledge and skill in tax to evaluate the forecasts of future income and tax implications. valuation of investments in mortgage-backed securities as described in notes 1 and 15 to the consolidated financial statements, the company accounts for its mortgage-backed securities at fair value, which totaled $65.2 million at december 31, 2020.  the fair value of mortgage-backed securities is based on independent pricing sources and/or third-party broker quotes, when available. because the price estimates may vary, management must make certain judgments and assumptions about the appropriate price to use to calculate the fair values based on various techniques including observing the most recent market for like or identical assets (including security coupon rate, maturity, yield, prepayment speed), market credit spreads, and model driven approaches.   we identified the valuation of mortgage-backed securities as a critical audit matter.  the principal considerations for our determination are: (i) the potential for bias in how management subjectively selects the price from multiple pricing sources to determine the fair value of the mortgage-backed securities and (ii) the audit effort involved, including the use of valuation professionals with specialized skill and knowledge.      the primary procedures we performed to address this critical audit matter included:   •evaluating the design and implementation of controls relating to the valuation of mortgaged-backed securities, including controls over management’s process to select the price from multiple pricing sources. •reviewing the range of values used for each investment position, and assessing the price selected for potential management bias by comparing the price to the high, low and average of the range of pricing sources. •testing the reasonableness of fair values determined by management by comparing the fair value of certain securities to recent transactions, if applicable. -68-•utilizing personnel with specialized knowledge and skill in valuation to develop an independent estimate of the fair value of each investment position by considering the stated security coupon rate, yield, maturity, and prepayment speeds, and comparing to the fair value used by management. /s/ bdo usa, llp certified public accountants we have 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 were communicated or required to be communicated to the audit committee of the board of directors and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved 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 separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. 18table of contents assessment of reserves for slow-moving or potential obsolescence as discussed in note 1 and 2 to the consolidated financial statements, the company assesses the valuation of its inventories, which principally consists of products held for resale, each reporting period. slow-moving inventory or inventory with potential obsolescence is written down to its estimated net realizable value if less than cost. estimates of slow-moving or potential obsolescence include the company’s analysis of anticipated demand, possible alternative uses of its inventory, as well as other qualitative factors. as of december 31, 2021, the company’s inventories totaled $5,261,000, net of reserves for slow-moving or potential obsolescence of $4,892,000. we identified the assessment of the value of the reserves for slow-moving or potential obsolescence as a critical audit matter. subjective auditor judgment was required to evaluate the company’s estimates of anticipated demand and possible alternative uses of its inventory, which are affected by market and economic conditions outside the company’s control. the primary procedures we performed to address the critical audit matter included, among other things, the following: 1) evaluation of the completeness, accuracy, and relevance of underlying data used in the estimate of the reserve; 2) development of an independent estimate of the reserve using historical information and compared it to management’s reserve; and 3) comparison of the reserve as of december 31, 2021 to the actual reserve recorded subsequent to the measurement date. 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 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.revenue recognition description of the matter as described in note 8 to the consolidated financial statements, the company recognizes revenue when a customer obtains control of promised services, in an amount that reflects the consideration the company expects to be entitled to receive in exchange for those services. contracts with customers may include multiple services, modules, brands, and/or geographies. the company evaluates such contracts to determine whether the services to be provided are distinct and accordingly accounted for as separate performance obligations. if a contract has multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price method.the audit effort in evaluating the company's accounting for revenue recognition was extensive and required auditor judgment for certain customer contracts to evaluate the terms and conditions and to identify distinct performance obligations.56table of contents how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the company's revenue recognition process, including management’s review of terms and conditions and identification of distinct performance obligations in customer contracts.to test the company's accounting for revenue recognition, our audit procedures included, among others, selecting a sample of revenue transactions covering each of the significant service offerings for which we evaluated the terms and conditions and reperformed management’s assessment of distinct performance obligations within the arrangement, as well as tested the application of the revenue recognition accounting requirements, including reperforming calculations of revenue recognized to test the mathematical accuracy and the underlying data used in the calculations. we also assessed the appropriateness of the related disclosures in the consolidated financial statements.accounting for acquisitions description of the matter as disclosed in note 4 to the consolidated financial statements, the company completed its acquisition of blueboard sas ("blue board") for a cash purchase price of $9.0 million. the transaction was accounted for as a business combination. auditing the company's accounting for its acquisition of blue board was complex due to the estimation utilized in the company's determination of the fair value of the contingent consideration and acquired developed technology of $1.5 million and $3.3 million, respectively. the significant estimation was primarily due to the complexity of the valuation models used by management to measure the fair value of the contingent consideration and acquired developed technology and the sensitivity of the respective fair values to the significant underlying assumptions. the company utilized black scholes models to measure the fair value of the contingent consideration and the significant assumptions used in the models were forecasted revenues, among other assumptions. the company used an income approach (discounted cash flow model) to measure the fair value of the acquired developed technology and the significant assumptions used in the model were the discount rate as well as the significant assumptions that form the basis of the forecasted results (e.g., forecasted revenue, ebitda and the obsolescence rate of the technology). the assumptions utilized in the models are forward looking and could be affected by future economic and market conditions.how we addressed the matter in our audit we obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the company's accounting for acquisitions including management’s review of the valuation models and underlying assumptions used to develop the estimated fair values of the contingent consideration and acquired developed technology.to test the estimated fair values of the contingent consideration and acquired developed technology, we performed audit procedures that included, among others, evaluating the methodologies and significant assumptions used in the models, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. for example, we evaluated significant forecast assumptions used in the models considering historical results as well as third-party industry projections for the e-commerce industry. we involved our valuation specialists to assist with our evaluation of the methodologies and significant assumptions used as well as to independently calculate fair value estimates for contingent consideration and acquired developed technology to compare to the company's recorded amounts./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.goodwill impairment assessment – one reporting unit where the excess of fair value over carrying value was approximately 13% at the assessment date as described in notes 3 and 10 to the consolidated financial statements, the company’s total goodwill balance was $10.1 billion as of december 31, 2020 and the goodwill associated with one reporting unit where the excess of fair value over carrying value was approximately 13% at the assessment date was $917 million. goodwill is tested annually for impairment as of july 1, or when a triggering event occurs that indicates the fair value of the reporting unit may have decreased below the 52table of contents carrying value. if the carrying value of the reporting unit exceeds its estimated fair value, management records an impairment based on the difference between fair value and carrying value, not to exceed the total amount of goodwill allocated to the reporting unit. management utilizes the discounted cash flow method under the income approach to estimate the fair value of the reporting units. the significant assumptions related to projected net sales, projected operating margins, working capital, capital expenditures, income tax rate, long-term growth rate and the discount rate.the principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the one reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement of the reporting unit, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected net sales, projected operating margins, long-term growth rate and the discount 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, among others (i) testing management’s process for developing the fair value measurement of the reporting unit; (ii) evaluating the appropriateness of the discounted cash flow method, (iii) testing the completeness and accuracy of underlying data used in the method, and (iv) evaluating the reasonableness of the significant assumptions used by management related to projected net sales, projected operating margins, long-term growth rate and the discount rate. evaluating management’s assumptions related to projected net sales and projected operating margins 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 management’s discounted cash flow method and management’s significant assumptions related to the long-term growth rate and the discount rate./s/ pricewaterhouse coopers llp hallandale beach, florida february 9, 2021we have served as the company's auditor since 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.goodwill impairment assessment as described in notes 1 and 5 to the consolidated financial statements, the company’s consolidated goodwill balance was $545.2 million as of december 31, 2021. management tests goodwill for impairment on an annual basis during the fourth quarter and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. fair value of the reporting units is determined by management using a discounted cash flow model. management’s cash flow projections included significant judgments and assumptions relating to expected revenue and terminal growth rates, ebitda margins, and the cost 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 developing the fair value estimate of the reporting units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to expected revenue and terminal growth rates, ebitda margins, and the cost of capital; 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 goodwill impairment assessment, including controls over the valuation of the company’s reporting units. 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 and accuracy of underlying data used in the model; and (iv) evaluating the significant assumptions used by management related to expected revenue and terminal growth rates, ebitda margins, and the cost of capital. evaluating management’s assumptions related to expected revenue and terminal growth rates and ebitda margins 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 model and the cost of capital assumption./s/ pricewaterhouse coopers llp charlotte, north carolina february 22, 2022we have served as the company’s auditor since 2000.

critical audit matters in the auditor’s report on consolidated financial statements. we may take advantage of these provisions until the last day of the fiscal year ending after the fifth anniversary of our initial public offering or such earlier time that we no longer qualify as an emerging growth company. we will cease to qualify as an emerging growth company on the date that is the earliest of: (i) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (ii) the last day of the fiscal year in which we have more than $1.07 billion in total annual gross revenues; (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the sec, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior june 30th and we have been a public company for at least 12 months and have filed one annual report on form 10-k; or (iv) the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period. we may choose to take advantage of some but not all of these reduced reporting burdens. we have taken advantage of certain reduced reporting requirements in this this annual report. accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests. we are also a “smaller reporting company.” if we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited consolidated financial statements in our annual report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. 143 item 7a. quantitative and qualitative disclosures about market risk. interest rate risk our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of u.s. interest rates, particularly because our cash equivalents are in the form of money market funds that are invested in u.s. treasury securities. interest income is sensitive to changes in the general level of interest rates. however, due to the short-term maturities of our cash equivalents, we believe a hypothetical 100 basis point increase or decrease in interest rates during any of the periods presented would not have had a material impact on our financial statements included elsewhere in this annual report on form 10-k (“annual report”). as of december 31, 2020, we had no debt outstanding and are therefore were not exposed to related interest rate risk. foreign currency exchange risk all of our employees and our operations are currently located in the united states and our expenses are generally denominated in u.s. dollars. we therefore are not currently exposed to significant market risk related to changes in foreign currency exchange rates. however, we have contracted with and may continue to contract with non-u.s. vendors who we may pay in local currency. our operations may be subject to fluctuations in foreign currency exchange rates in the future. to date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not had a formal hedging program with respect to foreign currency. we believe a hypothetical 100 basis point increase or decrease in exchange rates during any of the periods presented would not have a material effect on our financial statements included elsewhere in this annual report. effects of inflation inflation generally affects us by increasing our cost of labor and clinical trial costs. we believe that inflation has not had a material effect on our financial statements included elsewhere in this annual report. 144item 8. financial statements and supplementary data. the financial statements required to be filed pursuant to this item 8 are appended to this annual report on form 10-k. an index of those financial statements is found in item 15, exhibits and financial statement schedules, of this annual report on form 10-k. item 9. changes in and disagreements with accountants on accounting and financial disclosure. none. item 9a. controls and procedures. evaluation of disclosure controls and procedures our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of december 31, 2020. the term “disclosure controls and procedures,” as defined in rules 13a-15(e) and 15d-15(e) under the securities exchange act of 1934 (the “exchange act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the exchange act is recorded, processed, summarized and reported, within the time periods specified in the securities and exchange commission’s rules and forms. disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the exchange act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. based on the evaluation of our disclosure controls and procedures as of december 31, 2020, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. management’s report on internal control over financial reporting this annual report on form 10-k does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the sec for newly public companies. changes in internal control over financial reporting. there were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. item 9b. other information. none. 145part iii item 10. directors, executive officers and corporate governance. the following table provides information regarding our current executive officers, other key employees and directors, including their ages as of march 17, 2021: name age position(s) executive officers robert ang, m.b.b.s., m.b.a. 46 president, chief executive officer and director tirtha chakraborty, ph.d. 48 chief scientific officer nathan jorgensen, ph.d., m.b.a. 44 chief financial officer sadik kassim, ph.d. 40 chief technology officer christopher slapak, m.d. 62 chief medical officer non-employee directors kush parmar, m.d., ph.d.(1) 40 chair of the board of directors daniella beckman(2)(3) 42 director david c. lubner(2) 56 director sven (bill) ante lundberg, m.d.(3) 57 director matthew patterson(1)(2) 49 director joshua resnick, m.d.(1)(3) 46 director (1)member of the nominating and corporate governance committee.(2)member of the audit committee. (3)member of the compensation committee. executive officers robert ang, m.b.b.s., m.b.a., has served as our chief executive officer and a member of our board of directors since august 2019. prior to that, dr. ang served as chief business officer at neon therapeutics inc., a biopharmaceutical company, from october 2015 until august 2019, and as senior vice president, business development at bavarian nordic a/s, an immuno-oncology and infectious disease vaccine company, from 2013 to 2015. dr. ang received an m.b.b.s. medical degree from the university of western australia and an m.b.a. from columbia university. we believe that dr. ang is qualified to serve on our board of directors due to his service as our president and chief executive officer and his experience in the field of medicine and clinical drug development. tirtha chakraborty, ph.d., has served as our chief scientific officer since november 2020 and previously as our vice president, head of research starting in october 2019. from october 2018 to october 2019, dr. chakraborty served as vice president of cell therapy research at sana biotechnology, inc., a biotechnology company. prior to that, dr. chakraborty served as an executive director and head of hematology at crispr therapeutics ag, a biotechnology company, from 2015 to october 2018. dr. chakraborty received a ph.d. from tata institute of fundamental research and completed his post-doctoral associateship at harvard medical school. nathan jorgensen, ph.d., m.b.a., has served as our chief financial officer since may 2020. from august 2016 to april 2020, dr. jorgensen led global healthcare investments for qatar investment authority, the sovereign wealth fund for the state of qatar. dr. jorgensen served as investment analyst at calamos investments, a global investment firm, from 2013 to august 2016. dr. jorgensen received a ph.d. from the university of minnesota and an m.b.a. from cornell university johnson graduate school of management. sadik kassim, ph.d., has served as our chief technology officer since september 2019. from january 2019 to september 2019, dr. kassim served as executive director, process design of kite pharma. dr. kassim served in roles of increasing responsibility at mustang bio from february 2017 to january 2019, including most recently as chief scientific officer. from 2014 to february 2017, dr. kassim served as head of early analytical 146development at novartis in its cell and gene therapies unit. dr. kassim received a b.s. in cell and molecular biology from tulane university and a ph.d. in microbiology and immunology from louisiana state university. dr. kassim completed a post-doctoral fellowship in the gene therapy program at the university of pennsylvania. christopher slapak, m.d., has served as our chief medical officer since july 2020 and previously served in a consulting role as our chief medical officer from july 2019 to july 2020. from january 2018 to july 2020, dr. slapak provided oncology consulting services to pharmaceutical companies, including takeda oncology and translational drug development, inc. from july 2018 to june 2019, dr. slapak served in a consulting role as chief medical officer for prelude therapeutics, inc., a precision oncology company. dr. slapak served in roles of increasing responsibility at eli lilly and company from 1996 to december 2017, including most recently as vice president, early phase development oncology. dr. slapak is also a clinical associate professor of medicine and clinical pharmacology at the indiana university school of medicine. dr. slapak received a b.s. in chemistry from the ohio state university and an m.d. from the university of chicago pritzker school of medicine. non-employee directors kush parmar, m.d., ph.d., has served as a member of our board of directors since february 2019, the chairman of our board of directors since january 2021 and served as our interim president and chief executive officer from february 2019 until august 2019. dr. parmar is currently a member of 5am venture management, llc, where he has worked since 2010, and is co-chief executive officer and member of the board of directors of 5:01 acquisition corp, positions he has held since its inception in august 2020. dr. parmar has served on the boards of directors of homology medicines, inc. and akouos, inc. since december 2015 and october 2017, respectively, and previously served on the board of directors of arvinas, inc. from 2013 to november 2019, audentes therapeutics, inc. (“audentes”) from 2013 to november 2018 and sc pharmaceuticals, inc. from march 2014 to july 2018. dr. parmar received an a.b. in molecular biology and medieval studies from princeton university, a ph.d. in experimental pathology from harvard university and an m.d. from harvard medical school. we believe that dr. parmar is qualified to serve on our board of directors due to his extensive experience in the venture capital industry, medical and scientific background and training, and service on the boards of other public and private biopharmaceutical and biotechnology companies. daniella beckman has served as a member of our board of directors since july 2020. since september 2019, she has served as the chief financial officer of tango therapeutics, a targeted oncology biotechnology company. from november 2015 to september 2019, she provided consulting services and served as the interim chief financial officer for several early-stage biotechnology companies. ms. beckman has served on the board of directors and is a member of the audit committee of translate bio, inc., a clinical-stage m rna therapeutics company, since october 2017, and on the board of directors of 5:01 acquisition corp, a special purpose acquisition company, since october 2020. ms. beckman received a b.s. in business administration-accounting from boston university. she is also a certified public accountant in massachusetts. we believe that ms. beckman is qualified to serve on our board of directors due to her financial expertise and her experience in public accounting in the life sciences industry. david c. lubner has served as a member of our board of directors since july 2020. from january 2016 to june 2020, mr. lubner served as the executive vice president and chief financial officer of ra pharmaceuticals, a biotechnology company acquired by ucb s.a. in april 2020. mr. lubner has served on the boards of directors of dyne therapeutics, inc., a biotechnology company, and therapeutics acquisition corp., a special purpose acquisition company, since march 2020 and july 2020, respectively, and previously served as a member of the board of directors of nightstar therapeutics plc, a gene therapy company, from july 2017 until it was acquired by biogen inc in june 2019. mr. lubner received a b.s. in business administration from northeastern university and an m.s. in taxation from bentley university. mr. lubner is also a member of the american institute of certified public accountants and is a certified public accountant in massachusetts. we believe mr. lubner is qualified to serve on our board of directors due to his financial and accounting experience and his service as a director and executive officer of other biotechnology companies. sven (bill) ante lundberg, m.d., has served as a member of our board of directors since march 2019. since december 2019, he has served as president, chief executive officer and principal financial officer, and executive 147director of merus n.v., a clinical-stage immune-oncology company. from 2015 to february 2018, dr. lundberg was chief scientific officer of crispr therapeutics ag, a biotechnology company. dr. lundberg received an m.d. from stanford university and an m.b.a. from the university of massachusetts. he completed post-doctoral training at the whitehead institute/mit and clinical training in medicine and medical oncology from harvard and the dana-farber cancer institute. we believe that dr. lundberg is qualified to serve on our board of directors due to his experience in the field of medicine and clinical drug development as well as his leadership and business experience. matthew patterson has served as a member of our board of directors since october 2020. mr. patterson is the co-founder of, and currently serves as a strategic advisor for audentes. from 2012 to january 2020, he served as chief executive officer of audentes until its acquisition by astellas pharma, inc. mr. patterson has served as a member of the board of directors of the alliance for regenerative medicine, an international advocacy organization representing the gene and cell therapy and broader regenerative medicine sector, since 2015, including as chair since january 2019. he has also served on the board of directors of homology medicines, inc., a gene therapy company, and 5:01 acquisition corp, a special purpose acquisition company, since january 2018 and october 2020, respectively, and as the executive chairman of the board of directors of remix therapeutics, inc., a private biotechnology company, since march 2021. mr. patterson received a b.a. in biochemistry from bowdoin college. we believe that mr. patterson is qualified to serve on our board of directors due to his expertise in the fields of business, biotechnology and drug development. joshua resnick, m.d., has served as a member of our board of directors since february 2019. dr. resnick currently serves as a managing director at ra capital management, a position he has held since october 2018. dr. resnick previously served as a partner at sv health investors from january 2016 to september 2018 and as president and managing partner at mrl ventures fund, an early-stage therapeutics-focused corporate venture fund that he built and managed within merck & co., from 2014 to january 2016. dr. resnick is on staff in the department of emergency medicine at massachusetts general hospital. dr. resnick served on the boards of directors of kalvista pharmaceuticals, inc. and avrobio, inc. from november 2016 to september 2018 and july 2016 to september 2018, respectively. dr. resnick received a b.a. in chemistry from williams college, an m.d. from the university of pennsylvania school of medicine and an m.b.a. from the wharton school of business. we believe that dr. resnick is qualified to serve on our board of directors due to his experience as a biopharmaceutical and biotechnology public and private company investor. family relationships there are no family relationships among any of our directors or executive officers. audit committee our audit committee consists of daniella beckman, david c. lubner and matthew patterson, with daniella beckman serving as chair of the audit committee. our board of directors has determined that each of these individuals meets the independence requirements of rule 10a-3 under the securities exchange act, as amended (the “exchange act”), and the nasdaq listing rules. each member of our audit committee can read and understand fundamental financial statements in accordance with nasdaq audit committee requirements. our board of directors has also determined that daniella beckman qualifies as an audit committee financial expert within the meaning of sec regulations and meets the financial sophistication requirements of the nasdaq listing rules. in arriving at these determinations, the board has examined each audit committee member’s scope of experience and the nature of their prior and/or current employment. the functions of our audit committee include, among other things: •helping our board of directors oversee our corporate accounting and financial reporting processes; •managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit our financial statements; 148 •discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results; •developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; •reviewing related person transactions; and •approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm. we believe that the composition and functioning of our audit committee will comply with all applicable sec and nasdaq rules and regulations. we intend to comply with future requirements to the extent they become applicable to us. delinquent section 16(a) reports section 16(a) of the exchange act requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file reports of holdings and transactions in our common stock and other securities of our company with the securities and exchange commission. our directors, executive officers and beneficial owners of more than 10% of our common stock did not become subject to such section 16(a) reporting requirements until february 4, 2021, after the completion of our fiscal year ended december 31, 2020. code of business conduct and ethics we have adopted a code of business conduct and ethics (the “code of conduct”) applicable to all of our employees, executive officers and directors. this includes our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. a copy of the code of conduct is available on our website at www.vorbio.com. we intend to post on our website all disclosures that are required by law or the listing standards of the nasdaq stock market concerning any amendments to, or waivers from, any provision of the code of conduct. stockholder communications with the board of directors our board of directors has adopted a formal process by which stockholders may communicate with the board or any of its directors. stockholders who wish to recommend individuals for consideration to become nominees for election to the board at an annual meeting of stockholders must do so by delivering a written recommendation to the nominating and corporate governance committee c/o vor biopharma inc., 100 cambridgepark dr., suite 400, cambridge, ma 02140, attn: corporate secretary. each submission must set forth: the name and address of the stockholder on whose behalf the submission is made; the number and class of our shares that are owned beneficially by such stockholder as of the date of the submission; the full name of the proposed candidate; a description of the proposed candidate’s business experience for at least the previous five years; complete biographical information for the proposed candidate; and a description of the proposed candidate’s qualifications as a director. any such submission must be accompanied by the written consent of the proposed candidate to be named as a nominee and to serve as a director if elected. all written submissions received from stockholders that include the information described above will be reviewed by the committee at its next appropriate meeting. item 11. executive compensation. our named executive officers for the year ended december 31, 2020 consist of our principal executive officer, robert ang, our president and chief executive officer, and our next two most highly compensated executive officers dr. tirtha chakraborty, our chief scientific officer, and dr. christopher slapak, our chief medical officer. 149 2020 summary compensation table the following table provides information regarding the compensation provided to our named executive officers for the year ended december 31, 2020. name and principal position year salary($) bonus($) option awards($)(1) non-equity incentive plan compensation($)(2) all other compensation($) total($) robert ang, m.b.b.s.(3) president and chief executive officer 2020 424,173 — 1,619,356 211,200 500,015(4) 2,754,744 tirtha chakraborty, ph.d. chief scientific officer 2020 298,439 47,600(5) 718,008 111,784 2,059(6) 1,177,890 christopher slapak, m.d. chief medical officer 2020 176,846(7) — 627,356 136,800 283,344(8) 1,224,346 (1)this column reflects the full grant date fair value of stock awards and option awards granted during the year measured pursuant to financial accounting standard board accounting standards codification topic 718 (“asc 718”), which is the basis for computing stock-based compensation in our financial statements. this calculation assumes that the named executive officer will perform the requisite service for the award to vest in full as required by sec rules. these amounts do not reflect the actual economic value that will be realized by the named executive officer upon vesting of the stock options, the exercise of the stock options or the sale of the common stock underlying such stock options. see note 9 to our consolidated financial statements appearing elsewhere in this annual report on form 10-k (“annual report”). (2)the amounts disclosed represent performance bonuses earned in 2020. (3)dr. ang is also a member of our board of directors but did not receive any additional compensation in his capacity as a director. (4)consists of $497,920 resulting from our forgiveness of a loan to dr. ang, an aggregate of $1,645 in life insurance and disability insurance premiums paid by us on dr. ang’s behalf and reimbursement of $450 in commuting expenses. (5)dr. chakraborty was awarded a one-time bonus in connection with his promotion to chief scientific officer. (6)consists of an aggregate of $1,609 in life insurance and disability insurance premiums paid by us on dr. chakraborty’s behalf and reimbursement of $450 in commuting expenses. (7)dr. slapak commenced employment with us as our chief medical officer in july 2020. (8)consists of $282,592 paid to christopher slapak consulting llc for dr. slapak’s consulting services to us from january 2020 until his commencement of employment with us in july 2020 and an aggregate of $752 in life insurance and disability insurance premiums paid by us on dr. slapak’s behalf. narrative to the summary compensation table we review compensation annually for all employees, including our executive officers. in setting executive base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders and a long-term commitment to our company. we do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives. our board of directors has historically determined our executive officers’ compensation and has typically reviewed and discussed management’s proposed compensation with our chief executive officer for all executives other than our chief executive officer. based on those discussions and its discretion, the board of directors then approved the compensation of each executive officer. 150 annual base salary we have entered into offer letters with each of our named executive officers that establish annual base salaries, which are generally determined, approved and reviewed periodically by our board of directors in order to compensate our named executive officers for the satisfactory performance of duties to our company. annual base salaries are intended to provide a fixed component of compensation to our named executive officers, reflecting their skill sets, experience, roles and responsibilities. base salaries for our named executive officers have generally been set at levels deemed necessary to attract and retain individuals with superior talent. see “—offer letters and potential payments upon termination or change in control.” non-equity incentive plan compensation in accordance with the terms of their offer letters, our named executive officers are eligible to receive discretionary annual bonuses of up to a percentage of each officer’s gross base salary based on individual performance, company performance or as otherwise determined appropriate, as determined by our board of directors. in 2020, our named executive officers were eligible to earn an annual target performance bonus of each executive’s 2020 base salary based on achievement of certain corporate objectives. dr. ang was eligible to earn 40% of his 2020 base salary and drs. slapak and chakraborty were each eligible to earn 30% of their 2020 base salaries. in 2021, our board of directors adjusted drs. ang, slapak and chakraborty’s target bonus percentages to 50%, 40% and 40%, respectively, of their current base salary. equity-based incentive awards our equity-based incentive awards are designed to align our interests with those of our employees and consultants, including our executive officers. our board of directors has historically been responsible for approving equity grants. vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. our executives generally are awarded an initial new hire grant upon commencement of employment. we have also made true-up awards following certain financing events or promotions. additional grants may occur periodically in order to specifically incentivize executives with respect to achieving certain corporate goals or to reward executives for exceptional performance. the following table provides information regarding the outstanding equity awards held by our named executive officers as of december 31, 2020. all awards were granted pursuant to the 2015 stock incentive plan, as amended (the “2015 plan”). see “—equity incentive plans—2015 plan” below for additional information.151 outstanding equity awards at december 31, 2020 option awards(1) stock awards(1) name grant date vesting commencement date vesting cliff date number of securities underlying unexercised options(#)exercisable number of securities underlying unexercised options(#)unexercisable option exercise price($) option expiration date numberof sharesor unitsof stockthat have not vested(#) market value of shares or units of stock that have not vested($)(2) robert ang, m.b.b.s., m.b.a. 8/5/2019 8/5/2019 — — — — — 244,078 (3) 2,191,820 3/10/2020 8/5/2019 — 18,460 (4) 128,833 $2.18 3/9/2030 — — 8/21/2020 7/1/2020 9/1/2020 67,925 584,161 (5) $1.90 8/20/2030 — — christopher slapak, m.d. 8/21/2020 7/1/2020 8/1/2020 15,946 137,141 (5) $1.90 8/20/2030 — — 8/25/2020 7/30/2019 — 54,229 98,889 (6) $1.90 8/24/2030 — — tirtha chakraborty, ph.d. 9/25/2019 9/23/2019 — 14,451 31,794 (6) $1.36 9/24/2030 — — 3/10/2020 9/23/2019 — 7,628 16,782 (6) $2.18 3/9/2030 — — 8/21/2020 7/1/2020 10/1/2020 7,360 63,296 (5) $1.90 8/20/2030 — — 11/18/2020 11/16/2020 — 2,527 118,795 (6) $6.53 11/17/2030 — — (1)all equity awards were granted under our 2015 plan, the terms of which are described below under the subsection titled “—equity incentive plans—2015 stock incentive plan.” (2)this column represents the fair market value of a share of our common stock of $8.98 as of december 31, 2020 (the determination of the fair market value by our board of directors as of the most proximate date) multiplied by the amount shown in the column “stock awards—number of shares or units of stock that have not vested.” (3)the shares were acquired pursuant to the exercise of unvested options granted to dr. ang on august 5, 2019 and are subject to our right of repurchase upon dr. ang’s termination of service. the shares will be released from our repurchase right in equal monthly installments on the fifth day of each month through august 5, 2023, subject to continuous service with us as of each such date. the restricted shares are subject to vesting acceleration, as described in more detail below under the subsection titled “—offer letters and potential payments upon termination or change in control.” (4)twenty-five percent of the shares subject to the option vest on the first anniversary of the vesting commencement date, and thereafter the remaining shares subject to the option vest in 36 equal monthly installments on each monthly anniversary thereafter, subject to continuous service with us as of each such vesting date. the option is exercisable immediately with respect to all shares subject to the option granted on such date, subject to a repurchase right in favor of us which lapses as the option vests. as a result, this reflects the number of shares subject to the option that were exercisable and vested as of dec

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. net product sales description of the matter the company sells approved products through a limited number of distributors. as discussed in note 2, when recognizing revenue, the company makes an estimate of the transaction price, including an assessment of whether to constrain any variable consideration. product sales are recorded net of estimated government-mandated rebates and chargebacks, estimated product returns, and other deductions at the time revenue is recorded. limited historical data is available for use in developing such estimates which are periodically reviewed and adjusted as necessary. auditing the company’s net product sales was complex due to the company’s limited history of product sales and the growth of sales in international markets. the company’s estimates of government mandated rebates, chargebacks and estimated product returns depend on the identification of key customer contract terms and conditions, as well as estimates of sales volumes to different classes of payors. the revenue recognition process can be complex and involves significant judgment to identify and assess the terms and conditions of customer agreements and related government regulations that could affect revenue recognition, as the company’s revenue expands with new customers and new markets. f-2 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 recording product sales and related rebates, chargebacks and returns. we also tested management’s controls related to the identification and assessment of the terms and conditions of customer agreements and the completeness and accuracy of data utilized in the controls, and the calculations supporting management’s estimates. to test net product sales, our audit procedures included, among others, tracing a sample of revenue transactions recognized during the year to source documentation. we also confirmed a sample of outstanding receivable balances directly with the company’s customers. to test management’s estimates of rebates, chargebacks and returns, we obtained management’s calculations for the respective estimates and performed one or more of the following procedures: developed an independent expectation of the reserve and/or tested management’s estimation process to assess whether the recorded reserve balances are within a reasonable range of estimate, agreed relevant inputs to the terms of customer contracts, performed retrospective reviews, performed a sensitivity analysis on the inputs and assumptions used in the estimates and assessed subsequent events, and tested a sample of credits issued throughout the year. inventory description of the matter at december 31, 2019, the company had inventory of $11.5 million. the company values inventory at the lower of cost or net realizable value. as discussed in note 2 of the company’s financial statements, the company periodically reviews its inventories for excess amounts or obsolescence and writes down or reserves obsolete or otherwise unmarketable inventory to its estimated net realizable value. auditing the valuation of the company’s inventories, particularly management’s assessment of required reserves for excess inventory, was complex and highly judgmental due to the company’s limited history of product sales. management determines excess inventory based on expected future demand. estimates related to future demand are sensitive to significant inputs and assumptions such as acceptance by patients and physicians and the availability of formulary coverage and adequate reimbursement from private third-party payers for the product. 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 inventory reserve review process, including management's assessment of the assumptions and data underlying the excess and obsolete inventory valuation. to test management’s estimates of future demand, we performed audit procedures that included, among others, comparing management’s projected sales to available historical sales and trend information, and other relevant factors. we also compared on-hand inventories to management’s demand forecasts and assessed the projected utilization of the inventory lots including considering any applicable expiration dates. we performed sensitivity analysis of projected sales volumes to evaluate the changes in the inventory reserve that would result from changes in the assumptions. we also tested the clerical accuracy of the company’s model. /s/ ernst & young llp we have served as the company’s auditor since 2010.

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.note receivable related party the company loaned a material amount of money to a relatedparty that they have asserted was within the normal course of business for a future business transaction. the note is convertibleinto common stock of another related party company. management’s position on the legality of this payment and the realizabilityof the asset are inherently riskier and more complex than they would be had this been an arm’s length transaction. we evaluatedthe evidence provided by management for the business purpose of this loan and the current valuation of the stock that this assetis convertible into. there is a large reliance on managements representations about this transaction. notes receivable relatedparty is discussed in notes 7 & 11 to the financial statements.going concern as discussed in note 1 to the financialstatements, the company had a going concern due to a working capital deficiency and stockholders’ deficiency. auditing management’sevaluation of a going concern can be a significant judgment given the fact that the company uses management estimates on futurerevenues and expenses, which are not able to be substantiated. to evaluate the appropriateness of the going concern, we examinedand evaluated the financial information that was the initial cause along with management’s plans to mitigate the going concernand management’s disclosure on going concern. m&k cpas, pllc we 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 and finance 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.incurred but not reported (ibnr) claim liability - refer to notes 2 and 7 to the financial statements.critical audit matter description medical costs payable includes estimates of the company’s obligations for medical care services rendered on behalf of insured consumers, for which claims have either not yet been received or processed. these estimates are referred to as incurred but not reported (ibnr) claim liabilities. at december 31, 2021 the company’s ibnr balance was $17 billion. the company develops ibnr estimates using an actuarial model that requires management to exercise certain judgments in developing its estimates. judgments made by management include medical cost per member per month trend factors and completion factors, which include assumptions over the time from date of service to claim receipt, the impact of claim levels, processing cycles, and consideration of covid-19. we identified the ibnr claim liability as a critical audit matter because of the significant assumptions made by management in estimating the liability. this required complex auditor judgment, and an increased extent of effort, including the involvement of actuarial specialists in performing procedures to evaluate the reasonableness of management’s methods, assumptions and judgments in developing the liability. how the critical audit matter was addressed in the audit our audit procedures included the following, among others: •we tested the effectiveness of controls over management’s estimate of the ibnr claim liability balance, including controls over the judgments in both the completion factors and the medical cost per member per month trend factors, as well as controls over the claims and membership data used in the estimation process.38table of contents•we tested the underlying claims and membership data and other information that served as the basis for the actuarial analysis, to test that the inputs to the actuarial estimate were complete and accurate.•with the assistance of actuarial specialists, we evaluated the reasonableness of the actuarial methods and assumptions used by management to estimate the ibnr claim liability by: ◦performing an overlay of the historical claims data used in management’s current year model to the data used in prior periods to validate that there were no material changes to the claims data tested in prior periods. ◦developing an independent estimate of the ibnr claim liability and comparing our estimate to management’s estimate. ◦performing a retrospective review comparing management’s prior year estimate of ibnr to claims processed in 2021 with dates of service in 2020 or prior.goodwill - refer to notes 2 and 6 to the financial statements.critical audit matter description at december 31, 2021, the company’s goodwill balance was $76 billion. as discussed in note 2 of the financial statements, for reporting units where a quantitative analysis is performed, the company performs an annual impairment test measuring the fair values of the reporting units and comparing them to their aggregate carrying values including goodwill. the estimates of the reporting unit fair values are calculated using a discounted cash flow method or a weighted combination of discounted cash flows and a market-based method. the discounted cash flow method includes assumptions about revenue trends, medical cost trends, and operating costs as well as discount rates. the market-based method requires determination of an appropriate group of peer companies whose securities are traded on an active market. the annual impairment test indicated that the fair values of the reporting units exceeded the carrying values as of the impairment testing date; therefore, no impairment was recognized. we identified a critical audit matter related to the quantitative analysis performed for such reporting units because of the significant assumptions made by management to estimate the fair value of the reporting unit. this required increased auditor judgment and extent of effort, including involvement of fair value specialists to evaluate the reasonableness of management’s estimates and assumptions related to peer company selection and financial projections, which can be impacted by regulatory and macro-economic factors. how the critical audit matter was addressed in the audit our audit procedures related to the valuation, business, and market assumptions including the discount rate, financial forecasts, and peer group used by management to estimate the fair value of reporting units where a quantitative analysis was performed, included the following, among others: •we tested the effectiveness of controls over management’s annual goodwill impairment assessment, including those over the determination of the fair value such as controls related to management’s financial forecasts, as well as controls over the selection of discount rates, company specific risks, peer companies, and market multiples.•we evaluated management’s ability to forecast and meet future revenue, medical cost trend, and operating costs by comparing:◦actual results to historical forecasts.◦forecasted information to: internal communications to management and the board of directors, industry and economic trends, and analyst reports of revenue and earnings expectations for the company and its peers.•we evaluated the impact of changes in management’s forecasts from the october 1, 2021 annual measurement date to december 31, 2021.•we evaluated management’s selection of peer companies and market multiples. •with the assistance of our fair value specialists, we evaluated the reasonableness of (1) the valuation methodologies, including testing the mathematical accuracy of the calculation, (2) the weighting of such valuation methodologies, and (3) discount rate and company specific risks by:◦testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.◦developing a range of independent discount rate estimates and comparing to those selected by management./s/ deloitte & touche llp minneapolis, minnesota february 15, 2022we have served as the company's auditor since 2002.

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.inventory obsolescence reserve– refer to note 2 to the financial statements critical audit matter description the company’s inventories are stated at the lower of average cost or net realizable value. the company maintains an inventory reserve based primarily on the age of the inventory, estimated required sell-through time, stage of product life cycle and whether items are selling below cost. in determining appropriate inventory reserve percentages, the company evaluates a number of factors including its historical write off experience, the specific merchandise categories affected, its historic recovery percentages on various methods of liquidations, and return to vendor contract rights, as well as forecasts of future planned receipts, inventory levels, and product airings. inventories, net, and the inventory reserve at january 30, 2021, totaled $68.7 million and $10.0 million, respectively. 42table of contents given the significant judgments necessary to identify and record the inventory reserve timely, performing audit procedures to evaluate management’s estimates of the net realizable value for the inventory on-hand as of the reporting date involved a high degree of auditor judgment.how the critical audit matter was addressed in the audit our audit procedures related to management’s estimates of the net realizable value for the inventory on-hand as of the reporting date included the following, among others:●we evaluated the appropriateness and consistency of management’s methodology and assumptions used in determining the inventory reserve.●we obtained the company’s inventory reserve calculation and tested the mathematical accuracy.●we tested the accuracy and completeness of the underlying data used in the calculation of the company’s inventory reserve.●we selected a sample of inventory items and evaluated historical sales performance relative to management’s conclusions on the ability to sell through the inventory on-hand at the forecasted levels.●we performed a retrospective review of actual product sales activity and the relative gross margins earned subsequent to fiscal year end to assess potential bias present in the reserve estimate. /s/ deloitte & touche llp minneapolis, minnesota april 23, 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 separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 38table of contents complex debt and equity transactions description of the critical audit matter: as discussed in note 2 to the consolidated financial statements, the company has entered into debt and equity agreements which included convertible notes and warrants. these agreements required management to assess whether the conversion features of the convertible notes required bifurcation and separate valuation as a derivative liability and whether the warrants required accounting as derivative liabilities, which are required to be recorded at estimated fair value. the company’s determination of the estimated fair value involves the identification of related financial instruments and a clear understanding of the terms of the agreements. auditing management’s estimates of fair value requires a high degree of auditor judgment and an increased extent of effort, including the need to carefully examine to understand the true nature of the related agreements. how we addressed the critical audit matter in our audit: our audit procedures related to determination of the estimated fair values of these debt and equity transactions included the following, among others: ·we evaluated whether the company’s accounting treatment which required the recognition of a derivative liability was appropriate. ·we gained an understanding of management’s process and methodology to develop the estimates. ·we examined signed contracts and amendments. ·we evaluated the reasonableness of the inputs and assumptions used by management in developing the estimates. ·we evaluated the adequacy of the disclosures related to these fair value measurements. amortizable intangible assets impairment assessment description of the critical audit matter: as discussed in note 2 to the consolidated financial statements, the company evaluates intangible assets for impairment when events or circumstances indicated that the carrying amount of these assets may not be recoverable. the recoverability is based on management's estimates of future cash flows to be generated from the intangible assets. these estimates may be different from actual results due to several factors, some of which may be outside of the company's control. as further discussed in note 6 to the consolidated financial statements, during the fiscal year ended december 31, 2021, the company recorded an impairment of one of their intangible assets. the company's determination of impairment amounts, and by extension the remaining value of the intangible assets, involves significant judgments and assumptions in estimating future cash flows and remaining useful lives. auditing managements inputs and calculations used to estimate potential impairment of intangible assets requires a degree of auditor judgement and an increased extent of effort. how we addressed the critical audit matter in our audit: our audit procedures related to management’s forecasts used in determining the impairment and remaining value of the intangible asset after impairment included the following, among others: ·we gained an understanding of management’s process and methodology to develop the valuation. ·we evaluated management’s ability to accurately forecast revenues, expenses, and operating profit by (1) comparing actual results to management’s historical forecasts, and (2) relevant subsequent customer activity. ·we evaluated the reasonableness of the inputs and assumptions used by management in developing the valuation. ·we evaluated the adequacy of the disclosures related to the impairment and valuation of the intangible asset. haynie & company salt lake city, utah march 31, 2022pcaob id: 457 we have served as the company’s auditor since 2018.

critical audit matters critical audit matters 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. we determined that there are no critical audit matters./s/ deloitte & touche llp mclean, virginia march 25, 2022we have served as the fund’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. certain loss and loss adjustment expense (lae) reserves and insurance loss recoverable as described in notes 1, 2 and 6 to the consolidated financial statements, management recognizes loss reserves on a contract-by-contract basis when the present value of probability-weighted expected net cash outflows to be paid under the contract discounted using a risk-free rate as of the measurement date exceeds the unearned premium revenue. management estimates the likelihood of possible claim payments and possible recoveries of such claim payments using probability-weighted expected cash flows based on information available as of the measurement date, including market information. as of december 31, 2020, total loss and lae reserves were $990 million. a portion of the total loss and lae reserves relates to residential mortgage backed securities (rmbs) and exposures to insured debt obligations of puerto rico. the establishment of the appropriate level of loss reserves is an uncertain process involving numerous assumptions, estimates and subjective judgments by management that depend primarily on the nature of the underlying insured obligation, including 1) the nature and creditworthiness of the issuers of the insured obligations, 2) expected recovery rates on unsecured obligations, 3) the projected cash flow or market value of any assets pledged as collateral on secured obligations, 4) the expected rates of recovery, cash flow or market values on such obligations or assets, 5) economic conditions and trends, 6) political developments, 7) the extent to which sellers/servicers comply with the representations or warranties made in connection therewith, 8) levels of interest rates, 9) borrower behavior, 10) the default rate and salvage values of specific collateral, 11) management’s ability to enforce contractual rights through litigation and otherwise, including the collection of contractual interest on claim payments, and 12) management’s remediation strategy for an insured obligation that has defaulted or is expected to default. in addition, management recognizes potential recoveries on paid claims based on probability-weighted net cash inflows present 63 table of contents valued at applicable risk-free rates as of the measurement date. as of december 31, 2020, total insurance loss recoverable was $1,677 million. as disclosed by management, a portion of the total insurance loss recoverable relates to rmbs excess spread recoverables, recoverables on paid puerto rico losses, and recoverables from claims paid in respect of insured notes issued by zohar cdo 2003-1, limited (“zohar i”) and zohar ii 2005-1, limited (“zohar ii”). excess spread within insured rmbs securitizations is the difference between interest inflows on mortgage loan collateral and interest outflows on the insured rmbs notes. the aggregate amount of excess spread depends on the future loss trends, which include 1) future delinquency trends, 2) average time to charge-off/liquidate delinquent loans, 3) the future spread between prime and the libor interest rates, and 4) subsequent recoveries on previously charged-off loans associated with insured second-lien rmbs securitizations. for recoverables on paid puerto rico losses, the estimates include assumptions related to 1) economic conditions and trends, 2) political developments, 3) the company’s ability to enforce contractual rights through litigation and otherwise, 4) management’s discussions with other creditors and the obligors and any existing proposals, and 5) the remediation strategy for an insured obligation that has defaulted or is expected to default. as disclosed by management, for the estimated insurance loss recoverable for zohar i and zohar ii, the primary source of the recoveries will come from the monetization of the assets of zohar i and zohar ii. management’s estimate of the insurance loss recoverable for zohar i and zohar ii includes probability-weighted scenarios of the ultimate monetized recovery from the zohar i and zohar ii assets. the principal considerations for our determination that performing procedures relating to the estimation of certain loss and lae reserves and insurance loss recoverable is a critical audit matter are (i) the significant judgment by management in determining the estimates for the loss and lae reserves and insurance loss recoverable related to rmbs and puerto rico, and recoveries on paid claims related to the zohar i and zohar ii assets, which in turn led to a high degree of auditor subjectivity and judgment in performing procedures related to these estimates; (ii) the significant audit effort and judgment in evaluating the audit evidence relating to the aforementioned assumptions, cash flow models, estimates and subjective judgments; and (iii) 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. 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 estimation of certain loss and lae reserves and insurance loss recoverable, including controls over the cash flow models and the development of significant assumptions. these procedures, for a sample of contracts, also included, among others, the involvement of professionals with specialized skill and knowledge to assist in i) independently estimating a range of net cash flows that support the estimation of loss and lae reserves and insurance loss recoverable related to rmbs and the zohar i and zohar ii assets, using industry data and other benchmarks, and comparing the independently estimated range to management’s projected net cash flows; and ii) for the portion of loss and lae reserves and insurance loss recoverable related to puerto rico, evaluating the appropriateness of management’s cash flow models and the reasonableness of the aforementioned assumptions. evaluating the reasonableness of management’s estimates involved testing the completeness and accuracy of data provided by management. /s/ pricewaterhouse coopers new york, new york march 1, 2021 we have served as the company’s auditor since at least 1986.

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.long‑lived assets impairment assessment for an asset group for which management identified impairment indicators as described in notes 2, 10, 11 and 12 to the consolidated financial statements, the company’s consolidated long‑lived assets balance was $1,564 million as of december 31, 2020 and comprised $1,441 million fixed assets, net, $63 million amortizable intangible assets, net and $60 million operating lease right‑of‑use assets. management reviews long‑lived assets for impairment when events or changes in circumstances indicate that the carrying value of an asset group may no longer be recoverable. for asset groups that are held and used, the asset group represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other asset groups. the recoverability of an asset group that is held and used is tested by comparing the carrying value of the asset group to the sum of the estimated undiscounted future cash flows expected to be generated by that asset group. the principal assumptions used by management to estimate these undiscounted future cash flows include, but are not limited to, periods of operation, projections of product pricing, production levels and sales volumes, product costs, market supply and demand, foreign exchange rates, inflation, and projected capital spending. if it is determined that an asset group is not recoverable, an impairment loss is recognized in the amount by which the asset group’s carrying value exceeds its fair value. no impairment charge was required in the current year.the principal considerations for our determination that performing procedures relating to long‑lived assets impairment assessment for an asset group for which management identified impairment indicators is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in applying procedures relating to the recoverability of the asset group being tested for impairment due to the significant judgment required by management when developing the undiscounted future cash flows and (ii) significant audit effort in evaluating the principal assumptions related to the projections of product pricing and sales volumes, product costs and projected capital spending.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 long‑lived assets impairment assessment for an asset group for which management identified impairment indicators, including controls over (i) the development of principal assumptions used in the undiscounted cash flow model and (ii) the determination of the recoverable amount of an asset group for which management identified impairment indicators. these procedures also included, among others, (i) testing management’s process for determining the recoverable amount of the asset group tested for impairment, (ii) evaluating the appropriateness of the undiscounted cash flow model, (iii) testing the completeness and accuracy of the underlying data used in the models and (iv) evaluating the reasonableness of the principal assumptions used by management, including projections of product pricing and sales volumes, product costs and projected capital spending. evaluating the reasonableness of the principal assumptions related to projections of product pricing and sales volumes, product costs and projected capital spending involved considering the current and past performance of the asset group tested for impairment, management’s strategic plan, comparing market‑related assumptions used in the model to external market and industry data and whether these assumptions were consistent with evidence obtained in other areas of the audit. 113table of contents valuation of fixed assets acquired related to the us sawmill business as described in notes 2 and 3 to the consolidated financial statements, in 2020 the company completed the acquisition of certain subsidiaries, the business of which consisted mainly of three operating sawmills (the us sawmill business) for consideration of $173 million paid in cash. management accounted for this transaction as a business combination using the acquisition method. under this method, identifiable assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. management recorded the acquired fixed assets at an aggregated fair value of $114 million on the date of acquisition based on both cost and market approaches. management applied significant judgment in estimating the fair value of fixed assets acquired using the cost approach, which involved the use of principal assumptions with respect to estimated replacement and reproduction costs, estimated useful lives, and physical, functional and economic obsolescence at the time of acquisition.the principal considerations for our determination that performing procedures relating to the valuation of fixed assets acquired related to the us sawmill business is a critical audit matter are (i) the high degree of auditor judgment and subjectivity in performing procedures relating to the fair value measurement of fixed assets acquired due to the significant amount of judgment required by management when developing the fair value applying the cost approach and (ii) the significant audit effort in evaluating the principal assumptions relating to this estimate, including replacement and reproduction costs, estimated useful lives and physical, functional and economic condition obsolescence at the time of acquisition. 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 the acquisition accounting, including controls over management’s valuation of the acquired fixed assets and controls over the development of the principal assumptions used in the valuation of acquired fixed assets. these procedures also included, among others, (i) reading the securities purchase agreement, (ii) testing management’s process for estimating the fair value of the acquired fixed assets using the cost approach, (iii) testing the completeness and accuracy of underlying data used in the models, and (iv) with the assistance of professionals with specialized skill and knowledge, evaluating whether the principal assumptions were reasonable considering consistency with external market and industry data. professionals with specialized skill and knowledge were also involved in evaluating the appropriateness of the valuation approach./s/ pricewaterhouse coopers llp montréal, canada march 1, 2021we 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 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. income taxes and uncertain tax positions- refer to notes 1 and 6 to the financial statements. critical audit matter description the company’s net deferred income tax asset was $0.3 million as of december 31, 2020 and the related total income tax expense was $5.6 million for the year ended december 31, 2020. income taxes are provided based on the asset and liability method of accounting. the provision for income taxes is based on pretax financial income. deferred tax assets and liabilities are recognized for the future expected tax consequences of temporary differences between income tax and financial reporting and principally relate to differences in the tax basis of assets and liabilities and their reported amounts, using enacted tax rates in effect for the year in which differences are expected to reverse. filing positions in all of the federal and state jurisdictions where the company is required to file income tax returns are analyzed by the company, as well as all open tax years in these jurisdictions, to determine whether the positions will be more likely than not be sustained by the applicable tax authority. tax positions not deemed to meet the more-likely-than-not threshold are not recorded as a tax benefit or expense in the current year. we identified income taxes and uncertain tax positions as a critical audit matter due to the multiple jurisdictions in which the company operates including foreign jurisdictions, the industry in which the company operates in, and the complexity of tax laws and regulations. performing audit procedures and evaluating audit evidence obtained related to these considerations required a high degree of judgement and effort. 55 table of contents how the critical audit matter was addressed in the audit our audit procedures performed to address this critical audit matter included the following, among others: ●we obtained an understanding, evaluated the design and tested the operating effectiveness of controls over income taxes and uncertain tax positions. we tested controls over the company’s process for identifying and evaluating tax obligations and uncertain tax positions and related significant assumptions and judgments. ●we evaluated the completeness and accuracy of deferred income taxes and the income tax provision by agreement to material tax filings. ●we assessed the reasonableness of the key judgements and estimates inherent in management’s assessment of their tax obligation and uncertain tax positions, including analysis over forecasts and tax elections. ●we involved our tax specialists with our evaluation of management’s judgements that no uncertain positions exist by analyzing the related tax law, statutes, and regulations and their application to the company’s positions.●we evaluated the adequacy of the company’s disclosure in notes 1 and 6 in relation to the income taxes. we evaluated the assumptions and estimates used by management in the context of other audit evidence obtained during the audit. we have served as the company’s auditor since 2016.

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.goodwill - refer to notes 2 and 9 to the financial statements critical audit matter description the company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. the company determines the fair value of its reporting units using the income approach, which considers a discounted future cash flow analysis using various assumptions, including projections of revenues based on assumed long-term growth rates and projections of earnings before income tax (“ebit”), estimated costs and appropriate discount rates based on the particular reporting unit’s weighted-average cost of capital. the principal factors used in the discounted cash flow analysis requiring judgment are the projected future operating cash flows based on forecasted ebit margins, including future revenues, and the selection of the terminal value growth rate and the discount rate assumptions. the goodwill balance was $1,674.5 million as of june 30, 2020, which is allocated among various reporting units. during fiscal year 2020, the company performed the required impairment tests of goodwill and determined that there was no impairment. the company also performed a sensitivity analysis under step 1 of the goodwill impairment test assuming hypothetical reductions in the fair values of the reporting units. we identified goodwill as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of certain reporting units and the sensitivity of these reporting units’ operations to changes in demand. auditing the fair value of certain of the reporting units involved a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, as it relates to evaluating whether management’s judgments in determining whether the projected future operating cash flows based on forecasted ebit margins, including future revenues, and the selection of terminal value growth rate and discount rate were appropriate. how the critical audit matter was addressed in the audit our audit procedures related to the projected future operating cash flows based on forecasted ebit margins, including future revenues, and the selection of the terminal value growth rate and discount rate for certain of the reporting units included the following, among others: •we tested the effectiveness of controls over goodwill, including those over the projected future operating cash flows based on forecasted ebit margins, including future revenues, and the selection of the terminal value growth rate. •we performed a sensitivity analysis on the future cash flows to determine what revenue and ebit growth rate is needed to cause an impairment for each reporting unit.•we evaluated the reasonableness of management’s projected future operating cash flows based on forecasted ebit margins, including future revenues by comparing to (1) historical results for significant reporting units, (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.•we considered the impact of changes in the regulatory environment on management’s forecasts.•with the assistance of our fair value specialists, we evaluated the selection of the terminal value growth rate and the discount 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. /s/ deloitte & touche llp new york, new york august 11, 2020we have served as the company's auditor since 2007.

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 - identifying and evaluating performance obligations in certain customer contracts in the network enablement and service enablement reportable segments as described in notes 1 and 19 to the consolidated financial statements, the company had $1,198.9 million of revenue for the year ended july 3, 2021 of which $746.6 million and $91.3 million related to the network enablement and service enablement segments, respectively. the company’s revenue recognition is determined by management through the following steps: 1) identification of the contract with a customer; 2) identification of the performance obligations in the contract; 3) determination of the transaction price; 4) allocation of the transaction price to the performance obligations in the contract; and 5) recognition of revenue when (or as) the performance obligations are satisfied. certain of the company’s contracts with customers include performance obligations consisting of a variety of products and services and may involve a significant level of integration and interdependency between performance obligations. identifying and evaluating whether products and services are considered distinct performance obligations may require significant management judgment, particularly in the network enablement and service enablement reportable segments due to the nature of the products and service offerings.the principal considerations for our determination that performing procedures relating to revenue recognition - identifying and evaluating performance obligations in certain customer contracts in the network enablement and service enablement reportable segments is a critical audit matter are the significant judgment by management in identifying and evaluating performance obligations, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating audit evidence obtained related to whether such performance obligations were appropriately identified and evaluated 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 revenue recognition process, including controls related to the identification and evaluation of performance obligations in contracts with customers. these procedures also included, among others, testing on a sample basis, the completeness and accuracy of management’s identification and evaluation of performance obligations in certain customer contracts in the network enablement and service enablement reportable segments. 52table of contents/s/ pricewaterhouse coopers llp san jose, california august 23, 2021we 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.65revenues - refer to notes 1 and 2 to the consolidated financial statements critical audit matter description the company recognizes revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those products or services. the company has various products and service lines which have differing levels of involvement of management judgment and timing of revenue recognition. we identified revenues as a critical audit matter because of the diversity in products and service lines and diversity in audit evidence obtained as each billing arrangement is individually unique which requires a higher degree of auditor judgment and an increased extent of effort when designing and performing audit procedures to evaluate the appropriateness of management’s estimates and audit evidence related to the recognition of revenues.how the critical audit matter was addressed in the audit our audit procedures related to revenues included the following:•we tested the effectiveness of controls related to the revenue recognition process.•we evaluated management’s significant accounting policies related to revenue recognition for reasonableness.•we selected a sample of recorded revenue transactions and performed the following procedures:◦obtained customer source documents and the contract for each selection, including master agreements and related amendments to evaluate if relevant contractual terms have been appropriately considered by management.◦evaluated management’s application of their accounting policy and tested revenue recognition for specific performance obligations by comparing management’s conclusions to the underlying master agreement and any related amendments.◦tested the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial statements./s/ deloitte & touche llp milwaukee, wisconsin february 23, 2022we have served as the company's auditor since 2002.

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. valuation of intangible assets in association with fresh start accounting as described further in note 2 and note 3 to the consolidated financial statements, the company emerged from chapter 11 bankruptcy on november 19, 2020. in connection with the company’s emergence from bankruptcy and in 52table of contentsaccordance with asc 852, reorganizations, the company qualified for and adopted fresh start accounting. management calculated a reorganization value of $266.3 million, which represents the fair value of the successor company’s assets before considering liabilities and allocated value to its individual assets based on their estimated fair values. we identified the valuation of intangible assets associated with fresh start accounting as a critical audit matter. the principal considerations for our determination that the valuation of intangible assets associated with fresh start accounting is a critical audit matter are that there is high estimation uncertainty due to the significant management judgments with respect to assumptions used to estimate fair value of intangible assets, including revenue forecasts, relief from royalty rates and discount rates. such uncertainty requires greater auditor subjectivity in evaluating the appropriateness of those assumptions. our audit procedures related to the valuation of intangible assets associated with fresh start accounting included the following, among others. ●we utilized a valuation specialist to assist us in evaluating the methodologies used and whether they were acceptable for the underlying assets and being applied correctly.●we evaluated the reasonableness of the revenue forecasts and revenue growth rate by comparing them to fleet projections and pricing considerations, including publicly available industry data, and historical operating results.●we compared royalty data from similar industry transactions to management’s royalty rate and evaluated the profit split analysis for reasonableness.●we evaluated the appropriateness of the discount rate by recalculating the weighted-average cost of capital and evaluating future market conditions. ●we evaluated the qualifications of the third-party valuation specialist engaged by the company based on their credentials and experience /s/ grant thornton llp we have served as the company’s auditor since 2015.

critical audit matters thecritical audit matters communicated below “going concern” are matters arising from the current period audit of thefinancial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accountsor disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complexjudgments. the communication of critical audit matters does not alter in any way our opinion on the financial statements, takenas a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical auditmatters or on the accounts or disclosures to which they relate. theprincipal considerations for our determination that performing procedures relating to the company’s ability to continueas a going concern is a critical audit matter are there was significant judgment by management in determining the company’sability to continue as a going concern. this in turn led to significant auditor judgement, subjectivity, and effort in performingprocedures to evaluate the estimate of the nature, frequency, and costs of future claims, and the audit effort involved the useof professionals with specialized skill and knowledge. going concern theaccompanying financial statements have been prepared assuming that the company will continue as a going concern. as discussedin note 5 to the financial statements, the company has no revenues, has incurred recurring losses and recurring negative cashflow from operating activities, and has an accumulated deficit which raises substantial doubt about its ability to continue asa going concern. management’s plans concerning these matters are also described in note 5. the financial statements do notinclude any adjustments that might result from the outcome of this uncertainty. basisfor opinion thesefinancial statements are the responsibility of the company’s management. our responsibility is to express an opinion onthe company’s financial statements based on our audit. we are a public accounting firm registered with the public company accounting oversight board (united states) (pcaob) and are required to be independent with respect to the company in accordancewith the u.s. federal securities laws and the applicable rules and regulations of the securities and exchange commission and the pcaob. weconducted our audit in accordance with the standards of the pcaob. those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due toerror or fraud. the company is not required to have, nor were we engaged to perform, an audit of its internal control over financialreporting. as part of our audit, we are required to obtain an understanding of internal control over financial reporting,but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting.accordingly, we express no such opinion. ouraudit included performing procedures to assess the risks of material misstatement of the financial statements, whetherdue 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 audit also included evaluating the accountingprinciples used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. we believe that our audit provides a reasonable basis for our opinion. /s/ berkower llc 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 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. indefinite-lived intangible asset and goodwill impairment assessment as described in notes 1 and 13 to the consolidated financial statements, the company’s consolidated broadcast licenses and goodwill balances were $3.6 billion and $1.4 billion as of december 31, 2019, respectively. goodwill is allocated to the company’s reporting units, which the company identifies as each of its individual television markets and production companies. goodwill, at the reporting unit level, and each broadcast license is tested for impairment at least annually. in the company’s assessment of impairment, management identified those broadcast licenses and reporting units for which a qualitative assessment would be performed to determine whether it is more likely than not that the broadcast license or reporting unit is impaired. for those broadcast licenses and reporting units for which the company did not elect to perform a qualitative analysis, the company performed a quantitative analysis. to estimate the fair value of the reporting units using a quantitative assessment, the company used a discounted cash flow model supported by a market multiple approach. the impairment assessment of each broadcast license and reporting unit requires management to make significant estimates and assumptions related to a number of factors under both the qualitative and quantitative assessments. the company considered the relative impact of factors that are specific to the broadcast license and reporting unit such as industry, regulatory and macroeconomic factors as well as forecasts of future revenues, operating margins and discount rates. management also utilized industry data such as third party market reports which project trends related to the growth of the industry. the company has grown significantly through acquisition and as a result, many broadcast licenses and reporting units lack substantial historical operating performance data upon which to evaluate management’s forecasts. 55 we identified the broadcast license and goodwill impairment assessment as a critical audit matter because of the significant assumptions management used in the impairment analysis. auditing management’s judgments used in the impairment assessment regarding industry, regulatory, and microeconomic factors as well as forecasts of future revenue, operating margin, discount rate and its application of third party data related to industry growth involved a high degree of auditor judgment and increased audit effort, including the use of our valuation specialist. our audit procedures related to the company’s broadcast license and goodwill impairment assessment included the following, among others: ● we obtained an understanding of the relevant controls related to the company’s goodwill and broadcast license impairment assessments, and tested such controls for design and operating effectiveness, including controls related to management’s review of the significant assumptions noted above. ● we tested management’s determination of which broadcast licenses and reporting units were subject to the qualitative impairment assessment versus those subject to a quantitative impairment assessment, including comparison of actual results to management’s historical forecasts. ● we tested management’s process for evaluating factors specific to the broadcast licenses and reporting units subject to qualitative goodwill impairment assessment. this included comparing the third party industry data utilized by management to other sources of independently obtained industry data. ● we tested management’s process for determining the fair value of the broadcast licenses and reporting units. due to the lack of historical experience available for broadcast licenses and reporting units acquired in the current year, we compared management’s forecasts of future revenue and operating margin to historical operating results for the company’s similar existing reporting units, as well as third party, market specific industry data. ● we utilized our valuation specialist to assist in testing the discount rates for broadcast licenses and reporting units subject to a quantitative impairment assessment. valuation of broadcast licenses acquired in a business combination as described in note 3 to the consolidated financial statements, the company completed a significant business combination that added $2.0 billion in broadcast licenses, which management considers to be indefinite-lived intangible assets, for the year ended december 31, 2019. management used an income approach when valuing the broadcast licenses. under this approach, a broadcast license is recorded based on the estimated fair value, which is based on the estimated after-tax discounted future cash flows of the acquired station, assuming an initial hypothetical start-up operation maturing into an average performing station in a specific television market and giving consideration to other relevant factors such as the technical qualities of the broadcast license and the number of competing broadcast licenses within that market. the assumptions considered by management in the analysis reflect historical market and station growth trends, third party, market specific, industry data, as well as the anticipated performance of the stations. the valuation technique used by management included theoretical assumptions of the costs that would be incurred to construct a station when the only owned asset is the broadcast license and the associated revenues, operating margins and capital expenditures expected to be incurred in the start-up years, which are inherently judgmental. 56 we identified the valuation of broadcast licenses acquired in a business combination as a critical audit matter because of the significant estimates and assumptions used by management in estimating the fair value of the acquired licenses. auditing management’s judgments regarding forecasts of future revenue, operating margins, capital expenditures, and the discount rate to be applied involved a high degree auditor judgment and increased audit effort, including the use of our valuation specialist. our audit procedures related to the company’s broadcast license and goodwill impairment assessment included the following, among others: ● we obtained an understanding of the relevant controls related to the company’s valuation of the broadcast license and tested such controls for design and operating effectiveness, including controls relating to management’s review and approval of the assumptions included in the valuation specialist’s report. ● we compared management’s forecasts of future revenue and operating margin to historical operating results for the company’s similar existing owned broadcast licenses, as well as third-party market specific, industry data. we tested the assumptions related to the start-up years in the discounted cash flow model where there is no historical or third-party market data available to support those assumptions by comparing estimated capital expenditures to acquired capital assets of the acquired station, as well as ensuring that management’s build-up of revenues and operating margins were reasonable over the start-up period. ● we utilized our valuation specialist to assist in testing the company’s discounted cash flow models and certain significant assumptions, including the discount rate. we evaluated whether the assumptions used were reasonable by considering the past performance of similar assets and third party, market specific, industry data, and whether such assumptions were consistent with evidence obtained in other areas of the audit. /s/ rsm us llp 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. valuation of goodwill description of the matter as discussed in note 2 and 7 to the consolidated financial statements, goodwill is tested for impairment annually at the reporting unit level or more frequently if indicators of impairment exist. the company evaluates the recoverability of goodwill by comparing the fair value of each reporting unit to its carrying value. fair value is determined using a discounted cash flow analysis based upon projected financial information. given the significance of the events described in note 7, qualitative indicators of impairment existed resulting in an interim test of impairment during the first quarter of the year. the company recorded goodwill impairment charges of $230 million.auditing management's goodwill impairment test is complex, involved subjective auditor judgment and required the involvement of specialists due to the significant estimation required to determine the fair value of the reporting units. in particular, the fair value estimates of the reporting units were sensitive to assumptions such as changes in the revenue growth rates and the discount rate, which are affected by expectations about future market or economic conditions, and industry and company-specific qualitative factors. 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 impairment review process, including controls over management’s review of the significant assumptions described above. this included evaluating controls over the company’s forecasting process used to develop the estimated future cash flows and management’s review of the discount rate. to test the estimated fair value of the company’s reporting units, we performed audit procedures that included, among others, assessing valuation methodologies and testing the significant assumptions discussed above and the underlying data used by the company in its analysis. we compared the projected cash flows to the company’s historical cash flows and revenue growth rates to available industry data including forecasted rig count information. we involved our valuation specialists in reviewing the valuation methodology and evaluating the discount rate. we assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions. in addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the company. 43 impairment assessment and valuation of long-lived assets description of the matter as more fully described in notes 2, 5, 8 and 11 to the consolidated financial statements, in the first quarter of 2020, the company identified impairment indicators, which resulted in the company evaluating its long-lived assets including intangible assets for recoverability. the company compared the estimated undiscounted future cash flows of each long-lived asset group to its carrying value. if the long-lived asset group’s carrying amount exceeds its estimated undiscounted future cash flows, the fair value of the long-lived asset group is then estimated by management and compared to its carrying amount. an impairment charge is recognized on these long-lived asset groups when the carrying amount exceeds the fair value. the company determined that certain long-lived assets, including finite-lived intangibles, property, plant and equipment and right of use assets were not recoverable. as a result, the company recognized $84 million of intangible asset impairment, $4 million of property, plant and equipment impairment and $2 million of right-of-use asset impairment charges.auditing management's evaluation of long-lived asset groups for impairment was complex and involved subjectivity due to the significant estimation required to determine the estimated undiscounted future cash flows and fair values of the long-lived asset groups where indicators of impairment were determined to be present. in particular, the future cash flows and fair value estimates were sensitive to significant assumptions including the estimation of the revenue growth rates and discount rates, which are affected by expectations about future market or economic conditions, and industry and company-specific qualitative factors. 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 evaluate the asset groups for impairment, including controls over management’s review of the significant assumptions described above. to test the company’s evaluation of the long-lived asset groups for impairment, we performed audit procedures that included, among others, assessing the methodologies used to estimate future cashflows and estimate fair values, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the company in its analysis. we compared the projected cash flows to the company’s historical cash flows and revenue growth rates to available industry data including forecasted rig count information. we involved our valuation specialists in reviewing the methodologies and key assumptions. we assessed the historical accuracy of management’s estimates and where appropriate, assessed whether the assumptions used were consistent with those used in the goodwill impairment analysis./s/ ernst & young llp we have served as the company’s auditor since 2013.