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Published: 2023-03-31

AUDITED CONSOLIDATED FINANCIAL STATEMENTS
	FOR THE YEAR ENDED DECEMBER 31,2022
		Expressed in United States Dollars
			Dated: March 31, 2023
				The Management's Discussion and Analysis of Financial Condition and Results of Operations for Flora
				Growth Corp. is also included in the Form 10-K for the year ended December 31, 2022, filed on SEDAR
		on March 31, 2023, in its entirety.

Table of Contents

	Report of Independent Registered Public Accounting Firm
To the Shareholders and Directors ofFlora Growth Corp. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial position of Flora Growth Corp. (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statementsof loss and comprehensive loss, shareholders’ equity (deficiency), and cash flows for the years ended December 31, 2022 and 2021, and the related notes (collectively referred to as the “financialstatements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operationsand its cash flows for the years ended December 31, 2022 and December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financialstatements, the Company has incurred a net loss of $52.6 million for the year ended December 31, 2022, and has an accumulated deficit of $90.9 million at December 31, 2022. These factors amongstothers discussed raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidatedfinancial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. 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 theCompany 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 theconsolidated 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 internalcontrol over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to thoserisks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating theaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits providea reasonable basis for our opinion. We have served as the Company’s auditor since 2020.
		/s/ DAVIDSON & COMPANY LLP

Vancouver, Canada		Chartered Professional Accountants
				PCAOB ID: 731
March 31, 2023


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Table of Contents Flora Growth Corp.

Consolidated Statements of Financial Position(in thousands of United States dollars, except share amounts which are in thousands of shares)

	December 31,	December 31,

As at:				2022	2021
ASSETS
Current
Cash	$	9,537 $	37,614
Restricted cash		-	2
Trade and amounts receivable, net of $2,988 allowance ($1,252 at 2021)		6,851	5,324
Loans receivable and advances		271	273
Prepaid expenses and other current assets		978	1,700
Indemnification receivables		3,429	-
Inventory		10,089	3,030
Total current assets		31,155	47,943
Non-current
Property, plant and equipment		4,810	3,750
Operating lease right of use assets		2,537	1,229
Intangible assets		18,096	9,736
Goodwill		23,372	20,054
Investments		730	2,670
Other Assets		287	97
Total assets	$	80,987 $	85,479
LIABILITIES
Current
Trade payables	$	7,748 $	2,415
Contingencies		5,044	2,033
Current portion of debt		1,086	18
Current portion of operating lease liability		1,188	412
Other accrued liabilities		2,381	1,241
Total current liabilities		17,447	6,119
Non-current
Non-current operating lease liability		1,869	908
Deferred tax		1,712	1,511
Contingent purchase considerations		3,547	-
Total liabilities		24,575	8,538
SHAREHOLDERS' EQUITY
Share capital, no par value, unlimited authorized, 135,573 issued and outstanding (65,517 at 2021)		-	-
Additional paid-in capital				150,420	116,810
Accumulated other comprehensive loss		(2,732)	(1,108)
Deficit				(90,865)	(38,536)
Total Flora Growth Corp. shareholders’ equity		56,823	77,166
Non-controlling interest in subsidiaries		(411)	(225)
Total Shareholders' equity		56,412	76,941
Total liabilities and shareholders' equity	$	80,987 $	85,479

						The accompanying notes are an integral part of these consolidated financial statements. Commitments and contingencies – see Note 18.


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Table of Contents Flora Growth Corp.

Consolidated Statements of Loss and Comprehensive Loss
(in thousands of United States dollars, except per share amounts which are in thousands of shares)

	For the year ended	For the year ended
		December 31,		December 31,
				2022	2021
Revenue	$	37,171 $	8,980
Cost of sales		22,757	6,555
Gross profit		14,414	2,425
Operating expenses
Consulting and management fees		11,342	7,324
Professional fees		4,398	4,269
General and administrative		4,495	922
Promotion and communication		8,416	3,585
Travel expenses		1,055	603
Share based compensation		3,404	1,340
Research and development		430	132
Operating lease expense		1,221	316
Depreciation and amortization		2,629	501
Bad debt expense		1,607	1,335
Goodwill impairment		25,452	51
Other asset impairments		783	-
Other expenses (income), net		2,489	1,050
Total operating expenses		67,721	21,428
Operating loss		(53,307)	(19,003)
Interest (income) expense		(56)	32
Foreign exchange loss		323	79
Unrealized loss from changes in fair value		593	2,345
Net loss before income taxes		(54,167)	(21,459)
Income tax benefit		(1,538)	(98)
Net loss for the period	$			(52,629) $	(21,361)
Other comprehensive loss
Exchange differences on foreign operations, net of income taxes of $nil ($nil in 2021)	$	(1,624) $	(1,147)
Total comprehensive loss for the period	$			(54,253) $	(22,508)

Net loss attributable to:
Flora Growth Corp.	$	(52,415) $	(21,249)
Non-controlling interests in subsidiaries		(214)	(112)
Comprehensive loss attributable to:
Flora Growth Corp.	$	(54,039) $	(22,396)
Non-controlling interests in subsidiaries		(214)	(112)
Basic and diluted loss per share attributable to Flora Growth Corp.	$	(0.68) $	(0.48)
Weighted average number of common sharesoutstanding - basic and diluted

		76,655	43,954

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

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Table of Contents Flora Growth Corp.

Consolidated Statement of Shareholders' Equity (Deficiency)

									Non-
			Accumulated		Controllinginterests in
									Additional						other	Shareholders'
		paid-incapital	comprehensive	Accumulated	subsidiaries(Deficiency)					Equity
	Common Shares		(loss) income	Deficit		(Deficiency)
											#
Balance, December 31, 2020								38,355 $	- $	33,611 $	39 $	(17,287) $	(113) $	16,250

November Unit offering								11,500	-	34,500	-	-	-	34,500
November unit offering issuance costs								-	-	(2,665)	-	-	-	(2,665)
Initial public offering								3,333	-	16,667	-	-	-	16,667
Initial public offering issuance costs								333	-	(1,825)	-	-	-	(1,825)
Regulation A and other offerings								55	-	157	-	-	-	157
Common shares issued for business combinations								4,557	-	20,654	-	-	-	20,654
Common Shares issued for investments								225	-	2,507	-	-	-	2,507
Options Issued								-	-	1,340	-	-	-	1,340
Options Exercised								650	-	97	-	-	-	97
Warrants exercised								6,509	-	13,353	-	-	-	13,353
Warrants expired/cancelled								-	-	-	-	-	-	-
Other equity issuance costs								-	-	(1,586)	-	-	-	(1,586)
Other comprehensive loss – exchange differences on foreignoperations (net of income taxes of $nil)

	-	-	-	(1,147)	-	-	(1,147)
Current year net loss attributable to Flora								-	-	-	-	(21,249)	(112)	(21,361)
Balance, December 31, 2021								65,517	-	116,810	(1,108)	(38,536)	(225)	76,941

December unit offering								12,500	-	5,000	-	-	-	5,000
December unit offering issuance costs								-	-	(415)	-	-	-	(415)
Share repurchase								(368)	-	(255)	-	-	-	(255)
Common shares issued for business combinations								53,026	-	24,492	-	-	-	24,492
Equity issued for other agreements								811	-	1,554	-	-	-	1,554
Acquisition of noncontrolling interest								131	-	283	-	(365)	28	(54)
Options issued								-	-	4,003	-	-	-	4,003
Options exercised								545	-	82	-	-	-	82
Options expired/cancelled								-	-	(1,580)	-	451	-	(1,129)
Restricted stock vesting								2,938	-	446	-	-	-	446
Warrants exercised								473	-	105	-	-	-	105
Warrants expired/cancelled								-	-	-	-	-	-	-
Share issuance costs								-	-	(105)	-	-	-	(105)
Other comprehensive loss – exchange differences on foreignoperations (net of income taxes of $nil)

	-	-	-	(1,624)	-	-	(1,624)
Current year net loss attributable to Flora								-	-	-	-	(52,415)	(214)	(52,629)
Balance, December 31, 2022								135,573 $	- $	150,420 $	(2,732) $	(90,865) $	(411) $	56,412

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

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Table of Contents Flora Growth Corp.Consolidated Statement of Cash Flows(in thousands of United States dollars)

				For the
				year ended	For the

	December 31,				year ended
				2022	December 31, 2021
Cash flows from operating activities:
Net loss		$	(52,629)		$	(21,361)
Adjustments to net loss:
Depreciation and amortization			2,629						501
Stock based compensation			3,404						1,340
Goodwill impairment			25,452						51
Other asset impairments			783						-
Changes in fair value of investments and liabilities			593						2,345
Bad debt expense			1,607						1,335
Interest (income) expense			(56)					84
Interest paid			(4)					(78)
Income tax expense (benefit)			(1,538)			(98)
			(19,759)			(15,881)
Net change in non-cash working capital:
Trade and other receivables			143						(5,688)
Inventory			1,219						(1,213)
Prepaid expenses and other assets			1,372						(1,204)
Trade payables and accrued liabilities			1,090			3,047
Net cash used in operating activities					(15,935)					(20,939)

Cash flows from financing activities:
Common shares issued			4,551			42,617
Warrants issued			449			8,706
Equity issue costs			(520)			(5,475)
Exercise of warrants and options			187			12,851
Common shares repurchased			(255)			-
Loan borrowings			197			-
Loan repayments			(196)			(302)
Net cash provided by financing activities			4,413			58,397

Cash flows from investing activities:
Loans Provided			-			(273)
Loan repayments received			-			302
Purchases of property, plant and equipment and intangible assets			(1,294)			(3,983)
Purchase of investments			-			(2,509)
Business and asset acquisitions, net of cash acquired			(14,508)			(8,087)
Net cash used in investing activities					(15,802)					(14,550)

Effect of exchange rate on changes on cash			(755)			(815)

Change in cash during the period					(28,079)			22,093
Cash and restricted cash at beginning of period			37,616			15,523
Cash and restricted cash at end of period		$	9,537		$	37,616
Supplemental disclosure of non-cash investing and financing activities
Common shares issued for business combinations		$	24,712		$	20,654
Common shares issued for other agreements			1,470			2,507
Operating lease additions to right of use assets			2,919			1,233

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


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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 1. NATURE OF OPERATIONS Flora Growth Corp. (the “Company” or “Flora”) was incorporated under the laws of the Province of Ontario, Canada on March 13, 2019. The Company is a manufacturer, distributor and an all-outdoor cultivator of global cannabis and pharmaceutical products and brands, building a connected, design-led collective of plant-based wellness and lifestyle brands. The Company’s registeredoffice is located at 365 Bay Street, Suite 800, Toronto, Ontario, M5H 2V1, Canada and our principal place of business in the United States is located at 3406 SW 26th Terrace, Suite C-1, FortLauderdale, Florida 33132. On December 23, 2022, Flora completed its acquisition of all the issued and outstanding common shares of Franchise Global Health Inc., a corporation existing under the laws of the Province ofBritish Columbia (“Franchise”) by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia). Franchise, through its wholly-ownedsubsidiaries, is a multi-national distributor in the pharmaceutical and medical cannabis industry with principal operations in Germany. See Note 9 for further discussion. On February 24, 2022, Flora Growth U.S. Holdings Corp., a wholly-owned subsidiary of the Company, completed the acquisition of 100% of the outstanding equity interests in each of (i) Just BrandsLLC and (ii) High Roller Private Label LLC(collectively "JustCBD". JustCBD is a manufacturer and distributor of consumable cannabinoid products, including gummies, tinctures, vape cartridges,and creams with principal operations in Florida, United States. See Note 9 for further discussion. These consolidated financial statements have been prepared on a going concern basis, meaning that the Company will continue in operation for the foreseeable future and will be able to realizeassets and discharge liabilities in the ordinary course of operations. 2. BASIS OF PRESENTATION These consolidated financial statements have been presented in United States dollars and are prepared in accordance with United States generally accepted accounting principles (“US GAAP”) andpursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The Company has determined that the United States dollar is the most relevant andappropriate reporting currency as, despite continuing shifts in the relative size of our operations across multiple geographies, the majority of our operations are conducted in United States dollarsand our financial results are prepared and reviewed internally by management in United States dollars. Prior to January 1, 2023, Flora was a foreign private issuer reporting its financial statements under International Financial Reporting Standards (“IFRS”) as issued by the International AccountingStandard Boards. These consolidated financial statements, for all periods, are presented in accordance with US GAAP. Going concernThe accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that theCompany will continue for a period of at least one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in thenormal course of business. Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions orevents, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the date these financial statementsare issued. This evaluation does not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented or are not within control of the Company asof the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviatessubstantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans willbe effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions orevents that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The Company had cash of $9.5 million at December 31, 2022, net loss of $52.6 million for the year ended December 31, 2022, and an accumulated deficit of $90.9 million at December 31, 2022. Currenteconomic and market conditions have put pressure on the Company’s growth plans and may continue to do so in the future. If certain growth plans aren’t realized the Company’s ability to continueas a going concern may be dependent on its ability to obtain additional capital. The Company believes that its current level of cash is not sufficient to continue investing in growth, while at the sametime meeting its obligations as they become due. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from thedate of issuance of these consolidated financial statements. To alleviate these conditions, management may need to evaluate various cost reductions and other alternatives and may seek to raiseadditional funds through the issuance of equity, debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions or otherwise. The actual amountthat the Company may be able to raise under these alternatives will depend on market conditions and other factors. As it seeks additional sources of financing, there can be no assurance that suchfinancing would be available to the Company on favorable terms or at all. The Company’s ability to obtain additional financing in the debt and equity capital markets is subject to several factors,including market and economic conditions, the Company’s performance and investor sentiment with respect to it and its industry. As a result of these uncertainties, and notwithstandingmanagement’s plans, there is substantial doubt about the Company’s ability to continue as a going concern. Presentation of comparative financial statementsOn April 30, 2021, the Company consolidated its issued and outstanding common shares based on one new common share of the Company for every three existing common shares of the Company.All common shares and per share amounts have been restated to give retroactive effect to the share consolidation. Basis of consolidationThese consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated in consolidation. Subsidiaries areentities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities ofthe entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. As at December 31, 2022, theCompany had the following subsidiaries:
	Subsidiaries	Country of Incorporation	Ownership %	Functional Currency
Cosechemos YA S.A.S.		Colombia	90%		Colombia Peso (COP)
Flora Growth Corp. Sucursal Colombia		Colombia	100%		Colombia Peso (COP)
Hemp Textiles & Co. LLC		United States	100%		United States Dollar (USD)
Hemp Textiles & Co. S.A.S.		Colombia	100%		Colombia Peso (COP)
Flora Beauty LLC		United States	100%		United States Dollar (USD)
Flora Beauty LLC Sucursal Colombia		Colombia	100%		Colombia Peso (COP)
Kasa Wholefoods Company S.A.S.		Colombia	90%		Colombia Peso (COP)
Kasa Wholefoods Company LLC		United States	100%		United States Dollar (USD)
Grupo Farmaceutico Cronomed S.A.S.		Colombia	100%		Colombia Peso (COP)
Labcofarm Laboratories S.A.S.		Colombia	100%		Colombia Peso (COP)
Breeze Laboratory S.A.S		Colombia	100%		Colombia Peso (COP)
Vessel Brand Inc.		United States	100%		United States Dollar (USD)
Just Brands LLC		United States	100%		United States Dollar (USD)
Just Brands International LTD		United Kingdom	100%		British Pound (GBP)
High Roller Private Label LLC		United States	100%		United States Dollar (USD)
Flora Growth US Holdings Corp.		United States	100%		United States Dollar (USD)
Flora Growth Management Corp.		United States	100%		United States Dollar (USD)
Cardiff Brand Corp.		United States	100%		United States Dollar (USD)
Keel Brand Corp.		United States	100%		United States Dollar (USD)
Flora Growth F&B Corp.		United States	100%		United States Dollar (USD)
Masaya Holding Corp		United States	100%		United States Dollar (USD)
Franchise Global Health Inc.		Canada	100%		Canadian Dollar (CAD)
Harmony Health One Inc.		Canada	100%		Canadian Dollar (CAD)
ACA Mueller ADAG Pharma Vertriebs GmbH		Germany	100%		Euro (EUR)
Sativa Verwaltungs GmbH		Germany	100%		Euro (EUR)
Sativa Verwaltungs GmbH and Co. KG		Germany	100%		Euro (EUR)
CBD Med Therapeutics Inc.		Canada	100%		Canadian Dollar (CAD)
Fayber Technologies Canada Inc.		Canada	100%		Canadian Dollar (CAD)
Catalunia SAS		Colombia	100%		Colombia Peso (COP)
Green CannaHealth SAS		Colombia	100%		Colombia Peso (COP)
Klokken Aarhus Inc.		Canada	100%		Canadian Dollar (CAD)
Rangers Pharmaceuticals A/S		Denmark	100%		Danish Krone (DAK)
1200325 B.C. LTD.		Canada	100%		Canadian Dollar (CAD)
PhateboGermany	100%		Euro (EUR)
Franchise Cannabis Corp.		Canada	100%		Canadian Dollar (CAD)

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Basis of measurementThe consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair value as explained in the accounting policiesbelow. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carryingvalues of trade and amounts receivable, indemnification receivables, prepaids and other current assets, and trade and other payables, accrued liabilities, current portion of long term debt, and currentportion of lease liability approximate their fair values due to their short periods to maturity. The Company calculates the estimated fair value of financial instruments, including investments, andcontingent consideration, using quoted market prices when available. When quoted market prices are not available, fair value is determined based on valuation techniques using the best informationavailable and may include quoted market prices, market comparable, and discounted cash flow projections. The consolidated financial statements are presented in United States dollars (“$”) unless otherwise noted. Use of estimatesThe preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ fromthose estimates. 3. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used by the Company are as follows: CashCash in the consolidated statements of financial position includes cash on hand and deposits held with banks and other financial intermediaries that have a maturity of less than three months at thedate they are acquired. Financial assetsInitial recognition and measurementThe Company aggregates its financial assets into classes at the time of initial recognition based on the Company’s business model and the contractual terms of the cash flows. Non-derivativefinancial assets are classified and measured as “financial assets at fair value”, as either fair value through profit or loss (“FVPL”), or “financial assets at amortized cost”, as appropriate. All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes aparty to the contractual provisions of the instrument. Financial assets with embedded derivatives are considered in their entirety when determining their classification. Subsequent measurement – Financial assets at amortized costAfter initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate (“EIR”)method. Amortized cost is calculated by considering any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. In these consolidated financial statements,cash, trade and other receivables, indemnification receivables and loans receivable are classified in this category. Subsequent measurement – Financial assets at FVPLFinancial assets measured at FVPL include financial assets such as the Company’s equity investments in other entities, and any derivative financial instrument that is not designated as a hedginginstrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the consolidated statement of financial position with changes in fair value recognized in a separatecaption in the consolidated statements of loss and comprehensive loss.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) DerecognitionA financial asset is derecognized when the contractual rights to the cash flows from the asset expire, or the Company no longer retains substantially all the risks and rewards of ownership. Impairment of financial assetsFinancial assets classified subsequently as amortized cost are subject to impairment based on the expected credit losses (“ECL’s”). The Company’s financial assets subject to impairment are cash,trade and other receivables, and loans receivable. Trade and note receivables are recognized initially at fair value and subsequently measured at amortized cost, less any provisions for impairment. Impairment provisions are estimated using the ECLimpairment model where any expected future credit losses are provided for, irrespective of whether a loss event has occurred at the reporting date. Estimates of expected credit losses consider theCompany’s collection history by country and customer, deterioration of collection rates during the average credit period, as well as observable changes in and forecasts of future economicconditions that affect default risk. The Company utilizes a provision matrix to estimate lifetime ECL’s for trade receivables, supplemented by specific allowance based on customer-specific data.Changes in the allowance are recognized as bad debt expense in the consolidated statements of loss and comprehensive loss. When the Company determines that no recovery of the amount owedis possible, the amount is deemed irrecoverable, and the financial asset is written off. In Colombia, this is considered after 360 days consistent with local regulations, while other countries this isdetermined with judgment or otherwise when discharged by bankruptcy or other legal proceedings. InventoriesInventories are comprised of raw materials and supplies, cannabis, internally produced work in progress, and finished goods. Inventories are initially valued at cost and subsequently at the lower ofcost or net realizable value. Inventory cost is determined on a weighted average cost basis and any trade discounts and rebates are deducted from the purchase price. Raw material costs include thepurchase cost of the materials, freight-in and duty. Costs incurred during the cannabis growing and production process are capitalized as incurred to the extent that cost is less than net realizablevalue. These costs include materials, labor and manufacturing overhead used in the growing and production processes. The Company capitalizes pre-harvest cannabis costs. Finished goods includethe cost of direct materials and labor and a proportion of manufacturing overhead allocated based on normal production capacity. Net realizable value represents the estimated selling price for inventories in the ordinary course of business, less all estimated costs of completion and costs necessary to make the sale. Thedetermination of net realizable value requires significant judgment, including consideration of factors such as shrinkage, the aging of and future demand for inventory and contractual arrangementswith customers. Reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts and net realizable value. The impact of changes ininventory reserves is reflected in cost of sales. Property, plant and equipmentProperty, plant and equipment are measured at cost less accumulated depreciation and impairment losses, if any. Depreciation is provided for on a straight-line basis over the assets’ estimateduseful lives, which management has determined to be as follows: Machinery and office equipment
	5-10 years
Vehicle	5 years
Building	30 years
Right-of-use assets	Lesser of useful life and remaining term of the lease
The Company assesses an asset’s residual value, useful life and depreciation method at each financial year end and adjusts if appropriate. During their construction, property, plant and equipmentare not subject to depreciation. The Company capitalizes all costs necessary to get the asset to its intended use, including interest on borrowings when significant. When the asset is available foruse, depreciation commences. Depreciation expense is recorded within depreciation and amortization on the consolidated statements of loss and comprehensive loss. Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment and arerecognized in the consolidated statements of loss and comprehensive loss of the related year.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Intangible assetsIntangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisitiondate. Amortization is provided on a straight-line basis over the assets’ estimated useful lives, which do not exceed the contractual period, if any. The Company’s finite-lived intangible assets areamortized as follows: Patents and developed technology 9 yearsCustomer and supplier relationships
	5-10 years
Trademarks and brands	8-10 years
Licenses	5-10 years
Non-compete agreements	3 years
The estimated useful lives, residual values, and amortization methods are reviewed at each year end, and any changes in estimates are accounted for prospectively. Amortization expense is recordedwithin depreciation and amortization on the consolidated statements of loss and comprehensive loss. Intangible assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that theymight be impaired. InvestmentsInvestments include investments in equity securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted for at fair value.Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”). Inapplying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of theequity investments are less than carrying values. Changes in value are recorded in unrealized loss from changes in fair value on the consolidated statements of loss and comprehensive loss. Impairment of long-lived assetsThe Company reviews long-lived assets, including property and equipment and definite life intangible assets for impairment whenever events or changes in circumstances indicate that the carryingvalue of an asset may not be recoverable. An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of the asset group. The measurementof the impairment loss to be recognized is based on the difference between the fair value and the carrying amount of the asset group. Business combinationsAcquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of theacquisition date fair values of the assets transferred by the Company, liabilities assumed by the Company and the equity interests issued by the Company in exchange for control of the acquiree.Acquisition related costs are generally recognized in the consolidated statements of loss and comprehensive loss as incurred. At the acquisition date, the identifiable assets acquired, and theliabilities assumed, are recognized at their fair value. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree, and the fair value of the acquirer’s previously held equityinterest in the acquiree (if any) over the net of the amounts of identifiable assets acquired and liabilities assumed on the acquisition date. If, after assessment, the net of the amounts of identifiableassets acquired and liabilities assumed on the acquisition date exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of theacquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in the consolidated statements of loss and comprehensive loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured at thefair value of the acquiree’s identifiable net assets. Contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified asequity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasuredat subsequent reporting dates, with the corresponding gain or loss recognized in the consolidated statements of operations and comprehensive income.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) When a business combination is achieved in stages, the Company’s previously held equity interest in the acquiree is remeasured to its acquisition date fair value and the resulting gain or loss, ifany, is recognized in the consolidated statements of loss and comprehensive loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognizedin other comprehensive income are reclassified to the consolidated statements of loss and comprehensive loss where such treatment would be appropriate if that interest were disposed of. Purchase price allocations may be preliminary and, during the measurement period not to exceed one year from the date of acquisition, changes in assumptions and estimates that result inadjustments to the fair value of assets acquired and liabilities assumed are recorded in the period the adjustments are determined. Impairment of goodwill and indefinite-lived intangible assetsGoodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operatingsegment, for which discrete financial information is prepared and regularly reviewed by segment management. The Company operates in three operating segments which are the reporting units andgoodwill is allocated at the operating segment level. The Company reviews goodwill and indefinite-lived intangible assets annually for impairment in the fourth quarter, or more frequently, if eventsor circumstances indicate that the carrying amount of an asset may not be recoverable. Financial liabilitiesInitial recognition and measurementFinancial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measurethe financial liability at FVPL. The Company’s financial liabilities include trade payables and accrued liabilities, loans payable and long-term debt, which are measured at amortized cost. All financialliabilities are recognized initially at fair value. Subsequent measurement – Financial liabilities at amortized costAfter initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost iscalculated by considering any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. Subsequent measurement – Financial liabilities at FVPLFinancial liabilities measured at FVPL include any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial liabilities measured at FVPL arecarried at fair value in the consolidated statement of financial position with changes in fair value recognized in other income or expense in the consolidated statements of loss and comprehensiveloss. In these consolidated financial statements, trade payables and accrued liabilities, lease liability and loans payable are measured at amortized cost. DerecognitionA financial liability is derecognized when the obligation under the liability is discharged, cancelled, or expires with any associated gain or loss recognized in other income or expense in theconsolidated statements of loss and comprehensive loss. ProvisionsProvisions are recognized when (a) the Company has a present obligation (legal or constructive) due to a past event, and (b) it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects a provision to be reimbursed, for example under an insurancecontract, the reimbursement is recognized as a separate asset but only when the reimbursement is probable. The Company expenses legal costs as incurred related to such matters. The expense relating to any provision is presented in the consolidated statements of loss and comprehensive loss, net of any reimbursement. If the effect of the time value of money is material,provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage oftime is recognized as a finance cost in the consolidated statements of loss and comprehensive loss. Share capitalIssued common shares are recorded as equity at par value. Additional proceeds from the issuance of common shares are classified as equity in additional paid in capital. Incremental costs directlyattributable to the issue of common shares, stock options and warrants are recognized as a deduction from equity, net of any tax effects. Common shares are considered issued when considerationhas been received. The fair value of options and warrants is determined using the Black Scholes model.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Share based compensationShare based compensation to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share based compensation to non-employees are measuredat the fair value of goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured and are recordedat the date the goods or services are received. The Company operates an employee stock option plan. The corresponding amount is recorded to the additional paid-in capital caption withinshareholders’ equity, and the expense to the consolidated statements of loss and comprehensive loss over the vesting period. The fair value of options is determined using the Black–Scholespricing model which incorporates all market vesting conditions. For awards with graded vesting schedules, the Company has elected to calculate the fair value as a single award and recognizeexpense over the total expected vesting period rather than in tranches. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that theamount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Upon exercise of a stockoption, any amount related to the initial value of the stock option, along with the proceeds from exercise are recorded to share capital. Upon expiration of a stock option, any amount related to theinitial value of the stock option is recorded to accumulated deficit. The Company also grants employees and non-employees restricted stock awards (“RSAs”). The fair value of the RSAs isdetermined using the fair value of the common shares on the date of the grant. The Company has elected to recognize forfeitures as they occur. Foreign currency translationThese consolidated financial statements are presented in U.S. dollars (“USD”), which is the Company’s reporting currency; however, the functional currency of the entities in these financialstatements are their respective local currencies, including Canadian dollar, USD, Colombian and euro. Translation into functional currencyTransactions in foreign currencies are recorded in the functional currency at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets andliabilities denominated in foreign currencies are translated at the period end exchange rates. Non-monetary items are translated at the exchange rates in effect on the date of the transactions. Foreignexchange gains and losses arising on translation are presented in the consolidated statements of loss and comprehensive loss. Translation into presentation currencyThe assets and liabilities of foreign operations are translated into USD at year-end exchange rates. Revenue, expenses, and cash flows of foreign operations are translated into USD using averageexchange rates of the reporting period. Exchange differences resulting from translating foreign operations are recognized in other comprehensive income and accumulated in shareholders’ equity.The cumulative exchange differences are reclassified to the consolidated statements of loss and comprehensive loss upon the disposal of the foreign operation. Research expensesResearch expenses are expensed as they are incurred, net of any related investment tax credits, unless the criteria for capitalization of development expenses are met. Revenue recognitionThe Company primarily generates revenue as a distributor and retailer of cannabidiol oil derived products. See disaggregation of the Company’s revenue by products and sales by country in Note23. The Company uses the following five-step contract-based analysis of transactions to determine if, when and how much revenue can be recognized: 1.
	Identify the contract with a customer;
2.	Identify the performance obligations in the contract;
3.	Determine the transaction price;
4.	Allocate the transaction price to the performance obligations in the contract; and
5.	Recognize revenue when or as the Company satisfies the performance obligations.

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Revenue is recognized at the transaction price, which is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. Grossrevenue excludes duties and taxes collected on behalf of third parties. Revenue is presented net of expected price discounts, sales returns, customer rebates and other incentives. The Company's contracts with customers for the sales of products consist of one performance obligation. Revenue from product sales is recognized at the point in time when control is transferred tothe customer, which is on shipment or delivery, depending on the contract terms. The Company's payment terms generally range from 0 to 30 days from the transfer of control, and sometimes up tosix months. The Company elected as a permitted practical expedient to not adjust the customer contract consideration for significant financing components when the period between the transfer of theCompany’s goods and services and customer payment is one year or less. The Company elected as a permitted practical expedient to expense, as incurred, the costs of obtaining a customer contract such as sales commissions and other selling transaction costs when theamortization period of the assets otherwise would be one year or less. Accordingly, the Company has no assets recorded for costs to obtain a customer contract as at December 31, 2022 and 2021 asthere are no contracts where the underlying asset would have a life exceeding one year. The Company elected as a permitted practical expedient for shipping and handling not to be a separate performance obligation. Advertising costsAdvertising costs are expensed as incurred and recorded within the promotion and communication caption on the consolidated statements of loss and comprehensive loss. Advertising costs were$4.7 million in 2022 ($1.0 million in 2021). LeasesAt the inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identifiedasset for a period in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease. The right-of-use asset is initially measuredat cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate ofcosts to dismantle and remove the underlying asset, less any lease incentives received. The lease liability is initially measured at the present value of the lease payments that are not paid at thecommencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's estimated incremental borrowing rate. The lease term at the lease commencement date is determined based on the noncancellable period for which the Company has the right to use the underlying asset, together with any periodscovered by an option to extend the lease if the Company is reasonably certain to exercise that option, periods covered by an option to terminate the lease if the Company is reasonably certain not toexercise that option and periods covered by an option to extend (or not to terminate) the lease in which the exercise of the option is controlled by the lessor. The Company considers several factorswhen evaluating whether the options in its lease contracts are reasonably certain of exercise, such as length of time before an option exercise, expected value of the leased asset at the end of theinitial lease term, importance of the lease to the Company's operations, costs to negotiate a new lease, any contractual or economic penalties, and the economic value of leasehold improvements. For finance leases, from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term, the right-of-use asset is amortized on a straight-linebasis and the interest expense is recognized on the lease liability using the effective interest method. For operating leases, lease expense is recognized on a straight-line basis over the term of thelease and presented as a single charge in the consolidated statements of operations and comprehensive income. The lease liability is subsequently measured at amortized cost using the effectiveinterest method. Right-of-use assets are adjusted for impairment losses, if any. The estimated useful lives and recoverable amounts of right-of-use assets are determined on the same basis as those of property, plantand equipment. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value.The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Company has elected not to separate non-lease componentsfrom lease components for real estate leases.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Income taxesIncome tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in the consolidated statements of loss and comprehensive loss except to the extent that it relatesto a business combination, or items recognized directly in equity or in other comprehensive loss. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previousyears. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neitheraccounting nor taxable income or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in theforeseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expectedto be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset ifthere is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, butthey intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against whichthey can be utilized. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will notbe realized. An unrealized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority. A change in the recognition or measurement of an unrealized tax benefitis reflected in the period during which the change occurs. Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations as a component of income taxes but as a component of interest expense. Loss per shareBasic loss per share is calculated using the weighted average number of shares outstanding during the year. Diluted loss per share reflects the potential dilution of common share equivalents, suchas outstanding options and warrants, in the weighted average number of common shares outstanding during the period, if dilutive. The diluted loss per share calculation excludes any potentialconversion of options and warrants that would be anti-dilutive. Non-controlling interestsNon-controlling interests of subsidiaries (“NCI”) are recognized either at fair value or at the NCI’s proportionate share of the net assets, determined on an acquisition-by-acquisition basis at the dateof acquisition. Subsequently, the NCI’s share of net loss and comprehensive loss is attributed to the NCI. Adoption of accounting standards and amendmentsIn June 2016, the United States Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments. ASU 2016-13 requires the measurement of current expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonableand supportable forecasts. Adoption of ASU 2016-13 will require financial institutions and other organizations to use forward-looking information to better formulate their credit loss estimates. Inaddition, the ASU amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration. This update is effective for fiscal yearsbeginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU 2016-13 effective as of its inception March 13, 2019, and as such had no impact onthe Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). ASU 2018-13 adds, modifies, and removescertain fair value measurement disclosure requirements. ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. The Companyadopted ASU 2018-13 effective as of its inception March 13, 2019, and as such had no impact on the Company’s consolidated financial statements.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting forincome taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 would be effective for theCompany beginning January 1, 2021. The Company adopted ASU 2016-13 early, effective as of its inception March 13, 2019, and as such had no impact on the Company’s consolidated financialstatements. Accounting pronouncements not yet adoptedCertain new standards, amendments and interpretations, and improvements to existing standards have been published by the FASB and United States Securities and Exchange Commission but arenot yet effective and have not been adopted early by the Company. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date ofapplication unless noted. Information on new standards, amendments and interpretations, and improvements to existing standards which could potentially impact the Company’s financialstatements are detailed as follows: In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”),which requires an acquirer to recognize and measure contract assets and liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (“ASC 606”)rather than adjust them to fair value at the acquisition date. The effects of adoption are applied prospectively to business combinations occurring on or after the effective date. ASU 2021-08 iseffective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is assessing the impacts of adoption, but it is not expected to have an impact based onamounts recorded at December 31, 2022 as any changes required are for transactions occurring prospectively upon adoption. In June 2022, the FASB issued Accounting Standards Update 2022-03—Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions(“ASU 2022-03”), which requires that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered inmeasuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The effects of adoption are accounted forprospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. ASU 2022-03 is effective for fiscal years beginning afterDecember 15, 2023, with early adoption permitted. The Company is assessing the impacts of adoption, but it is not expected to have an impact based on amounts recorded at December 31, 2022 asany changes required are for transactions occurring prospectively upon adoption. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Company’s financial statements.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 4. CRITICAL JUDGMENTS AND ESTIMATION UNCERTAINTIES The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets,liabilities, revenues, and expenses. These estimates and judgements are subject to change based on experience and new information which could result in outcomes that require a material adjustmentto the carrying amounts of assets or liabilities affecting future periods. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognized prospectively. Liquidity and going concern considerationsThe accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Management must assess the Company’s ability to continue as a goingconcern each reporting period. This assessment involves the use of internal budgets and estimates of revenues, expenses and cash flows, which requires a significant amount of managementjudgement. Determination of functional currencyThe Company determines the functional currency through an analysis of several indicators. Primary considerations include the currency in which the Company’s goods and services are sold andthe currency of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services. The Company also considers the currency in which funds fromfinancing debt and equity activities are generated and the currency in which receipts from operating activities are retained. Management judgment is applied when there are indicators supportingmore than one currency for a Company subsidiary. Expected credit losses on financial assetsDetermining an allowance for expected credit losses for all financial asset receivables not held at fair value through profit or loss requires judgment. Factors that cause the estimate to be sensitive tochange include historical and expected future patterns for the probability of default, the timing of collection and the amount of incurred credit losses, and management’s judgment about whethereconomic conditions and credit terms are such that actual losses may be higher or lower than what the historical patterns suggest. These conditions are applied across each of the Company’sbusiness units to the extent the expected risk of loss differ from each other. InventoryInventory is valued at the lower of cost and net realizable value. Determining net realizable value requires the Company to make assumptions about estimated selling prices in the ordinary course ofbusiness, the estimated costs of completion and the estimated variable costs to sell. Management judgment is applied to determine potential impairment exposure related to potential excess productinventory levels, obsolescence, and expiration. Business combinationsIn a business combination, the Company may acquire assets and assume certain liabilities of an acquired entity. Judgement is used in determining whether an acquisition is a business combinationor an asset acquisition. Estimates are made as to the fair value of the identifiable assets acquired and the liabilities assumed on the acquisition date, as well as the fair value of consideration paid andcontingent consideration payable. In certain circumstances, such as the valuation of property, plant and equipment, intangible assets and goodwill acquired, the Company obtains assistance fromthird-party valuation specialists. The determination of these fair values involves a variety of judgment in assumptions, include revenue growth rates, expected operating income, discount rates, andearnings multiples. Estimated useful lives and depreciation of long-lived assets with finite livesAmortization of intangible assets with finite lives are dependent upon estimates of useful lives and when the asset is available for use. These are determined through the exercise of judgment and aredependent upon estimates that consider factors such as economic and market conditions, frequency of use, and anticipated changes in laws. Determination of reporting units and asset groups for impairment testingManagement is required to use judgement in determining which assets or group of assets make up appropriate reporting units and asset groups for the level at which goodwill and other long-livedassets are tested for impairment. Management considers the nature of operations and ability to track asset performance within each of the Company’s business units to determine the appropriatelevel of asset aggregation and allocation, as well as the materiality of the underlying assets within the units.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Impairment of goodwill and long-lived assetsFor reporting units to which goodwill and other long-lived assets is allocated is based on a recoverable amount, the impairment test is determined in accordance with the expected cash flowapproach or another suitable model depending on the asset type. The calculation is based on assumptions including, but not limited to, the cash flow growth rate and the discount rate. Significantmanagement judgment is required when developing these assumptions, which include internal budgets and expectations, as well as consideration of external Company communications and marketestimates of the Company’s and its industry’s future growth. For reporting units that test using the market based fair value approach, the fair value is determined based on guideline public companies similar to the reporting unit and considers similar financialmetrics, operations and sales channels. The fair value calculation is based on assumptions including the determination of guideline public companies, determining the relevant financial metric tomeasure the reporting unit’s recoverable value, and selecting the amount of the financial metric from the observable range of guideline public company amounts to apply to the reporting unit. Asset groups are subject to a two-step impairment testing model. Under Step 1 (recoverability test), the undiscounted expected future cash flows from an asset group are compared to the assetgroup’s carrying amount. The estimates involved in this first step are similar to the recoverable amount assumptions discussed above. If the carrying amount exceeds the undiscounted estimatedfuture cash flows, the Company is required to perform a Step 2 fair value test, with a chosen model and estimates similar to those discussed above. Revenue recognitionManagement judgment is required to determine when the Company is acting as principal or agent in a sales contract where the Company is an intermediary, which affects whether the amount ofrevenue recognized is presented on a gross or net basis, respectively. The Company first considers whether it has obtained control over the product when acting as an intermediary beforetransferring it to the customer, and if the Company combines or transforms the product with other goods and services before transferring the good to the customer. The Company considerssecondary factors, including whether the Company is primarily responsible for the fulfillment of the product obligations to the customer, whether the Company has inventory risk (acquiring and/orpaying for the product prior to transferring to the customer, Company liability for damages and sales returns), and whether the Company has price discretion when selling the product to itscustomers. Management considers the terms of the customer and supplier contracts, as well as established business practices for the arrangements. Management judgment is required to determine the effects on the sales contract transaction price for the potential impacts of sales returns, discounts, rebates, and other customer incentives. TheCompany considers the terms of the contract, historical experience, as well as actual and expected customer activity after the end of the reporting period. The Company’s primary sale of products requires management judgment to determine at what point in time control passes to the customer to recognize revenue. The Company considers thecustomer contract terms, logistic supplier terms, local law, and established business practices to make this determination. Share based compensation transactionsThe Company measures the cost of equity-settled transactions with employees and applicable non-employees by reference to the fair value of the equity instruments at the date at which they arevested. Estimating fair value for share based compensation requires judgment to determine the appropriate valuation model, which is dependent on the terms and conditions of the grant. Thisestimate also requires determining the most appropriate inputs to the valuation model including the expected life of the stock price, stock option, risk-free interest rates, volatility, and dividend yield.For awards with market or performance-based features, the Company applies judgment to determine its expectation of achieving the agreement milestones. Due to the Company’s limited history ofpublicly traded common shares, the volatility and expected term assumptions require additional judgment. The Company considers the Company’s actual trading volatility to date compared to actualand expected volatility of comparable companies of similar size and industry that have been publicly traded longer than the Company’s shares. For expected term, the Company generally uses the maximum stated term in the award agreement unless there is reasonable likelihood established to shorten the expected term for potential earlyexercises.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Income taxes and valuation allowances for deferred tax assetsIn assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expectedtiming of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments,management gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations andthe application of existing tax laws in each jurisdiction. The Company considers relevant tax planning opportunities that are within the Company’s control, are feasible and within management’sability to implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of the relevant tax position examined considering all available evidence.Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affectthe amounts of income tax assets recognized net of valuation allowances. Also, future changes in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. TheCompany reassesses unrecognized income tax assets at each reporting period. The Company applies judgment when determining whether the earnings of its foreign subsidiaries (outside Canada) will be indefinitely reinvested in those subsidiaries and earnings will not berepatriated. The Company considers its historical practices and projected plans for such subsidiaries when making this assessment. The Company must apply judgement when determining whether it has taken an uncertain tax position. Management has analyzed the tax positions taken by the Company, and has concluded that asof December 31, 2022 and 2021, there were no uncertain tax positions taken. 5. TRADE AND AMOUNTS RECEIVABLE The Company’s trade and amounts receivable are recorded at amortized cost. The trade and other receivables balance as at December 31, 2022 and December 31, 2021 consists of trade accountsreceivable, amounts recoverable from the Government of Canada for Harmonized Sales Taxes (“HST”), as well as Value Added Tax (“VAT”) from various jurisdictions, and other receivables.
	December 31,		December 31,

		2022		2021
Thousands of United States dollars
Trade accounts receivable	$		6,767 $	5,565
Allowance for expected credit losses		(2,988)		(1,252)
HST/VAT receivable			2,294		259
Other receivables			778		752
Total	$		6,851 $	5,324
Changes in the trade accounts receivable allowance in the year ended December 31, 2022 relate to establishing an additional allowance for expected credit losses. The Company recorded $0.2 millionof write-offs of trade receivables during 2022. The Company has no amounts written-off that are still subject to collection enforcement activity as at December 31, 2022. The Company’s aging oftrade accounts receivable is as follows:
			December 31,

				2022
Thousands of United States dollars
Current			$	1,398
1-30 Days				1,194
31-60 Days					728
61-90 Days					191
91-180 Days					408
180+ Days				2,848
Total trade receivables			$	6,767
A continuity schedule of the allowance for expected credit losses for the years ended December 31, 2022 and 2021 is as follows:
	December 31,		December 31,

		2022		2021
Thousands of United States dollars
Balance at January 1	$	(1,252) $			-
Current period additions for expected credit losses		(2,002)		(1,252)
Write-offs charges against allowance			205		-
Recoveries collected			50		-
Foreign exchange impacts			11		-
Balance at December 31	$	(2,988) $		(1,252)

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 6. INVENTORY Inventory is comprised of the following as at December 31, 2022 and 2021:
	December 31,		December 31,

		2022		2021
Thousands of United States dollars
Raw materials and supplies	$	3,153 $			899
Harvested cannabis			120		72
Work in progress			6		97
Finished goods		6,810			1,962
Total	$	10,089 $			3,030
In the year ended December 31, 2022, $17.6 million of inventory was expensed to cost of sales (2021 – $6.3 million) and write-downs to cost of sales for impairment was $1.1 million (2021 – less than$0.1 million). There were no reversals of previous inventory impairments in the years ended December 31, 2022 or 2021. 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following:
	December 31,		December 31,

		2022		2021
Thousands of United States dollars
Land	$		637 $		112
Buildings			1,875		928
Machinery and office equipment			2,853		1,991
Vehicles			71		37
Construction in progress			-		905
Total			5,436		3,973
Less: accumulated depreciation			(626)		(223)
Property, plant and equipment, net	$		4,810 $		3,750
Depreciation expense for the year ended December 31, 2022 was $0.5 million (2021 - $0.2 million) and was recorded in depreciation and amortization in the consolidated statements of loss andcomprehensive loss. At December 31, 2022, the Company recorded an impairment charge of the remaining value of the property, plant and equipment within the Colombia Brands segment. The amount of less than $0.1million (2021 - $nil) is included in the other asset impairments line in the consolidated statements of loss and comprehensive loss. See Note 11 for further discussion. As at December 31, 2022, the Company’s property, plant and equipment have no significant restrictions on title or pledges as security for liabilities, there are no significant commitments for futurepurchases, and there were no significant disposals during the year ended December 31, 2022. 8. INVESTMENTS As at December 31, 2022, the Company’s investments consist of common shares and warrants to purchase additional common shares in an early-stage European cannabis company. The Companypurchased common shares from the investee for Euro 2.0 million ($2.4 million), purchased its first tranche of warrants from existing investors in exchange for 225,000 common shares of the Company,and obtained a second tranche of warrants from the investee as an inducement to exercise some of the first tranche of warrants. As at December 31, 2022, the Company owns approximately 9.6% ofthe investee, or approximately 9% on a diluted basis including exercisable warrants of the Company and other investors.
						78

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The warrants allow the holder to purchase one common share of the investee for CAD 0.30 ($0.22) for the first tranche, and CAD 1.00 ($0.74) for the second tranche. The Company did not exercisethe warrants and they expired on February 1, 2023. The Company’s cost of the investments was recorded based on the fair value of the consideration exchanged as at the respective transaction dates. The investee is not a publicly listed entity andhas no active quoted prices for its common shares or warrants. The Company has elected the measurement alternative to record the common share investment at cost and test for impairment. Theinvestment had impairment indicators during 2021 and 2022, and impairments were recorded as indicated in the table below. The Company also considers observable transactions of the commonshares for indicators of fair value but there have been none. Cumulative impairment related to the common shares was $2.2 million and the net carrying value was $0.7 million at December 31, 2022. When impairment indicators were present, the investee common shares were valued considering price to book value and price to tangible book value of the investee (3.6 and 4.8, respectively) as wellas comparable guideline publicly traded companies at the time of initial investment. These initial investment multiples were compared to the guideline public company multiples observed as atDecember 31, 2022 (1.4 price to book value and 2.0 price to tangible value), with these updated valuation multiples applied to the investee’s estimated book value. The Company also considered thestatus of the investee’s milestones between the purchase date and year-end for indicators of change in value. The impairment valuation model for the common shares uses Level 3 inputs of the fairvalue hierarchy. The fair value of the warrants was developed using a Black-Scholes model for each tranche with the following assumptions, using Level 3 inputs of the fair value hierarchy:
	Warrants CAD 0.30	Warrants CAD 1.00

	exercise price	exercise price
Share price	$	0.21 $	0.21
Exercise price	$	0.22 $	0.74
Volatility		100%	100%
Risk-free interest rate		4.1%	4.1%
Dividend yield		0.0%	0.0%
Expected term in years		0.1	0.1
Fair value	$	0.02 $	0.00
Quantity owned				1,666,667	333,333
Fair value	$	34,000 $	-
The share price is based on the calculated value of the investee’s common shares as discussed above. The volatility considers actual volatility of comparable guideline public companies. A schedule of the Company’s investments activity is as follows:
					Investee common		Warrants CAD 0.30	Warrants CAD 1.00

						shares	exercise price	exercise price					Total
Thousands of United States dollars
Financial asset hierarchy level						Level 3			Level 3			Level 3
Balance at January 1, 2021							-	-	-	-
Purchases					$		2,430 $		2,507 $	- $	4,937
Exercise warrants							496	(418)	101	179
Impairment							(939)	-	-	(939)
Loss on changes in fair value							-		(1,464)	(43)	(1,507)
Balance at December 31, 2021							1,987	625	58	2,670
Impairment						(1,257)	-	-	(1,257)
Loss on changes in fair value							-	(591)	(58)	(649)
Balance at December 31, 2022					$		730 $	34 $	- $	764

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The impairment of common shares and loss on changes in fair value appear in the unrealized loss on fair value of investments caption in the consolidated statements of loss and comprehensive loss. The value of the investee common shares appears in the investment line on the consolidated statement of financial position. The value of the warrants appears in current assets within the prepaidexpenses and other accrued assets line on the consolidated statement of financial position. As a sensitivity assessment to the fair value calculations, a 10% change in the valuation multiples applied to the investee common shares results in a 10% change in the fair value as at December 31,2022 of $0.1 million. Applying a 10% change in share price to the warrants results in a less than $0.1 million change in fair value, and a 10% change in volatility results in a less than $0.1 millionchange in fair value. 9. ASSET ACQUISITIONS AND BUSINESS COMBINATIONS Franchise Global Health Inc. (“FGH”) business combinationOn December 23, 2022, the Company completed its acquisition of all the issued and outstanding common shares (the “Franchise Common Shares”) of FGH., a corporation existing under the laws ofthe Province of British Columbia by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia). The Arrangement was completed pursuantto that certain Arrangement Agreement, dated October 21, 2022, by and between Flora and FGH. FGH, through its wholly-owned subsidiaries, is a multi-national operator in the medical cannabis andpharmaceutical industry with principal operations in Germany. The Company acquired FGH to expand its product offerings, accelerate its revenue growth, expand its customer and distributioncapabilities in Germany and to improve synergies and cost savings. Pursuant to the Arrangement Agreement, at completion of the Arrangement, Flora acquired the Franchise Common Shares in exchange for 43,525,951 of Flora’s common shares, no par value (the“Flora Shares”), for a total purchase consideration of $9.8 million. The issuance of the Flora Shares in exchange for the Franchise Common Shares was, subject to applicable securities laws, exemptfrom the registration requirements of (i) the Securities Act of 1933, as amended, pursuant to the exemption provided by Section 3(a)(10) thereof and (ii) applicable U.S. state securities laws.Notwithstanding the foregoing, in accordance with the terms set forth in the Arrangement Agreement, all Flora Shares delivered to the former shareholders of FGH bear a restrictive legend and maynot be sold for a period of ninety (90) days following the closing of the Arrangement. The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows: (Thousands of United States dollars)

Current assets
Cash	$	730
Trade receivables		2,271
Inventory		2,019
Indemnity receivables		3,415
Prepaid assets		139

Non-current assets
Property, plant, and equipment		452
Right of use assets		115
Intangible asset		6,102
Goodwill		3,716
Total assets	$	18,959

Current liabilities
Trade payables and accrued liabilities	$	(6,245)
Current lease liabilities		(98)
Current portion of debt		(1,062)

Long term lease liability		(21)
Deferred tax		(1,717)
Total liabilities	$	(9,143)
Total net assets acquired	$	9,816

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The amounts shown are provisional. The Company has a measurement period of one year following the acquisition date on December 23, 2022 to adjust the provisional amounts recognized for anynew information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities, or affected themeasurement of the amounts recognized as of that date. Since the acquisition date through December 31, 2022, FGH revenue was $0.1 million with net loss and comprehensive loss of $0.1 million. As part of the acquisition terms, the former Chief Executive Officer of FGH, together with certain affiliated entities under his control, entered into an agreement pursuant to which they agreed toindemnify the Company for certain potential liabilities of FGH and its subsidiaries, up to a maximum of $5.0 million. A total of $3.4 million of liabilities were recognized in the trade payables andaccrued liabilities of FGH on the date of acquisition that were subject to this indemnification obligation. The Company believes it will be fully indemnified by the former CEO of FGH, and, as such,has recorded $3.4 million of indemnification receivables. The indemnified losses include:
	1.	any losses that are related to the ownership or the operation of FGH and its Canadian subsidiaries, in each case prior to the closing of the Arrangement, that are unknown to theCompany and that: (i) have not been disclosed or accounted for in FGH filings; or (ii) have not been disclosed in the Company Disclosure Letter, in each case as at the date of theArrangement Agreement;


	2.	any losses that may arise from amounts owed or that may become owed to certain persons or in respect of certain matters identified in the indemnity agreement, as amended; and

	3.	any fraud, intentional misrepresentation, willful breach, or willful misconduct on the part of FGH or any other entity identified in the indemnity agreement of any of the foregoing inconnection with the indemnity agreement or the Arrangement Agreement.

The intangible assets of $6.1 million are comprised of the following categories and estimated useful lives: supplier relationships of $2.4 million for five years, customer relationships of $2.3 million forfive years, and licenses of $1.4 million for five years. The Company does not expect the goodwill and intangible asset values to be deductible for Canadian income tax purposes. The goodwill isassigned to the commercial and wholesale segment. If FGH was acquired at January 1, 2022, the combined revenue and net loss of FGH and the Company would have increased approximately $40.3 million and $19.0 million, respectively (unaudited). The Company incurred acquisition related costs of $0.3 million which were expensed as incurred in professional fees on the consolidated statements of loss and comprehensive loss. Just Brands LLC and High Roller Private Label LLC (collectively "JustCBD") business combinationOn February 24, 2022, Flora Growth U.S. Holdings Corp., a wholly-owned subsidiary of the Company, completed the acquisition of 100% of the outstanding equity interests in each of (i) Just BrandsLLC and (ii) High Roller Private Label LLC for total purchase consideration of $34.4 million. JustCBD is a manufacturer and distributor of consumable cannabinoid products, including gummies,tinctures, vape cartridges, and creams. JustCBD is based in Florida in the United States and was formed in 2017. The Company acquired JustCBD to expand its product offerings, accelerate itsrevenue growth, expand its customer and distribution capabilities in the United States and for the acquisition of human capital through JustCBD's management team. The purchase consideration was comprised of (i) $16.0 million of cash, less $0.2 million returned to the Company in August 2022 due to final calculated closing working capital falling short of thetarget working capital, (ii) 9.5 million common shares of the Company valued at $14.7 million, inclusive of a 15% fair value discount for the required six-month holding period of the shares, and (iii)$4.0 million of contingent purchase consideration. The contingent purchase consideration is based on a clause in the purchase agreement that provides that if at any time during the 24 monthsfollowing the acquisition date, the five-day volume weighted average price (“VWAP”) per share of the Company's common shares as quoted on the Nasdaq Capital Market fails to equal or exceed$5.00, then the Company shall issue a number of additional common shares to the sellers equal to the difference between (x) a fraction, the numerator of which is $47.5 million and the denominator ofwhich is the highest five day VWAP at any point during the 24 months following the closing and (y) the 9.5 million common shares delivered to the sellers at the closing. In no event shall theCompany be required to issue more than 3.65 million common shares unless it shall have obtained the consent of the Company’s shareholders to do so. In the event the Company is required todeliver in excess of 3.65 million shares to the sellers (”Excess Shares”) and the Company shall not have obtained shareholder consent, the Company may deliver cash to the sellers in lieu of suchExcess Shares determined by a formula set forth in the purchase agreement. The contingent purchase consideration is classified as a financial liability within the contingent purchase considerationsline on the statement of financial position as the Company may be required to settle any amounts due in cash instead of common shares if the Company's common shareholders do not providerequisite shareholder approval to issue additional common shares.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The fair value of the contingent purchase consideration at February 24, 2022 was determined using a Monte Carlo simulation incorporating Brownian motion with 100,000 trials through a binomiallattice model. The significant inputs to the valuation included the two-year time period, the Company's closing share price at February 24, 2022 ($1.82), estimated Company common share volatility(100%), and risk free rate of 1.5% to discount the ending result to present value. The fair value of the contingent purchase consideration at December 31, 2022 was determined using a Monte Carlo simulation incorporating Brownian motion with 100,000 trials through a binomiallattice model. The significant inputs to the valuation include the remaining time period, the Company's closing share price at December 31, 2022 ($0.23), estimated Company common share volatility(110%), and risk free rate of 4.7% to discount the ending result to present value. The Company determined that the balance of this contingent consideration at December 31, 2022 was $2.6 million,with the $1.3 million decrease in the balance from February 24, 2022 recorded in the unrealized loss from changes in fair value caption in the consolidated statements of loss and comprehensive loss. The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows: (Thousands of United States dollars)

Current assets
Cash	$	535
Trade receivables		975
Inventory		5,534
Other current assets		540

Non-current assets
Property, plant, and equipment		536
Right of use assets		772
Other non-current assets		127
Intangible asset		4,533
Goodwill		24,898
Total assets	$	38,450

Current liabilities
Trade payables and accrued liabilities	$	(2,273)
Current lease liabilities		(644)
Provision for sales tax		(982)
Deferred tax		(24)
Other current liabilities		(99)
Total liabilities	$	(4,022)
Total net assets acquired	$	34,428
The fair value of the trade receivables reflects a $0.3 million discount to the gross contractual amounts as allowance for potentially uncollectible amounts. Since the acquisition date throughDecember 31, 2022, JustCBD revenue was $26.4 million with net loss and comprehensive loss of $6.5 million. The acquired provision for sales tax is discussed at Note 18 below. The intangible assets of $4.5 million are comprised of the following categories and estimated useful lives: tradenames of $3.1 million for eight to nine years, customer relationships of $1.2 million forfive to seven years, and know-how of $0.2 million for three years. The Company expects the goodwill and intangible asset values to be deductible for United States income tax purposes. Thegoodwill is assigned to the house of brands segment. If JustCBD was acquired at January 1, 2022, the combined revenue and net loss of JustCBD and the Company would have increased approximately $5.2 million and $1.6 million, respectively(unaudited).
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The Company incurred acquisition related costs of $0.6 million which were expensed as incurred in professional fees on the consolidated statements of loss and comprehensive loss. No Cap Hemp Co. (“No Cap”) business combinationOn July 20, 2022, Just Brands LLC., a wholly owned subsidiary of the Company, acquired certain assets, assumed certain liabilities, retained certain employees and processes (together the“purchased assets”) of No Cap for total purchase consideration of $0.9 million. No Cap is a manufacturer and distributor of high quality and affordable CBD products. No Cap is based in Florida inthe United States and was formed in 2017. Just Brands LLC acquired No Cap to expand its product offerings and accelerate its revenue growth. As consideration for the purchased assets of No Cap, Just Brands LLC will pay an amount equal to 10% of the sales of No Cap until such a time that Just Brands LLC will have paid a total of $2.0million. Also on July 20, 2022, Just Brands LLC advanced $0.2 million to the former owners of No Cap. This $0.2 million will be settled prior to and in the same manner as the consideration for thepurchased assets. As these entire amounts are considered contingent consideration, it was valued using discounted cash flow models utilizing two different rates, high and low. The significantinputs to the valuation include the estimated nine-year time period to accumulate the $2.0 million maximum payment and discount rates of 23.5%, high, and 14.3%, low, to estimate the present valueof the future cash outflows. The resulting acquisition date fair value of $0.9 million contingent purchase consideration is classified within the contingent purchase considerations line on thestatement of financial position. At December 31, 2022, the remaining balance outstanding was $0.9 million. The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows: (Thousands of United States dollars)

Current assets
Trade receivables		31
Inventory		725

Non-current assets
Intangible asset		-
Goodwill		417
Total assets	$	1,173

Current liabilities
Trade payables and accrued liabilities		(272)
Total liabilities	$	(272)
Total net assets acquired	$	901
The fair value of the trade receivables reflects a $0.2 million discount to the gross contractual amounts as allowance for potentially uncollectible amounts. Since the acquisition date throughDecember 31, 2022, No Cap revenue was $0.6 million with net income and comprehensive loss of $0.1 million. The Company expects the goodwill to be deductible for Unites States income tax purposes. The goodwill is assigned to the house of brands segment. If No Cap was acquired at January 1, 2022, the combined revenue of No Cap and the Company would have increased approximately $1.9 million, and the combined net loss would have decreased by$1.0 million (unaudited). Vessel Brand, Inc. (“Vessel”) business combination On November 12, 2021, the Company acquired 100% of the equity interests in Vessel for total purchase consideration of $28.7 million. Vessel designs and sells premium cannabis consumptionaccessories in the United States through Vessel’s direct to consumer website and wholesale to distributors. Vessel was based in California (Note 13) in the United States and was formed in 2018. Thepurchase consideration was comprised of $8.0 million and 4,557,000 common shares of the Company valued at $20.7 million based on the closing share price of the Company’s common shares less a15% fair value discount for the required six-month holding period of 3.6 million of the Company’s shares issued. The Company acquired Vessel to expand its product offerings, accelerate its revenuegrowth, expand its presence in the United States and for the acquisition of human capital through Vessel’s management team.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:
	(Thousands of United States dollars)
Current assets
Cash		$	570
Trade receivables			49
Inventory			1,278
Other current assets			151

Non-current assets
Property, plant and equipment			124
Right of use assets			501
Other long-term assets			42
Intangible assets			9,150
Goodwill			19,675
Total assets		$	31,540

Current liabilities
Trade payables and accrued liabilities		$	(856)
Deferred tax			(1,500)

Non-current lease liability			(530)
Total liabilities		$	(2,886)
Total net assets acquired		$	28,654
The fair value of the trade receivables approximates the gross contractual amounts and the Company expects to fully collect the balance. Since the acquisition date through December 31, 2021,Vessel revenue was $1.1 million with net loss and comprehensive loss of $0.3 million. The intangible assets of $9.2 million were comprised of the following categories and estimated useful lives: tradename of $2.1 million for eight years, patents and developed technology of $4.3 millionfor nine years, noncompete agreement of $1.2 million for three years, and customer relationships of $1.6 million for ten years. The Company does not expect the goodwill and intangible asset valuesto be deductible for Unites States income tax purposes. The goodwill is assigned to the house of brands segment. If Vessel was acquired at January 1, 2021, the combined revenue and net loss of Vessel and the Company would have increased approximately $ 6.5 million and $1.5 million, respectively, during theyear ended December 31, 2021 (unaudited). The Company incurred acquisition related costs of $0.3 million which were expensed as incurred in professional fees on the consolidated statements of loss and comprehensive loss. Quipropharma asset acquisition On January 12, 2021, the Company acquired certain laboratory assets from Quipropharma for COP 1.2 billion ($0.4 million) and real estate assets for COP 3.9 billion ($1.1 million). These purchases didnot meet the definition of a business combination under US GAAP and was therefore recorded as an asset acquisition. The asset acquisition was recorded at 100% of the fair value of the net assetsacquired, with the consideration paid entirely assigned to property and equipment of $1.5 million. Supplemental Pro Forma Information (unaudited)The unaudited pro forma information for the periods set forth below gives effect to the acquisition of JustCBD, Vessel, and FGH as if the acquisitions had occurred on January 1, 2021. Proforma netrevenue for the years ended December 31, 2022 and 2021 are $84.5 million and $45.8 million, respectively. Proforma net loss and comprehensive loss attributable to common shareholders for the yearsended December 31, 2022 and 2021 are $72.2 million and $34.0 million, respectively.
				84

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Acquisition of Minority interestsOn January 18, 2022, the Company acquired the remaining 13% of the outstanding equity interests in Flora Beauty LLC from its minority shareholder in exchange for 100,000 common shares of theCompany and a stock option exercisable for up to 50,000 common shares of the Company at an exercise price of $1.70 per share that expire five years from the date of the grant. On January 31, 2022, the Company completed its acquisition of Breeze by acquiring the remaining 10% of the equity interests in Breeze from its minority shareholders in exchange for 30,282 commonshares of the Company. 10. INTANGIBLE ASSETS AND GOODWILL A continuity of intangible assets for the years ended December 31, 2022 and 2021 is as follows:
		Customer	Trademarks		Non-Compete

In Thousands of United States dollars	License	Relationships	and Brands	Patents	Agreements	Goodwill		Total
Cost
At December 31, 2020	$	410 $	189 $	121 $	- $	- $	431 $	1,151
Additions		200	-	-	-	-	-	200
Acquired through business combinations		-	1,570	2,090	4,300	1,190	19,675	28,825
Impairment		-	-	-	-	-	(51)	(51)
At December 31, 2021	$	610 $	1,759 $	2,211 $	4,300 $	1,190 $	20,054 $	30,124

Accumulated Amortization
At December 31, 2020	$	64 $	- $	- $	- $	- $	- $	64
Additions		65	26	35	48	66	-	240
At December 31, 2021	$	129 $	26 $	35 $	48 $	66 $	- $	304

Foreign Currency translation		(30)	-	-	-	-	-	(30)
Net book value at December 31, 2021	$	451 $	1,733 $	2,176 $	4,252 $	1,124 $	20,054 $	29,790

		Customer/Supplier	Trademarks		Non-Compete

In Thousands of United States dollars	License	Relationships	and Brands	Patents	Agreements	Goodwill		Total
Cost
At December 31, 2021	$	610 $		1,759 $	2,211 $	4,300 $	1,190 $	20,054 $	30,124
Acquired through business combinations		1,397		5,945	3,063	230	-	29,031	39,666
Impairment		(128)		(1)	(31)	-	-	(25,452)	(25,612)
At December 31, 2022	$	1,879 $		7,703 $	5,243 $	4,530 $	1,190 $	23,633 $	44,178

Accumulated Amortization
At December 31, 2021	$	129 $		26 $	35 $	48 $	66 $	- $	304
Additions		144		360	623	573	397	-	2,097
At December 31, 2022	$	273 $		386 $	658 $	621 $	463 $	- $	2,401

Foreign Currency translation		(46)		17	(19)	-	-	(261)	(309)
Net book value at December 31, 2022	$	1,560 $		7,334 $	4,566 $	3,909 $	727 $	23,372 $	41,468

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The Company’s intangible assets acquired in 2020 consist of customer relationships, tradenames/brands and licenses and certifications for formulations due to the acquisitions of Kasa, Breeze andGrupo Farmaceutico Cronomed. The amounts were recorded based on their estimated fair values as part of the business combinations accounting as of the respective acquisition dates. At December31, 2022, the Company determined that indicators of impairment were present that related to certain customer relationships and tradenames acquired in 2020. The Company recorded an impairment ofless than $0.1 million on these assets during the year ended December 31, 2022 (Note 11). The Company’s intangible asset additions in 2021 primarily consist of assets acquired as part of the November 2021 purchase of Vessel (Note 9) and intellectual property for cannabis industryeducation materials purchased from a third party categorized under licenses. The 2021 additions to license were being amortized over its estimated useful life of 36 months, with 23 months remainingas at December 31, 2022. At December 31, 2022, the Company determined that indicators of impairment related to these licenses were present, and, thus, recorded a full impairment of $0.1 million onthe remaining value of these licenses (Note 11). Information regarding the significant Vessel intangible assets within the indicated categories of the table above is as follows as at December 31, 2022:
	·	Tradenames and brands: carrying amount $1.8 million with 82 months of remaining amortization period
	·	Patents and developed technology: carrying amount $3.7 million with 94 months of remaining amortization period
	·	Noncompete agreement: carrying amount $0.8 million with 22 months of remaining amortization period
	·	Customer relationships: carrying amount $1.4 million with 106 months of remaining amortization period
The Company’s intangible asset additions in 2022 primarily consist of assets acquired as part of the February 2022 purchase of JustCBD and the December 2022 purchase of Franchise (Note 9).Information regarding the significant JustCBD intangible assets within the indicated categories of the table above is as follows as at December 31, 2022:
	·	Tradenames: carrying amount $2.7 million with 86 to 98 months of remaining amortization periods
	·	Customer relationships: carrying amount $1.1 million with 50 to 74 months of remaining amortization periods
	·	Know-how: carrying amount $0.2 million with 26 months of remaining amortization period
Information regarding the significant FGH intangible assets within the indicated categories of the table above is as follows as at December 31, 2022:
	·	Customer and supplier relationships: carrying amount $4.7 million with 60 months of remaining amortization period
	·	Licenses: carrying amount $1.4 million with 60 months of remaining amortization period
The gross cost of the intangible assets is amortized over their estimated useful lives, as the Company does not expect the assets to have significant residual value for any of the asset classes. Theweighted average amortization period at December 31, 2022 by asset class subject to amortization is as follows: License
			5.0 years
Customer relationships			5.9 years
Trademarks and brands			7.1 years
Patents			7.6 years
Non-complete agreements			1.8 years
Total			6.3 years
Certain licenses and trademarks have renewal or extension terms available, with a weighted average of 5.3 and 7.1 years, respectively, remaining before the next renewal or extension is due atDecember 31, 2022. The Company expenses such costs as incurred. The licenses are necessary to conduct operations in the Company’s jurisdictions, and especially for the cannabis relatedoperations. The Company’s trademarks and brands are registered to protect the assets from use by others, and cash flows of the related reporting units and asset groups could be negativelyimpacted if the Company did not successfully renew them. At December 31, 2022, the estimated aggregate amortization expense for each of the next five years is as follows: Thousands of United States dollars 2023
				$	3,254
2024					3,180
2025					2,754
2026					2,741
2027					2,667

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The Company’s goodwill is assigned to the following reporting units for the years ended December 31, 2021 and 2022:
		Food and

In Thousands of United States dollars	Pharmaceuticals	beverage	Vessel	JustCBD	Franchise	Total
Gross goodwill recorded prior to December 31, 2020	$	1,413 $	834 $	- $	- $	- $	2,247
Impairment recorded prior to December 31, 2020		(1,034)	(783)	-	-	-	(1,817)
Net book value as at December 31, 2020		379	51	-	-	-	430
Acquired through business combinations		-	-	19,675	-	-	19,675
Impairment		-	(51)	-	-	-	(51)
Net book value as at December 31, 2021		379	-	19,675	-	-	20,054
Acquired through business combinations		-	-	-	25,315	3,716	29,031
Impairment		(379)	-	(19,675)	(5,398)	-	(25,452)
Foreign exchange impacts		-	-	-	(277)	16	(261)
Net book value as at December 31, 2022	$	- $	- $	- $	19,640 $	3,732 $	23,372
11. IMPAIRMENT OF ASSETS For the year ended December 31, 2022, the Company tested its goodwill for impairment as part of its annual fourth quarter impairment test, and at interim periods when impairment indicators exist. Inaddition, the Company assessed its other long-lived assets for impairment due to external indicators such as a decline in the value of the Company’s publicly traded common shares as well asinternal indicators such as negative operating cash flows. The Company’s goodwill is assigned to the reporting units associated with the original acquisition of those operations. Managementdetermined the Company’s reporting units for 2022 impairment testing are its reportable segments shown in Note 23, but with the house of brands segment broken down into separate reporting unitsfor the Company’s JustCBD, Vessel, and Colombia brands product groups of assets. The Company may consider the results of both an income approach (discounted cash flows) and market approach (guideline public companies) when determining the recoverable amount of itsreporting units. For the income approach, the significant assumptions used in the calculation of the recoverable amounts of the reporting units include forecasted revenue, expenses and net cashflows, terminal period cash flows and growth rates, and the weighted average cost of capital used as the discount rate. These assumptions are considered Level 3 inputs in the fair value hierarchy.The assumptions consider historical and projected data from internal sources as well as external industry trends and expectations. For the market approach, the significant assumptions includeidentifying and calibrating relevant guideline public companies, and determining the financial metric to measure against. The results of the two approaches are considered, and judgment is applied inweighting each approach to determine the recoverable amount of the reporting unit. For long-lived assets other than goodwill, which show impairment indicators are present, the Company compares its expected undiscounted future cash flows to the carrying value of the assetgroup. If the undiscounted future cash flows are less than the carrying value of the assets, then the fair value of the asset group is calculated using an income or market approach as discussed in theprior paragraph. The significant assumptions used in calculating the undiscounted future cash flows include determining the primary asset of the asset group which sets the length of time to projectthe cash flows, and the forecasted revenue, expenses and net cash flows relating to the asset group. 2022 Annual Impairment Test The Company concluded that the carrying values of its Vessel, JustCBD and pharmaceuticals reporting units were higher than their respective estimated fair values, and a goodwill impairment losstotaling $25.5 million was recognized in the year ended December 31, 2022, with details of these impairment tests discussed below. The goodwill impairment loss was comprised of (i) $19.7 millionrelated to the Vessel reporting unit, representing the entirety of the goodwill assigned to the Vessel reporting unit, part of the house of brands segment; (ii) $ 5.4 million related to the JustCBDreporting unit, part of the house of brands segment; and (iii) $0.4 million related to the pharmaceuticals reporting unit and segment. See Note 23 for discussion of the Company’s segments. Certainnegative trends, including slower growth rates, resulted in updated long-term financial forecasts indicating lower forecasted revenue and cash flow generation for the Vessel and pharmaceuticalreporting units. No impairment was noted for the Franchise reporting unit, as the acquisition of Franchise occurred close to the end of the year and fair value calculated at the December 23, 2022acquisition date approximates fair value as at December 31, 2022.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The Company reconciled the sum of its reporting unit recoverable amounts discussed above plus all other net assets to the Company’s market capitalization of common shares as December 31, 2022.The Company’s recoverable amounts at December 31, 2022 exceeded the market capitalization of its common shares. The Company believes the excess is due to implied equity control premium and iswithin an acceptable range of values based on control premiums observed in business combinations within the cannabis and wholesale industries. December 31, 2022 Annual Goodwill Impairment Test of Vessel At June 30, 2022, the Company’s Vessel reporting unit had external indicators of impairment primarily due to a decline in comparable public company share prices which would negatively impact theimplied valuation of Vessel. As such, the Company tested the Vessel reporting unit for impairment as at June 30, 2022 and determined that the carrying value of the reporting unit’s assets exceededthe recoverable amount, resulting in goodwill impairment of $16.0 million recorded in the first half of fiscal 2022. The impairment is recorded in the goodwill impairment caption on the consolidatedstatements of loss and comprehensive loss. Vessel’s December 31, 2022 carrying value of $ 11.6 million was comprised primarily of goodwill and identified intangible assets of $11.3 million and other long-lived assets of $1.0 million. Thecarrying value is reduced by inseparable market participant liabilities associated with the November 2021 acquisition of Vessel which includes $1.1 million of lease liability. The estimated recoverableamount of Vessel at December 31, 2022 was $6.8 million, resulting in goodwill impairment of the remaining $3.7 million as the carrying value of the reporting unit’s assets exceeds the recoverableamount. The impairment is recorded in the goodwill impairment caption on the consolidated statements of loss and comprehensive loss. The reporting unit’s fair value was determined based on an income approach discounted cash flow model of $7.6 million (80% weighting) and a market approach guideline public company method of$7.0 million (20% weighting). After working capital adjustments, the resulting fair value was estimated at $7.0 million. The income approach used a discount rate of 17%, operating margins from 0% to18%, working capital requirements of 15% revenue, and a terminal period growth rate of 3%. The revenue growth rates start at 14% in 2023 and taper down to 3% in the terminal period after 2030. Themarket approach considered guideline public companies similar to Vessel considering financial metrics such as historical revenue growth, gross margin and EBITDA profitability and with operationsfocused on consumer brands and similar sales channels. An enterprise value to latest twelve months revenue multiple of 1.0 was selected based on consideration of the enterprise value to latesttwelve months multiples of the guideline companies. The multiple was applied to Vessel’s revenue for the twelve months ended December 31, 2022. The impairment test valuation is considered aLevel 3 method within the ASC 820 fair value hierarchy. After the impairment recorded at December 31, 2022, Vessel’s carrying value was equal to its recoverable amount. As a sensitivity assessment to the recoverable amount calculations, increasing thediscount rate by 3% in the income approach model would decrease the reporting unit fair value by $1.8 million. Reducing the market approach selected revenue multiple by 0.10 from 1.00 above downto 0.90 (approximately 10% change) would result in a decrease of the reporting unit fair value of approximately $0.7 million. However, there would be no impact on the goodwill impairment amount foreither of these unfavorable changes in the models as the imputed fair value of the goodwill exceeded its carrying amount by $1.1 million with the goodwill impaired to zero. December 31, 2022 Annual Goodwill Impairment Test of JustCBD JustCBD’s December 31, 2022 carrying value of $34.4 million was comprised primarily of goodwill and identified intangible assets of $29.0 million and other long-lived assets of $2.0 million. Thecarrying value is reduced by inseparable market participant liabilities associated with the February 2022 acquisition of JustCBD which includes $1.2 million of lease liability. The estimatedrecoverable amount of JustCBD at December 31, 2022 was $29.0 million, resulting in goodwill impairment of $5.4 million as the carrying value of the reporting unit’s assets exceeds the recoverableamount. The impairment is recorded in the goodwill impairment caption on the consolidated statements of loss and comprehensive loss.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The reporting unit’s fair value was determined based on an income approach discounted cash flow model of $28.0 million (80% weighting) and a market approach guideline public company methodof $21.9 million (20% weighting). After working capital adjustments, the resulting fair value was estimated at $29.0 million. The income approach used a discount rate of 32%, operating margins from5% to 28%, working capital requirements of 10% revenue, and a terminal period growth rate of 3%. The revenue growth rates start at 21% in 2023 and taper down to 3% in the terminal period after2030. The market approach considered guideline public companies similar to JustCBD considering financial metrics such as historical revenue growth, gross margin and EBITDA profitability andwith operations focused on consumer brands and similar sales channels. An enterprise value to latest twelve months revenue multiple of 0.6 was given the most weight in the valuation and wasselected based on consideration of the enterprise value to latest twelve months multiples of the guideline companies. The multiple was applied to JustCBD’s revenue for the twelve months endedDecember 31, 2022. The impairment test valuation is considered a Level 3 method within the ASC 820 fair value hierarchy. After the impairment recorded at December 31, 2022, JustCBD’s carrying value was equal to its recoverable amount. Any change in the significant assumptions could result in additional impairmentof its goodwill as at December 31, 2022. As a sensitivity assessment to the recoverable amount calculations, increasing the discount rate in the income approach model by 3% from 32% above up to35% (approximately 9% change) would result in a decrease of the reporting unit fair value and additional goodwill impairment of approximately $3.5 million. Reducing the market approach selectedrevenue multiple by 0.1 from 0.6 above down to 0.5 (approximately 17% change) would result in a decrease of the reporting unit fair value and additional goodwill impairment of approximately $3.7million. December 31, 2022 Annual Goodwill Impairment Test of Pharmaceuticals Pharmaceutical’s December 31, 2022 carrying value of $2.4 million was comprised primarily of goodwill and identified intangible assets of $0.7 million and other long-lived assets of $1.6 million. Theestimated recoverable amount of pharmaceuticals at December 31, 2022 was $2.0 million, resulting in impairment of the remaining $0.4 million as the carrying value of the reporting unit’s assetsexceeds the recoverable amount. The impairment is recorded in goodwill impairment caption on the consolidated statements of loss and comprehensive loss. The reporting unit’s fair value wasdetermined based on an income approach discounted cash flow model, with the fair value estimated at $2.0 million. The income approach used a discount rate of 25%, operating margins from 8% to16%, working capital requirements of 30% revenue, and a terminal period growth rate of 3%. The revenue growth rates start at 11% in 2023 and taper down to 3% in the terminal period after 2028. After the impairment recorded at December 31, 2022, Pharmaceutical’s carrying value was equal to its recoverable amount. As a sensitivity assessment to the recoverable amount calculations,increasing the discount rate in the model by 3% from 25% to 28% (approximately 12% change) would decrease the value of the reporting unit by $0.3 million. However, there would be no impact onthe goodwill impairment amount for this potential unfavorable change in the model as the imputed fair value of the goodwill approximated the prior goodwill balance, and the goodwill is nowimpaired to zero. December 31, 2022 Other Long-Lived Asset Impairment Tests For asset groups that had indicators of impairment, the Company performed a quantitative analysis as of December 31, 2022 to determine if impairment existed by comparing the carrying amount ofeach asset to the future undiscounted cash flows the asset is expected to generate over their remaining lives. This analysis indicated that certain asset values may not be recoverable. The Companythen calculated the fair value of these assets using an income approach. As a result, the Company recorded an impairment of the property, plant and equipment, customer relationships andtrademarks within its Colombia asset groups within the house of brands segment totaling $0.1 million and an impairment of the licenses within the corporate segment totaling $0.1 million. Thesecharges were recorded in the other asset impairments caption on the consolidated statements of loss and comprehensive loss. The Company performed a similar analysis for its Colombiancommercial and wholesale asset group property, plant and equipment as of December 31, 2022, and determined that no indicators of impairment were present. During the fourth quarter of 2022, the Company decided to consolidate operations and looked for subtenants for two building leases that have contractual lease obligations through 2026 and 2027.These leases are recorded on the Company’s statement of financial position as operating lease right of use assets. The lease assets have indicators of impairment as they are no longer used in theasset groups’ operations, but the Company is actively seeking to sublease both spaces to generate income from the spaces. The Company calculated the fair value of the two leases using an incomeapproach on the expected sublease income. The resulting fair values were compared to the operating right of use asset values at December 31, 2022, resulting in an impairment of $0.6 million. Thediscounted cash flow models assumed the spaces would be subleased within 2023 at 75% to 100% of the Company’s cost of the leases, less upfront costs to obtain a sublease tenant. The cashflows were discounted at 8% to 9% which approximates the discount rate in the Company’s right of use asset and lease liability calculations . These charges were recorded in the other assetimpairments caption on the consolidated statements of loss and comprehensive loss.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 2021 Annual Impairment Test As a result of the impairment test, the Company’s food and beverage reporting unit incurred a goodwill impairment of $0.1 million to write-down goodwill to zero as at December 31, 2021. Thediscount rate used in the analysis was 20.5%, revenue growth reflecting the Company’s budget estimates and annualizing 2021 results for 2022, revenue growth of approximately 55% through 2025,and tapering down to 3% terminal period growth. Operating margin ranged from -14% in 2022 and increasing to 6% in 2024 through the terminal period and working capital requirements at 25% ofrevenue and tapering down to 15% of revenue by 2024 through the terminal period. The Company’s Vessel reporting unit was acquired in November 2021 as discussed in Note 9. The reporting unit’s carrying value was considered for impairment as at December 31, 2021, resulting inno impairment as the recoverable amount exceeded the carrying value of the reporting unit’s assets. The recoverable amount is based on fair value. The fair value of the Company’s Vessel reportingunit was determined based on guideline public companies similar to Vessel considering financial metrics such as historical revenue growth, gross margin and EBITDA profitability and withoperations focused on consumer brands and similar sales channels. An enterprise value to latest twelve months revenue multiple of 4.3x was selected based on consideration of the enterprise valueto latest twelve months multiples of the guideline companies as well as the implied multiple the Company paid to acquire Vessel in November 2021. The multiple was applied to Vessel’s revenue forthe twelve months ended December 31, 2021. The impairment test valuation is considered a Level 3 method within the ASC 820 fair value hierarchy. The Company’s other reporting units were tested for impairment in the fourth quarter of 2021, but the recoverable amounts significantly exceeded the carrying values, resulting in no impairment. Atthe time of the test, the carrying value of goodwill for these other reporting unit’s totaled $0.4 million and other long-lived assets totaled $3.1 million. The recoverable amounts were determined basedon an income approach, with discount rates ranging from 20.5% to 30%, operating margins from 6% to 45%, working capital requirements ranging from 15% to 30% of revenue, and terminal periodgrowth rates of 3%. The revenue growth rates reflected the Company’s expectations for developing these businesses with growth rates beyond the development stage period of 55% in 2024 andtapering down to 3% in the terminal period after 2025. The discount rates applied include reporting unit specific risk premiums ranging from 8% to 19%. 12. DEBT Euro credit facility The Company, through FGH, has a credit facility for 1.0 million Euro with, secured by the trade and other receivables of one of the subsidiaries of FGH. As of December 31, 2022, the outstandingamount was 1.0 million Euros ($1.1 million USD). The credit facility has a rate of Euro Interbank Offer Rate (“Euribor”) plus 2.95% per year and is due January 10, 2023. The Company and the bankagreed to renew the credit facility on January 10, 2023, under the same terms. The interest on the credit facility resets every two months and the interest on the outstanding balance is paid monthly.There arrangement is open ended without a predetermined maturity date. 13. LEASES The Company’s leases primarily consist of administrative real estate leases in Colombia, Germany and the United States, and the Company’s cultivation property in Santander, Colombia.Management has determined all the Company’s leases are operating leases through December 31, 2022. Information regarding the Company’s leases is as follows:
	Year ended			Year ended
		December 31,			December 31,
Thousands of United States dollars		2022		2021
Components of lease expense
Operating lease expense	$	1,221 $			316
Short-term lease expense			396		14
Total lease expense	$	1,617 $			330

Other Information
Operating cash flows from operating leases	$	1,180 $			256
ROU assets obtained in exchange for new operating lease liabilities		2,919			1,233
Weighted-average remaining lease term in years for operating leases			3.5		3.3
Weighted-average discount rate for operating leases			7.9%		9.0%

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Maturities of operating lease liabilities as of December 31, 2022 are as follows: Thousands of United States dollars
	Operating Leases
2023	$	1,383
2024		849
2025		443
2026		417
2027		237
Thereafter		189
Total future lease payments		3,518
Less: imputed interest		(461)
Total lease liabilities		3,057
Less: current lease liabilities		(1,188)
Total non-current lease liabilities	$	1,869
Most of the Company’s leases contain renewal options to continue the leases for another term equivalent to the original term, which are generally up to two years. The lease liabilities above includerenewal terms that management has executed or is reasonably certain of renewing, which only included leases that would have expired in 2022. The Company’s operating lease of warehousing and office space for Vessel Brand Inc. expires August 31, 2027. The lease includes an option to extend the lease term for the entire space for a periodof five years at the end of the current lease term. At December 31, 2022, the renewal option is not included in the related operating right of use asset recorded. At the end of 2022, the Companydecided to move Vessel’s operations and to consolidate them with JustCBD’s operations in Florida. The Company is currently seeking a subtenant for this lease. See Note 11. The Company’s operating lease of manufacturing and warehousing for High Roller Private Label LLC expires June 30, 2024. The lease does not contain a renewal option. The Company’s operating lease of warehousing and office space for Just Brands LLC expires April 30, 2024. The lease does not contain a renewal option. The Company’s land lease for 361 hectares of property in Santander, Colombia expires August 31, 2024 with an option to extend the lease for an additional five years, unless either the Company orlessor provide notice to terminate the lease at the end of the original term with six months’ notice. At December 31, 2022, the renewal option is not included in the related right of use asset recorded. 14. SHARE CAPITAL Authorized and issued The Company is authorized to issue an unlimited number of common shares, no par value. On April 30, 2021, the Company consolidated its issued and outstanding common shares based on onenew common share of the Company for every three existing common shares of the Company. All common shares and per share amounts have been restated to give retroactive effect to the shareconsolidation. The Company had the following significant common share transactions:
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Year ended December 31, 2022 DECEMBER 2022 PAYMENT TO FGH OWNERS As discussed in Note 9, the Company issued 43,525,951 common shares of the Company valued at $9.8 million, inclusive of a 7.5% fair value discount for the required three-month holding period ofthe shares, to the prior owners of FGH as part of the Company’s acquisition of FGH on December 23, 2022. DECEMBER 2022 UNIT OFFERING On December 8, 2022, the Company closed a registered direct offering of 12,500,000 units of the Company at a price of $0.40 per unit for gross proceeds of $5.0 million. Each unit is comprised of onecommon share of the Company and one common share purchase warrant (12,500,000 total warrants) to purchase one additional common share at an exercise price of $0.40 per warrant share throughDecember 8, 2027. Additionally, the Company amended the exercise price with respect to 1,325,000 warrants that were previously issued in the November 2021 offering (see Note 16) from $3.75 pershare to $0.40 per share with no increase to the value of the additional paid-in capital as it was offset by a corresponding increase to issuance costs. The Company paid $0.4 million in issuance costsrelating to the December 2022 unit offering, as well as 500,000 warrants issued to the placement agent as discussed in Note 16. FEBRUARY 2022 PAYMENT TO JUSTCBD OWNERS As discussed in Note 9, the Company issued 9,500,000 common shares of the Company valued at $14.7 million, inclusive of a 15% fair value discount for the required six-month holding period of theshares, to the prior owners of JustCBD as part of the Company’s acquisition of JustCBD on February 25, 2022. ACQUISITION OF NONCONTROLLING INTERESTS On January 18, 2022, the Company issued 100,000 common shares of the Company valued at $0.2 million to acquire the remaining 13% of the outstanding equity interests in Flora Beauty LLC from itsminority shareholders. In addition to the common shares, the Company granted a stock option, exercisable for up to 50,000 common shares of the Company at an exercise price of $1.70 per share thatexpire five years from the date of the grant. On January 31, 2022, the Company issued 30,282 common shares of the Company valued at $0.1 million to complete its acquisition of Breeze by acquiring the remaining 10% of the equity interests inBreeze from its minority shareholders. OTHER ISSUANCES In January 2022, the Company amended an agreement with a consultant pursuant to which the Company issued 111,112 common shares of the Company valued at $0.2 million and a stock option,exercisable for up to 83,333 common shares of the Company at an exercise price of $2.25 per share that expire five years from the date of the grant. On April 5, 2022, the Company issued 700,000 common shares of the Company valued at $1.3 million as part of a settlement agreement with Boustead Securities, LLC (“Boustead”) to resolve certaindisputes arising under a prior underwriting agreement and engagement letter. In addition to the common shares, the Company paid Boustead $0.4 million. SHARE REPURCHASE The Company repurchased 368,244 common shares for $0.3 million during the year ended December 31, 2022. Any future repurchases will depend on factors such as market conditions, share price and other opportunities to invest capital for growth. From time to time when management does not possessmaterial nonpublic information about the Company or its securities, the Company may enter a pre-defined plan with a broker to allow for the repurchase of shares at times when the Companyordinarily would not be active in the market due to internal trading blackout periods, insider trading rules or otherwise. Any such plans entered with our broker will be adopted in accordance withapplicable securities laws such as the requirements of Rule 10b5-1 under the U.S. Securities Exchange Act of 1934, as amended.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Year ended December 31, 2021 NOVEMBER 2021 UNIT OFFERING On November 23, 2021, the Company closed an offering of 11,500,000 units of the Company at a price of $3.00 per unit for gross proceeds of $34.5 million. Each unit is comprised of one commonshare of the Company and one-half of one common share purchase warrant (5,750,000 total warrants) to purchase one additional common share at an exercise price of $3.75 per warrant share throughNovember 18, 2026. As described above, 1,325,000 of such warrants were repriced in connection with the December 2022 Unit Offering. The Company paid $2.7 million in issuance costs relating tothe November 2021 unit offering, as well as 460,000 warrants issued to the underwriters as discussed in Note 16. NOVEMBER 2021 PAYMENT TO VESSEL OWNERS As discussed in Note 9, the Company issued 4,557,000 common shares of the Company valued at $20.7 million to the prior owners of Vessel as part of the Company’s acquisition of Vessel inNovember 2021. INITIAL PUBLIC OFFERING On May 13, 2021, the Company closed its initial public offering (“IPO”) upon which it issued 3,333,333 common shares of the Company at a price of $5.00 per common share for gross proceeds of$16.7 million. On May 11, 2021, the Company was listed on the NASDAQ stock exchange in the United States. In connection with the closing, the Company paid issuance costs of $1.8 million andissued 632,000 warrants to the underwriters of the IPO valued at $1.3 million. The Company also issued 333,333 common shares to the Chief Executive Officer of the Company, valued at $1.7 millionbased on the IPO price per share of $5.00. REGULATION A OFFERING On January 20, 2021, the Company issued 26,000 units of the Company at a price of $2.25 per unit for gross proceeds of $0.1 million. Each unit is comprised of one common share of the Company andone-half of one common share purchase warrant to purchase one additional common share at an exercise price of $3.00 per warrant share, subject to certain adjustments, over an 18-month exerciseperiod following the date of issuance of the warrant. The Company sold the units through a Tier 2 offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933, as amended. Additionally, the Company cancelled 28,000 units of the Company at a price of $2.25 per unit and valued at $0.1 million. The units were cancelled due to non-payment of the subscription price. OTHER OFFERING On July 23, 2021, the Company issued 55,555 common shares of the Company valued at $0.2 million for consulting services performed. 15. SHARE BASED COMPENSATION The Company adopted the Flora Growth Corp. 2022 Incentive Compensation Plan (the “2022 Plan”) to attract, retain and motivate independent directors, executives, key employees and consultants.The 2022 Plan was approved by the Company’s shareholders on July 5, 2022, and reserves an aggregate of 6,000,000 of the Company’s common shares for issuance in connection with Awards (asdefined in the 2022 Plan) granted under the 2022 Plan. Previously, the Company’s shareholders had adopted a “rolling” stock option plan (the “Prior Plan”) which authorized the Company to grantstock options constituting up to 10% of the Company’s issued and outstanding common shares at the time of each option grant. Since the adoption of the 2022 Plan, no further grants have beenmade or will be made under the Prior Plan; however, any currently outstanding stock options granted prior to July 5, 2022 will remain in effect until they have been exercised or terminated or haveexpired in accordance with the terms of the Prior Plan. Under the 2022 Plan, the Compensation Committee of our Board of Directors (the “Committee”) may grant a variety of awards including stockoptions, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents and other stock-based awards. OPTIONS Stock options granted under the Prior Plan are non-transferable and non-assignable and may be granted for a term not exceeding five years. Under the 2022 Plan, stock options may be granted with aterm of up to ten years and in the case of all stock options, the exercise price may not be less than 100% of the fair market value of a Common Share on the date the award is granted. Stock optionvesting terms are subject to the discretion of the Committee. Common shares are newly issued from available authorized shares upon exercise of awards.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Information relating to share options outstanding and exercisable as at December 31, 2022 and 2021 is as follows:
		Options Outstanding		Options Exercisable
	Number of options					Weighted average	Number of options				Weighted average

	(in thousands)					exercise price	(in thousands)				exercise price
Balance, December 31, 2020		3,794	1.08	3,794	1.08
Granted		2,304	2.88	2,304	2.88
Exercised		(650)	0.07	(650)	0.07
Balance, December 31, 2021		5,448	1.96	5,448	1.96
Granted		1,806	0.96	217	1.48
Exercised		(545)	0.24	(545)	0.24
Cancelled/Expired		(904)	2.62	(728)	2.62
Balance, December 31, 2022		5,805 $	1.71	4,392 $	2.04

										Options	Options	Grant date fair								Remaining

								Date of expiry	outstanding	exercisable					Exercise price	value vested			life in years
			Thousands of

									Thousands	Thousands											$	Dollars
June 28, 2024										815	815 $	0.15 $	30	1.5
April 23, 2025										33	33	2.25	138	2.3
July 6, 2025										150	150	2.25	115	2.5
July 15, 2025										84	84	2.25	84	2.5
September 8, 2025										8					8	2.25	11	2.7
November 4, 2025										666	666	2.25	918	2.8
December 23, 2025										500	500	2.25	689	3.0
June 3, 2026										233	233	3.87	669	3.4
June 10, 2026										167	167	3.68	455	3.4
September 21, 2026										16	16	5.20	64	3.7
September 25, 2026										105	105	6.90	539	3.7
December 16, 2026										1,348	1,348	2.04	2,046	4.0
January 17, 2027										50	50	1.70	63	4.0
January 26, 2027										245	217	1.48	288	4.1
May 16, 2027										50					-	1.30	29	4.4
December 31, 2029										1,010					-	0.67	31	7.0
August 18, 2032										275					-	0.93	84	9.6
July 5, 2033										50					-	0.67	9	10.5
										5,805	4,392 $	1.71 $	6,262	4.2
The fair value of stock options issued during the years ended December 31, 2022 and 2021 was determined at the time of issuance using the Black-Scholes option pricing model with the followingweighted average inputs, assumptions and results:
				2022								2021
Risk-free annual interest rate				2.85%	1.12%
Current stock price			$	0.95 $	2.88
Expected annualized volatility				100%	100%
Expected life (years)				7	5
Expected annual dividend yield				0%	0%
Exercise price			$	0.96 $	2.88
Weighted average grant date fair value			$	0.96 $	2.88

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The total expense related to the options granted in the year ended December 31, 2022 was $3.0 million (2021 - $1.3 million). This expense is included in the share based compensation line on thestatement of comprehensive loss. Generally, the options granted in 2022 and 2021 vest one to two years following the date of grant provided that the recipient is still employed or engaged by theCompany. The options granted in 2020 vested immediately at the time of grant. During the year ended December 31, 2022, 903,829 (2021 – nil) unexercised stock options expired following the termination of certain employees and were charged to deficit. The intrinsic value of options exercised for the year ended December 31, 2022 was $0.8 million ($1.2 million in 2021). The total fair value of options vested during the year ended December 31, 2022was $4.0 million (less than $0.1 million in 2021). For the years ended December 31, 2022 and 2021, there has been no recognized income tax benefits associated with stock options, and no amounts capitalized as part of the cost of an asset. At December 31, 2022 the total remaining stock option cost for nonvested awards is expected to be $0.4 million over a weighted average future period of 1.4 years until the awards vest. A total of402,500 options issued in 2022 will vest in either 2023 provided if the award holder is still employed or engaged by the Company. The remaining 1,010,203 options issued in 2022 will vest if the totalshareholder return (“TSR”) of the Company’s common shares on the NASDAQ Capital Market exceeds the TSR of the ETFMG Alternative Harvest ETF (the “Index”) for any of the calendar yearsended December 31, 2022, 2023, or 2024. If the Company’s TSR exceeds the TSR of the TSR of the Index on such date, then all the options shall become vested and exercisable. The Company valuedthese options using a weighted average approach based on the probability that the options would vest at December 31, 2022, 2023, 2024, or not all. The TSR of the Company’s common shares didnot exceed the TSR of the Index for the year ended December 31, 2022. RESTRICTED STOCK AWARDS Restricted stock is a grant of common shares which may not be sold or disposed of, and which is subject to such risks of forfeiture and other restrictions as the Committee, in its discretion, mayimpose. A participant granted restricted stock generally has all of the rights of a shareholder of the Company, unless otherwise determined by the Committee. Subject to certain exceptions, thevesting of restricted stock awards is subject to the holder’s continued employment or engagement through the applicable vesting date. Unvested restricted stock awards will be forfeited if theholder’s employment or engagement ceases during the vesting period and may, in certain circumstances, be accelerated. The Company values restricted stock awards based on the closing shareprice of the Company’s common shares as of the date of grant. The fair value of the restricted stock award is recorded as expense over the vesting period. Information relating to restricted stock awards outstanding as at December 31, 2022 and December 31, 2021:
	Number of		Weighted average
		restricted stock			grant date fair
		awards		value
		Thousands			$
Balance, December 31, 2021			-		-
Granted		2,938			0.68
Vested			(20)		0.73
Balance, December 31, 2022		2,918			0.68
The total expense related to the restricted stock awards in the year ended December 31, 2022 was $0.4 million (2021 - nil). This expense is included in the share based compensation line on theconsolidated statements of loss and comprehensive loss. For the years ended December 31, 2022 and 2021, there has been no recognized income tax benefits associated with restricted stock awards. The Company issued 20,000 restricted stock awards that vested immediately on September 28, 2022 at a total fair value of less than $0.1 million. The remaining restricted stock awards issued in 2022vest over the next three years provided the award holder is still employed or engaged by the Company. As of December 31, 2022, the Company had $ 1.6 million of unrecognized compensationexpense related to restricted stock awards which will be recognized over the next three years. No restricted stock awards expired or were forfeited in the year ended December 31, 2022.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 16. WARRANTS On December 8, 2022, the Company issued 12,500,000 warrants issued as part of the December 2022 unit offering (Note 14). Each warrant permits the holder to purchase one common share of theCompany through December 8, 2027 for $0.40. The issue date fair value of the warrants was estimated at $2.0 million using the Black Scholes option pricing model with the following assumptions:expected dividend yield of 0%; expected volatility of 100% based on comparable companies; risk-free interest rate of 3.0% and an expected life of 5 years. The resulting grant date fair value of eachwarrant was $0.16. Additionally, the Company amended the exercise price with respect to 1,325,000 warrants that were previously issued in the November 2021 offering (described below) from $3.75per share to $0.40 per share. Related to the December 2022 unit offering, 500,000 warrants were issued to the placement agent and recorded as issuance costs to share capital. Each warrant permits the holder to purchase onecommon share of the Company after the 180th day immediately following the date of issuance through December 8, 2027 for $0.40. The issue date fair value of the warrants was estimated at $0.1million using the Black Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 100% based on comparable companies; risk-free interestrate of 3.0% and an expected life of 5 years. The resulting grant date fair value of each warrant was $0.30. On May 10, 2021, the Company issued 632,053 warrants issued as share issuance costs pursuant to the IPO (Note 14). Each warrant permits the holder to purchase one common share of theCompany through May 11, 2026 for $6.25 for 233,333 of the warrants, and $3.00 for 398,720 of the warrants. The issue date fair value of the warrants was estimated at $1.3 million using the BlackScholes option pricing model with the following weighted average assumptions: expected dividend yield of 0%; expected volatility of 100% based on comparable companies; risk-free interest rate of0.91% and an expected life of 5 years. The resulting grant date fair value of each warrant was $2.13. In November 2021, the Company issued 5,750,000 warrants issued as part of the November 2021 unit offering (Note 14). Each warrant permits the holder to purchase one common share of theCompany through November 18, 2026 for $3.75. The issue date fair value of the warrants was estimated at $8.7 million using the Black Scholes option pricing model with the following assumptions:expected dividend yield of 0%; expected volatility of 100% based on comparable companies; risk-free interest rate of 1.5% and an expected life of 5 years. The resulting grant date fair value of eachwarrant was $1.51. Related to the November 2021 unit offering, 460,000 warrants were issued to the underwriters and recorded as issuance costs to share capital. Each warrant permits the holder to purchase onecommon share of the Company through November 18, 2027 for $3.30. The issue date fair value of the warrants was estimated at $1.1 million using the Black Scholes option pricing model with thefollowing assumptions: expected dividend yield of 0%; expected volatility of 100% based on comparable companies; risk-free interest rate of 1.5% and an expected life of 6 years. The resulting grantdate fair value of each warrant was $2.29. The intrinsic value of warrants exercised for the year ended December 31, 2022 was $0.5 million ($30.6 million in 2021). The total fair value of warrants vested during the year ended December 31, 2022was $2.3 million ($8.5 million in 2021). For all warrants, common shares are newly issued from available authorized shares upon exercise of awards. The following tables show warrants outstanding as at December 31, 2022:
	Number of	Weighted average

	warrants	exercise price
		Thousands
Balance, December 31, 2020		9,000 $	2.26
Exercised		(6,509)	2.29
Cancelled/Expired		(600)	3.00
Issued		6,855	3.76
Balance, December 31, 2021		8,746 $	3.37
Exercised		(473)	0.49
Cancelled/Expired		(2,063)	3.00
Issued		13,000	0.06
Balance, December 31, 2022		19,210 $	1.24

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts)
		Warrants		Grant date fair		Remaining life in

	Date of expiry	outstanding	Exercise price		value		years
			Thousands
November 18, 2026			4,425 $	3.75 $	6,700			3.88
November 18, 2026			1,325	0.40		422		3.88
November 18, 2027			460	3.30	1,055			4.88
December 8, 2027			12,500	0.40	2,033			4.94
December 8, 2027			500	0.44		149		4.94
			19,210 $	1.24 $	10,359			4.62

									(1) See Note 24 for subsequent exercise of warrants.
17. RELATED PARTY DISCLOSURES Key management personnel compensation In addition to their contracted fees, directors and officers also participate in the Company’s stock option program. Certain executive officers are subject to termination notices of 6 to 24 months andchange of control payments (Note 18). Key management personnel compensation is comprised of the following:
					Year ended		Year ended
					December 31,			December 31,
Thousands of United States dollars					2022		2021
Directors’ and officers’ compensation				$	2,560 $		2,261
Share-based compensation						797	2,373
				$	3,357 $		4,634
The Company defines key management personnel as those persons having authority and responsibility for planning, directing, and controlling the activities of the Company directly or indirectly,and was determined to be executive officers and directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the Board of Directors ofthe Company having regard to the performance of individuals and market trends. As at December 31, 2022, $0.2 million of the above directors’ and officers’ compensation was included in the trade payables and accrued liabilities (2021 – $0.3 million). These amounts are unsecured,non-interest bearing and due on demand. The share-based compensation amount above for 2021 includes 333,333 common shares to the Chief Executive Officer of the Company, valued at $1.7million, that were recorded to equity as share issuance costs as payment related to services provided during the Company’s initial public offering process (Note 14). Related party transactionsPrior to its acquisition by the Company, Harmony Health One, a subsidiary of FGH, entered into an Intellectual Property License Agreement with Hampstead Private Capital Limited (“Hampstead”) –a corporation controlled by the President of the Company and former CEO of FGH. Under the terms of this agreement, Harmony is to pay Hampstead a royalty in the amount of 3.5% of the grossrevenues from the sale of Harmony products. No royalty amounts have been recorded by the Company for the years ended December 31, 2022 and December 31, 2021, as there were no sales for theperiod after the Company acquired FGH. During the fourth fiscal quarter of 2021, the Company entered into an agreement with Dr. Manalo-Morgan, a member of the Company’s board of directors, to serve in the additional capacity asMedical Advisor to the Company. In connection with this agreement, Dr. Manalo-Morgan will be responsible for developing and identifying medical applications of cannabinoids for the Companyfor the treatment of various ailments and (ii) supporting the Company’s public relations efforts and assisting the Company with its media engagements. For these services, the Company paid Dr.Manalo-Morgan $0.2 million and $0.1 million for the years ended December 31, 2022 and December 31, 2021, respectively.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 18. COMMITMENTS AND CONTINGENCIES Contingencies are possible liabilities arising from past events which, by their nature, will only be resolved when one or more future events not wholly within our control occur or fail to occur. Theassessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. Management assesses loss contingencies related to legalproceedings, tax or other regulatory actions pending against the Company, as well as unasserted claims that may result in such actions. The Company, its legal counsel and other subject matteradvisors evaluate the perceived merits of any legal proceedings or unasserted claims or actions as well as the perceived merits of the nature and amount of relief sought or expected to be sought,when determining the amount, if any, to recognize as a provision or assessing the impact on the carrying value of assets. The Company recognizes legal expenses on contingency and provisionmatters when incurred. ProvisionsThe Company’s current known provisions and contingent liabilities consist of termination benefits and legal disputes.
	Termination

Thousands of United States dollars		benefits	Legal disputes		Sales tax		Total
Balance as at December 31, 2021	$		352 $	1,681 $		- $	2,033
Acquired through business combinations			-	3,030		982	4,012
Payments/Settlements			(352)	(1,681)		-	(2,033)
Additional provisions			183	-		849	1,032
Balance as at December 31, 2022	$		183 $	3,030 $		1,831 $	5,044
The termination benefits relate to contractual termination benefits owed to a former board member of the Company, a consultant and a former member of the management team. The amounts arerecorded within contingencies on the consolidated statements of financial position and $0.2 million expense (2021 - $0.4 million) on the consolidated statements of loss and comprehensive loss. The legal disputes in 2021 relate to the settlement of a contractual dispute between the Company and Boustead, with respect to the amount of compensation due to Boustead pursuant to anengagement letter entered into in September 2020 and an underwriting agreement dated May 2021, each entered between Boustead and the Company. In April 2022, the Company entered asettlement agreement with Boustead pursuant to which the Company paid $0.4 million and issued 700,000 common shares of the Company to Boustead to settle the dispute. The provision balance asof December 31, 2021 reflects the value of the cash and the Company’s shares as of the date of the settlement agreement. The amounts are recorded within contingencies on the consolidatedstatements of financial position and $1.7 million expense on the consolidated statements of loss and comprehensive loss. The additional legal disputes in 2022 relate to the settlement of two contractual disputes involving entities that were part of the Company's acquisition of FGH in December 2022. The first involves athird party that entered into a conditional share grant arrangement dated April 2, 2019 with Franchise Cannabis Corp and Rangers Pharmaceuticals A/S. In January 2023, the Company entered into asettlement agreement with this third party pursuant to which the Company issued 325,000 common shares of the Company, valued at $0.1 million, to the third party to settle the dispute. Theprovision balance as of December 31, 2022 reflects the value of the Company’s shares as of the date of the settlement agreement. The second dispute involves a former shareholder of ACA Muller,who filed a statement of claim against a wholly-owned subsidiary of the Company in the Constance Regional Court in Germany. While the Company believes that this claim is without merit, at thistime the Company believes it is probable that a liability has been incurred and the Company is able to reasonably estimate the loss of $2.9 million. As a result, without acknowledgement (explicitly orimplicitly) of any amount of liability arising from this claim, the Company recognized a provision of $2.9 million to reflect the value of the claim. This dispute is covered under the indemnificationagreement between the Company and the former Chief Executive Officer and shareholder of FGH as discussed in Note 9. The Company intends to vigorously defend itself through appropriate legalproceedings. Both above amounts are recorded within contingencies and $2.9 million within indemnification receivables on the consolidated statements of financial position and $0.1 million isrecorded as expense on the consolidated statements of loss and comprehensive loss. The Sales tax relates to estimated amounts owed to certain jurisdictions in the Unites States for sales from the Company's JustCBD operations. The opening balance was acquired during theFebruary 24, 2022 acquisition of JustCBD, with additional provision for estimated amounts due on sales subsequent to the acquisition. The ending balance is recorded within contingencies on theconsolidated statement of financial position, and additions to the provision as a reduction of revenue on the consolidated statements of loss and comprehensive loss.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) For the sales tax provision and 2022 matters with accruals recorded as discussed above, it is at least reasonably possible that a change in the estimated liability could occur in the near term. Suchchanges in the Company’s judgment could continue to change until the matters are ultimately resolved. Legal proceedingsThe Company records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable. The Company is engaged from time-to-time in various legal proceedings and claims that have arisen in the ordinary course of business. The outcome of all the proceedings and claims against the Company is subject to futureresolution, including the uncertainties of litigation. Based on information currently known to the Company and after consultation with outside legal counsel, management believes that the probableultimate resolution of any such proceedings and claims, individually or in the aggregate, will not have a material adverse effect on the financial condition of the Company, taken as a whole as atDecember 31, 2022. On June 21, 2022, an action was brought against the Company in the Ontario Superior Court of Justice by Gerardo Andres Garcia Mendez claiming that the Company is obligated to issue 3.0 million(pre-one-for three reverse stock split) common shares to him for a purchase price of $0.05 per share. Mr. Mendez claims he is entitled to such shares as a result of alleged consulting services heperformed in 2019. The Company disputes his claims and intends to vigorously defend against this action. The Company believes that an unfavorable settlement in this matter is remote, and, assuch, has not accrued a liability as of December 31, 2022. In connection with the Company’s acquisition of FGH, the former Chief Executive Officer of FGH, together with certain affiliated entities under his control, entered into an agreement pursuant towhich they agreed to indemnify the Company for certain potential liabilities of FGH and its subsidiaries, up to a maximum of $5.0 million. In addition to the matter regarding the former shareholder ofACA Mueller, discussed above, the following actions are pending as of the date hereof: On February 3, 2023, an action was brought in the Ontario Superior Court of Justice by Nathan Shantz and Liberacion e Inversiones S.A. against various parties including Clifford Starke, FGH’sformer Chief Executive Officer, and FGH. The statement of claim alleges that, prior to the closing of the Arrangement, 8,831,109 FGH shares purportedly owned by the plaintiffs were wrongfullytransferred to third parties, in part through alleged unauthorized steps taken by Mr. Starke. FGH has been named as a defendant by virtue of the alleged unauthorized transfer of the shares. Theplaintiffs are seeking damages of $3.9 million. The defendants have all brought motions to stay the proceedings on the grounds that the Ontario court lacks jurisdiction over the claim. In the eventFGH should incur any losses in connection with this matter, such losses are to be indemnified by Mr. Starke subject to the maximum threshold of the indemnity agreement. The total amount claimed against the former entities of FGH currently exceeds the maximum $5.0 million of the indemnification agreement. However, the Company is estimating the likelihood of lossin these cases will not exceed $5.0 million. Management contractsThe Company is party to management contracts with certain of its executive officers. As at December 31, 2022, these contracts would require payments totaling approximately $2.6 million to be madein the event that such executive officers are terminated (i) “without cause” or (ii) within twelve months following a “change in control” (as such terms are defined in the management contracts). TheCompany is also obligated to make payments to certain individuals upon termination “without cause” of approximately $1.5 million pursuant to the terms of these contracts. As a triggering event hasnot taken place, these amounts have not been recorded in these consolidated financial statements. Shared services and space commitmentThe Company had an agreement in 2021 and through March 2022 to share general and administrative, promotion, corporate development, consulting services, and office space with other companieswith monthly payments and a minimum commitment of CAD 45,000 ($36,000 on December 31, 2021). This agreement could be terminated by either party giving at least 90 days’ prior written notice (orsuch shorter period as the parties may mutually agree upon) to the other party of termination. These services were provided by 2227929 Ontario Inc which was a related party. This agreement expiredby its terms on March 14, 2022.

Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 19. INCOME TAXES The components of the income tax provision include the following. As the Company is domiciled in Canada, the Federal caption below represents the provision amount for Canada.
	For the year ended		For the year ended
		December 31,			December 31,
Thousands of United States dollars		2022		2021
Current
Canada	$		- $		-
U.S. federal			-		-
U.S. state			-		1
Foreign			6		29
Total current tax expense	$		6 $		30

Deferred
Canada	$		(11) $		-
U.S. federal		(1,055)			(96)
U.S. state			(316)		(32)
Foreign			(162)		-
Total deferred tax expense	$	(1,544) $			(128)

Total income tax benefit	$	(1,538) $			(98)
The reconciliation of the combined Canadian federal and provincial statutory income tax rate of 26.5% for the year ended December 31, 2022 and 2021 to the effective rate is as follows. As theCompany is domiciled in Canada, the reconciliation is to the Company’s home country income tax rate rather than the applicable statutory rates in the United States. The statutory tax rate as ofDecember 31, 2022 in other countries relevant to the Company’s subsidiaries include the following: United States 21%, Colombia 35%, Germany 27.73%, Denmark 22%, and United Kingdom 19%.The Colombian Government raised the corporate income tax rate from 30% to 35% during the tax year 2022.
	For the year ended		For the year ended
		December 31,			December 31,
	2022			2021
Statutory U.S. federal rate		26.5%		26.5%

Earnings in jurisdictions taxed at different rates		0.5%			0.6%
Impairments		(12.9)%			0.0%
Stock based compensation		(1.7)%		(1.7)%
Loss on investments		0.0%		(3.0)%
Valuation allowance		(12.3)%		(20.7)%
Other		2.7%			0.4%
Legal settlement		0.0%		(1.6)%
		2.8%			0.5%

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) The Components of the Company's deferred income tax assets and liabilities at December 31, 2022 and 2021 are as follows: Thousands of United States dollars
		2022		2021
Deferred tax assets
Non-capital loss carryforwards	$	20,240 $		7,715
Share issuance costs		1,406		1,589
Unrealized gains (losses) on investments			823		-
Right of use assets			614		-
Other			677		-
Legal settlement			-		106
Allowance for doubtful accounts			-		106
Gross deferred tax assets		23,760		9,516
Valuation allowance		(20,909)		(8,286)
Total net deferred tax assets		2,851		1,230

Deferred tax liabilities
Intangible assets		4,094		2,741
Lease obligations			469		-
Total deferred tax liabilities		4,563		2,741

Net deferred tax liabilities	$	(1,712) $		(1,511)
Deferred taxes are a result of temporary differences that arise due to the differences between the income tax values and the carrying values of assets and liabilities. The Company’s deferred tax assetvaluation allowances are primarily the result of uncertainties regarding the future realization of recorded tax benefits on the tax loss carryforwards from operations in various jurisdictions. Currentevidence does not suggest the Company will realize sufficient taxable income of the appropriate character within the carryforward period to allow the Company to realize the deferred tax benefits. Ifthe Company were to identify and implement tax planning strategies to recover these deferred tax assets or generate sufficient income of the appropriate character in these jurisdictions in the future,it could lead to the reversal of these valuation allowances and income tax expense. The Company asserts that the earnings of its foreign subsidiaries (outside Canada) will be indefinitely reinvested in those subsidiaries and earnings will not be repatriated. The Company may needto accrue and pay taxes if those earnings were repatriated to Canada. As at December 31, 2022, the amount of cash and cash equivalents related to foreign operations subject to these assertions is$3.8 million. Unused loss carryforwards in Canada totaling $48.7 million expire beginning 2037. Unused loss carryforwards in Columbia totaling $6.5 million in Colombia expire beginning 2031. Unused losscarryforwards in the United States totaling $13.2 million have an indefinite carryforward period. Unused loss carryforwards in Denmark totaling $6.0 million expire beginning in 2039. Unused losscarryforwards in the Germany of $0.4 have an indefinite carryforward period. Deferred tax assets have not been recognized for legal entities where it is not probable that future taxable profit will beavailable against which the Company can use the benefits. Tax attributes are subject to review, and potential adjustment, by tax authorities. The tax years that remain subject to examination bysignificant tax jurisdictions of the Company as of December 31, 2022 are as follows: Canada 2019 to 2022, United States 2019 to 2022, Colombia 2019 to 2022, Germany 2018 to 2022, Denmark 2019 to2022, and United Kingdom 2021 to 2022. The amount of current income tax expense for the year ended December 31, 2022 was less than $0.1 million and deferred income tax benefit was $1.5 million within the consolidated statements of lossand comprehensive loss. The amount of current income tax expense recorded for the year ended December 31, 2021 was less than $0.1 million and deferred income tax benefit was $0.1 million. The Company had no unrecognized income tax benefits because of uncertain income tax positions for the years ended December 31, 2022 and 2021.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 20. LOSS PER SHARE The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive as the Company has a net loss for each period presented:
	December 31,		December 31,

Thousands of securities		2022		2021
Stock options		5,805		5,448
Warrants		19,210		8,746
Restricted stock awards		2,917		-
JustCBD potential additional shares to settle contingent consideration		13,141		-
Total anti-dilutive		41,073		14,194
Subsequent to December 31, 2022, the Company granted a total of 1,040,000 Restricted Stock Awards and 100,000 Options under the 2022 Plan (Note 24). 21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT EnvironmentalThe Company’s growth and development activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing andgenerally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in thefuture, expenditures to comply with such laws and regulations. Fair valueThe Company’s financial instruments measured at amortized cost as at December 31, 2022 and December 31, 2021 consist of cash, restricted cash, trade and amounts receivable, loans receivable,trade payables, contingencies, accrued liabilities, contingent purchase consideration liabilities, lease liabilities, and debt and loans payable. The amounts reflected in the consolidated statements offinancial position approximate fair value due to the short-term maturity of these instruments. Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fairvalue based on: Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilitiesLevel 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; andLevel 3 - inputs for the instruments are not based on any observable market data. The Company’s long-term investments require significant unobservable inputs and as discussed at Note 8, are measured at FVPL and as a Level 3 fair value financial instrument within the fair valuehierarchy as at December 31, 2022. As discussed in Note 9, the Company’s contingent purchase considerations consist of the estimated fair value of contingent purchase consideration from theacquisition of JustCBD in February 2022. The amount is measured at FVPL as a Level 2 fair value financial instrument within the fair value hierarchy as at December 31, 2022. As valuations ofinvestments for which market quotations are not readily available are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value maydiffer materially from the values that would have resulted if a ready market existed for the investments. Such changes may have a significant impact on the Company’s financial condition oroperating results. The following tables present information about the Company’s financial instruments and their classifications as at December 31, 2022 and 2021 and indicate the fair value hierarchy of the valuationinputs utilized to determine such fair value. Fair value measurements at December 31, 2022 using:

Thousands of United States Dollars							Level 1			Level 2		Level 3		Total
Financial assets:
Investments (Note 8)					$	- $	- $	764 $		764

Financial liabilities:
Contingent purchase consideration from business combinations (Note 9)					$	- $	2,645 $	- $		2,645
Fair value measurements at December 31, 2021 using:

Thousands of United States Dollars						Level 1			Level 2		Level 3		Total
Financial assets:
Investments (Note 8)					$	- $	- $	2,670 $		2,670

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Risk management overviewThe Company has exposure to credit, liquidity and market risks from its use of financial instruments. This note provides information about the Company’s exposure to each of these risks, theCompany’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these condensed interim consolidated financial statements. Credit riskCredit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s trade and otherreceivables, loans receivable and cash held with banks and other financial intermediaries. The carrying amount of the cash, restricted cash, trade and amounts receivables, indemnification receivables, and loan receivable represents the maximum credit exposure as presented in thestatement of financial position. The Company has assessed that there has been no significant increase in credit risk of the loans receivable from initial recognition based on the financial position of the borrowers, and theregulatory and economic environment of the borrowers. Based on historical information, and adjusted for forward-looking expectations, the Company has assessed an insignificant loss allowanceon the loans’ receivable and advances as at December 31, 2022 and 2021. The Company provides credit to certain customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk. Credit risk for customers isassessed on a case-by-case basis and an allowance for specific expected credit losses is recorded where required, in addition to an estimate of lifetime expected credit losses for the portfolio ofaccounts receivable. See credit risk analysis for trade receivables at Note 5. The Company held cash and restricted cash of $9.5 million as at December 31, 2022 (2021 - $37.6 million), of which, $9.5 million (2021 - $37.4 million) is held with large financial institutions and nationalcentral banks. The remaining cash amount of less than $0.1 million cash (2021 - $0.2 million) are held with financial intermediaries in Colombia and the United States. The Company has assessed nosignificant increase in credit risk from initial recognition based on the availability of funds, and the regulatory and economic environment of the financial intermediary. As a result, the loss allowancerecognized during the period was limited to twelve months of expected credit losses. Based on historical information, and adjusted for forward-looking expectations, the Company has assessed aninsignificant loss allowance on these cash and restricted cash balances as at December 31, 2022 and 2021. Market riskMarket risk is the risk that changes in market conditions, such as commodity prices, foreign exchange rates, and interest rates, will affect the Company’s net income or the value of financialinstruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing the Company’s returns. Foreign currency exchange rate risk is the risk that the fair value of future cash flows will fluctuate due to changes in foreign exchange rates. The Company does not currently use foreign exchangecontracts to hedge its exposure to currency rate risk as management has determined that this risk is not significant. As such, the Company's financial position and financial results may be adverselyaffected by the unfavorable fluctuations in currency exchange rates. As at December 31, 2022, the Company had the following monetary assets and liabilities denominated in foreign currencies: December 31, 2022
	CAD		COP		GBP		EUR		CHF
Thousands of foreign currencies
Cash	1,691		2,961,487			64		1		-
Amounts receivable	2,964		15,127,223			61		-		-
Loans receivable		-		-		-		-		250
Trade payables	(9,333)		(2,975,794)			(56)		(161)		-
Accrued liabilities		(522)	(1,173,118)			(22)		-		-
Lease liability		(153)	(1,809,970)			(17)		-		-
Long term debt	(1,446)			-		-		-		-
Net carrying value	(6,799)		12,129,828			30		(160)		250

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) As at December 31, 2021, the Company had the following monetary assets and liabilities denominated in foreign currencies: December 31, 2021
		CAD		COP		EUR		CHF
Thousands of foreign currencies
Cash		1,393		4,451,775			896		-
Amounts receivable			72	15,775,755			-		-
Loans receivable			-		-		-		250
Trade payables			(40)	(5,398,068)			-		-
Accrued liabilities			(589)	(2,120,869)			-		-
Lease liability			-	(1,690,797)			-		-
Long term debt			-	(72,963)			-		-
Net carrying value			836	10,944,833			896		250
Monetary assets and liabilities denominated in Canadian dollars, Colombian pesos, British pounds, Euros and Swiss Francs are subject to foreign currency risk. The Company has estimated that asat December 31, 2022, the effect of a 10% increase or decrease in Canadian dollars, Colombian pesos, British pounds, Euros and Swiss Francs (“CHF”) against the Unites States dollar on financialassets and liabilities would result in an increase or decrease of approximately $0.1 million (December 31, 2021 – $0.5 million) to net loss and comprehensive loss. Subsequent to December 31, 2022 andthrough the date of issuance of these financial statements, the exchange rates remained within the 10% range discussed above, and the Company does not expect significant changes in unsettledtransactions from December 31, 2022. The Company calculates this sensitivity analysis based on the net financial assets denominated in each currency using the December 31 exchange rate, then changing the rate by 10%. Managementdetermined 10% is a ‘reasonably possible’ change in foreign currency rates by considering the approximate change in rates in the prior twelve months. It is management’s opinion that the Company is not subject to significant commodity or interest rate risk. Management considers concentration risk with counterparties considering the level of purchases and sales of its business segments (Note 23). Several of the Company’s business units purchasesubstantially all their inventory or materials from a single supplier. Liquidity riskLiquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. The Company’s financial liabilities consist of trade payables andaccrued liabilities, loans payable and debt, and lease liabilities as presented on the statement of financial position. The Company had cash and restricted cash as presented on the statement offinancial position. The Company has no available credit lines of facilities to draw borrowings from should additional liquidity be needed. The Company’s policy is to review liquidity resources andensure that sufficient funds are available to meet financial obligations as they become due. Further, the Company's management is responsible for ensuring funds exist and are readily accessible tosupport business opportunities as they arise. Trade payables and accrued liabilities consist of invoices payable to trade suppliers for administration and professional expenditures. The Company processes invoices within a normal paymentperiod. Trade payables have contractual maturities of less than 90 days. Some suppliers of materials and inventory require full prepayment from the Company prior to providing such goods to theCompany. See schedule of future lease commitments at Note 13 and other commitments at Note 18. The Company’s long-term investments in equity of other entities are not publicly traded and there is not an active market to sell the investments for cash. Novel Coronavirus (“COVID-19”)The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illnesscaused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, includinguncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed bygovernments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect theeconomies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.
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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) 22. CAPITAL MANAGEMENT The Company considers the aggregate of its common shares, options, warrants and borrowings as capital. The Company’s capital management objective is to ensure sufficient resources areavailable to meet day to day operating requirements and to safeguard its ability to continue as a going concern to provide returns for shareholders and benefits for other shareholders. The Company’s capital management objectives were being met in 2022 primarily from the use of existing cash balances from 2021 and prior issuances of common shares and warrants and generatingincreasing revenue in 2022 from the Company’s reportable segments as presented in Note 23. The Company’s officers and senior management take full responsibility for managing the Company’s capital and do so through quarterly meetings and regular review of financial information. TheCompany’s Board of Directors is responsible for overseeing this process. The Company is not subject to any external capital requirements. As at December 31, 2022, there were no changes in the Company’s approach to capital management. 23. SEGMENTED INFORMATION Prior to the fourth quarter of the year ended December 31, 2022, the Company had the following four operating segments, which were also its reportable segments: cannabis growth and derivativeproduction, consumer products, pharmaceuticals and nutraceuticals, and beverage and food. Following the acquisition of FGH in December 2022 (Note 9), the Company changed the structure of itsinternal management financial reporting. Accordingly, in the fourth quarter of the year ended December 31, 2022, the Company began reporting its financial results for the following three operatingsegments, which are also its reportable segments: commercial and wholesale (primarily FGH and Cosechemos subsidiaries), house of brands (primarily JustCBD, Vessel and Kasa WholefoodsCompany subsidiaries), and pharmaceuticals (primarily Grupo Farmaceutico Cronomed and Breeze Laboratory subsidiaries). These segments reflect how the Company’s operations are managed,how the Company Chief Executive Officer, who is the chief operating decision maker, allocates resources and evaluates performance, and how the Company’s internal management financialreporting is structured. The Company’s operates its manufacturing and distribution business in its United States, Germany, and Colombia subsidiaries. The Company also is engaged in the growth, cultivation, anddevelopment of medicinal cannabis and medicinal cannabis derivative products through its Colombia Cosechemos subsidiary. Management has defined the reportable segments of the Companybased on this internal business unit reporting, which is by major product line, and aggregates similar businesses into the house of brands segment below. The Corporate segment reflects balancesand expenses that do not directly influence business unit operations and includes the Company’s long-term investments. The following tables show information regarding the Company’s segments for the years ended December 31, 2022 and 2021. The 2021 amounts were revised to conform to the Company’s current2022 reportable segments determination. In 2022, the Company did not have sales to a single customer exceeding 10% of its consolidated revenue. In 2021, the Company had sales to a single customer exceeding 10% of its consolidatedrevenue. Sales to this customer were $1.3 million and were part of the house of brands reportable segment.

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts)
	December 31,		December 31,

		2022		2021
Net Sales
Commercial & Wholesale	$		201 $		3
House of Brands		40,531		6,254
Pharmaceuticals		2,543		3,190
Eliminations		(6,104)			(467)
	$	37,171 $		8,980

Gross Profit
Commercial & Wholesale	$		(150) $		(14)
House of Brands		13,592		1,256
Pharmaceuticals			972	1,650
Corp & Eliminations			-		(467)
	$	14,414 $		2,425

Net Income (Loss)
Commercial & Wholesale	$	(1,643) $		(1,076)
House of Brands		(31,764)		(1,197)
Pharmaceuticals		(1,229)			311
Corp & Eliminations		(17,993)		(19,399)
	$	(52,629) $		(21,361)
Other significant items:
						Commercial &	Corporate &Eliminations

						Wholesale	House of Brands	Pharmaceuticals	Consolidated
2022
Stock based compensation						$	- $	- $	- $	3,404 $		3,404
Interest income							(19)	(20)	(9)		(8)		(56)
Income taxes							(12)	(1,393)	(133)		-	(1,538)
Depreciation and amortization							165	2,099	174		191	2,629
Unrealized loss from changes in fair value							-	-	-		593		593
Total assets							22,225	48,950	3,313	6,499		80,987

2021
Stock based compensation						$	- $	- $	- $	1,340 $		1,340
Interest expense							2	8	14		8		32
Income taxes							-	(127)	29		-		(98)
Depreciation and amortization							168	208	58		67		501
Unrealized loss from changes in fair value							-	-	-	2,345		2,345
Total assets							3,040	36,912	4,602	40,925		85,479
Disaggregation of net sales and net loss before income taxes by geographic area:
	December 31,		December 31,

		2022		2021
Net Sales
United States	$	32,504 $		1,681
Germany			87		-
Colombia		3,578		6,919
United Kingdom		1,002			-
Canada			-		380
	$	37,171 $		8,980

	December 31,		December 31,

		2022		2021
Net Loss Before Income Taxes
United States	$	(27,867) $			(750)
Germany			(121)		-
Colombia		(6,059)		(3,312)
United Kingdom		(3,120)			-
Canada		(17,000)		(17,397)
	$	(54,167) $		(21,459)

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Table of Contents Flora Growth Corp.Notes to the consolidated financial statementsFor the years ended December 31, 2022 and 2021(United States dollars, except shares and per share amounts) Disaggregation of property, plant and equipment and other long-lived assets by geographic area:
	December 31,		December 31,

		2022		2021
Property, Plant and Equipment
United States	$		759 $		117
Germany			459		-
Colombia		3,592			3,633
	$	4,810 $			3,750

	December 31,		December 31,

		2022		2021
Other Long-lived Assets
United States	$	33,332 $		29,533
Germany			9,969		-
Colombia			800		409
United Kingdom			191		-
Canada			730		3,844
	$	45,022 $		33,786

	December 31,		December 31,

		2022		2021
Total Assets
United States	$	45,341 $		31,847
Germany		19,382			-
Colombia			8,122	12,439
United Kingdom			559		-
Canada			7,583	41,193
	$	80,987 $		85,479
24. SUBSEQUENT EVENTS OTHEROn January 6, 2023, the Company received an extension of 180 calendar days from the Nasdaq Stock Market LLC ("Nasdaq") to regain compliance with the Nasdaq's minimum $1.00 bid pricerequirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market (the "Bid Price Requirement"), following the expiration of the initial 180 calendar daysperiod to regain compliance on January 4, 2023. The Nasdaq determination is based on the Company meeting the continued listing requirement for market value of publicly held shares and all otherapplicable requirements for initial listing on the Nasdaq Capital Market with the exception of the Bid Price Requirement, and the Company's written notice of its intention to cure the deficiency duringthe second compliance period by effecting a reverse stock split, if necessary. On January 31, 2023, the Company entered into a settlement agreement with a third party pursuant to which the Company issued 325,000 common shares of the Company, valued at $0.1 million, to athird party to settle a legal dispute that arose in April 2019. See Note 18. In March 2023, pursuant to the 2022 Plan, the Committee granted an aggregate of 1,040,000 shares of Restricted Stock and 100,000 Stock Options to certain of our employees and members of ourBoard of Directors. With respect to the shares of Restricted Stock, 675,000 vest in one year and 365,000 vest over three years. The Stock Option vests after one year, is exercisable at $0.35 per shareand expires 10 years from the date of the grant. Subsequent to December 31, 2022, a total of 200 warrants were exercised in exchange for 200 common shares.
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