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

EXHIBIT 99.1

img260723042_0.jpg 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SNDL Inc.

Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 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

June 30, 2024

 

December 31, 2023

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

 

182,934

 

 

195,041

 

Restricted cash

 

 

19,972

 

 

19,891

 

Marketable securities

 

 

156

 

 

225

 

Accounts receivable

 

 

22,361

 

 

27,059

 

Biological assets

5

 

868

 

 

429

 

Inventory

6

 

132,912

 

 

129,060

 

Prepaid expenses and deposits

 

 

19,303

 

 

22,464

 

Investments

12

 

28,514

 

 

3,400

 

Assets held for sale

7

 

19,051

 

 

6,375

 

Net investment in subleases

10

 

2,819

 

 

2,970

 

 

 

428,890

 

 

406,914

 

Non-current assets

 

 

 

 

 

Long-term deposits and receivables

 

 

6,232

 

 

4,837

 

Right of use assets

8

 

119,473

 

 

129,679

 

Property, plant and equipment

9

 

132,362

 

 

152,916

 

Net investment in subleases

10

 

16,572

 

 

18,396

 

Intangible assets

11

 

73,961

 

 

73,149

 

Investments

12

 

835

 

 

29,660

 

Equity-accounted investees

13

 

571,178

 

 

538,331

 

Goodwill

 

 

124,552

 

 

119,282

 

Total assets

 

 

1,474,055

 

 

1,473,164

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

62,389

 

 

68,210

 

Lease liabilities

15

 

32,618

 

 

30,537

 

Derivative warrants

14

 

3,900

 

 

4,400

 

 

 

98,907

 

 

103,147

 

Non-current liabilities

 

 

 

 

 

Lease liabilities

15

 

124,994

 

 

136,492

 

Other liabilities

 

 

6,236

 

 

4,185

 

Total liabilities

 

 

230,137

 

 

243,824

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Share capital

16(b)

 

2,380,753

 

 

2,375,950

 

Warrants

16(c)

 

667

 

 

2,260

 

Contributed surplus

 

 

79,568

 

 

73,014

 

Contingent consideration

 

 

2,279

 

 

2,279

 

Accumulated deficit

 

 

(1,269,177

)

 

(1,260,851

)

Accumulated other comprehensive income

 

 

33,751

 

 

19,417

 

Total shareholders’ equity

 

 

1,227,841

 

 

1,212,069

 

Non-controlling interest

 

 

16,077

 

 

17,271

 

Total liabilities and shareholders’ equity

 

 

1,474,055

 

 

1,473,164

 

Commitments (note 24)

Subsequent events (note 12)

See accompanying notes to the condensed consolidated interim financial statements.

1

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
June 30

 

 

Six months ended
June 30

 

 

 

Note

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net revenue

 

18

 

 

228,127

 

 

 

231,916

 

 

 

425,877

 

 

 

422,961

 

Cost of sales

 

6

 

 

169,963

 

 

 

179,983

 

 

 

317,313

 

 

 

338,487

 

Gross profit

 

 

 

 

58,164

 

 

 

51,933

 

 

 

108,564

 

 

 

84,474

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income (loss)

 

19

 

 

3,204

 

 

 

(599

)

 

 

7,240

 

 

 

(1,557

)

Share of profit (loss) of equity-accounted investees

 

13

 

 

5,252

 

 

 

(936

)

 

 

14,400

 

 

 

8,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

 

 

48,036

 

 

 

52,727

 

 

 

92,731

 

 

 

101,300

 

Sales and marketing

 

 

 

 

3,439

 

 

 

4,104

 

 

 

6,037

 

 

 

7,490

 

Research and development

 

 

 

 

109

 

 

 

20

 

 

 

146

 

 

 

160

 

Depreciation and amortization

 

8,9,11

 

 

13,519

 

 

 

13,443

 

 

 

27,662

 

 

 

29,911

 

Share-based compensation

 

17

 

 

4,883

 

 

 

3,893

 

 

 

9,726

 

 

 

6,102

 

Restructuring costs

 

 

 

 

221

 

 

 

4,042

 

 

 

132

 

 

 

5,578

 

Asset impairment

 

7,8,9

 

 

919

 

 

 

1,658

 

 

 

2,575

 

 

 

2,465

 

Loss on disposition of assets

 

 

 

 

328

 

 

 

77

 

 

 

406

 

 

 

261

 

Operating income (loss)

 

 

 

 

(4,834

)

 

 

(29,566

)

 

 

(9,211

)

 

 

(61,770

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

20

 

 

(1,417

)

 

 

(422

)

 

 

(4,689

)

 

 

(2,996

)

Loss before income tax

 

 

 

 

(6,251

)

 

 

(29,988

)

 

 

(13,900

)

 

 

(64,766

)

Income tax recovery

 

 

 

 

1,284

 

 

 

—

 

 

 

4,281

 

 

 

—

 

Net loss from continuing operations

 

 

 

 

(4,967

)

 

 

(29,988

)

 

 

(9,619

)

 

 

(64,766

)

Net loss from discontinued operations

 

 

 

 

—

 

 

 

(3,170

)

 

 

—

 

 

 

(4,535

)

Net loss

 

 

 

 

(4,967

)

 

 

(33,158

)

 

 

(9,619

)

 

 

(69,301

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-accounted investees - share of other comprehensive income (loss)

 

13

 

 

4,300

 

 

 

(11,621

)

 

 

14,334

 

 

 

(12,006

)

Gain on translation of foreign operations

 

 

 

 

—

 

 

 

(5

)

 

 

—

 

 

 

—

 

Comprehensive income (loss)

 

 

 

 

(667

)

 

 

(44,784

)

 

 

4,715

 

 

 

(81,307

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owners of the Company

 

 

 

 

(5,772

)

 

 

(29,350

)

 

 

(8,326

)

 

 

(63,553

)

Non-controlling interest

 

 

 

 

805

 

 

 

(638

)

 

 

(1,293

)

 

 

(1,213

)

 

 

 

 

 

(4,967

)

 

 

(29,988

)

 

 

(9,619

)

 

 

(64,766

)

Net loss attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owners of the Company

 

 

 

 

(5,772

)

 

 

(32,520

)

 

 

(8,326

)

 

 

(68,088

)

Non-controlling interest

 

 

 

 

805

 

 

 

(638

)

 

 

(1,293

)

 

 

(1,213

)

 

 

 

 

 

(4,967

)

 

 

(33,158

)

 

 

(9,619

)

 

 

(69,301

)

Comprehensive income (loss) attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owners of the Company

 

 

 

 

(1,472

)

 

 

(44,146

)

 

 

6,008

 

 

 

(80,094

)

Non-controlling interest

 

 

 

 

805

 

 

 

(638

)

 

 

(1,293

)

 

 

(1,213

)

 

 

 

 

 

(667

)

 

 

(44,784

)

 

 

4,715

 

 

 

(81,307

)

Net loss per common share attributable to owners of the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

21

 

$

(0.02

)

 

$

(0.12

)

 

$

(0.03

)

 

$

(0.26

)

See accompanying notes to the condensed consolidated interim financial statements.

2

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

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(8,326

)

 

—

 

 

(1,293

)

 

(9,619

)

Other comprehensive income

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

14,334

 

 

—

 

 

14,334

 

Share issuances

 

 

164

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

164

 

Share issuance costs

 

 

(57

)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(57

)

Share issuances by subsidiaries

 

 

—

 

 

—

 

 

52

 

 

—

 

 

—

 

 

—

 

 

76

 

 

128

 

Acquisition

3

 

3,693

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

3,693

 

Warrants expired

 

 

—

 

 

(1,593

)

 

753

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(840

)

Share-based compensation

17

 

—

 

 

—

 

 

6,752

 

 

—

 

 

—

 

 

—

 

 

—

 

 

6,752

 

Employee awards exercised

 

 

1,003

 

 

—

 

 

(1,003

)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Distribution declared by subsidiaries

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

23

 

 

23

 

Balance at June 30, 2024

 

 

2,380,753

 

 

667

 

 

79,568

 

 

2,279

 

 

(1,269,177

)

 

33,751

 

 

16,077

 

 

1,243,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2024

 

 

2,377,163

 

 

667

 

 

75,233

 

 

2,279

 

 

(1,263,405

)

 

29,451

 

 

15,240

 

 

1,236,628

 

Net loss

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(5,772

)

 

—

 

 

805

 

 

(4,967

)

Other comprehensive income

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

4,300

 

 

—

 

 

4,300

 

Share issuance costs

 

 

(57

)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(57

)

Share issuances by subsidiaries

 

 

—

 

 

—

 

 

(22

)

 

—

 

 

—

 

 

—

 

 

32

 

 

10

 

Acquisition

3

 

3,693

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

3,693

 

Share-based compensation

17

 

—

 

 

—

 

 

4,311

 

 

—

 

 

—

 

 

—

 

 

—

 

 

4,311

 

Employee awards exercised

 

 

(46

)

 

—

 

 

46

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Balance at June 30, 2024

 

 

2,380,753

 

 

667

 

 

79,568

 

 

2,279

 

 

(1,269,177

)

 

33,751

 

 

16,077

 

 

1,243,918

 

 

3

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 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

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(68,088

)

 

—

 

 

(1,213

)

 

(69,301

)

Other comprehensive loss

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(12,006

)

 

—

 

 

(12,006

)

Share repurchases

 

 

(5,344

)

 

—

 

 

—

 

 

—

 

 

3,808

 

 

—

 

 

—

 

 

(1,536

)

Share issuances by subsidiaries

 

 

—

 

 

—

 

 

25

 

 

—

 

 

—

 

 

—

 

 

26

 

 

51

 

Acquisition

 

 

83,953

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

83,953

 

Shares acquired and cancelled

 

 

(6,615

)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(6,615

)

Share-based compensation

 

 

—

 

 

—

 

 

5,691

 

 

—

 

 

—

 

 

—

 

 

—

 

 

5,691

 

Employee awards exercised

 

 

1,041

 

 

—

 

 

(1,041

)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Distribution declared by subsidiaries

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(4

)

 

(4

)

Balance at June 30, 2023

 

 

2,365,845

 

 

2,260

 

 

73,636

 

 

2,279

 

 

(1,156,279

)

 

20,182

 

 

19,965

 

 

1,327,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2023

 

 

2,365,319

 

 

2,260

 

 

70,716

 

 

2,279

 

 

(1,123,759

)

 

31,808

 

 

20,587

 

 

1,369,210

 

Net loss

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(32,520

)

 

—

 

 

(638

)

 

(33,158

)

Other comprehensive loss

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(11,626

)

 

—

 

 

(11,626

)

Share issuances by subsidiaries

 

 

—

 

 

—

 

 

37

 

 

—

 

 

—

 

 

—

 

 

22

 

 

59

 

Share-based compensation

 

 

—

 

 

—

 

 

3,409

 

 

—

 

 

—

 

 

—

 

 

—

 

 

3,409

 

Employee awards exercised

 

 

526

 

 

—

 

 

(526

)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Distribution declared by subsidiaries

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

(6

)

 

(6

)

Balance at June 30, 2023

 

 

2,365,845

 

 

2,260

 

 

73,636

 

 

2,279

 

 

(1,156,279

)

 

20,182

 

 

19,965

 

 

1,327,888

 

See accompanying notes to the condensed consolidated interim financial statements.

4

SNDL Inc.

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited - expressed in thousands of Canadian dollars)

 

 

 

 

 

Three months ended
June 30

 

 

Six months ended
June 30

 

 

 

Note

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the period

 

 

 

 

(4,967

)

 

 

(33,158

)

 

 

(9,619

)

 

 

(69,301

)

Adjustments for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax recovery

 

 

 

 

(1,284

)

 

 

—

 

 

 

(4,281

)

 

 

—

 

Interest and fee income

 

19

 

 

(3,218

)

 

 

(3,421

)

 

 

(7,309

)

 

 

(7,632

)

Change in fair value of biological assets

 

 

 

 

(336

)

 

 

1,413

 

 

 

(568

)

 

 

4,948

 

Share-based compensation

 

17

 

 

4,883

 

 

 

3,893

 

 

 

9,726

 

 

 

6,102

 

Depreciation and amortization

 

8,9,11

 

 

14,139

 

 

 

14,674

 

 

 

28,709

 

 

 

32,933

 

Loss on disposition of assets

 

 

 

 

328

 

 

 

77

 

 

 

406

 

 

 

261

 

Inventory impairment and obsolescence

 

6

 

 

1,069

 

 

 

4,291

 

 

 

2,982

 

 

 

13,468

 

Finance costs, net

 

20

 

 

2,157

 

 

 

2,458

 

 

 

3,782

 

 

 

7,631

 

Change in estimate of fair value of derivative warrants

 

14

 

 

(1,800

)

 

 

(2,240

)

 

 

(500

)

 

 

(7,042

)

Unrealized foreign exchange loss

 

 

 

 

51

 

 

 

(72

)

 

 

155

 

 

 

(24

)

Transaction costs

 

 

 

 

—

 

 

 

—

 

 

 

164

 

 

 

—

 

Asset impairment

 

7,8,9

 

 

919

 

 

 

1,658

 

 

 

2,575

 

 

 

2,465

 

Share of (profit) loss of equity-accounted investees

 

13

 

 

(5,252

)

 

 

936

 

 

 

(14,400

)

 

 

(8,580

)

Realized loss on settlement of marketable securities

 

19

 

 

—

 

 

 

48,988

 

 

 

—

 

 

 

92,792

 

Unrealized (gain) loss on marketable securities

 

19

 

 

14

 

 

 

(44,968

)

 

 

69

 

 

 

(83,603

)

Proceeds from settlement of marketable securities

 

 

 

 

—

 

 

 

3,437

 

 

 

—

 

 

 

3,463

 

Interest received

 

 

 

 

2,649

 

 

 

3,217

 

 

 

5,821

 

 

 

6,920

 

Change in non-cash working capital

 

 

 

 

(4,650

)

 

 

(14,193

)

 

 

(9,709

)

 

 

(56,755

)

Net cash provided by (used in) operating activities from continuing operations

 

 

 

 

4,702

 

 

 

(13,010

)

 

 

8,003

 

 

 

(61,954

)

Net cash provided by operating activities from discontinued operations

 

 

 

 

—

 

 

 

4,167

 

 

 

—

 

 

 

4,314

 

Net cash provided by (used in) operating activities

 

 

 

 

4,702

 

 

 

(8,843

)

 

 

8,003

 

 

 

(57,640

)

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

9

 

 

(1,190

)

 

 

(1,247

)

 

 

(3,600

)

 

 

(2,641

)

Additions to intangible assets

 

11

 

 

—

 

 

 

(39

)

 

 

—

 

 

 

(56

)

Changes to investments

 

12

 

 

1,235

 

 

 

125

 

 

 

1,368

 

 

 

(702

)

Changes to equity-accounted investees

 

13

 

 

—

 

 

 

(9,443

)

 

 

168

 

 

 

(16,989

)

Proceeds from disposal of property, plant and equipment

 

 

 

 

188

 

 

 

55

 

 

 

126

 

 

 

137

 

Acquisitions, net of cash acquired

 

3

 

 

(1,654

)

 

 

—

 

 

 

(1,654

)

 

 

3,695

 

Change in non-cash working capital

 

 

 

 

75

 

 

 

1,586

 

 

 

570

 

 

 

1,127

 

Net cash used in investing activities from continuing operations

 

 

 

 

(1,346

)

 

 

(8,963

)

 

 

(3,022

)

 

 

(15,429

)

Net cash used in investing activities from discontinued operations

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Net cash used in investing activities

 

 

 

 

(1,346

)

 

 

(8,963

)

 

 

(3,022

)

 

 

(15,429

)

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in restricted cash

 

 

 

 

150

 

 

 

(76

)

 

 

(81

)

 

 

(118

)

Payments on lease liabilities, net

 

 

 

 

(9,706

)

 

 

(10,116

)

 

 

(17,222

)

 

 

(19,607

)

Repurchase of common shares, net of costs

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,536

)

Proceeds from issuance of shares, net of costs

 

 

 

 

(57

)

 

 

—

 

 

 

(57

)

 

 

—

 

Issuance of common shares by subsidiaries

 

 

 

 

174

 

 

 

—

 

 

 

174

 

 

 

—

 

Change in non-cash working capital

 

 

 

 

63

 

 

 

200

 

 

 

98

 

 

 

199

 

Net cash used in financing activities from continuing operations

 

 

 

 

(9,376

)

 

 

(9,992

)

 

 

(17,088

)

 

 

(21,062

)

Net cash used in financing activities from discontinued operations

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Net cash used in financing activities

 

 

 

 

(9,376

)

 

 

(9,992

)

 

 

(17,088

)

 

 

(21,062

)

Change in cash and cash equivalents

 

 

 

 

(6,020

)

 

 

(27,798

)

 

 

(12,107

)

 

 

(94,131

)

Cash and cash equivalents, beginning of period

 

 

 

 

188,954

 

 

 

213,253

 

 

 

195,041

 

 

 

279,586

 

Cash and cash equivalents, end of period

 

 

 

 

182,934

 

 

 

185,455

 

 

 

182,934

 

 

 

185,455

 

See accompanying notes to the condensed consolidated interim financial statements.

5

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

1.
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 65% 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 13), 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”.

2.
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 August 1, 2024.

6

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

3.
Business acquisitions

On March 28, 2023, the Company announced that it had 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) would acquire the assets comprising four cannabis retail stores operating under the Dutch Love cannabis retail banner (the “Lightbox Transaction”). The Lightbox Transaction consideration was comprised of (i) approximately $1.7 million in cash, (ii) the cancellation of approximately $3.0 million in debt owing by Lightbox to the Company, and (iii) the issuance of 1.1 million SNDL common shares valued at $3.7 million.

On April 1, 2024, the Company announced that it had agreed to assign its rights to own or operate the four cannabis retail stores to Nova. On May 8, 2024, the Company completed the Lightbox Transaction and the assignment of its rights to own or operate the four cannabis retail stores to Nova.

The Company has engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts. The purchase price allocation is not final as the Company is continuing to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes, if any, arising on their recognition.

Due to the inherent complexity associated with valuations and the timing of the acquisition, the amounts below are provisional and subject to adjustment. The fair value of consideration paid was as follows:

 

 

 

Cash

 

1,654

 

Issuance of common shares

 

3,693

 

Extinguishment of convertible debenture

 

3,000

 

 

 

8,347

 

The preliminary fair value of the assets and liabilities acquired was as follows:

 

 

 

Inventory

 

154

 

Right of use assets

 

2,828

 

Property, plant and equipment

 

964

 

Intangible assets

 

1,959

 

Lease liabilities

 

(2,828

)

Total identifiable net assets acquired

 

3,077

 

Goodwill

 

5,270

 

 

 

8,347

 

Goodwill is attributable to expansion of the store network and the Value Buds brand growth in British Columbia.

As new information is obtained within one year of the date of acquisition, about facts and circumstances that existed at the date of acquisition, the accounting for the acquisition will be revised.

The financial statements incorporate the operations of Lightbox commencing May 9, 2024. During the period May 9, 2024 to June 30, 2024 the Company recorded revenues of $1.2 million and net loss of $0.1 million from the Lightbox operations. Had the Lightbox Transaction closed on January 1, 2024, management estimates that for the period January 1, 2024, to May 8, 2024, revenue would have increased by $3.1 million and net earnings would have increased by $0.2 million. In determining these amounts, management assumes the fair values on the date of acquisition would have been the same as if the acquisition had occurred on January 1, 2024.

The Company incurred costs related to the Lightbox Transaction of $0.1 million which have been included in transaction costs.

7

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

4.
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 June 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

308,295

 

 

 

212,046

 

 

 

201,648

 

 

 

732,094

 

 

 

19,972

 

 

 

1,474,055

 

Six months ended June 30, 2024

 

Net revenue (2)

 

 

256,614

 

 

 

147,375

 

 

 

47,371

 

 

 

—

 

 

 

(25,483

)

 

 

425,877

 

Gross profit

 

 

64,519

 

 

 

37,627

 

 

 

6,418

 

 

 

—

 

 

 

—

 

 

 

108,564

 

Operating income (loss)

 

 

10,661

 

 

 

2,860

 

 

 

(1,025

)

 

 

21,535

 

 

 

(43,242

)

 

 

(9,211

)

Earnings (loss) before income tax

 

 

8,414

 

 

 

1,309

 

 

 

(2,068

)

 

 

20,960

 

 

 

(42,515

)

 

 

(13,900

)

Three months ended June 30, 2024

 

Net revenue (2)

 

 

140,560

 

 

 

76,069

 

 

 

24,976

 

 

 

—

 

 

 

(13,478

)

 

 

228,127

 

Gross profit

 

 

35,713

 

 

 

19,268

 

 

 

3,183

 

 

 

—

 

 

 

—

 

 

 

58,164

 

Operating income (loss)

 

 

8,481

 

 

 

3,902

 

 

 

(1,916

)

 

 

8,456

 

 

 

(23,757

)

 

 

(4,834

)

Earnings (loss) before income tax

 

 

7,450

 

 

 

3,157

 

 

 

(2,766

)

 

 

7,881

 

 

 

(21,973

)

 

 

(6,251

)
(1)
Total assets include cash and cash equivalents.
(2)
The Company has eliminated $25.5 million for the six months ended June 30, 2024 and $13.5 million for the three months ended June 30, 2024 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 retail 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

 

Six months ended June 30, 2023

 

Net revenue (4)

 

 

267,601

 

 

 

139,289

 

 

 

40,073

 

 

 

—

 

 

 

(24,002

)

 

 

422,961

 

Gross profit

 

 

61,627

 

 

 

33,599

 

 

 

(10,752

)

 

 

—

 

 

 

—

 

 

 

84,474

 

Operating income (loss)

 

 

6,257

 

 

 

2,257

 

 

 

(33,038

)

 

 

7,077

 

 

 

(44,323

)

 

 

(61,770

)

Earnings (loss) before income tax

 

 

3,751

 

 

 

477

 

 

 

(32,951

)

 

 

3,453

 

 

 

(39,496

)

 

 

(64,766

)

Three months ended June 30, 2023

 

Net revenue (4)

 

 

151,690

 

 

 

71,881

 

 

 

20,940

 

 

 

—

 

 

 

(12,595

)

 

 

231,916

 

Gross profit

 

 

35,360

 

 

 

17,780

 

 

 

(1,207

)

 

 

—

 

 

 

—

 

 

 

51,933

 

Operating income (loss)

 

 

8,207

 

 

 

2,335

 

 

 

(14,206

)

 

 

(1,660

)

 

 

(24,242

)

 

 

(29,566

)

Earnings (loss) before income tax

 

 

6,714

 

 

 

1,221

 

 

 

(13,831

)

 

 

(1,917

)

 

 

(22,175

)

 

 

(29,988

)
(1)
Cannabis retail includes the operations of Superette Inc. for the period February 8, 2023 to June 30, 2023.
(2)
Cannabis operations includes the operations of The Valens Company Inc. for the period January 18, 2023 to June 30, 2023.
(3)
Total assets include cash and cash equivalents.
(4)
The Company has eliminated $24.0 million for the six months ended June 30, 2023 and $12.6 million for the three months ended June 30, 2023 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 retail subsidiaries for resale, at which point the full retail sales revenue will be recognized. The elimination was recorded in the Corporate segment.

8

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

Geographical disclosure

As at June 30, 2024, the Company had non-current assets related to credit investments in the United States of $571.2 million (December 31, 2023 – $538.3 million). For the six months ended June 30, 2024, share of profit of equity-accounted investees related to operations in the United States was a gain of $14.4 million (six months ended June 30, 2023 – gain of $8.6 million). All other non-current assets relate to operations in Canada and revenues from external customers relate to operations in Canada.

5.
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

June 30, 2024

 

December 31, 2023

 

Balance, beginning of year

 

429

 

 

3,477

 

Increase in biological assets due to capitalized costs

 

2,775

 

 

21,501

 

Net change in fair value of biological assets

 

(568

)

 

(7,936

)

Transferred to inventory upon harvest

 

(1,768

)

 

(16,613

)

Balance, end of period

 

868

 

 

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 June 30, 2024, it is estimated that the Company’s biological assets will yield approximately 3,480 kilograms (December 31, 2023 – 2,230 kilograms) of dry cannabis when harvested. During the six months ended June 30, 2024, the Company harvested 3,453 kilograms of dry cannabis (six months ended June 30, 2023 – 10,865 kilograms).

6.
Inventory

As at

June 30, 2024

 

December 31, 2023

 

Retail liquor

 

84,909

 

 

83,923

 

Retail cannabis

 

20,430

 

 

19,516

 

Harvested cannabis

 

 

 

 

Raw materials, packaging and components

 

9,849

 

 

7,781

 

Extracted cannabis & hemp oils

 

14,695

 

 

11,989

 

Work-in-progress

 

—

 

 

995

 

Finished goods

 

3,029

 

 

4,856

 

 

 

132,912

 

 

129,060

 

During the three and six months ended June 30, 2024, inventories of $169.2 million and $315.1 million were recognized in cost of sales as an expense (three and six months ended June 30, 2023 – $176.3 million and $323.1 million).

During the three and six months ended June 30, 2024, the Company recognized inventory write downs of $1.1 million and $3.0 million (three and six months ended June 30, 2023 – $4.3 million and $13.5 million).

9

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

7.
Assets held for sale

At June 30, 2024, assets held for sale were measured at their fair value less costs to sell and comprised of the following:

As at

June 30, 2024

 

December 31, 2023

 

Olds facility

 

18,800

 

 

—

 

Stellarton facility

 

—

 

 

6,375

 

Extraction equipment

 

251

 

 

—

 

 

 

19,051

 

 

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 as part of the Zenabis acquisition. During the six months ended June 30, 2024, the Company concluded that the Stellarton facility no longer met certain criteria for assets held for sale due to secondary commercial real estate market conditions in Nova Scotia. The facility was reclassified to property, plant and equipment and a $1.3 million impairment loss was recognized.

8.
Right of use assets

Cost

 

 

 

Balance at December 31, 2023

 

 

199,032

 

Acquisition (note 3)

 

 

2,828

 

Additions

 

 

826

 

Renewals, remeasurements and dispositions

 

 

3,019

 

Balance at June 30, 2024

 

 

205,705

 

 

 

 

 

Accumulated depreciation and impairment

 

 

 

Balance at December 31, 2023

 

 

69,353

 

Depreciation

 

 

15,697

 

Impairment

 

 

1,182

 

Balance at June 30, 2024

 

 

86,232

 

 

 

 

 

Net book value

 

 

 

Balance at December 31, 2023

 

 

129,679

 

Balance at June 30, 2024

 

 

119,473

 

As at June 30, 2024, the Company recorded impairment losses of right of use assets of $1.2 million, $1.6 million for the three months ended March 31, 2024 and a reversal of $0.4 million for the three months ended June 30, 2024 (June 30, 2023 – nil) with $1.5 million ($1.8 million for the three months ended March 31, 2024 and a reversal of $0.3 million for the three months ended June 30, 2024) in the cannabis retail reporting segment and an impairment reversal of $0.3 million ($0.2 million reversal for the three months ended March 31, 2024 and $0.1 million reversal for the three months ended June 30, 2024) in the liquor retail reporting segment. Refer to note 9 for the significant assumptions applied in the impairment test.

10

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

9.
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

 

Acquisition (note 3)

 

—

 

 

—

 

 

964

 

 

—

 

 

—

 

 

964

 

Additions

 

—

 

 

—

 

 

454

 

 

2,870

 

 

1,721

 

 

5,045

 

Reclass to assets held for sale

 

(11,834

)

 

(143,540

)

 

—

 

 

(411

)

 

(6,013

)

 

(161,798

)

Dispositions

 

—

 

 

—

 

 

(559

)

 

(1,594

)

 

(90

)

 

(2,243

)

Balance at June 30, 2024

 

9,119

 

 

35,616

 

 

77,758

 

 

100,029

 

 

4,292

 

 

226,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and impairment

 

Balance at December 31, 2023

 

—

 

 

145,420

 

 

28,448

 

 

52,241

 

 

5,821

 

 

231,930

 

Depreciation

 

—

 

 

637

 

 

5,480

 

 

5,716

 

 

—

 

 

11,833

 

Impairment

 

—

 

 

—

 

 

(53

)

 

77

 

 

—

 

 

24

 

Reclass to assets held for sale

 

—

 

 

(141,811

)

 

—

 

 

(165

)

 

(5,821

)

 

(147,797

)

Dispositions

 

—

 

 

—

 

 

(559

)

 

(979

)

 

—

 

 

(1,538

)

Balance at June 30, 2024

 

—

 

 

4,246

 

 

33,316

 

 

56,890

 

 

—

 

 

94,452

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

20,953

 

 

33,736

 

 

48,451

 

 

46,923

 

 

2,853

 

 

152,916

 

Balance at June 30, 2024

 

9,119

 

 

31,370

 

 

44,442

 

 

43,139

 

 

4,292

 

 

132,362

 

During the six months ended June 30, 2024, depreciation expense of $1.0 million was capitalized to biological assets and inventory (six months ended June 30, 2023 – $3.0 million).

During the six months ended June 30, 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 forecasts. 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 June 30, 2024, the Company recorded impairment losses of property, plant and equipment of $0.56 million, $0.77 million for the three months ended March 31, 2024 and a reversal of $0.21 million for the three months ended June 30, 2024 (June 30, 2023 – $0.5 million) in the cannabis retail reporting segment and an impairment reversal of $0.54 million, $0.76 million reversal for the three months ended March 31, 2024 and impairment of $0.22 million for

11

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

the three months ended June 30, 2024 (June 30, 2023 – nil) in the liquor retail reporting segment. The Company also recorded impairment losses and impairment reversals of right of use assets (note 8).

10.
Net investment in subleases

 

June 30, 2024

 

December 31, 2023

 

Balance, beginning of year

 

21,366

 

 

23,319

 

Additions

 

—

 

 

832

 

Finance income

 

386

 

 

857

 

Rents recovered (payments made directly to landlords)

 

(1,800

)

 

(4,004

)

Dispositions and remeasurements

 

(561

)

 

362

 

Balance, end of period

 

19,391

 

 

21,366

 

 

 

 

 

 

Current portion

 

2,819

 

 

2,970

 

Long-term

 

16,572

 

 

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.

11.
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

 

Acquisition (note 3)

 

—

 

 

—

 

 

—

 

 

1,959

 

 

1,959

 

Additions

 

—

 

 

—

 

 

32

 

 

—

 

 

32

 

Balance at June 30, 2024

 

81,900

 

 

10,000

 

 

5,588

 

 

2,709

 

 

100,197

 

 

 

 

 

 

 

 

 

 

 

Accumulated amortization and impairment

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

20,447

 

 

3,061

 

 

1,549

 

 

—

 

 

25,057

 

Amortization

 

86

 

 

623

 

 

470

 

 

—

 

 

1,179

 

Balance at June 30, 2024

 

20,533

 

 

3,684

 

 

2,019

 

 

—

 

 

26,236

 

 

 

 

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

61,453

 

 

6,939

 

 

4,007

 

 

750

 

 

73,149

 

Balance at June 30, 2024

 

61,367

 

 

6,316

 

 

3,569

 

 

2,709

 

 

73,961

 

 

12.
Investments

As at

June 30, 2024

 

December 31, 2023

 

Investments at amortized cost

 

20,187

 

 

24,405

 

Investments at fair value through profit and loss ("FVTPL")

 

9,162

 

 

8,655

 

 

 

29,349

 

 

33,060

 

 

 

 

 

 

Current portion

 

28,514

 

 

3,400

 

Long-term

 

835

 

 

29,660

 

 

12

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

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.

On June 12, 2024, the Company agreed to lend Indiva up to an additional $2.4 million as a debtor-in-possession loan, of which $0.9 million was drawn upon as of June 30, 2024.

On July 5, 2024, the Company announced that it had entered into a purchase agreement (the “Bid Agreement”) with Indiva and its direct and indirect subsidiaries (collectively with Indiva, the “Indiva Group”), pursuant to which the Company offered to purchase all of the issued and outstanding shares of Indiva and the business and assets of the Indiva Group (collectively, the “Indiva Assets”) for consideration comprising of a credit bid of all of the indebtedness of the Indiva Group owing to the Company, the retention of certain liabilities of the Indiva Group, and cash payments sufficient to repay certain priority indebtedness of the Indiva Group and costs associated with the Indiva Group’s proceedings under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA Proceedings”).

The Bid Agreement was entered into in the context of the CCAA Proceedings, as part of a sales process where the Indiva Assets will be marketed to prospective purchasers (the “Sale Process”) and, accordingly, is subject to approval by the court overseeing the CCAA Proceedings and to potential alternative bids submitted pursuant to the Sale Process.

Investments at fair value through profit and loss

On March 7, 2024, the Company provided notice to Delta-9 Cannabis Inc. (“Delta 9”) regarding non-compliance with certain covenants and conditions related to the Second Waiver that had been granted on September 9, 2022.

On July 5, 2024, the Company announced that it had completed the acquisition (the “Debt Acquisition”) of the principal indebtedness (the “Purchased Indebtedness”) of Delta 9 from Connect First and Servus Credit Union Ltd. for a purchase price of $28.1 million pursuant to a purchase and sale of indebtedness agreement dated July 5, 2024. As a result of the Debt Acquisition, the Company became Delta 9’s senior secured creditor with a first priority security interest in all of the assets of Delta 9 and certain Delta 9 subsidiaries. As of July 5, 2024, the Purchased Indebtedness increased Delta 9’s total indebtedness owing to the Company to $40.7 million.

13.
Equity-accounted investees

As at

June 30, 2024

 

December 31, 2023

 

Interest in joint venture

 

571,178

 

 

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 separately from the Company, 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.

13

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

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

 

 

14,400

 

Share of other comprehensive income (loss) (taxes at 23%)

 

 

18,615

 

Balance at June 30, 2024

 

 

571,178

 

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

June 30, 2024

 

June 30, 2023

 

Current assets (including cash and cash equivalents - 2024: $0.4 million, 2023: $2.0 million)

 

1,045

 

 

8,720

 

Non-current assets

 

565,911

 

 

520,211

 

Current liabilities

 

(332

)

 

(662

)

Non-current liabilities

 

—

 

 

—

 

Net assets (liabilities) (100%)

 

566,624

 

 

528,269

 

 

 

 

 

 

Six months ended June 30

2024

 

2023

 

Revenue

 

18,418

 

 

12,280

 

Profit from operations

 

14,765

 

 

8,933

 

Other comprehensive income (loss)

 

18,615

 

 

(12,006

)

Total comprehensive income (loss)

 

33,364

 

 

(3,026

)
14.
Derivative warrants

 

June 30, 2024

 

December 31, 2023

 

Balance, beginning of year

 

4,400

 

 

11,002

 

Change in fair value recognized in profit or loss

 

(500

)

 

(6,602

)

Balance, end of period

 

3,900

 

 

4,400

 

During the six months ended June 30, 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 June 30, 2024:

 

Exercise price (US$)

 

Number of warrants

 

Weighted average contractual life

 

2020 Series A Warrants (1)

 

1.77

 

 

50,000

 

 

1.1

 

New Warrants

 

2.29

 

 

9,833,333

 

 

0.2

 

 

 

 

 

9,883,333

 

 

0.2

 
(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

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

15.
Lease Liabilities

 

June 30, 2024

 

December 31, 2023

 

Balance, beginning of year

 

167,029

 

 

169,831

 

Acquisitions

 

2,828

 

 

4,336

 

Additions

 

826

 

 

4,362

 

Lease payments

 

(19,022

)

 

(45,017

)

Renewals, remeasurements and dispositions

 

2,096

 

 

25,505

 

Tenant inducement allowances received

 

—

 

 

91

 

Accretion expense

 

3,855

 

 

7,921

 

Balance, end of period

 

157,612

 

 

167,029

 

 

 

 

 

 

Current portion

 

32,618

 

 

30,537

 

Long-term

 

124,994

 

 

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 June 30, 2024:

 

 

June 30, 2024

 

Less than one year

 

 

40,564

 

One to three years

 

 

68,477

 

Three to five years

 

 

45,837

 

Thereafter

 

 

27,763

 

Minimum lease payments

 

 

182,641

 

 

16.
Share capital and warrants
A)
Authorized

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

B)
Issued and outstanding

 

 

June 30, 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 issuance costs

 

 

—

 

 

(57

)

 

—

 

 

—

 

Share repurchases

 

 

—

 

 

—

 

 

(546,700

)

 

(5,344

)

Acquisitions

3

 

1,099,744

 

 

3,693

 

 

27,605,782

 

 

83,953

 

Shares acquired and cancelled

 

 

—

 

 

—

 

 

(2,261,778

)

 

(6,879

)

Employee awards exercised

 

 

312,844

 

 

1,003

 

 

1,852,573

 

 

9,510

 

Balance, end of period

 

 

264,284,840

 

 

2,380,753

 

 

262,775,853

 

 

2,375,950

 

During the six months ended June 30, 2024, the Company issued 1.1 million common shares as part of the consideration for the Lightbox Transaction (note 3) and 0.1 million common shares related to the acquisition of certain franchise stores in Ontario.

15

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

C)
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 June 30, 2024

 

118,400

 

 

667

 

During the six months ended June 30, 2024, the remaining Inner Spirit Holdings Ltd. warrants that comprised the contingent consideration from the acquisition expired.

The following table summarizes outstanding warrants as at June 30, 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

 

 

5.1

 

Acquisition of intellectual property

 

9.40

 

 

64,000

 

 

1.5

 

 

$

26.21

 

 

118,400

 

 

3.1

 

 

17.
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.

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

 

Three months ended
June 30

 

Six months ended
June 30

 

 

2024

 

2023

 

2024

 

2023

 

Equity-settled expense

 

 

 

 

 

 

 

 

Simple warrants (A)

 

—

 

 

2

 

 

—

 

 

(335

)

Stock options (B)

 

1

 

 

3

 

 

1

 

 

(2

)

Restricted share units (1) (C)

 

4,310

 

 

3,485

 

 

6,751

 

 

6,109

 

Cash-settled expense

 

 

 

 

 

 

 

 

Deferred share units (1)(2) (D)

 

572

 

 

403

 

 

2,974

 

 

330

 

 

4,883

 

 

3,893

 

 

9,726

 

 

6,102

 
(1)
For the six months ended June 30, 2024, the Company recognized share-based compensation expense under Nova’s RSU plan of $6 (2023 — $21) and share-based compensation expense under Nova’s DSU plan of $903 (2023 — $201).
(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

A)
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.

16

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

The following table summarizes changes in the simple and performance warrants during the six months ended June 30, 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

 

 

(8,780

)

 

 

6.25

 

 

 

—

 

 

 

0.00

 

Balance at June 30, 2024

 

 

57,920

 

 

$

44.85

 

 

 

54,400

 

 

$

38.62

 

The following table summarizes outstanding simple and performance warrants as at June 30, 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

 

 

27,520

 

 

 

8.07

 

 

 

0.57

 

 

 

27,520

 

 

 

8.07

 

 

 

0.57

 

$29.69 - $45.31

 

 

7,200

 

 

 

34.90

 

 

 

1.32

 

 

 

7,200

 

 

 

34.90

 

 

 

1.32

 

$62.50 - $93.75

 

 

17,280

 

 

 

64.81

 

 

 

2.39

 

 

 

17,280

 

 

 

64.81

 

 

 

2.39

 

$125.00 - $312.50

 

 

5,920

 

 

 

169.62

 

 

 

2.94

 

 

 

5,920

 

 

 

169.62

 

 

 

2.94

 

 

 

57,920

 

 

$

44.85

 

 

 

1.45

 

 

 

57,920

 

 

$

44.85

 

 

 

1.45

 

Performance warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$6.25 - $9.38

 

 

19,200

 

 

 

6.25

 

 

 

0.69

 

 

 

19,200

 

 

 

6.25

 

 

 

0.69

 

$29.69 - $45.31

 

 

23,200

 

 

 

32.60

 

 

 

0.77

 

 

 

23,200

 

 

 

32.60

 

 

 

0.77

 

$62.50 - $93.75

 

 

9,334

 

 

 

77.68

 

 

n/a

 

 

 

1,334

 

 

 

93.75

 

 

 

1.67

 

$125.00 - $218.75

 

 

2,666

 

 

 

187.50

 

 

n/a

 

 

 

—

 

 

 

—

 

 

n/a

 

 

 

 

54,400

 

 

$

38.62

 

 

n/a

 

 

 

43,734

 

 

$

22.90

 

 

 

0.76

 
B)
Stock options

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

The following table summarizes changes in stock options during the six months ended June 30, 2024:

 

 

Stock options outstanding

 

 

Weighted
average
exercise price

 

Balance at December 31, 2023

 

 

853,705

 

 

$

17.92

 

Forfeited

 

 

(89,331

)

 

 

18.03

 

Expired

 

 

(83,350

)

 

 

37.89

 

Balance at June 30, 2024

 

 

681,024

 

 

$

15.46

 

 

17

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

The following table summarizes outstanding stock options as at June 30, 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

 

 

 

5.91

 

 

 

10,000

 

 

 

5.91

 

$11.90

 

 

8,160

 

 

 

5.99

 

 

 

8,160

 

 

 

5.99

 

$31.50

 

 

3,000

 

 

 

4.23

 

 

 

2,700

 

 

 

4.23

 

$11.79 - $38.88

 

 

659,864

 

 

 

2.08

 

 

 

659,864

 

 

 

2.08

 

 

 

 

681,024

 

 

 

2.19

 

 

 

680,724

 

 

 

2.19

 
C)
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.

The following table summarizes changes in RSUs during the six months ended June 30, 2024:

 

 

 

 

RSUs
outstanding

 

Balance at December 31, 2023

 

 

 

 

8,629,716

 

Granted

 

 

 

 

5,461,726

 

Forfeited

 

 

 

 

(249,759

)

Exercised

 

 

 

 

(349,093

)

Balance at June 30, 2024

 

 

 

 

13,492,590

 

At June 30, 2024, no RSUs were vested or exercisable.

Cash-settled plans

D)
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 June 30, 2024, the Company recognized a liability of $6.0 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 six months ended June 30, 2024:

 

 

 

 

DSUs
outstanding

 

Balance at December 31, 2023

 

 

 

 

2,398,333

 

Granted

 

 

 

 

345,840

 

Balance at June 30, 2024

 

 

 

 

2,744,173

 

At June 30, 2024, 1.8 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.

18

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

18.
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.

 

Three months ended
June 30

 

Six months ended
June 30

 

 

2024

 

2023

 

2024

 

2023

 

Liquor retail revenue

 

 

 

 

 

 

 

 

Retail

 

140,223

 

 

151,690

 

 

256,027

 

 

267,601

 

Other

 

337

 

 

—

 

 

587

 

 

—

 

Liquor retail revenue

 

140,560

 

 

151,690

 

 

256,614

 

 

267,601

 

Cannabis retail revenue

 

 

 

 

 

 

 

 

Retail

 

70,740

 

 

67,423

 

 

137,092

 

 

131,523

 

Proprietary licensing

 

3,847

 

 

2,583

 

 

7,349

 

 

4,043

 

Franchise

 

1,482

 

 

1,799

 

 

2,934

 

 

3,566

 

Other

 

—

 

 

76

 

 

—

 

 

157

 

Cannabis retail revenue

 

76,069

 

 

71,881

 

 

147,375

 

 

139,289

 

Cannabis operations revenue

 

 

 

 

 

 

 

 

Provincial boards

 

17,689

 

 

19,119

 

 

30,437

 

 

33,841

 

Wholesale

 

7,609

 

 

1,780

 

 

15,135

 

 

4,929

 

Analytical testing and other

 

334

 

 

360

 

 

658

 

 

662

 

Cannabis operations revenue

 

25,632

 

 

21,259

 

 

46,230

 

 

39,432

 

Gross revenue

 

242,261

 

 

244,830

 

 

450,219

 

 

446,322

 

Excise taxes

 

14,134

 

 

12,914

 

 

24,342

 

 

23,361

 

Net revenue

 

228,127

 

 

231,916

 

 

425,877

 

 

422,961

 

 

19.
Investment income (LOSS)

 

Three months ended
June 30

 

Six months ended
June 30

 

 

2024

 

2023

 

2024

 

2023

 

Interest income from investments at amortized cost

 

733

 

 

980

 

 

1,614

 

 

1,986

 

Interest and fee income from investments at FVTPL

 

449

 

 

250

 

 

1,499

 

 

874

 

Interest income from cash

 

2,036

 

 

2,191

 

 

4,196

 

 

4,772

 

Gains (losses) on marketable securities

 

(14

)

 

(4,020

)

 

(69

)

 

(9,189

)

 

 

3,204

 

 

(599

)

 

7,240

 

 

(1,557

)

 

19

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

20.
Other income (expenses)

 

Three months ended
June 30

 

Six months ended
June 30

 

 

2024

 

2023

 

2024

 

2023

 

Finance costs (income)

 

 

 

 

 

 

 

 

Accretion on lease liabilities

 

1,933

 

 

2,293

 

 

3,887

 

 

4,239

 

Change in fair value of investments at FVTPL

 

575

 

 

257

 

 

575

 

 

3,625

 

Financial guarantee liability recovery

 

8

 

 

—

 

 

(19

)

 

(139

)

Other finance (recoveries) costs

 

(169

)

 

123

 

 

(275

)

 

341

 

Interest income

 

(190

)

 

(215

)

 

(386

)

 

(435

)

Total finance costs

 

2,157

 

 

2,458

 

 

3,782

 

 

7,631

 

Change in fair value of derivative warrants (note 14)

 

(1,800

)

 

(2,240

)

 

(500

)

 

(7,042

)

Transaction costs

 

857

 

 

173

 

 

995

 

 

2,213

 

Foreign exchange loss

 

203

 

 

31

 

 

412

 

 

194

 

 

 

1,417

 

 

422

 

 

4,689

 

 

2,996

 

 

21.
Loss per share

 

 

Three months ended
June 30

 

 

Six months ended
June 30

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Weighted average shares outstanding (000s)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (1)

 

 

263,832

 

 

 

260,228

 

 

 

263,400

 

 

 

257,905

 

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to owners of the Company

 

 

(5,772

)

 

 

(29,350

)

 

 

(8,326

)

 

 

(63,553

)

Per share - basic and diluted

 

$

(0.02

)

 

$

(0.11

)

 

$

(0.03

)

 

$

(0.24

)

Discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to owners of the Company

 

 

—

 

 

 

(3,170

)

 

 

—

 

 

 

(4,535

)

Per share - basic and diluted

 

 

—

 

 

$

(0.01

)

 

$

—

 

 

$

(0.02

)

Net loss attributable to owners of the Company

 

 

(5,772

)

 

 

(32,520

)

 

 

(8,326

)

 

 

(68,088

)

Per share - basic and diluted

 

$

(0.02

)

 

$

(0.12

)

 

$

(0.03

)

 

$

(0.26

)
(1)
For the six months ended June 30, 2024, there were 0.1 million equity classified warrants, 9.9 million derivative warrants, 0.1 million simple warrants, 0.1 million performance warrants, 0.7 million stock options and 13.5 million RSUs that were excluded from the calculation as the impact was anti-dilutive (six months ended June 30, 2023– 0.3 million equity classified warrants, 9.9 million derivative warrants, 0.1 million simple warrants, 0.1 million performance warrants, 0.03 million stock options and 8.7 million RSUs).
22.
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

20

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

investments at amortized cost approximate their fair value as the fixed interest rates approximate market rates for comparable transactions.

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

 

 

 

Fair value measurements using

 

June 30, 2024

Carrying
amount

 

Level 1

 

Level 2

 

Level 3

 

Recurring measurements:

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

Marketable securities

 

156

 

 

156

 

 

—

 

 

—

 

Investments at FVTPL

 

9,162

 

 

—

 

 

—

 

 

9,162

 

Financial liabilities

 

 

 

 

 

 

 

 

Derivative warrants (1)

 

3,900

 

 

—

 

 

—

 

 

3,900

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2024, a 10% change in the material assumptions would change the estimated fair value of derivative warrant liabilities by approximately $0.5 million.

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

23.
RELATED PARTIES

The Company entered into the following related party transactions during the periods noted, in addition to those disclosed in note 13 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 six months ended June 30, 2024, the Company paid $83.4 thousand in total rent with respect to this lease (six months ended June 30, 2023 — $83.4 thousand).

21

SNDL Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and six months ended June 30, 2024

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

 

 

24.
Commitments and contingencies

The following table summarizes contractual commitments at June 30, 2024:

 

Less than
one year

 

One to three
years

 

Three to five
years

 

Thereafter

 

Total

 

Accounts payable and accrued liabilities

 

62,389

 

 

—

 

 

—

 

 

—

 

 

62,389

 

Financial guarantee liability

 

—

 

 

248

 

 

—

 

 

—

 

 

248

 

Balance, end of year

 

62,389

 

 

248

 

 

—

 

 

—

 

 

62,637

 
A)
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 June 30, 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).

B)
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.

22