6-K

RSUs
outstanding

Balance at December 31, 2023

Balance at March 31, 2024

0000950170-24-056149.txt : 20240509 0000950170-24-056149.hdr.sgml : 20240509 20240508204319 ACCESSION NUMBER: 0000950170-24-056149 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20240508 FILED AS OF DATE: 20240509 DATE AS OF CHANGE: 20240508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SNDL Inc. CENTRAL INDEX KEY: 0001766600 STANDARD INDUSTRIAL CLASSIFICATION: MEDICINAL CHEMICALS & BOTANICAL PRODUCTS [2833] ORGANIZATION NAME: 03 Life Sciences IRS NUMBER: 000000000 STATE OF INCORPORATION: A0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-39005 FILM NUMBER: 24928148 BUSINESS ADDRESS: STREET 1: 919 11 AVENUE SW STREET 2: SUITE 300 CITY: CALGARY STATE: A0 ZIP: T2R1P3 BUSINESS PHONE: 14039485227 MAIL ADDRESS: STREET 1: 919 11 AVENUE SW STREET 2: SUITE 300 CITY: CALGARY STATE: A0 ZIP: T2R1P3 FORMER COMPANY: FORMER CONFORMED NAME: Sundial Growers Inc. DATE OF NAME CHANGE: 20190131 6-K 1 sndl-6-k-2024_q1.htm 6-K 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of May 2024

Commission File Number 001-39005

SNDL INC.

(Registrant’s name)

#300, 919 - 11 Avenue SW

Calgary, AB T2R 1P3

Tel.: (403) 948-5227

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ☐ Form 40-F ☒

INCORPORATION BY REFERENCE

This report on Form 6-K shall be deemed to be incorporated by reference in SNDL Inc.’s registration statements on Form F-3 (File No. 333-253813) and Form S-8 (File No. 333-233156, File No. 333-262233, File No. 333-267510, File No. 333-269242 and File No. 333-278683) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	SNDL INC.
Date: May 8, 2024	By:	/s/ Alberto Paredero Quiros
	Name:	Alberto Paredero Quiros
	Title:	Chief Financial Officer

EXHIBIT


Exhibit		Description of Exhibit
99.1		Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2024 and 2023
99.2		Management’s Discussion and Analysis for the Three Months Ended March 31, 2024 and 2023
99.3		Form 52-109F2 Certificate of Interim Filings by CEO (pursuant to Canadian regulations)
99.4		Form 52-109F2 Certificate of Interim Filings by CFO (pursuant to Canadian regulations)

EX-99.1 2 sndl-ex99_1.htm FS EX-99.1

EXHIBIT 99.1

SNDL Inc.

Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited – expressed in thousands of Canadian dollars)

SNDL Inc.

Condensed Consolidated Interim Statements of Financial Position

(Unaudited - expressed in thousands of Canadian dollars)


As at	Note	March 31, 2024			December 31, 2023

Assets
Current assets
Cash and cash equivalents			188,954			195,041
Restricted cash			20,122			19,891
Marketable securities			170			225
Accounts receivable			20,522			27,059
Biological assets	4		772			429
Inventory	5		134,786			129,060
Prepaid expenses and deposits			15,478			22,464
Investments	11		13,034			3,400
Assets held for sale	6		25,233			6,375
Net investment in subleases	9		2,818			2,970
			421,889			406,914
Non-current assets
Long-term deposits and receivables			7,344			4,837
Right of use assets	7		122,100			129,679
Property, plant and equipment	8		129,895			152,916
Net investment in subleases	9		17,287			18,396
Intangible assets	10		72,595			73,149
Investments	11		20,663			29,660
Equity-accounted investees	12		560,342			538,331
Goodwill			119,282			119,282
Total assets			1,471,397			1,473,164

Liabilities
Current liabilities
Accounts payable and accrued liabilities			61,360			68,210
Lease liabilities	14		32,975			30,537
Derivative warrants	13		5,700			4,400
			100,035			103,147
Non-current liabilities
Lease liabilities	14		128,816			136,492
Other liabilities			5,918			4,185
Total liabilities			234,769			243,824

Shareholders’ equity
Share capital	15(b)		2,377,163			2,375,950
Warrants	15(c)		667			2,260
Contributed surplus			75,233			73,014
Contingent consideration			2,279			2,279
Accumulated deficit			(1,263,405	)		(1,260,851	)
Accumulated other comprehensive income			29,451			19,417
Total shareholders’ equity			1,221,388			1,212,069
Non-controlling interest			15,240			17,271
Total liabilities and shareholders’ equity			1,471,397			1,473,164

Commitments (note 23)

Subsequent events (notes 11, 16(c) and 24)

See accompanying notes to the condensed consolidated interim financial statements.

SNDL Inc.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss

(Unaudited - expressed in thousands of Canadian dollars, except per share amounts)


		Three months ended March 31
	Note	2024			2023
Net revenue	17		197,750			191,045
Cost of sales	5		147,350			158,504
Gross profit			50,400			32,541

Investment income (loss)	18		4,036			(958	)
Share of profit of equity-accounted investees	12		9,148			9,516

General and administrative			44,695			48,573
Sales and marketing			2,598			3,386
Research and development			37			140
Depreciation and amortization	7,8,10		14,143			16,468
Share-based compensation	16		4,843			2,209
Restructuring (recovery) costs			(89	)		1,536
Asset impairment	7,8		1,656			807
Loss on disposition of assets			78			184
Operating income (loss)			(4,377	)		(32,204	)

Other income (expenses)	19		(3,272	)		(2,574	)
Loss before income tax			(7,649	)		(34,778	)
Income tax recovery			2,997			—
Net loss from continuing operations			(4,652	)		(34,778	)
Net loss from discontinued operations			—			(1,365	)
Net loss			(4,652	)		(36,143	)

Equity-accounted investees - share of other comprehensive income (loss)	12		10,034			(385	)
Gain on translation of foreign operations			—			5
Comprehensive income (loss)			5,382			(36,523	)

Net loss from continuing operations attributable to:
Owners of the Company			(2,554	)		(34,203	)
Non-controlling interest			(2,098	)		(575	)
			(4,652	)		(34,778	)
Net loss attributable to:
Owners of the Company			(2,554	)		(35,568	)
Non-controlling interest			(2,098	)		(575	)
			(4,652	)		(36,143	)
Comprehensive income (loss) attributable to:
Owners of the Company			7,480			(35,948	)
Non-controlling interest			(2,098	)		(575	)
			5,382			(36,523	)
Net loss per common share attributable to owners of the Company
Basic and diluted	20	$	(0.01	)	$	(0.14	)

See accompanying notes to the condensed consolidated interim financial statements.

SNDL Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

(Unaudited - expressed in thousands of Canadian dollars)


	Note	Share capital		Warrants			Contributed surplus			Contingent consideration		Accumulated deficit			Accumulated other comprehensive income		Non-controlling interest			Total
Balance at December 31, 2023			2,375,950		2,260			73,014			2,279		(1,260,851	)		19,417		17,271			1,229,340
Net loss			—		—			—			—		(2,554	)		—		(2,098	)		(4,652	)
Other comprehensive income			—		—			—			—		—			10,034		—			10,034
Share issuances			164		—			—			—		—			—		—			164
Share issuances by subsidiaries			—		—			74			—		—			—		44			118
Warrants expired			—		(1,593	)		753			—		—			—		—			(840	)
Share-based compensation	16		—		—			2,441			—		—			—		—			2,441
Employee awards exercised			1,049		—			(1,049	)		—		—			—		—			—
Distribution declared by subsidiaries			—		—			—			—		—			—		23			23
Balance at March 31, 2024			2,377,163		667			75,233			2,279		(1,263,405	)		29,451		15,240			1,236,628


	Note	Share capital			Warrants		Contributed surplus			Contingent consideration		Accumulated deficit			Accumulated other comprehensive income			Non- controlling interest			Total equity
Balance at December 31, 2022			2,292,810			2,260		68,961			2,279		(1,091,999	)		32,188			21,156			1,327,655
Net loss			—			—		—			—		(35,568	)		—			(575	)		(36,143	)
Other comprehensive loss			—			—		—			—		—			(380	)		—			(380	)
Share repurchases			(5,344	)		—		—			—		3,808			—			—			(1,536	)
Share issuances by subsidiaries			—			—		(12	)		—		—			—			4			(8	)
Acquisition			83,953			—		—			—		—			—			—			83,953
Shares acquired and cancelled			(6,615	)		—		—			—		—			—			—			(6,615	)
Share-based compensation			—			—		2,282			—		—			—			—			2,282
Employee awards exercised			515			—		(515	)		—		—			—			—			—
Distribution declared by subsidiaries			—			—		—			—		—			—			2			2
Balance at March 31, 2023			2,365,319			2,260		70,716			2,279		(1,123,759	)		31,808			20,587			1,369,210

See accompanying notes to the condensed consolidated interim financial statements.

SNDL Inc.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited - expressed in thousands of Canadian dollars)


		Three months ended March 31
	Note	2024			2023
Cash provided by (used in):
Operating activities
Net loss for the period			(4,652	)		(36,143	)
Adjustments for:
Income tax recovery			(2,997	)		—
Interest and fee income	18		(4,091	)		(4,211	)
Change in fair value of biological assets			(232	)		3,535
Share-based compensation	16		4,843			2,209
Depreciation and amortization	7,8,10		14,570			18,259
Loss on disposition of assets			78			184
Inventory impairment and obsolescence	5		1,913			9,177
Finance costs, net	19		1,625			5,173
Change in estimate of fair value of derivative warrants	13		1,300			(4,802	)
Unrealized foreign exchange loss			104			48
Transaction costs			164			—
Asset impairment	7,8		1,656			807
Share of (profit) of equity-accounted investees	12		(9,148	)		(9,516	)
Realized loss on settlement of marketable securities	18		—			43,804
Unrealized (gain) loss on marketable securities	18		55			(38,635	)
Proceeds from settlement of marketable securities			—			26
Interest received			3,172			3,703
Change in non-cash working capital			(5,059	)		(42,562	)
Net cash provided by (used in) operating activities from continuing operations			3,301			(48,944	)
Net cash provided by operating activities from discontinued operations			—			147
Net cash provided by (used in) operating activities			3,301			(48,797	)
Investing activities
Additions to property, plant and equipment	8		(2,410	)		(1,394	)
Additions to intangible assets	10		—			(17	)
Changes to investments	11		133			(827	)
Changes to equity-accounted investees	12		168			(7,546	)
Proceeds from disposal of property, plant and equipment			(62	)		82
Acquisitions, net of cash acquired			—			3,695
Change in non-cash working capital			495			(459	)
Net cash used in investing activities from continuing operations			(1,676	)		(6,466	)
Net cash used in investing activities from discontinued operations			—			—
Net cash used in investing activities			(1,676	)		(6,466	)
Financing activities
Change in restricted cash			(231	)		(42	)
Payments on lease liabilities, net			(7,516	)		(9,491	)
Repurchase of common shares, net of costs			—			(1,536	)
Change in non-cash working capital			35			(1	)
Net cash used in financing activities from continuing operations			(7,712	)		(11,070	)
Net cash used in financing activities from discontinued operations			—			—
Net cash used in financing activities			(7,712	)		(11,070	)
Effect of exchange rate changes on cash held in foreign currency			—			—
Change in cash and cash equivalents			(6,087	)		(66,333	)
Cash and cash equivalents, beginning of period			195,041			279,586
Cash and cash equivalents, end of period			188,954			213,253

See accompanying notes to the condensed consolidated interim financial statements.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Description of business

SNDL Inc. (“SNDL” or the “Company”) was incorporated under the Business Corporations Act (Alberta) on August 19, 2006. On July 25, 2022, the Company’s shareholders approved a special resolution amending the articles of SNDL to change the name of the Company from “Sundial Growers Inc.” to “SNDL Inc.”.

The Company’s head office is located at 300, 919 11th Avenue SW, Calgary, Alberta, Canada.

The principal activities of the Company are the retailing of wines, beers and spirits, the operation and support of corporate-owned and franchise retail cannabis stores in Canadian jurisdictions where the private sale of recreational cannabis is permitted, the manufacturing of cannabis products providing proprietary cannabis processing services, the production, distribution and sale of cannabis domestically and for export pursuant to the Cannabis Act (Canada) (the “Cannabis Act”), and the deployment of capital to investment opportunities. The Cannabis Act regulates the production, distribution, and possession of cannabis for both medical and adult recreational access in Canada. The Company also owns approximately 63% of Nova Cannabis Inc. (“Nova”), whose principal activities are the retail sale of cannabis.

SNDL and its subsidiaries operate solely in Canada. Through its joint venture, SunStream Bancorp Inc. (“SunStream”) (note 12), the Company provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities. The Company also makes strategic portfolio investments in debt and equity securities.

The Company’s liquor retail operations are seasonal in nature. Accordingly, sales will vary by quarter based on consumer spending behaviour. The Company is able to adjust certain variable costs in response to seasonal revenue patterns; however, costs such as occupancy are fixed, causing the Company to report a higher level of earnings in the third and fourth quarters. This business seasonality results in quarterly performance that is not necessarily indicative of the year’s performance. The cannabis retail industry is a growing industry for which seasonality cannot be reliably predicted.

The Company’s common shares trade on the Nasdaq Capital Market under the ticker symbol “SNDL”.

Basis of presentation

Statement of compliance

These condensed consolidated interim financial statements (“financial statements”) have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee. These financial statements were prepared using the same accounting policies and methods as those disclosed in the annual consolidated financial statements for the year ended December 31, 2023. These financial statements should be read in conjunction with the annual consolidated financial statements for the Company for the year ended December 31, 2023.

Certain prior period amounts have been reclassified to conform to current year presentation. Specifically, cost of sales, inventory impairment and obsolescence, change in fair value of biological assets and change in fair value realized through inventory have been combined as cost of sales. Interest and fee revenue and investment income (loss) have been combined as investment income (loss). Finance costs (income), change in fair value of derivative warrants, transaction costs and foreign exchange gain (loss) have been combined as other income (expenses).

These financial statements were approved and authorized for issue by the board of directors of the Company (the “Board”) on May 8, 2024.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Segment information

The Company’s reportable segments are organized by business line and are comprised of four reportable segments: liquor retail, cannabis retail, cannabis operations, and investments.

Liquor retail includes the sale of wines, beers and spirits through owned liquor stores. Cannabis retail includes the private sale of adult-use cannabis through owned and franchise retail cannabis stores. Cannabis operations include the cultivation, distribution and sale of cannabis for the adult-use and medical markets domestically and for export, and providing proprietary cannabis processing services, in addition to product development, manufacturing, and commercialization of cannabis consumer packaged goods. Investments include the deployment of capital to investment opportunities. Certain overhead expenses not directly attributable to any operating segment are reported as “Corporate”.


	Liquor Retail		Cannabis Retail			Cannabis Operations		Investments (1)		Corporate			Total
As at March 31, 2024
Total assets		308,357		202,970			197,334		742,614		20,122			1,471,397
Three months ended March 31, 2024
Net revenue (2)		116,054		71,306			22,395		—		(12,005	)		197,750
Gross profit		28,806		18,359			3,235		—		—			50,400
Operating income (loss)		2,180		(1,042	)		891		13,079		(19,485	)		(4,377	)
Earnings (loss) before income tax		964		(1,848	)		698		13,079		(20,542	)		(7,649	)

(1)

Total assets include cash and cash equivalents.

(2)

The Company has eliminated $12.0 million of cannabis operations revenue and equal cost of sales associated with sales to provincial boards that are expected to be subsequently repurchased by the Company’s licensed retailer subsidiaries for resale, at which point the full retail sales revenue will be recognized. The elimination was recorded in the Corporate segment.


	Liquor Retail			Cannabis Retail (1)			Cannabis Operations (2)			Investments (3)		Corporate			Total
As at December 31, 2023
Total assets		320,239			206,988			208,295			717,751		19,891			1,473,164
Three months ended March 31, 2023
Net revenue (4)		115,911			67,408			19,133			—		(11,407	)		191,045
Gross profit		26,267			15,819			(9,545	)		—		—			32,541
Operating income (loss)		(1,950	)		(78	)		(18,832	)		8,737		(20,081	)		(32,204	)
Earnings (loss) before income tax		(2,963	)		(744	)		(19,120	)		5,370		(17,321	)		(34,778	)

(1)

Cannabis retail includes the operations of Superette for the period February 8, 2023 to March 31, 2023.

(2)

Cannabis operations includes the operations of The Valens Company Inc. (“Valens”) for the period January 18, 2023 to March 31, 2023.

(3)

Total assets include cash and cash equivalents.

(4)

The Company has eliminated $11.4 million of cannabis operations revenue and equal cost of sales associated with sales to provincial boards that are expected to be subsequently repurchased by the Company’s licensed retailer subsidiaries for resale, at which point the full retail sales revenue will be recognized. The elimination was recorded in the Corporate segment.

Geographical disclosure

As at March 31, 2024, the Company had non-current assets related to investment credit operations in the United States of $560.3 million (December 31, 2023 – $538.3 million). For the three months ended March 31, 2024, share of profit of equity-accounted investees related to operations in the United States was a gain of $9.1 million (three months ended March 31, 2023 – gain of $9.5 million). All other non-current assets relate to operations in Canada and revenues from external customers relate to operations in Canada.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

biological assets

The Company’s biological assets consist of cannabis plants in various stages of vegetation, including plants which have not been harvested. The change in carrying value of biological assets is as follows:


As at	March 31, 2024			December 31, 2023
Balance, beginning of year		429			3,477
Increase in biological assets due to capitalized costs		859			21,501
Net change in fair value of biological assets		232			(7,936	)
Transferred to inventory upon harvest		(748	)		(16,613	)
Balance, end of period		772			429

Biological assets are valued in accordance with International Accounting Standard 41 – Agriculture and are presented at their fair value less costs to sell up to the point of harvest. This is determined using a model which estimates the expected harvest yield in grams for plants currently being cultivated, and then adjusts that amount for the expected selling price less costs to produce and sell per gram.

The fair value measurements for biological assets have been categorized as Level 3 fair values based on the inputs to the valuation technique used. The Company’s method of accounting for biological assets attributes value accretion on a straight-line basis throughout the life of the biological asset from initial cloning to the point of harvest.

The Company estimates the harvest yields for cannabis at various stages of growth. As at March 31, 2024, it is estimated that the Company’s biological assets will yield approximately 2,754 kilograms (December 31, 2023 – 2,230 kilograms) of dry cannabis when harvested. During the three months ended March 31, 2024, the Company harvested 1,145 kilograms of dry cannabis (three months ended March 31, 2023 – 6,029 kilograms).

Inventory


As at	March 31, 2024		December 31, 2023
Retail liquor		88,053		83,923
Retail cannabis		19,633		19,516
Harvested cannabis
Raw materials, packaging and components		8,821		7,781
Extracted cannabis & hemp oils		13,474		11,989
Work-in-progress		1,557		995
Finished goods		3,248		4,856
		134,786		129,060

During the three months ended March 31, 2024, inventories of $145.9 million were recognized in cost of sales as an expense (three months ended March 31, 2023 – $146.7 million).

During the three months ended March 31, 2024, the Company recognized inventory write downs of $1.9 million (three months ended March 31, 2023 – $9.2 million).

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Assets held for sale

At March 31, 2024, assets held for sale were measured at their fair value less costs to sell and comprised of the following:


As at	March 31, 2024		December 31, 2023
Olds facility		18,607		—
Stellarton facility		6,375		6,375
Extraction equipment		251		—
		25,233		6,375

The Olds facility is located in Olds, Alberta, and its primary purpose was the cultivation of cannabis for the adult-use cannabis market. Management is committed to a plan to sell the Olds facility and the asset is available for immediate sale.

The Stellarton facility is located in Stellarton, Nova Scotia, and its primary purpose was the packaging and processing of value added and derivative products for the adult-use cannabis market. The Stellarton facility was acquired in the Zenabis acquisition.

Right of use assets


Cost
Balance at December 31, 2023			199,032
Additions			581
Renewals, remeasurements and dispositions			1,330
Balance at March 31, 2024			200,943

Accumulated depreciation and impairment
Balance at December 31, 2023			69,353
Depreciation			7,893
Impairment			1,597
Balance at March 31, 2024			78,843

Net book value
Balance at December 31, 2023			129,679
Balance at March 31, 2024			122,100

As at March 31, 2024, the Company recorded impairment losses of right of use assets of $1.6 million (March 31, 2023 – nil) with $1.8 million in the cannabis retail reporting segment and an impairment reversal of $0.2 million in the liquor retail reporting segment. Refer to note 8 for the significant assumptions applied in the impairment test.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Property, plant and equipment


	Land			Production facilities			Leasehold improvements			Equipment			Construction in progress			Total
Cost
Balance at December 31, 2023		20,953			179,156			76,899			99,164			8,674			384,846
Additions		—			—			(171	)		2,324			—			2,153
Reclass to assets held for sale		(11,834	)		(148,590	)		—			(411	)		—			(160,835	)
Dispositions		—			—			—			(616	)		(90	)		(706	)
Balance at March 31, 2024		9,119			30,566			76,728			100,461			8,584			225,458

Accumulated depreciation and impairment
Balance at December 31, 2023		—			145,420			28,448			52,241			5,821			231,930
Depreciation		—			318			2,958			2,875			—			6,151
Impairment		—			—			559			(500	)		—			59
Reclass to assets held for sale		—			(141,811	)		—			(166	)		—			(141,977	)
Dispositions		—			—			—			(600	)		—			(600	)
Balance at March 31, 2024		—			3,927			31,965			53,850			5,821			95,563

Net book value
Balance at December 31, 2023		20,953			33,736			48,451			46,923			2,853			152,916
Balance at March 31, 2024		9,119			26,639			44,763			46,611			2,763			129,895

During the three months ended March 31, 2024, depreciation expense of $0.4 million was capitalized to biological assets and inventory (three months ended March 31, 2023 – $1.8 million).

During the three months ended March 31, 2024, the Company determined that indicators of impairment existed relating to certain cannabis retail stores due to underperforming store level operating results as well as indicators of impairment reversal relating to certain previously impaired liquor retail stores now overperforming store level operating results. For impairment testing of retail property, plant and equipment and right of use assets, the Company determined that a cash generating unit (“CGU”) was defined as each individual retail store. The Company completed impairment tests for each CGU determined to have an indicator of potential impairment or impairment reversal using a discounted cash flow model. The recoverable amounts for each CGU were based on the higher of its estimated value in use and fair value less costs of disposal using Level 3 inputs. The significant assumptions applied in the impairment test are described below:

•

Cash flows: Projected future sales and earnings for cash flows are based on actual operating results and operating budgets. Management determined forecasted growth rates of sales based on past performance, expectations of future performance for each location and industry averages. Expenditures were based upon a combination of historical percentages of revenue, sales growth rates, forecasted inflation rates and contractual lease payments. The duration of the cash flow projections for individual CGUs varies based on the remaining lease term of the CGU.

•

Discount rate: A pre-tax discount rate range of 12.0% – 13.8% was estimated and is based on market assessments of the time value of money and CGU specific risks. To determine a pre-tax discount rate, a weighted average cost of capital was used as a reference point which is based on market capital structure of debt, risk-free rate, equity risk premium, beta adjustment to the equity risk premium based on a review of betas of comparable publicly traded companies, the Company’s historical data, an unsystematic risk premium and after-tax cost of debt based on corporate bond yields.

As at March 31, 2024, the Company recorded impairment losses of property, plant and equipment of $0.77 million (March 31, 2023 – nil) in the cannabis retail reporting segment and an impairment reversal of $0.76 million (March 31, 2023 – nil) in the liquor retail reporting segment. The Company also recorded impairment losses and impairment reversals of right of use assets (note 7).

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Net investment in subleases


	March 31, 2024			December 31, 2023
Balance, beginning of year		21,366			23,319
Additions		—			832
Finance income		196			857
Rents recovered (payments made directly to landlords)		(896	)		(4,004	)
Dispositions and remeasurements		(561	)		362
Balance, end of period		20,105			21,366

Current portion		2,818			2,970
Long-term		17,287			18,396

Net investment in subleases represent leased retail stores that have been subleased to certain franchise partners. These subleases are classified as a finance lease as the sublease terms are for the remaining term of the head lease.

10.

Intangible assets


	Brands and trademarks		Franchise agreements		Software			Retail Licenses		Total
Cost
Balance at December 31, 2023		81,900		10,000		5,556			750		98,206
Additions		—		—		(28	)		—		(28	)
Balance at March 31, 2024		81,900		10,000		5,528			750		98,178

Accumulated amortization and impairment
Balance at December 31, 2023		20,447		3,061		1,549			—		25,057
Amortization		43		312		171			—		526
Balance at March 31, 2024		20,490		3,373		1,720			—		25,583

Net book value
Balance at December 31, 2023		61,453		6,939		4,007			750		73,149
Balance at March 31, 2024		61,410		6,627		3,808			750		72,595

11.

Investments


As at	March 31, 2024		December 31, 2023
Investments at amortized cost		24,242		24,405
Investments at fair value through profit and loss ("FVTPL")		9,455		8,655
		33,697		33,060

Current portion		13,034		3,400
Long-term		20,663		29,660

Investments at amortized cost

On April 1, 2024, the Company and Indiva Limited (“Indiva”) entered into an amendment to the Second Amended and Restated Promissory Note dated August 28, 2023, whereby Indiva repaid $2.0 million of principal and certain financial and reporting conditions were amended.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Investments at fair value through profit and loss

On March 7, 2024, the Company provided notice to Delta-9 Cannabis Inc. regarding non-compliance with certain covenants and conditions related to the Second Waiver that had been granted on September 9, 2022. A further waiver with respect to the current non-compliance has not been granted.

12.

Equity-accounted investees


As at	March 31, 2024		December 31, 2023
Interest in joint venture		560,342		538,331

SunStream is a joint venture in which the Company has a 50% ownership interest. SunStream is a private company, incorporated under the Business Corporations Act (Alberta), which provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities.

SunStream is structured as a separate vehicle and the Company has a residual interest in the net assets of SunStream. Accordingly, the Company has classified its interest in SunStream as a joint venture, which is accounted for using the equity-method.

The current investment portfolio of SunStream is comprised of secured debt, hybrid debt and derivative instruments with United States based cannabis businesses. These investments are recorded at fair value each reporting period with any changes in fair value recorded through profit or loss. SunStream actively monitors these investments for changes in credit risk, market risk and other risks specific to each investment.

The following table summarizes the carrying amount of the Company’s interest in the joint venture:


	Carrying amount
Balance at December 31, 2023		538,331
Capital contributions (refunds)		(168	)
Share of net earnings		9,148
Share of other comprehensive income (loss) (taxes at 23%)		13,031
Balance at March 31, 2024		560,342

SunStream is a related party due to it being classified as a joint venture of the Company. Capital contributions to the joint venture and distributions received from the joint venture are classified as related party transactions.

The following table summarizes the financial information of SunStream:


As at	March 31, 2024			December 31, 2023
Current assets (including cash and cash equivalents - 2024: $1.3 million, 2023: $0.3 million)		2,212			2,675
Non-current assets		553,252			532,740
Current liabilities		(360	)		(1,096	)
Net assets (liabilities) (100%)		555,104			534,319

Three months ended March 31	2024			2023
Revenue		11,095			11,329
Profit from operations		9,334			9,691
Other comprehensive income (loss)		13,031			(385	)
Total comprehensive income		22,359			9,332

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

13.

Derivative warrants


	March 31, 2024		December 31, 2023
Balance, beginning of year		4,400		11,002
Change in fair value recognized in profit or loss		1,300		(6,602	)
Balance, end of period		5,700		4,400

During the three months ended March 31, 2024, the 50,000 remaining unsecured convertible note warrants expired. The unsecured convertible notes warrants were issued in 2020 as part of the Company’s debt restructuring transactions. A total of 1.45 million derivative warrants were issued in such transactions, of which 1.4 million were exercised during the year ended December 31, 2020.

The following table summarizes outstanding derivative warrants as at March 31, 2024:


	Exercise price (US$)		Number of warrants		Weighted average contractual life
2020 Series A Warrants (1)		1.77		50,000		1.4
New Warrants		2.29		9,833,333		0.4
				9,883,333		0.4

(1)

The conversion or exercise price, as applicable, is subject to full ratchet antidilution protection upon any subsequent transaction at a price lower than the price then in effect and standard adjustments in the event of any share split, share dividend, share combination, recapitalization or other similar transaction. If the Company issues, sells or enters into any agreement to issue or sell, any variable rate securities, the investors have the additional right to substitute the variable price (or formula) of such securities for the conversion or exercise price, as applicable.

14.

Lease Liabilities


	March 31, 2024			December 31, 2023
Balance, beginning of year		167,029			169,831
Acquisitions		—			4,336
Additions		581			4,362
Lease payments		(8,412	)		(45,017	)
Renewals, remeasurements and dispositions		639			25,505
Tenant inducement allowances received		—			91
Accretion expense		1,954			7,921
Balance, end of period		161,791			167,029

Current portion		32,975			30,537
Long-term		128,816			136,492

The following table presents the contractual undiscounted cash flows, excluding periods covered by lessee lease extension options that have been included in the determination of the lease term, related to the Company’s lease liabilities as at March 31, 2024:


	March 31, 2024
Less than one year		41,480
One to three years		68,735
Three to five years		48,565
Thereafter		32,274
Minimum lease payments		191,054

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

15.

Share capital and warrants

Authorized

The authorized capital of the Company consists of an unlimited number of voting common shares and preferred shares with no par value.

Issued and outstanding


		March 31, 2024				December 31, 2023
	Note	Number of Shares		Carrying Amount		Number of Shares			Carrying Amount
Balance, beginning of year			262,775,853		2,375,950		235,194,236			2,292,810
Share issuances			96,399		164		931,740			1,900
Share repurchases			—		—		(546,700	)		(5,344	)
Acquisitions			—		—		27,605,782			83,953
Shares acquired and cancelled			—		—		(2,261,778	)		(6,879	)
Employee awards exercised			318,423		1,049		1,852,573			9,510
Balance, end of period			263,190,675		2,377,163		262,775,853			2,375,950

During the three months ended March 31, 2024, the Company issued 0.1 million common shares related to the acquisition of certain franchise stores in Ontario.

COMMON SHARE PURCHASE WARRANTS


	Number of Warrants			Carrying Amount
Balance at December 31, 2023		308,612			2,260
Warrants expired		(190,212	)		(1,593	)
Balance at March 31, 2024		118,400			667

During the three months ended March 31, 2024, the warrants acquired as part of the Inner Spirit Holdings Ltd. acquisition expired.

The following table summarizes outstanding warrants as at March 31, 2024:


	Warrants outstanding and exercisable
Issued in relation to	Weighted average exercise price		Number of warrants		Weighted average contractual remaining life (years)
Financial services		45.98		54,400		5.3
Sun 8		9.40		64,000		1.8
	$	26.21		118,400		3.4

16.

Share-based compensation

The Company has a number of share-based compensation plans which include simple and performance warrants, stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”). Subsequent to the Company’s initial public offering, the Company established the stock option, RSU and DSU plans to replace the granting of simple warrants and performance warrants.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

The components of share-based compensation expense are as follows:


	Three months ended March 31
	2024		2023
Equity-settled expense
Simple warrants (A)		—		(337	)
Stock options (B)		—		(5	)
Restricted share units (1) (C)		2,441		2,624
Cash-settled expense
Deferred share units (1)(2) (D)		2,402		(73	)
		4,843		2,209

(1)

For the three months ended March 31, 2024, the Company recognized share-based compensation expense under Nova’s RSU plan of $6 (2023 — $14) and share-based compensation expense under Nova’s DSU plan of $642 (2023 — recovery of $25).

(2)

Cash-settled DSUs are accounted for as a liability and are measured at fair value based on the market value of the Company’s common shares at each period end. Fluctuations in the fair value are recognized during the period in which they occur.

Equity-settled plans

Simple and performance warrants

The Company issued simple warrants and performance warrants to employees, directors and others at the discretion of the Board. Simple and performance warrants granted generally vest annually over a three-year period, simple warrants expire five years after the grant date and performance warrants expire five years after vesting criteria met.

The following table summarizes changes in the simple and performance warrants during the three months ended March 31, 2024:


	Simple warrants outstanding			Weighted average exercise price		Performance warrants outstanding		Weighted average exercise price
Balance at December 31, 2023		66,700		$	39.77		54,400	$	38.62
Expired		(3,840	)		6.25		—		0.00
Balance at March 31, 2024		62,860		$	41.81		54,400	$	38.62

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

The following table summarizes outstanding simple and performance warrants as at March 31, 2024:


	Warrants outstanding						Warrants exercisable
Range of exercise prices	Number of warrants		Weighted average exercise price		Weighted average contractual life (years)		Number of warrants		Weighted average exercise price		Weighted average contractual life (years)
Simple warrants
$6.25 - $9.38		32,460		7.79		0.70		32,460		7.79		0.70
$29.69 - $45.31		7,200		34.90		1.57		7,200		34.90		1.57
$62.50 - $93.75		17,280		64.81		2.64		17,280		64.81		2.64
$125.00 - $312.50		5,920		169.62		3.19		5,920		169.62		3.19
		62,860	$	41.81		1.57		62,860	$	41.81		1.57
Performance warrants
$6.25 - $9.38		19,200		6.25		0.94		19,200		6.25		0.94
$29.69 - $45.31		23,200		32.60		1.02		23,200		32.60		1.02
$62.50 - $93.75		9,334		77.68	n/a			1,334		93.75		1.92
$125.00 - $218.75		2,666		187.50	n/a			—		—	n/a
		54,400	$	38.62	n/a			43,734	$	22.90		1.01

Stock options

The Company issues stock options to employees and others at the discretion of the Board. Stock options granted generally vest annually in thirds over a three-year period and generally expire ten years after the grant date.

The following table summarizes changes in stock options during the three months ended March 31, 2024:


	Stock options outstanding			Weighted average exercise price
Balance at December 31, 2023		853,705		$	17.92
Forfeited		(82,389	)		17.16
Balance at March 31, 2024		771,316		$	18.00

The following table summarizes outstanding stock options as at March 31, 2024:


	Stock options outstanding				Stock options exercisable
Exercise prices	Number of options		Weighted average contractual life (years)		Number of options		Weighted average contractual life (years)
$11.50		10,000		6.16		10,000		6.16
$11.90		8,160		6.24		8,160		6.24
$31.50		3,000		4.48		2,700		4.40
$11.79 - $38.88 (Legacy Valens)		750,156		2.08		750,156		2.08
		771,316		2.19		771,016		2.19

Restricted share units

RSUs are granted to employees and the vesting requirements and maximum term are at the discretion of the Board. RSUs are exchangeable for an equal number of common shares.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

The following table summarizes changes in RSUs during the three months ended March 31, 2024:

At March 31, 2024, no RSUs were vested or exercisable. Subsequent to March 31, 2024, the Company granted 5.4 million RSUs to employees as part of its long-term incentive program.

Cash-settled plans

Deferred share units

DSUs are granted to directors and generally vest in equal instalments over one year. DSUs are settled by making a cash payment to the holder equal to the fair value of the Company’s common shares calculated at the date of such payment.

As at March 31, 2024, the Company recognized a liability of $5.7 million relating to the fair value of cash-settled DSUs (December 31, 2023 – $3.9 million). The liability is included as a non-current liability within other liabilities.

The following table summarizes changes in DSUs during the three months ended March 31, 2024:

At March 31, 2024, 1.3 million DSUs were vested but none were exercisable. At December 31, 2023, 1.5 million DSUs were vested but none were exercisable. DSUs can only be exercised once a director ceases to be on the board.

17.

NET revenue

Liquor retail revenue is derived from the sale of wines, beers and spirits to customers and proprietary licensing. Cannabis retail revenue is derived from retail cannabis sales to customers, franchise revenue consisting of royalty and franchise fee revenue, and other revenue consisting of millwork, supply and accessories revenue and proprietary licensing. Cannabis operations revenue is derived from contracts with customers and is comprised of sales to provincial boards that sell cannabis through their respective distribution models, sales to licensed producers for further processing, provision of proprietary cannabis processing services, product development, manufacturing and commercialization of cannabis consumer products and sales to medical customers.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)


	Three months ended March 31
	2024		2023
Liquor retail revenue
Retail		115,804		115,911
Other		250		—
Liquor retail revenue		116,054		115,911
Cannabis retail revenue
Retail		66,352		64,100
Franchise		1,452		1,767
Other		3,502		1,541
Cannabis retail revenue		71,306		67,408
Cannabis operations revenue
Provincial boards		12,748		14,722
Medical		—		21
Wholesale		7,526		3,149
Analytical testing		324		281
Cannabis operations revenue		20,598		18,173
Gross revenue		207,958		201,492
Excise taxes		10,208		10,447
Net revenue		197,750		191,045

18.

Investment income (LOSS)


	Three months ended March 31
	2024			2023
Interest income from investments at amortized cost		881			1,006
Interest and fee income from investments at FVTPL		1,050			624
Interest income from cash		2,160			2,581
Gains (losses) on marketable securities		(55	)		(5,169	)
		4,036			(958	)

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

19.

Other income (expenses)


	Three months ended March 31
	2024			2023
Finance costs (income)
Accretion on lease liabilities		1,954			1,946
Change in fair value of investments at FVTPL		—			3,368
Financial guarantee liability recovery		(27	)		(139	)
Other finance (recoveries) costs		(106	)		218
Interest income		(196	)		(220	)
Total finance costs		1,625			5,173
Change in fair value of derivative warrants (note 13)		1,300			(4,802	)
Transaction costs		138			2,040
Foreign exchange loss		209			163
		3,272			2,574

20.

Loss per share


	Three months ended March 31
	2024			2023
Weighted average shares outstanding (000s)
Basic and diluted (1)		262,968			255,556
Continuing operations
Net loss attributable to owners of the Company		(2,554	)		(34,203	)
Per share - basic and diluted	$	(0.01	)	$	(0.13	)
Discontinued operations
Net loss attributable to owners of the Company		—			(1,365	)
Per share - basic and diluted	$	—		$	(0.01	)
Net loss attributable to owners of the Company		(2,554	)		(35,568	)
Per share - basic and diluted	$	(0.01	)	$	(0.14	)

(1)

For the three months ended March 31, 2024, there were 0.1 million equity classified warrants, 9.9 million derivative warrants, 0.1 million simple warrants, 0.1 million performance warrants, 0.8 million stock options and 8.3 million RSUs that were excluded from the calculation as the impact was anti-dilutive (three months ended March 31, 2023– 0.3 million equity classified warrants, 9.9 million derivative warrants, 0.3 million simple warrants, 0.1 million performance warrants, 0.04 million stock options and 2.4 million RSUs).

21.

Financial instruments

The financial instruments recognized on the consolidated statement of financial position are comprised of cash and cash equivalents, restricted cash, marketable securities, accounts receivable, investments at amortized cost, investments at FVTPL, accounts payable and accrued liabilities and derivative warrants.

Fair value

The carrying value of cash and cash equivalents, restricted cash, accounts receivable and accounts payable and accrued liabilities approximate their fair value due to the short-term nature of the instruments. The carrying value of investments at amortized cost approximate their fair value as the fixed interest rates approximate market rates for comparable transactions.

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Fair value measurements of marketable securities, investments at FVTPL and derivative warrants are as follows:


			Fair value measurements using
March 31, 2024	Carrying amount		Level 1		Level 2		Level 3
Recurring measurements:
Financial assets
Marketable securities		170		170		—		—
Investments at FVTPL		9,455		—		—		9,455
Financial liabilities
Derivative warrants (1)		5,700		—		—		5,700

			Fair value measurements using
December 31, 2023	Carrying amount		Level 1		Level 2		Level 3
Recurring measurements:
Financial assets
Marketable securities		225		225		—		—
Investments at FVTPL		8,655		—		—		8,655
Financial liabilities
Derivative warrants (1)		4,400		—		—		4,400

(1)

The carrying amount is an estimate of the fair value of the derivative warrants and is presented as a current liability. The Company has no cash obligation with respect to the derivative warrants, rather it will deliver common shares if and when warrants are exercised.

At March 31, 2024, a 10% change in the material assumptions would change the estimated fair value of derivative warrant liabilities by approximately $0.7 million.

There were no transfers between Levels 1, 2 and 3 inputs during the period.

22.

RELATED PARTIES

The Company entered into the following related party transactions during the periods noted, in addition to those disclosed in note 12 relating to the Company’s joint venture.

A member of key management personnel jointly controls a company that owns property leased to SNDL for one of its retail liquor stores. The lease term is from November 1, 2017 to October 31, 2027 and includes extension terms from November 1, 2027 to October 31, 2032 and November 1, 2032 to October 31, 2037. Monthly rent for the location includes base rent, common area costs and sign rent. The rent amounts are subject to increases in accordance with the executed lease agreement. For the three months ended March 31, 2024, the Company paid $41.7 thousand in total rent with respect to this lease (three months ended March 31, 2023 — $41.7 thousand).

23.

Commitments and contingencies

The following table summarizes contractual commitments at March 31, 2024:


	Less than one year		One to three years		Three to five years		Thereafter		Total
Accounts payable and accrued liabilities		61,360		—		—		—		61,360
Financial guarantee liability		—		241		—		—		241
Balance, end of year		61,360		241		—		—		61,601

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2024

(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)

Commitments

The Company has entered into certain supply agreements to provide dried cannabis and cannabis products to third parties. The contracts require the provision of various amounts of dried cannabis on or before certain dates. Should the Company not deliver the product in the agreed timeframe, financial penalties apply which may be paid either in product in-kind or cash. Under these agreements, the Company has accrued financial penalties payable as at March 31, 2024 of $2.5 million (December 31, 2023 – $2.5 million). The corresponding expenses were recognized during the years ended December 31, 2019 ($1.5 million) and December 31, 2021 ($1.0 million).

Contingencies

From time to time, the Company and its subsidiaries are or may become involved in various legal claims and actions which arise in the ordinary course of their business and operations. While the outcome of any such claim or action is inherently uncertain, after consulting with counsel, the Company believes that the losses that may result, if any, will not be material to the financial statements.

24.

Subsequent events

On March 28, 2023, the Company announced that it entered into an agreement with Lightbox Enterprises Ltd. (“Lightbox”) pursuant to which, in connection with Lightbox’s proceedings under the Companies’ Creditors Arrangement Act (Canada), the Company (or its designee) will acquire the assets comprising four cannabis retail stores operating under the Dutch Love cannabis retail banner (the “Dutch Love Stores”) for total consideration value of $7.8 million. The purchase price is to be satisfied by (i) certain cash payments, (ii) the cancellation of debt owing by Lightbox to the Company, and (iii) the issuance of SNDL common shares.

On April 1, 2024, the Company announced that it had agreed to assign its rights to own or operate the Dutch Love Stores to Nova (the “Assignment”). Pursuant to the Assignment, Nova shall issue to the Company $8.18 million of Nova shares based on the 20-day volume-weighted average price of the Nova shares on March 28, 2024. The Company owns approximately 63% of Nova prior to the closing of the Assignment and will own approximately 66% after the closing of the Assignment.

The closing of the acquisition is subject to customary closing conditions, including the receipt of requisite regulatory approvals, and the closing is expected to occur (in whole or in part) in May of 2024.

EX-99.2 3 sndl-ex99_2.htm MD&A EX-99.2

EXHIBIT 99.2

SNDL Inc.

Management’s Discussion and Analysis

For the three months ended March 31, 2024

Management’s Discussion and Analysis

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and performance of SNDL Inc. (“SNDL” or the “Company”) for the three months ended March 31, 2024 is dated May 8, 2024. This MD&A should be read in conjunction with the Company’s condensed consolidated interim financial statements and the notes thereto for the three months ended March 31, 2024 (the “Interim Financial Statements”) and the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 (the “Audited Financial Statements”) and the risks identified in the Company’s Annual Information Form for the year ended December 31, 2023 (the “AIF”) and elsewhere in this MD&A. This MD&A has been prepared in accordance with National Instrument 51-102 - Continuous Disclosure Obligations and is presented in thousands of Canadian dollars, except where otherwise indicated.

MD&A – Table of Contents


COMPANY OVERVIEW	1
RECENT DEVELOPMENTS	1
Other developments	2
FINANCIAL HIGHLIGHTS	3
CONSOLIDATED RESULTS	3
OPERATING SEGMENTS	5
LIQUOR RETAIL SEGMENT RESULTS	6
CANNABIS RETAIL SEGMENT RESULTS	7
CANNABIS OPERATIONS SEGMENT RESULTS	8
INVESTMENTS SEGMENT RESULTS	8
SELECTED QUARTERLY INFORMATION	9
LIQUIDITY AND CAPITAL RESOURCES	9
CONTRACTUAL COMMITMENTS AND CONTINGENCIES	12
NON-IFRS FINANCIAL MEASURES	12
RELATED PARTIES	13
OFF BALANCE SHEET ARRANGEMENTS	13
CRITICAL ACCOUNTING POLICIES AND ESTIMATES	13
NEW ACCOUNTING PRONOUNCEMENTS	14
RISK FACTORS	14
DISCLOSURE CONTROLS AND PROCEDURES	14
INTERNAL CONTROL OVER FINANCIAL REPORTING	15
REMEDIATION	15
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING	15
ABBREVIATIONS	15
FORWARD-LOOKING INFORMATION	15
ADDITIONAL INFORMATION	16

COMPANY OVERVIEW

SNDL Inc. operates under four reportable segments:

•

Liquor retail sales of wines, beers and spirits;

•

Cannabis retail sales of cannabis products and accessories through corporate-owned and franchised cannabis retail operations;

•

Cannabis operations as a licensed producer that grows cannabis using indoor facilities and manufactures cannabis products, providing proprietary cannabis processing services; and

•

Investments targeting the cannabis industry.

The principal activities of the Company are the retailing of wines, beers and spirits under the Wine and Beyond, Ace Liquor and Liquor Depot retail banners; the operation and support of corporate-owned and franchise retail cannabis stores in certain Canadian jurisdictions where the private sale of recreational cannabis is permitted, under the Value Buds, Spiritleaf, Superette and Firesale retail banners; the manufacturing of cannabis products providing proprietary cannabis processing services, the production, distribution and sale of cannabis domestically and for export pursuant to the Cannabis Act (Canada) (the “Cannabis Act”) through a cannabis brand portfolio that includes Top Leaf, Contraband, Citizen Stash, Sundial Cannabis, Vacay, Spiritleaf Selects, Palmetto, Value Buds, Versus, Bonjak, Namaste, Re-up and Grasslands; and, the provision of financial services through the deployment of capital to direct and indirect investments and partnerships throughout the cannabis industry.

The Company produces and markets cannabis products for the Canadian adult-use market and for the international medicinal market. SNDL’s operations cultivate cannabis using approximately 380,000 square feet of total space in Atholville, New Brunswick. SNDL’s extraction and manufacturing operations include approximately 84,506 square feet of total space in British Columbia and approximately 25,500 square feet of total space in Ontario. The Company has a distribution network that covers 98% of the national adult-use cannabis market.

SNDL and its subsidiaries operate solely in Canada. Through its joint venture, SunStream Bancorp Inc. (“SunStream”), the Company provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities. The current investment portfolio of SunStream is comprised of secured debt, hybrid debt and derivative instruments issued by United States based cannabis businesses. The Company also makes strategic portfolio investments in debt and equity securities.

The Company also owns approximately 63% of Nova Cannabis Inc. (“Nova”), whose principal activities are related to the retail sale of cannabis.

SNDL was incorporated under the Business Corporations Act (Alberta) on August 19, 2006. The Company’s common shares are listed under the symbol “SNDL” on the Nasdaq Capital Market (“Nasdaq”).

SNDL is headquartered in Calgary, Alberta, with operations in Edmonton, Alberta, Kelowna, British Columbia, Bolton, Ontario, Toronto, Ontario and Atholville, New Brunswick, and corporate-owned and franchised retail liquor and cannabis stores in five provinces across Canada.

SNDL’s overall strategy is to build sustainable, long-term shareholder value by improving liquidity and cost of capital while optimizing the capacity and capabilities of its production facilities in the creation of a consumer-centric brand and product portfolio. SNDL’s retail operations will continue to build a Canadian retail liquor brand and a network of retail cannabis stores across Canadian jurisdictions where the private distribution of cannabis is legal. SNDL’s investment operations seek to deploy capital through direct and indirect investments and partnerships throughout the cannabis industry.

RECENT DEVELOPMENTS

Lightbox acquisition and assignment

The Company entered into a transition services agreement (the “TSA”) with Lightbox Enterprises Ltd. (“Lightbox”), pursuant to which the Company became the operator of three cannabis retail stores in British Columbia and one cannabis retail store in Ontario operating under the “Dutch Love” banner. The TSA has a term of 12 months for which the Company earns a net management fee. The Company does not control these stores or consolidate the results on a line-by-line basis.

On March 28, 2023, the Company announced that it entered into an agreement with Lightbox pursuant to which, in connection with Lightbox’s proceedings under the Companies’ Creditors Arrangement Act (Canada), the Company (or its designee) will acquire the assets comprising four cannabis retail stores operating under the Dutch Love cannabis retail banner (the “Dutch Love Stores”) for total consideration value of $7.8 million. The purchase price is to be satisfied by (i) certain cash payments, (ii) the cancellation of debt owing by Lightbox to the Company, and (iii) the issuance of SNDL common shares.

UNITED STATES Cannabis regulations

On April 30, 2024, the U.S. Justice Department through the U.S. Drug Enforcement Administration announced that it will move to reclassify cannabis from a Schedule I drug to a Schedule III drug, subject to a formal rulemaking process. Though this decision will not legalize cannabis at a federal level in the U.S., it is expected to facilitate various research and permit certain tax deductions for cannabis businesses operating in the U.S.

OTHER DEVELOPMENTS

share repurchase program

On November 13, 2023, the Company announced that the board of directors of the Company (the “Board”) approved a renewal of the share repurchase program upon its expiry on November 20, 2023. The share repurchase program authorizes the Company to repurchase up to $100 million of its outstanding common shares through open market purchases at prevailing market prices. SNDL may purchase up to a maximum of approximately 13.1 million common shares under the share repurchase program, representing approximately 5% of the issued and outstanding common shares as at the date of announcement, and will expire on November 20, 2024. The share repurchase program does not require the Company to purchase any minimum number of common shares and repurchases may be suspended or terminated at any time at the Company’s discretion. The actual number of common shares which may be purchased pursuant to the share repurchase program and the timing of any purchases will be determined by SNDL’s management and the Board. All common shares purchased pursuant to the share repurchase program will be returned to treasury for cancellation.

The Company did not repurchase any common shares for cancellation during the period. Refer to “Liquidity and Capital Resources – Equity” below for further details regarding common shares purchased and cancelled.

FINANCIAL HIGHLIGHTS

The following table summarizes selected financial information of the Company for the periods noted.



($000s, except per share amounts)	Q1 2024			Q1 2023			Change			% Change
Financial Results
Net revenue		197,750			191,045			6,705			4	%
Cost of sales		147,350			158,504			(11,154	)		-7	%
Gross profit		50,400			32,541			17,859			55	%
Gross profit %		25	%		17	%					8	%
Operating income (loss)		(4,377	)		(32,204	)		27,827			86	%
Adjusted operating income (loss) (1)		(4,466	)		(29,861	)		25,395			85	%
Net loss from continuing operations attributable to owners of the Company		(2,554	)		(34,203	)		31,649			93	%
Per share, basic and diluted		(0.01	)		(0.13	)		0.12			92	%
Net loss from discontinued operations attributable to owners of the Company		—			(1,365	)		1,365			-100	%
Per share, basic and diluted		—			(0.01	)		0.01			-100	%
Net loss attributable to owners of the Company		(2,554	)		(35,568	)		33,014			93	%
Per share, basic and diluted		(0.01	)		(0.14	)		0.13			93	%
Change in cash and cash equivalents		(6,087	)		(66,333	)		60,246			91	%
Free cash flow (1)		(6,388	)		(60,119	)		53,731			89	%

Statement of Financial Position
Cash and cash equivalents		188,954			213,253			(24,299	)		-11	%
Inventory		134,786			153,542			(18,756	)		-12	%
Property, plant and equipment		129,895			200,228			(70,333	)		-35	%
Total assets		1,471,397			1,617,746			(146,349	)		-9	%

(1)

Adjusted operating income (loss) and free cash flow are specified financial measures that do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. Refer to the “Non-IFRS Financial Measures” section of this MD&A for further information.

CONSOLIDATED RESULTS

General and administrative


	Three months ended March 31
($000s)	2024			2023
Salaries and wages		29,921			28,863
Consulting fees		931			747
Office and general		10,989			12,826
Professional fees		1,502			3,155
Merchant processing fees		1,410			1,271
Director fees		119			131
Other		(177	)		1,580
		44,695			48,573

General and administrative expenses for the three months ended March 31, 2024 were $44.7 million compared to $48.6 million for the three months ended March 31, 2023. The decrease of $3.9 million was mainly due to decreases in office and general, professional fees and other expenses which were mainly comprised of decreases in expected credit losses.

Share-based compensation


	Three months ended March 31
($000s)	2024		2023
Equity-settled expense
Simple warrants		—		(337	)
Stock options		—		(5	)
Restricted share units		2,441		2,624
Cash-settled expense
Deferred share units		2,402		(73	)
		4,843		2,209

Share-based compensation expense includes the expense related to the Company’s issuance of simple and performance warrants, stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”) to employees, directors, and others at the discretion of the Board. DSUs are accounted for as a liability instrument and measured at fair value based on the market value of the Company’s common shares at each period end. Share-based compensation also includes the expense related to Nova’s issuance of RSUs and DSUs.

Share-based compensation expense for the three months ended March 31, 2024 was $4.8 million compared to $2.2 million for the three months ended March 31, 2023. The increase of $2.6 million was due to an increase in DSU expense, partially offset by a marginal decrease in RSU expense. The increase in DSU expense was caused by the change in fair value. The current period had an increase in fair value resulting from an increase in the Company’s share price compared to the prior period decrease in fair value resulting from a decrease in the Company’s share price.

Finance costs


	Three months ended March 31
($000s)	2024			2023
Cash finance expense
Other finance costs		95			28
		95			28
Non-cash finance expense
Change in fair value of investments at fair value through profit or loss		—			3,368
Accretion on lease liabilities		1,954			1,946
Financial guarantee liability recovery		(27	)		(139	)
Other		(201	)		190
		1,726			5,365
Interest income		(196	)		(220	)
		1,625			5,173

Finance costs include accretion expense related to lease liabilities, finance income related to net investment in subleases, change in fair value of investments at Fair Value Through Profit or Loss (“FVTPL”) and certain other expenses.

Finance costs for the three months ended March 31, 2024 were $1.6 million compared to $5.2 million for the three months ended March 31, 2023. The decrease of $3.6 million was due to the comparative period change in fair value of investments at FVTPL, caused by a decrease in the Superette promissory note.

Change in estimate of fair value of derivative warrants


	Three months ended March 31
($000s)	2024		2023
Change in estimate of fair value of derivative warrants		1,300		(4,802	)

Change in estimate of fair value of derivative warrants for the three months ended March 31, 2024 was an expense of $1.3 million compared to a recovery of $4.8 million for the three months ended March 31, 2023. The expense in the current

period relates to an increase in fair value, mainly due to an increase in the Company’s share price from US$1.64 on December 31, 2023, to US$2.01 on March 31, 2024. The recovery in the prior period relates to a decrease in fair value, mainly due to a decrease in the Company’s share price from US$2.09 on December 31, 2022, to US$1.60 on March 31, 2023.

Operating income (loss)


	Three months ended March 31
($000s)	2024			2023
Operating income (loss)		(4,377	)		(32,204	)

Operating loss for the three months ended March 31, 2024 was $4.4 million compared to $32.2 million for the three months ended March 31, 2023. The increase of $27.8 million was due to increases in gross profit ($17.9 million) and investment income ($5.0 million), decreased general and administrative expenses ($3.9 million) and depreciation and amortization ($2.3 million), partially offset by increased share-based compensation expense ($2.6 million).

Net loss from continuing operations


	Three months ended March 31
($000s)	2024			2023
Net loss from continuing operations		(4,652	)		(34,778	)

Net loss from continuing operations for the three months ended March 31, 2024 was $4.7 million compared to $34.8 million for the three months ended March 31, 2023. The decrease in net loss from continuing operations of $30.1 million was largely due to increases in gross profit ($17.9 million) and investment income ($5.0 million), decreased general and administrative expenses ($3.9 million) and depreciation and amortization ($2.3 million), and an increase in income tax recovery ($3.0 million), partially offset by increased share-based compensation expense ($2.6 million).

OPERATING SEGMENTS

The Company’s reportable segments are organized by business line and are comprised of four reportable segments: liquor retail, cannabis retail, cannabis operations, and investments.

Liquor retail includes the sale of wines, beers and spirits through wholly owned liquor stores. Cannabis retail includes the private sale of recreational cannabis through wholly owned and franchise retail cannabis stores. Cannabis operations include the cultivation, distribution and sale of cannabis for the adult-use and medical markets domestically and for export, and providing proprietary cannabis processing services, in addition to product development, manufacturing, and commercialization of cannabis consumer packaged goods. Investments include the deployment of capital to investment opportunities. Certain overhead expenses not directly attributable to any operating segment are reported as “Corporate”.


($000s)	Liquor Retail		Cannabis Retail			Cannabis Operations		Investments (1)		Corporate			Total
As at March 31, 2024
Total assets		308,357		202,970			197,334		742,614		20,122			1,471,397
Three months ended March 31, 2024
Net revenue (2)		116,054		71,306			22,395		—		(12,005	)		197,750
Gross profit		28,806		18,359			3,235		—		—			50,400
Operating income (loss)		2,180		(1,042	)		891		13,079		(19,485	)		(4,377	)
Adjusted operating income (loss) (3)		2,180		(1,042	)		1,146		13,079		(19,829	)		(4,466	)

(1)

Total assets include cash and cash equivalents.

(2)

(3)

Adjusted operating income (loss) is a specified financial measure that does not have standardized meaning prescribed by IFRS Accounting Standards and therefore may not be comparable to similar measures used by other companies. Refer to the “Non-IFRS Financial Measures” section of this MD&A for further information.


($000s)	Liquor Retail			Cannabis Retail (1)			Cannabis Operations (2)			Investments (3)		Corporate			Total
As at December 31, 2023
Total assets		320,239			206,988			208,295			717,751		19,891			1,473,164
Three months ended March 31, 2023
Net revenue (4)		115,911			67,408			19,133			—		(11,407	)		191,045
Gross profit		26,267			15,819			(9,545	)		—		—			32,541
Operating income (loss)		(1,950	)		(78	)		(18,832	)		8,737		(20,081	)		(32,204	)
Adjusted operating income (loss) (5)		(1,950	)		(78	)		(17,936	)		8,737		(18,634	)		(29,861	)

(1)

Cannabis retail includes the operations of Superette for the period February 8, 2023 to March 31, 2023.

(2)

Cannabis operations include the operations of The Valens Company Inc. (“Valens”) for the period January 18, 2023 to March 31, 2023.

(3)

Total assets include cash and cash equivalents.

(4)

(5)

LIQUOR RETAIL SEGMENT RESULTS

Operating income (loss)


	Three months ended March 31
($000s)	2024			2023
Net revenue		116,054			115,911
Cost of sales		87,248			89,644
Gross profit		28,806			26,267
Gross profit %		24.8	%		22.7	%

General and administrative		18,085			17,046
Sales and marketing		493			811
Depreciation and amortization		8,973			10,346
Asset impairment		(925	)		—
Loss on disposition of assets		—			14
Operating income (loss)		2,180			(1,950	)

Net revenue for the three months ended March 31, 2024 was $116.1 million compared to $115.9 million for the three months ended March 31, 2023. The increase of $0.2 million was due to the introduction of new proprietary licensing arrangements.

Cost of sales for liquor retail operations is comprised of the cost of wine, beer and spirits. Cost of sales for the three months ended March 31, 2024 was $87.2 million compared to $89.6 million for the three months ended March 31, 2023. The decrease of $2.4 million was due to decreases in average item costs, shifting consumer purchases from lower to higher margin item categories and further optimization of the Company’s preferred label offerings.

Gross profit for the three months ended March 31, 2024 was $28.8 million (24.8%) compared to $26.3 million (22.7%) for the three months ended March 31, 2023. The increase of $2.5 million was due to the introduction of new proprietary licensing arrangements and the reduction to cost of sales noted above.

At March 31, 2024, and May 8, 2024, the Ace Liquor store count was 138, the Liquor Depot store count was 20 and the Wine and Beyond store count was 13.

CANNABIS RETAIL SEGMENT RESULTS

Operating income (loss)


	Three months ended March 31
($000s)	2024			2023 (1)
Net revenue		71,306			67,408
Cost of sales		52,947			51,589
Gross profit		18,359			15,819
Gross profit %		25.7	%		23.5	%

General and administrative		12,620			11,967
Sales and marketing		526			226
Depreciation and amortization		3,727			3,690
Share-based compensation		—			(11	)
Asset impairment		2,528			—
Loss on disposition of assets		—			25
Operating income (loss)		(1,042	)		(78	)

(1)

Cannabis retail results include the operations of Superette from February 8, 2023 to March 31, 2023.

Net revenue for the three months ended March 31, 2024 was $71.3 million compared to $67.4 million for the three months ended March 31, 2023. The increase of $3.9 million is mainly attributable to an increase in corporate store sales and proprietary licensing arrangements. Corporate store sales increased partly as a result of newly opened stores and the increase in proprietary licensing arrangements was due to a new variable services agreement.

Cost of sales for the three months ended March 31, 2024 was $52.9 million compared to $51.6 million for the three months ended March 31, 2023. The increase of $1.3 million was due to an increase in corporate store sales.

Gross profit for the three months ended March 31, 2024 was $18.4 million (25.7%) compared to $15.8 million (23.5%) for the three months ended March 31, 2023. The increase of $2.6 million was due to proprietary licensing arrangements which do not have an associated cost of sales and increased corporate store sales.

At March 31, 2024, the Spiritleaf store count was 85 (21 corporate stores and 64 franchise stores), the Superette store count was 4 corporate stores, the Firesale store count was 2 corporate stores, the Dutch Love store count was 3 corporate stores and the Value Buds store count was 96 corporate stores. At May 8, 2024, the Spiritleaf store count was 84 (20 corporate stores and 64 franchise stores), the Superette store count was 4 corporate stores, the Firesale store count was 1 corporate store, the Dutch Love store count was 3 corporate stores and the Value Buds store count was 96 corporate stores.

CANNABIS OPERATIONS SEGMENT RESULTS

Operating income (loss)


	Three months ended March 31
($000s)	2024			2023 (1)
Net revenue		22,395			19,133
Cost of sales		19,160			28,678
Gross profit		3,235			(9,545	)
Gross profit %		14.4	%		-49.9	%

Gain (loss) on marketable securities		—			(283	)

General and administrative		94			5,380
Sales and marketing		1,089			1,297
Research and development		37			140
Depreciation and amortization		738			1,146
Restructuring costs		255			89
Asset impairment		53			807
Loss on disposition of assets		78			145
Operating income (loss)		891			(18,832	)

(1)

Cannabis operations include the operations of Valens for the period January 18, 2023 to March 31, 2023.

The Company’s revenue comprises bulk and packaged sales under the Cannabis Act pursuant to its supply agreements with Canadian provincial boards, other licensed producers and international exports, proprietary extraction services, white label product formulation and manufacturing, the sale of bulk winterized oil and distillate, toll processing and co-packaging services and analytical testing.

Net revenue for the three months ended March 31, 2024 was $22.4 million compared to $19.1 million for the three months ended March 31, 2023. The increase of $3.3 million was mainly due to increased wholesale and international sales.

Cost of sales for the three months ended March 31, 2024 were $19.2 million compared to $28.7 million for the three months ended March 31, 2023. The decrease of $9.5 million was mainly due to a decrease in inventory impairment and obsolescence of $7.3 million, and an increase in sales to licensed producers which have a lower associated cost than sales to provincial boards.

Gross profit for the three months ended March 31, 2024 was $3.2 million compared to negative $9.5 million for the three months ended March 31, 2023. The increase of $12.7 million was due to the increase in net revenue and the decrease in cost of sales, mainly due to the decrease in inventory impairment and obsolescence.

The decrease in general and administrative expenses was due to the reversal of expected credit losses in the current period, and a decrease in costs from the closure of the Olds facility.

INVESTMENTS SEGMENT RESULTS

Operating income (loss)


	Three months ended March 31
($000s)	2024		2023
Investment income (loss)		4,036		(675	)
Share of profit of equity-accounted investees		9,148		9,516

General and administrative		105		104
Operating income (loss)		13,079		8,737

Investment income for the three months ended March 31, 2024 was $4.0 million compared to a loss of $0.7 million for the three months ended March 31, 2023. The increase of $4.7 million was mainly due to a decrease in loss on marketable securities, partially offset by a minor decrease in interest revenue. The Company disposed of the majority of its marketable securities in the prior year resulting in a minor loss in the current period.

Share of profit of equity-accounted investees is comprised of the Company’s share of the net profit generated from its investments in SunStream. The current investment portfolio of SunStream is comprised of secured debt, hybrid debt and derivative instruments issued by United States based cannabis businesses.

Share of profit of equity-accounted investees for the three months ended March 31, 2024 was $9.1 million compared to $9.5 million for the three months ended March 31, 2023. The decrease of $0.4 million was due to accounting fair value adjustments to the investments.

SELECTED QUARTERLY INFORMATION

The following table summarizes selected consolidated operating and financial information of the Company for the preceding eight quarters.


	2024			2023												2022
($000s, except per share amounts)	Q1			Q4			Q3			Q2			Q1			Q4			Q3			Q2
Gross revenue		207,958			261,607			249,796			257,425			212,899			246,866			235,144			227,557
Gross profit		50,400			57,336			48,605			51,933			32,541			43,568			50,309			43,079
Investment (loss) income		4,036			3,400			3,416			(599	)		(958	)		(879	)		(1,201	)		(32,496	)
Net loss from continuing operations attributable to owners of the Company		(2,554	)		(82,788	)		(21,784	)		(29,350	)		(34,203	)		(125,801	)		(98,108	)		(73,301	)
Per share, basic and diluted		(0.01	)		(0.32	)		(0.08	)		(0.11	)		(0.13	)		(0.53	)		(0.41	)		(0.31	)
Net loss attributable to owners of the Company		(2,554	)		(82,788	)		(21,784	)		(32,520	)		(35,568	)		(125,801	)		(98,108	)		(73,301	)
Per share, basic and diluted		(0.01	)		(0.32	)		(0.08	)		(0.12	)		(0.14	)		(0.53	)		(0.41	)		(0.31	)

During the eight most recent quarters the following items have had a significant impact on the Company’s financial results and results of operations:

•

Implementing several streamlining and efficiency initiatives which included workforce optimizations;

•

Entering into and acquiring several cannabis-related investments;

•

Disposing of marketable securities;

•

Price discounts and provisions for product returns;

•

Impairment of property, plant and equipment;

•

Provisions for inventory obsolescence and impairment;

•

Investments in SunStream;

•

Acquisitions of Alcanna Inc. (“Alcanna”) (inclusive of its ownership interest in Nova), Zenabis Ltd., Valens and Superette;

•

Impairment of goodwill and intangible assets from the Inner Spirit and Alcanna acquisitions;

•

Impairment of goodwill from the Valens acquisition; and

•

Impairment of the Olds facility due to the consolidation of all cultivation activities to the Atholville facility.

LIQUIDITY AND CAPITAL RESOURCES


($000s)	March 31, 2024		December 31, 2023
Cash and cash equivalents		188,954		195,041

Capital resources are financing resources available to the Company and are defined as the Company’s debt and equity. The Company manages its capital resources with the objective of maximizing shareholder value and sustaining future development of the business. The Company manages its capital structure and adjusts it, based on the funds available to the Company, in order to support the Company’s activities. The Company may adjust capital spending, issue new equity or issue new debt, subject to the availability of such debt or equity financing on commercial terms.

The Company’s primary need for liquidity is to fund investment opportunities, capital expenditures, working capital requirements and for general corporate purposes. The Company’s primary source of liquidity historically has been from funds received from the proceeds of common share issuances and debt financing. The Company’s ability to fund operations and investments and make planned capital expenditures depends on future operating performance and cash flows, as well as the availability of future financing–all of which is subject to prevailing economic conditions and financial, business and other factors.

Management believes its current capital resources will be sufficient to satisfy cash requirements associated with funding the Company’s operating expenses and future development activities for at least the next 12 months. However, no assurance can be given that this will be the case or that future sources of capital will not be necessary.

Debt

As at March 31, 2024, the Company had no outstanding bank debt or other debt.

Equity

As at March 31, 2024, the Company had the following share capital instruments outstanding:


(000s)	March 31, 2024		December 31, 2023
Common shares		263,191		262,776
Common share purchase warrants (1)		118		309
Simple warrants (2)		63		67
Performance warrants (3)		54		54
Stock options (4)		771		854
Restricted share units		8,258		8,630

(1)

0.1 million warrants were exercisable as at March 31, 2024.

(2)

0.1 million simple warrants were exercisable as at March 31, 2024.

(3)

43.7 thousand performance warrants were exercisable as at March 31, 2024.

(4)

0.8 million stock options were exercisable as at March 31, 2024.

Common shares were issued during the three months ended March 31, 2024 in connection with the following transactions:

•

The Company issued 0.3 million common shares in connection with the vesting of RSUs under its long term incentive plan; and

•

The Company issued 0.1 million common shares related to the acquisition of certain franchise stores in Ontario.

The Company did not repurchase any common shares for cancellation during the period.

As at May 8, 2024, a total of 263.2 million common shares were outstanding.

Cash Flow Summary


	Three months ended March 31
($000s)	2024			2023
Cash provided by (used in):
Operating activities		3,301			(48,797	)
Investing activities		(1,676	)		(6,466	)
Financing activities		(7,712	)		(11,070	)
Change in cash and cash equivalents		(6,087	)		(66,333	)

Cash Flow – Operating Activities

Net cash provided by operating activities was $3.3 million for the three months ended March 31, 2024 compared to $48.8 million used in operating activities for the three months ended March 31, 2023. The increase of $52.1 million was due to the change in non-cash working capital and an increase in net loss adjusted for non-cash items. The change in non-cash working capital is comprised of changes in inventory, accounts receivable, prepaid expenses and deposits and accounts payable.

Cash Flow – Investing Activities

Net cash used in investing activities was $1.7 million for the three months ended March 31, 2024 compared to $6.5 million used in investing activities for the three months ended March 31, 2023. The decrease of $4.8 million was primarily due to lower additions to equity-accounted investees, partially offset by acquisitions, net of cash acquired in the comparative period and an increase in additions to property, plant and equipment.

Cash Flow – Financing Activities

Net cash used in financing activities was $7.7 million for the three months ended March 31, 2024 compared to $11.1 million used in financing activities for the three months ended March 31, 2023. The decrease of $3.4 million was largely due to decreased payments on lease liabilities and no repurchases of common shares in the current period.

Free cash flow

Free cash flow is a specified financial measure that does not have standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. Refer to the “Non-IFRS Financial Measures” section of this MD&A for further information. The Company defines free cash flow as the total change in cash and cash equivalents less cash used for common share repurchases, dividends (if any), changes to debt instruments, changes to long-term investments, net cash used for acquisitions plus cash provided by dispositions (if any)

Free cash flow was negative $6.4 million for the three months ended March 31, 2024 compared to negative $60.1 million for the three months ended March 31, 2023. The increase of $53.7 million was mainly due a decrease in net loss adjusted for non-cash items ($15.3 million) and a decrease in non-cash working capital ($38.5 million).

Liquidity risks associated with financial instruments

Credit risk

Credit risk is the risk of financial loss if the counterparty to a financial transaction fails to meet its obligations. The maximum amount of the Company’s credit risk exposure is the carrying amounts of cash and cash equivalents, accounts receivable, and investments. The Company attempts to mitigate such exposure to its cash and cash equivalents by investing only in financial institutions with investment grade credit ratings or secured investments. The Company manages risk over its accounts receivable by issuing credit only to credit worthy counterparties. The Company limits its exposure to credit risk over its investments by ensuring the agreements governing the investments are secured in the event of counterparty default. The Company considers financial instruments to have low credit risk when its credit risk rating is equivalent to investment grade. The Company assumes that the credit risk on a financial asset has increased significantly if it is outstanding past the contractual payment terms. The Company considers a financial asset to be in default when the debtor is unlikely to pay its credit obligations to the Company.

The Company applies the simplified approach under IFRS 9 and has calculated expected credit losses based on lifetime expected credit losses, taking into consideration historical credit loss experience and financial factors specific to the debtors and general economic conditions.

Liquidity risk

Liquidity risk is the risk that the Company cannot meet its financial obligations when due. The Company manages liquidity risk by monitoring operating and growth requirements. The Company prepares forecasts to ensure sufficient liquidity to fulfil obligations and operating plans. Management believes its current capital resources will be sufficient to satisfy cash requirements associated with funding the Company’s operating expenses and future development activities for at least the next 12 months. However, no assurance can be given that this will be the case or that future sources of capital will not be necessary.

Market risk

Market risk is the risk that changes in market prices will affect the Company’s income or value of its holdings of financial instruments. The Company is exposed to market risk in that changes in market prices will cause fluctuations in the fair value of its marketable securities. The fair value of marketable securities is based on quoted market prices as the Company’s marketable securities are shares of publicly traded entities.

CONTRACTUAL COMMITMENTS AND CONTINGENCIES

Commitments

The information presented in the table below reflects management’s estimate of the contractual maturities of the Company’s obligations at March 31, 2024.


($000s)	Less than one year		One to three years		Three to five years		Thereafter		Total
Accounts payable and accrued liabilities		61,360		—		—		—		61,360
Lease liabilities		41,480		68,735		48,565		32,274		191,054
Financial guarantee liability		—		241		—		—		241
Total		102,840		68,976		48,565		32,274		252,655

Contingencies

From time to time, the Company and its subsidiaries are or may become involved in various legal claims and actions which arise in the ordinary course of their business and operations. While the outcome of any such claim or action is inherently uncertain, the Company believes that the losses that may result, if any, will not be material to the financial statements.

NON-IFRS FINANCIAL MEASURES

Certain specified financial measures in this MD&A including adjusted operating income (loss) and free cash flow are non-IFRS measures. These terms are not defined by IFRS and, therefore, may not be comparable to similar measures reported by other companies. These non-IFRS financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS.

Adjusted operating income (loss)

Adjusted operating income (loss) is a non-IFRS financial measure which the Company uses to evaluate its operating performance. Adjusted operating income (loss) provides information to investors, analysts, and others to aid in understanding and evaluating the Company’s operating results in a similar manner to its management team. The Company defines adjusted operating income (loss) as operating income (loss) less restructuring costs (recovery), goodwill and intangible asset impairments and asset impairments triggered by restructuring activities.

The following tables reconcile adjusted operating income (loss) to operating income (loss) for the periods noted.


($000s)	Liquor Retail		Cannabis Retail			Cannabis Operations		Investments		Corporate			Total
Three months ended March 31, 2024
Operating income (loss)		2,180		(1,042	)		891		13,079		(19,485	)		(4,377	)
Adjustments:
Restructuring costs (recovery)		—		—			255		—		(344	)		(89	)
Adjusted operating income (loss)		2,180		(1,042	)		1,146		13,079		(19,829	)		(4,466	)


($000s)	Liquor Retail			Cannabis Retail			Cannabis Operations			Investments		Corporate			Total
Three months ended March 31, 2023
Operating income (loss)		(1,950	)		(78	)		(18,832	)		8,737		(20,081	)		(32,204	)
Adjustments:
Restructuring costs		—			—			89			—		1,447			1,536
Intangible asset impairments		—			—			807			—		—			807
Adjusted operating income (loss)		(1,950	)		(78	)		(17,936	)		8,737		(18,634	)		(29,861	)

Free cash flow

Free cash flow is a non-IFRS financial measure which the Company uses to evaluate its financial performance. Free cash flow provides information which management believes to be useful to investors, analysts and others in understanding and evaluating the Company’s ability to generate positive cash flows as it removes cash used for non-operational items. The Company defines free cash flow as the total change in cash and cash equivalents less cash used for common share repurchases, dividends (if any), changes to debt instruments, changes to long-term investments, net cash used for acquisitions plus cash provided by dispositions (if any).

The following table reconciles free cash flow to change in cash and cash equivalents for the periods noted.


	Three months ended March 31
($000s)	2024			2023
Change in cash and cash equivalents		(6,087	)		(66,333	)
Adjustments
Repurchase of common shares		—			1,536
Changes to long-term investments		(301	)		8,373
Acquisitions, net of cash acquired		—			(3,695	)
Free cash flow		(6,388	)		(60,119	)

RELATED PARTIES

The Company entered into the following related party transactions during the periods noted, in addition to those disclosed in note 12 of the Interim Financial Statements relating to the Company’s SunStream joint venture.

A member of key management personnel jointly controls a company that owns property leased to SNDL for one of its retail liquor stores. The lease term is from November 1, 2017 to October 31, 2027 and includes extension terms from November 1, 2027 to October 31, 2032 and November 1, 2032 to October 31, 2037. Monthly rent for the location includes base rent, common area costs and sign rent. The rent amounts are subject to increases in accordance with the executed lease agreement. For the three months ended March 31, 2024, the Company paid $41.7 in total rent with respect to this lease (three months ended March 31, 2023 – $41.7).

OFF BALANCE SHEET ARRANGEMENTS

As at March 31, 2024, the Company did not have any off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company makes assumptions in applying critical accounting estimates that are uncertain at the time the accounting estimate is made and may have a significant effect on its consolidated financial statements. Critical accounting estimates include the classification and recoverable amounts of cash generating units, value of inventory, estimating potential future returns on revenue, convertible instruments, value of investments, value of equity-accounted investees and value of leases. Critical accounting estimates are based on variable inputs including but not limited to:

•

Demand for cannabis for recreational and medical purposes;

•

Price of cannabis;

•

Expected cannabis sales volumes;

•

Demand for liquor;

•

Price of liquor;

•

Expected liquor sales volumes;

•

Changes in market interest and discount rates;

•

Future development and operating costs;

•

Costs to convert harvested cannabis to finished goods;

•

Expected yields from cannabis plants;

•

Potential returns and pricing adjustments; and

•

Market prices, volatility and discount rates used to determine fair value of equity-accounted investees.

Changes in critical accounting estimates can have a significant effect on profit or loss as a result of their impact on revenue, costs of sales, provisions and impairments. Changes in critical accounting estimates can have a significant effect on the valuation of biological assets, inventory, property, plant and equipment, provisions and derivative financial instruments.

For a detailed discussion regarding the Company’s critical accounting policies and estimates, refer to the notes to the Audited Financial Statements.

NEW ACCOUNTING PRONOUNCEMENTS

The International Accounting Standards Board and the IFRS Interpretations Committee regularly issue new and revised accounting pronouncements which have future effective dates and therefore are not reflected in the Company’s consolidated financial statements. Once adopted, these new and amended pronouncements may have an impact on the Company’s consolidated financial statements. The Company’s analysis of recent accounting pronouncements is included in the notes to the Audited Financial Statements.

RISK FACTORS

In addition to the risks described elsewhere in this document, for a detailed discussion regarding the Company’s risk factors, refer to the “Risk Factors” section of the AIF.

DISCLOSURE CONTROLS AND PROCEDURES

The Company has designed disclosure controls and procedures (as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) and Rules 13a-15(e) and 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to provide reasonable assurance that: (i) material information relating to the Company is made known to the Company’s Chief Executive Officer and Chief Financial Officer by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in such securities legislation.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based upon evaluation of the Company’s disclosure controls and procedures as of March 31, 2024, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as March 31, 2024, due to a material weakness described in our MD&A for the year ended December 31, 2023.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in NI 52-109 and Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Refer to our MD&A for the year ended December 31, 2023, for a discussion regarding our internal control over financial reporting and the material weakness identified.

REMEDIATION

Management has implemented and continues to implement measures designed to ensure that control deficiencies are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include:

•

continuing to strengthen procedures and controls related to the provisioning of and periodic review of user access to IT systems;

•

enhancing the timeliness and precision of executing user access reviews; and

•

working with our advisors to continue to assist with process improvements and strengthening of controls over financial systems.

At May 8, 2024 the above remediation measures are in progress but will not be considered remediated until the updated controls operate for a sufficient period of time, and management has concluded through testing, that these controls are operating effectively.

The Company is pursuing remediation of the above material weakness during the 2024 fiscal year.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Except for the remediation activities described above, as of March 31, 2024, there have been no other changes in our internal control over financial reporting (as defined in NI 52-109 and Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ABBREVIATIONS

The following provides a summary of common abbreviations used in this document:


Financial and Business Environment
$ or C$	Canadian dollars
U.S.	United States
US$	United States dollars

FORWARD-LOOKING INFORMATION

This MD&A may contain forward-looking information concerning the Company’s business, operations and financial performance and condition, as well as the Company’s plans, objectives and expectations for its business operations and financial performance and condition, such as the expected acquisition of certain assets from Lightbox. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim”, “anticipate”, “assume”, “believe”, “contemplate”, “continue”, “could”, “due”, “estimate”, “expect”, “goal”, “intend”, “may”, “objective”, “plan”, “predict”, “potential”, “positioned”, “pioneer”, “seek”, “should”, “target”, “will”, “would”, and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.

Although the forward-looking statements contained in this MD&A are based on assumptions that the Company believes are reasonable, you are cautioned that actual results and developments (including Company results of operations, financial condition and liquidity, and the development of the industry in which the Company operates) may differ materially from those made in or suggested by the forward-looking statements contained in this MD&A. In addition, even if results and developments are consistent with the forward-looking statements contained in this MD&A, those results and developments may not be indicative of results or developments in subsequent periods.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company’s business and the industry in which it operates and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond its control. As a result, any or all of the forward-looking information in this MD&A may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” in the AIF and otherwise described in this MD&A. Readers of this MD&A are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this MD&A and, except as required by applicable law, the Company assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with applicable securities regulators, including the Canadian securities regulators and the U.S. Securities and Exchange Commission (the “SEC”), after the date of this MD&A.

This MD&A contains estimates, projections and other information concerning the Company’s industry, its business and the markets for its products. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, the Company obtained this industry, business, market and other data from its own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. Certain statements included in this MD&A may be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this MD&A. The purpose of the financial outlook is to provide readers with disclosure of the Company’s reasonable expectations of its anticipated results. The financial outlook is provided as of the date of this MD&A.

In addition, assumptions and estimates of the Company’s and industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” in the AIF and elsewhere in this MD&A. These and other factors could cause the Company’s future performance to differ materially from the Company’s assumptions and estimates. Readers of this MD&A are cautioned against placing undue reliance on forward-looking statements.

Further information regarding the assumptions and risks inherent in the making of forward-looking statements can be found in the AIF, along with the Company’s other public disclosure documents. Copies of the AIF and other public disclosure documents are available under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR+”) at www.sedarplus.ca and on the EDGAR section of the SEC’s website at www.sec.gov.

ADDITIONAL INFORMATION

Additional information relating to the Company, including the Company’s most recent AIF, can be viewed under the Company’s profile on SEDAR+ at www.sedarplus.ca, on the EDGAR section of the SEC’s website at www.sec.gov, or on the Company’s website at www.sndl.com. The information on or accessible through our website is not part of and is not incorporated by reference into this MD&A, and the inclusion of our website address in this MD&A is only for reference.

EX-99.3 4 sndl-ex99_3.htm CEO EX-99.3

EXHIBIT 99.3

Form 52-109F2

Certification of Interim Filings

Full Certificate

I, Zachary George, Chief Executive Officer of SNDL Inc., certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of SNDL Inc. (the “issuer”) for the interim period ended March 31, 2024.

2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1 Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is “Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)”.

5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period

(a) a description of the material weakness;

(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

5.3 Limitation on scope of design: N/A

6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and ended on March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: May 8, 2024

/s/ Zachary George

_______________________

Zachary George

Chief Executive Officer

EX-99.4 5 sndl-ex99_4.htm CFO EX-99.4

EXHIBIT 99.4

Form 52-109F2

Certification of Interim Filings

Full Certificate

I, Alberto Paredero Quiros, Chief Financial Officer of SNDL Inc., certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of SNDL Inc. (the “issuer”) for the interim period ended March 31, 2024.

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period

(a) a description of the material weakness;

(b) the impact of the material weakness on the issuer’s financial reporting and its ICFR; and

5.3 Limitation on scope of design: N/A

Date: May 8, 2024

/s/ Alberto Paredero Quiros

_______________________

Alberto Paredero Quiros

Chief Financial Officer

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