20-F/A

December 31, 2022

December 31, 2021

Trade payables

Accrued and other liabilities

(Name, Telephone, E-mail and/or facsimile number and Address of Company Contact Person)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of business covered by the annual report. As at December 31, 2022, 235,194,236 common shares were issued and outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

This Amendment No. 1 (this “Amendment”) to the Annual Report on Form 20-F of SNDL Inc. (the “Company”) for the fiscal year ended December 31, 2022, which was originally filed with the Securities and Exchange Commission on April 24, 2023 (the “Original Filing”), is being filed solely for the purpose of including a corrected copy of the Company’s audited consolidated financial statements and related notes for the years ended December 31, 2022 and 2021, and 2020 (the “Annual Financial Statements”).

List all exhibits filed as part of the registration statement or annual report, including exhibits incorporated by reference.

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

To the Shareholders and Board of Directors of SNDL Inc. (f/k/a Sundial Growers Inc.)

We have audited the accompanying consolidated statement of financial position of SNDL Inc. (the “Company”) as of December 31, 2022, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Boards (“IFRS”).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated April 24, 2023 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of a material weakness.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

The accompanying consolidated financial statements of the Company as of December 31, 2021 and for the year then ended were audited by another auditor. As described in Note 5(b), the Company recorded adjustments to the fair value in the third quarter of 2022 to reflect additional information and greater certainty with respect to management estimates pertaining to facts and circumstances that were either unknown or uncertain at the date of the Inner Spirit acquisition. These adjustments related to changes in preliminary valuation assumptions, including refinement of accounts receivable, inventory, net investment in subleases, lease liabilities and amounts allocated to intangible assets and deferred tax liability. All measurement period adjustments were offset to goodwill. We audited the retrospective adjustments to provisional amounts in the comparative December 31, 2021 period. However, we were not engaged to audit, review, or apply any procedures to the December 31, 2021 consolidated financial statements of the Company other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the December 31, 2021 consolidated financial statements taken as a whole.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The Company acquired Alcanna, Inc. on March 31, 2022. The acquisition was accounted for as a business combination. We identified the evaluation of the acquisition date fair value of the intangible assets as a critical audit matter.

The main consideration for our determination that the evaluation of the acquisition date fair values of the intangible assets acquired was a critical audit matter is the high degree of subjective auditor judgement associated with evaluating management’s determination of the fair values of the intangible assets, which is primarily due to complexity of the valuation models used and the sensitivity of the underlying significant assumptions. The assumptions used within the valuation models included prospective financial information, including future revenue growth and expected profitability, an applied discount rate, a reasonable approximation of a royalty rate and historical data pertaining to replacement costs. Auditing these assumptions involved extensive audit effort, including the need to involve our valuation specialists, due to the complexity of these assumptions and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

Our audit procedures related to the evaluation of acquisition date fair values of intangibles assets acquired included the following, among other:

Goodwill is assessed for impairment annually or when facts and circumstances indicate that it is possibly impaired. Goodwill is tested for impairment at a cash generating unit (“CGU”) level by comparing the carrying amount to the recoverable amount, which is determined as the greater of fair value less costs of disposal and value in use. Any excess of the carrying amount over the recoverable amount is the impaired amount.

The main consideration for our determination that the impairment assessment is a critical audit matter is the complexity of auditing management’s impairment assessment due to judgments and assumptions required to evaluate those factors. Auditing these assumptions involved extensive audit effort, including the need to involve our valuation specialists, due to the complexity of these assumptions and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

Our audit procedures related to accounting for impairment of goodwill and intangible assets to address this critical audit matter included the following, among others:

The Company’s underlying investments in its equity-accounted investee is a joint venture through SunStream Bancorp Inc. (the “Joint Venture”). The Company records its interest in the Joint Venture using the equity method. The Joint Venture records its investments at fair value through profit and loss at each reporting period. The valuation of the investments held by the Joint Venture requires estimates, including market values of investment holdings and related underlying assumptions such as volatility and discount rates.

The main consideration for our determination that the fair value of the measurement of the Joint Venture’s investment is a critical audit matter is the high degree of subjectivity and auditor judgement required to evaluate the estimates, including market values of investment holdings and related underlying assumptions such as volatilities and discount rates used to calculate the fair value of its investments. Auditing these assumptions involved extensive audit effort, including the need to involve our valuation specialists, due to the complexity of these assumptions and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

Our audit procedures related to valuation of equity-accounted investees to address this critical audit matter included the following, among others:

To the Shareholders and Board of Directors of SNDL Inc. (formerly Sundial Growers Inc.)

We have audited, before the effects of the adjustments to retrospectively adjust the provisional amounts recorded for the fair value of the assets and liabilities acquired as part of the Inner Spirit Transaction described in Note 5(b), the consolidated statement of financial position of SNDL Inc. and subsidiaries (the Company) as of December 31, 2021, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). The 2021 consolidated financial statements before the effects of the adjustments described in Note5(b) are not presented herein. In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively adjust the provisional amounts recorded for the fair value of the assets and liabilities acquired as part of the Inner Spirit Transaction, described in Note 5(b), present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and its financial performance and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively adjust the provisional amounts recorded for the fair value of the assets and liabilities acquired as part of the Inner Spirit Transaction described in Note 5(b) and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

To the Shareholders and Board of Directors of SNDL Inc. (f/k/a Sundial Growers Inc).

We have audited SNDL Inc. and subsidiaries’ (the "Company") internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness have been identified and included in “Management's Annual Report on Internal Control Over Financial Reporting”:

Information technology general controls (ITGCs) were not designed and operating effectively to ensure (i) that access to applications and data, and the ability to make program and job changes, were adequately restricted to appropriate personnel and (ii) that the activities of individuals with access to modify data and make program and job changes were appropriately monitored. Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the fiscal December 31, 2022 consolidated financial statements, and this report does not affect our report dated April 24, 2023 on those consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets as of December 31, 2022, the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the year ended December 31, 2022, and related notes of the Company, and our report dated April 24, 2023 expressed an unqualified opinion on those consolidated financial statements.

The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying "Management Annual Report on Internal Control Over Financial Reporting". Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with International Financial Reporting Standards, as promulgated by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, deposits held with banks and other short-term liquid investments with maturities of less than 90 days.

RESTRICTED CASH

Restricted cash is recorded as current assets representing (i) a cash balance to satisfy margin requirements on the Company’s option trading positions, if any, and (ii) minimum funding requirements for two separate captive insurance structures.

BIOLOGICAL ASSETS

The Company’s biological assets consist of cannabis plants. The Company capitalizes all direct and indirect costs related to the biological transformation of the biological assets between the point of initial recognition and the point of harvest, including labour-related costs, consumables, materials, utilities, facilities costs, depreciation and quality and testing costs. Biological assets are then recorded at fair value and consist of cannabis plants in various stages of vegetation, including cannabis clones which have not been harvested. Net unrealized changes in fair value of biological assets less costs to sell during the period are included in the results of operations for the related period. Biological assets are valued in accordance with International Accounting Standard 41 – Agriculture (“IAS 41”) and are presented at their fair values less costs to sell up to the point of harvest. The fair values are determined using a model which estimates the expected harvest yield in grams for plants currently being cultivated, and then adjusts the 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 estimated expected harvest yield is based on assumptions of the estimated yield per plant and the weighted average number of growing weeks completed as a percentage of total expected growing weeks as at year end. These estimates are subject to volatility in market prices, market conditions, yields and costs, which could significantly affect the fair value of biological assets in future periods. Differences from the anticipated yield will be reflected in the net change in fair value of biological assets in future periods.

F-13

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

INVENTORY

Harvested cannabis

Inventories of harvested cannabis are valued at the lower of cost and net realizable value. Inventories of harvested cannabis are transferred from biological assets at their fair value less costs to sell up to the point of harvest, which becomes the initial deemed cost. All subsequent direct and indirect post-harvest costs are capitalized to inventory as incurred, including labour-related costs, consumables, materials, packaging supplies, utilities, facilities costs, as well as quality and testing costs. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cannabis supplies and consumables are initially valued at cost and subsequently at the lower of cost and net realizable value.

The valuation of biological assets at the point of harvest is used as the measurement basis for all cannabis-based inventory and, thus, any critical estimates and judgements related to the valuation of biological assets are also applicable to inventory. The valuation of work-in-progress and finished goods also requires the estimate of conversion costs incurred, which become part of the carrying amount of the inventory.

Retail inventory

Retail inventory at Company-owned stores is valued at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of selling the final product. Cost is determined using the weighted average method and comprises direct purchase costs. Inventory is written down to its net realizable value when the cost of inventory is estimated to be unrecoverable due to obsolescence, damage or declining selling prices. The Company makes estimates related to obsolescence, future selling prices, seasonality, customer behavior and fluctuations in inventory levels.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment (“PP&E”) are carried at cost less accumulated depreciation, less any recognized impairment losses. The cost of additions, betterments, renewals, and interest during construction is capitalized. Each part of a component of PP&E with a cost that is significant in relation to the total cost of the component is depreciated separately. When the cost of replacing a portion of a component of PP&E is capitalized, the carrying amount of the replaced component is derecognized.

Depreciation of construction in progress assets commences when the assets are ready for their intended use or when a Health Canada producer’s licence is granted. The assets’ residual values and useful lives are reviewed, and adjusted as appropriate, at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by adjusting the depreciation period or method, as appropriate, and are treated as changes in accounting estimates.

Any gain or loss arising on the disposal or retirement of a component of PP&E is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognized in profit and loss.

PP&E are depreciated as they become available for use. Buildings are not depreciated until a producer’s licence is obtained, if required for operation. For assets available for use, depreciation is computed using the straight-line method over the estimated useful lives of the assets, as described below:

•

Production facilities — 20 years

•

Equipment — 1 to 10 years

•

Right of use assets and leasehold improvements — Shorter of estimated useful life or lease term

INTANGIBLE ASSETS

Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization of definite life intangibles is provided on a straight-line basis over their estimated useful lives, once the intangible asset is available

F-14

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

for use, as described below. If the intangible asset is not yet available for use it will be tested for impairment on an annual basis in accordance with International Accounting Standard 38 – Intangible Assets (“IAS 38”).

The Company’s intangible assets are comprised of the following:

•

Intellectual property purchased from Sun 8 Holdings Inc. in 2019 consisting of world-wide proprietary rights to certain cannabis brands, including patents, copyrights and trademarks with a useful life of 15 years.

•

Intellectual property purchased from a private company consisting of world-wide proprietary rights to certain cannabis strains with a useful life of 12 years.

•

Intellectual property acquired through the acquisition of Inner Spirit (as defined below) consisting of a trade name with an indefinite life and franchise agreements with useful lives of 8 years.

•

Intangible assets acquired through the acquisition of Alcanna consisting of brands, licenses, permits and software.

Joint arrangements

Joint arrangements represent activities where the Company has joint control established by a contractual agreement. Joint control requires unanimous consent for the relevant financial and operational decisions. A joint arrangement is either a joint operation, whereby the parties have rights to the assets and obligations for the liabilities, or a joint venture, whereby the parties have rights to the net assets.

For a joint operation, the parties consolidate their proportionate share of the assets, liabilities, revenues, expenses and cash flows of the arrangement with items of a similar nature on a line-by-line basis, from the date that joint control commences until the date that joint control ceases.

Joint ventures are accounted for using the equity method of accounting and are initially recognized at cost, or fair value if acquired as part of a business combination. Joint ventures are adjusted thereafter for the post-acquisition change in the Company's share of the equity accounted investment's net assets. The Company’s consolidated financial statements include its share of the equity accounted investment's profit or loss and other comprehensive income, until the date that joint control ceases. When the Company’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee. Distributions from and contributions to investments in equity accounted investees are recognized when received or paid.

Interests in equity-accounted investees

The Company’s interest in equity-accounted investees comprise interests in an associate and a joint venture.

Associates are those entities in which the Company has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Company has joint control, whereby the Company has rights to the net assets of the arrangement, rather than rights to assets and obligations for its liabilities.

Interests in associates and joint ventures are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Company’s share of the profit or loss and OCI of equity-accounted investees, until the date on which significant influence or joint control ceases.

IMPAIRMENT OF ASSETS

Management assesses and continually monitors internal and external indicators of impairment relating to the Company’s assets. The assessment of indicators of impairment takes into account various factors including the likelihood of obtaining and maintaining future licences from Health Canada, the demand for cannabis for recreational purposes, the price of cannabis, and changes in market discount rates.

F-15

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

(I)

Financial assets

The Company applies an expected credit loss (“ECL”) model to all financial assets not held at fair value through profit and loss (“FVTPL”) where credit losses that are expected to transpire in futures years are provided for, irrespective of whether a loss event has occurred or not as at the statement of financial position date. For trade receivables, the Company has applied the simplified approach under International Financial Reporting Standard 9 – Financial Instruments (“IFRS 9”) and have calculated ECLs based on lifetime expected credit losses, taking into consideration historical credit loss experience and financial factors specific to the debtors and general economic conditions. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of the difference between the cash flows due in accordance with the contract and the cash flow the Company expects to receive. ECLs are discounted at the effective interest rate of the financial asset. For financial assets measured at amortized cost, the Company has applied the general approach under IFRS 9 and has calculated ECLs based on lifetime expected credit losses, taking into consideration whether the credit risk of a financial asset has increased significantly since initial recognition. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment, that includes forward-looking information.

(II)

Non-financial assets

The carrying amounts of the Company’s PP&E, right of use assets and intangible assets, including goodwill, are assessed for impairment indicators and impairment reversal indicators at each reporting period end to determine whether there is an indication that such assets have experienced impairment or impairment reversal. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss or impairment reversal, if any.

An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s or group of asset’s estimated fair value less costs of disposal and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable independent cash inflows (a cash generating unit (“CGU”)).

Where an impairment loss is subsequently determined to have reversed, the carrying amount of the asset or CGU is adjusted to the revised estimate of its recoverable amount but limited to the carrying amount that would have been determined had no impairment loss been recognized previously. A reversal of an impairment loss, net of any depreciation that would have been recorded, is recognized immediately in the statements of loss and comprehensive loss. Impairments of goodwill are not reversed.

FINANCIAL INSTRUMENTS

The Company classifies the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instruments:

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

F-16

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset or liability is measured initially at fair value plus, for an item not measured at FVTPL, transaction costs that are directly attributable to its acquisition or issuance.

(I)

Financial assets

At initial recognition, a financial asset is classified and measured at: amortized cost, FVTPL or fair value through other comprehensive income (“FVOCI”) depending on the business model and contractual cash flows of the instrument.

Financial assets at amortized cost are subsequently measured at amortized cost using the effective interest rate method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss.

Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. A substantial modification to the terms of an existing financial asset results in the derecognition of the financial asset and the recognition of a new financial asset at fair value. In the event that the modification to the terms of an existing financial asset do not result in a substantial difference in the contractual cash flows the gross carrying amount of the financial asset is recalculated and the difference resulting from the adjustment in the gross carrying amount is recognized in profit or loss.

The Company’s cash and cash equivalents, restricted cash and accounts receivable are measured at amortized cost. The Company’s marketable securities are measured at FVTPL. The Company’s long-term investments are measured at amortized cost and FVTPL. The Company has no financial assets measured at FVOCI.

(II)

Financial liabilities

Financial liabilities are initially measured at amortized cost or FVTPL. Accounts payable and accrued liabilities are initially recognized at the amount required to be paid less any required discount to reduce the payables to fair value. Long-term debt is recognized initially at fair value, net of any transaction costs incurred, and subsequently at amortized cost using the effective interest method.

Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense and foreign exchange gains and losses, are recognized in profit or loss.

Financial liabilities are derecognized when the liability is extinguished. A substantial modification of the terms of an existing financial liability is recorded as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of a financial liability extinguished and the consideration paid is recognized in profit or loss. Where a financial liability is modified in a way that does not constitute an extinguishment, the modified cash flows are discounted at the liability’s original effective interest rate. Transaction costs paid to third parties in a modification are amortized over the remaining term of the modified debt.

The Company’s accounts payable and accrued liabilities and financial guarantee liability are measured at amortized cost. The Company’s derivative warrant liabilities were designated as FVTPL upon initial recognition.

Provisions

A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. The amount of a provision is the best estimate of the consideration at the end of

F-17

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

the reporting period. Provisions measured using estimated cash flows required to settle the obligation are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The Company has no onerous contracts during the years ended and as at December 31, 2022 and 2021.

NON-MONETARY TRANSACTIONS

All non-monetary transactions are measured at the fair value of the asset surrendered or the asset received, whichever is more reliable, unless the transaction lacks commercial substance, or the fair value cannot be reliably established. The lack of commercial substance requirement is met when the future cash flows are expected to change significantly as a result of the transaction. When the fair value of a non-monetary transaction cannot be reliably measured, it is recorded at the carrying amount (after reduction, when appropriate, for impairment) of the asset given up, adjusted by the fair value of any monetary consideration received or given. When the asset received or the consideration given consists of shares in an actively traded market, the value of those shares will be considered fair value.

COMPOUND FINANCIAL INSTRUMENTS

The liability component of a compound financial instrument is recognized initially at the fair value of a similar liability which does not have an equity conversion option. The equity component is recognized initially as the difference between the fair value of the compound financial instrument taken as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.

Interest and losses and gains relating to the financial liability are recognized in profit and loss. On conversion, the financial liability is reclassified to equity; no gain or loss is recognized on conversion.

REVENUE

Under International Financial Reporting Standard 15 – Revenue from Contracts with Customers (“IFRS 15”), to determine the amount and timing of revenue to be recognized, the Company follows a five-step model:

Identifying the contract with a customer

Identifying the performance obligations

Determining the transaction price

Allocating the transaction price to the performance obligations

Recognizing revenue when/as performance obligations are satisfied

Cannabis revenue

Gross revenue from the direct sale of cannabis for a fixed price is recognized when the Company transfers control of the goods to the customer. The transfer of control is specific to each contract and can range from the point of delivery to a specified length of time for the customer to accept the goods.

For contracts that permit the customer to return goods, revenue is recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Therefore, the amount of revenue recognized is adjusted for expected returns, which are estimated based on historical data and management’s expectation of future returns. In these circumstances, a refund liability and a right to recover returned goods asset are recognized. The right to recover returned goods asset is measured at the former carrying amount of the inventory

F-18

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

less any expected costs to recover goods. The refund liability is included in accounts payable and accrued liabilities and the right to recover returned goods is included in inventory. The Company reviews its estimate of expected returns at each reporting date and updates the amounts of the asset and liability accordingly.

Gross revenue earned in Canada includes excise taxes, which the Company pays as principal, but excludes duties and taxes collected on behalf of third parties. Net revenue is gross revenue less excise taxes. Gross revenue is recognized to the extent that it is highly probable that a significant reversal will not occur. Therefore, gross revenue is stated net of expected price discounts, allowances for customer returns and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry practices, with no element of financing.

Retail revenue

Retail revenue consists of sales through corporate stores and e-commerce operations. Revenue at corporate stores is recognized at the point of sale when the customer takes control of the goods or service and is measured at the amount of consideration to which the Company expects to be entitled to, net of estimated returns, and sales incentives. The Company considers its performance obligations to be satisfied at the point of sale. The Company’s goods and services are generally capable of being distinct and are accounted for as a separate performance obligation. Sales through e-commerce operations are recognized when the customer takes control of the goods or services upon delivery and is measured at the amount of consideration to which the Company expects to be entitled, net of estimated returns, and sales incentives.

It is the Company’s policy to sell merchandise with a limited right to return. Returns are only provided through exchanges or the issuance of a gift card.

The Company sells gift cards. The sale of a gift card creates a future performance obligation. When (or as) the performance obligation is satisfied, the Company recognizes revenue as the amount of the transaction price.

Franchise revenue

Franchise fees are recognized at a point in time when the Company satisfies its performance obligations which is determined to be when the franchise begins operations. Performance obligations include site selection, lease assistance and training. Initial franchise fees are allocated to the performance obligations based on the estimated standalone selling prices. Funds received in advance of a franchise starting operations are recorded as franchise fee deposits.

Ongoing royalty and advertisement fees, which are determined on a formula basis in accordance with the terms of the relevant franchise agreement, based on monthly revenues of the franchisees, are recognized as revenue when the contractual performance obligations have been achieved or other service-related performance obligations have been completed. The performance obligations relate to providing support to the franchise partners and stewarding the Spiritleaf brand. While the franchisees are operating under the name Spiritleaf, they utilize the Spiritleaf trademark, thereby, the Company has performed its obligations to recognize the revenue, as per the franchise agreements.

Other revenue

Proprietary licensing revenue is generated from proprietary licensing services provided to customers. Revenue is recognized when the services are delivered to the customer at a point in time as outlined by the contract. The Company does not operate or manage these services separately from its primary retail sales or operations.

Millwork revenue is defined as the proceeds and receivables related to the sale of millwork, which includes store fixtures. Millwork revenue is recognized at a point in time when a contractual exchange agreement has been entered into, and the performance obligation is considered to have been met when the millwork has been delivered to the franchise partner.

Supply revenue represents revenues earned from the sales of custom Spiritleaf accessories to franchise locations. The Spiritleaf accessory revenue is earned when the goods are shipped.

F-19

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

RESEARCH AND DEVELOPMENT

Research costs are expensed in the period incurred. Development costs are expensed in the period incurred unless the Company believes a development project meets the generally accepted criteria for deferral and amortization per IAS 38. Research and development costs comprise consulting fees, costs to cultivate and test cultivar batches to the point of commercialization and licence acquisition fees. No development costs have been capitalized as at December 31, 2022, or December 31, 2021.

SHARE-BASED COMPENSATION

The Company’s share-based compensation plans include equity-settled awards and cash-settled awards.

The fair value of share-based compensation expenses is estimated using the Black-Scholes pricing model and relies on a number of estimates, such as the expected life of the award, the volatility of the underlying share price, the risk-free rate of return and the estimated rate of forfeiture of awards granted.

Equity-settled

Simple and performance warrants, stock options and restricted share units (“RSUs”) are granted from time to time to employees, directors, and others at the discretion of the Board. The grant date fair value of simple warrants, performance warrants, stock options and RSUs is recognized as share-based compensation expense, with a corresponding increase in contributed surplus, over the vesting period of the awards. On exercise of simple warrants, performance warrants and stock options, the cash consideration received is credited to share capital and the associated amount in contributed surplus is reclassified to share capital. On exercise of RSUs, the associated amount in contributed surplus is reclassified to share capital.

Cash-settled

DSUs are granted to directors and represent a right for the holder to receive a cash payment equal to the fair value of the Company’s common shares calculated at the date of such payment.

Nova DSUs are granted to Nova directors and represent a right for the holder to receive a cash payment equal to the fair value of Nova’s common shares calculated at the date of such payment, or Nova common shares, at the discretion of Nova.

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. The fair value is recognized as share-based compensation over the vesting period. Fluctuations in the fair value are recognized within share-based compensation in the period in which they occur.

INCOME TAXES

Income taxes are recognized in profit and loss, except to the extent that they relate to items recognized directly in equity, in which case the tax is recognized in equity.

Current taxes are generally the expected income tax payable on taxable income for the reporting period, calculated using rates enacted or substantively enacted at the consolidated statements of financial position dates, and include any adjustment to income tax payable or recoverable in respect of previous periods.

Uncertain income tax positions are accounted for using the standards applicable to current income tax assets and liabilities. Liabilities and assets are recorded to the extent they are deemed to be probable.

Deferred tax is recognized using the asset and liability method, based on temporary differences between financial statement carrying amounts of assets and liabilities and their respective income tax bases. Deferred tax is determined using tax rates that have been enacted or substantively enacted at the consolidated statements of financial position date and are expected to apply when the related deferred tax asset is realized, or the deferred tax liability is settled. Deferred tax is not accounted for where it arises from initial recognition of an asset or liability in a transaction other than a business combination which, at the time of the transaction, affects neither accounting nor taxable income

F-20

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

(loss). The amount of deferred tax recognized is based on the expected manner and timing of realization or settlement of the carrying amount of assets and liabilities. Deferred tax assets are recognized only to the extent that it is probable that future taxable income will be available for which the temporary differences can be utilized. Deferred tax assets are reviewed at each reporting date and adjusted to the extent that it is no longer probable that the related tax benefit will be realized.

Tax assets and liabilities are offset when the Company has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Deferred tax assets, including those arising from tax loss carry-forwards, require management to assess the likelihood that the Company will generate sufficient taxable earnings in future periods in order to utilize recognized deferred tax assets. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be affected.

BUSINESS COMBINATIONS

Business combinations are accounted for using the acquisition method of accounting when the acquired assets meet the definition of a business. The acquired identifiable assets and liabilities and contingent liabilities assumed in a business combination are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the fair value of consideration transferred to the sellers, including cash paid and the fair value of assets given, equity instruments issued, and liabilities of the seller assumed at the acquisition date. Any excess of the fair value of the consideration paid over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recorded as goodwill. If the cost of the acquisition is less than the fair value of the net assets acquired, the difference is recognized immediately in net earnings. Transaction costs associated with business combinations are expensed as incurred.

FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN A BUSINESS COMBINATION

The fair value of assets acquired and liabilities assumed in a business combination, including contingent consideration and goodwill, is estimated based on information available at the date of acquisition. Various valuation techniques are applied for measuring fair value including market comparables and discounted cash flows which rely on assumptions such as future selling prices, expected sales volumes, discount rates and future development and operating costs. Changes in these variables could significantly impact the carrying value of the net assets. Specific judgement is required in the identification of intangible assets.

GOODWILL

Goodwill is assessed for impairment annually or when facts and circumstances indicate that it is impaired. Goodwill is tested for impairment at a CGU level by comparing the carrying amount to the recoverable amount, which is determined as the greater of fair value less costs of disposal and value in use. Any excess of the carrying amount over the recoverable amount is the impaired amount. The recoverable amount estimates are categorized as Level 3 according to the fair value hierarchy. Impairment charges are recognized in profit and loss. Goodwill is reported at cost less any accumulated impairment. Goodwill impairments are not reversed.

NON-CONTROLLING INTERESTS

The Company recognizes non-controlling interests in an acquired entity either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets, determined on an acquisition-by-acquisition basis.

F-21

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

Loss of control

When the Company loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

LEASES

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

As a lessee

The Company recognizes a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost and any direct costs of obtaining the lease, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. Depreciation is recognized on the lease asset over the shorter of the estimated useful life of the asset or the lease term. The lease liability is initially measured at the present value of the lease payments that have not been paid at the commencement date, discounted at the rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. Lease payments are allocated between the liability and accretion expense. Accretion expense is recognized on the lease liability using the effective interest rate method and payments are applied against the lease liability.

The carrying amounts of the right of use assets, lease liability, and the resulting interest and depreciation expense are based on the implicit interest rate within the lease arrangement or, if this information is unavailable, the incremental borrowing rate. Incremental borrowing rates are based on judgements including economic environment, term, and the underlying risk inherent to the asset.

As a lessor

When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. Under a finance lease, the Company recognizes a receivable at an amount equal to the net investment in the lease which is the present value of the aggregate of lease payments receivable by the lessor. Under an operating lease, the Company recognizes lease payments received as income on a straight-line basis over the lease term. When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right of use asset arising from the head lease, not with reference to the underlying asset.

GOVERNMENT GRANTS

Government grants are recognized when there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. If a grant is received but reasonable assurance and compliance with conditions is not achieved, the grant is recognized as a deferred liability until such conditions are fulfilled. When the grant relates to an expense item in nature, it is recognized as “government subsidies” in profit or loss on a systematic basis in the period in which the costs are incurred.

Captive Insurance

The Company has secured insurance coverage for its directors and officers through two separate captive insurance structures.

The first structure is a captive cell program entered into with a registered insurer for the purpose of holding and managing the Company’s coverage funds through a separate cell account (“Cell Captive”). The Company applies International Financial Reporting Standard 10 – Consolidated Financial Statements (“IFRS 10”) in its assessment of

F-22

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

control as it relates to the Cell Captive. The Company’s accounting policy is to consolidate the Cell Captive. The Cell Captive funds are held as cash and may be invested according to the Company’s treasury policy. The funds are disclosed as restricted cash as the Cell Captive must be fully funded at all times. The Company will recognize any gains or losses from fair market value adjustments, interest and/or foreign exchange in the statements of income (loss) and comprehensive income (loss).

The second structure is a wholly owned subsidiary, Sundial Insurance (Bermuda) Ltd. (“SIBL”), incorporated to provide separate and additional coverage. The Company applies IFRS 10 in its assessment of control as it relates to SIBL. The Company’s accounting policy is to consolidate SIBL. The funds are disclosed as restricted cash as the funds were required for initial capitalization of the entity and there is a requirement to maintain minimum capital and surplus in accordance with industry regulations.

NEW ACCOUNTING STANDARDS

The following accounting standards were effective for annual periods beginning on or after January 1, 2022 and did not have a material impact on the Company’s consolidated financial statements:

•

Onerous Contracts — Cost of Fulfilling a Contract — Amendments to IAS 37

•

Property, Plant and Equipment: Proceeds before Intended Use — Amendments to IAS 16

There are new accounting standards, amendments to accounting standards and interpretations that are effective for annual periods beginning on or after January 1, 2023, that have not been applied in preparing the consolidated financial statements for the year ended December 31, 2022. These standards and interpretations are not expected to have a material impact on the Company’s consolidated financial statements and include:

•

Classification of Liabilities as Current or Non-current — Amendment to IAS 1

•

IFRS 17 Insurance Contracts

•

Definition of Accounting Estimate — Amendments to IAS 8

•

Deferred Tax related to Assets and Liabilities arising from a Single Transaction — Amendments to IAS 12

Business acquisitions

Alcanna

On October 7, 2021, the Company announced that it had entered into an arrangement agreement with Alcanna Inc. (“Alcanna”) pursuant to which the Company would acquire all of the issued and outstanding common shares of Alcanna by way of a statutory plan of arrangement (the “Alcanna Transaction”). The Company and Alcanna amended the arrangement agreement in respect of the Alcanna Transaction on January 6, 2022, and the Alcanna Transaction closed on March 31, 2022. Alcanna is a Canadian liquor retailer, operating predominantly in Alberta under its three retail brands, “Wine and Beyond”, “Liquor Depot” and “Ace Liquor”. Alcanna holds an approximate 63% equity interest in Nova, a Canadian cannabis retailer operating stores across Alberta, Saskatchewan and Ontario, under its “Value Buds” and “Sweet Tree” retail brands. The Company is deemed to control Nova through its equity interest and Nova’s results are included in the consolidated financial statements of the Company with the minority interest shown as non-controlling interest through equity.

Alcanna was acquired to diversify and stabilize cash flows and advance the Company’s vertical integration strategy.

The Alcanna Transaction consideration was comprised of (i) an aggregate $54.3 million cash ($1.50 in cash for each Alcanna common share), and (ii) an aggregate 32.1 million SNDL common shares valued at $287.1 million based on the fair value of each common share of the Company on the closing date (0.885 of a SNDL common share for each Alcanna common share).

The Company engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts, if any.

The fair value of consideration paid was as follows:


	Provisional		Adjustments		Final
Cash		54,339		—		54,339
Issuance of common shares		287,129		—		287,129
		341,468		—		341,468

F-25

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

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


	Provisional			Adjustments			Final
Cash		23,190			—			23,190
Accounts receivable		1,868			—			1,868
Prepaid expenses and deposits		10,986			—			10,986
Inventory		105,022			—			105,022
Right of use assets		171,866			(31,117	)		140,749
Property, plant and equipment		86,059			24,632			110,691
Intangible assets		—			45,100			45,100
Goodwill		280,243			(129,308	)		150,935
Accounts payable and accrued liabilities		(36,703	)		(44	)		(36,747	)
Long-term debt		(10,000	)		—			(10,000	)
Lease liabilities		(232,755	)		90,736			(142,019	)
Derivative warrants		(58	)		(27	)		(85	)
Non-controlling interest		(58,250	)		28			(58,222	)
		341,468			—			341,468

Non-controlling interest has been measured as the fair value of the non-controlling interest in Nova, which at the time was 37%, and was measured by applying a market approach with reference to Nova’s closing share price on the day of the Alcanna Transaction of $2.66.

On March 31, 2022, the Company repaid in full the acquired long-term debt balance of $10.0 million.

These consolidated financial statements incorporate the operations of Alcanna commencing March 31, 2022. During the period March 31, 2022 to December 31, 2022, the Company recorded revenues of $639.5 million and net loss of $101.0 million from the Alcanna operations. Had the Alcanna Transaction closed on January 1, 2022, management estimates that for the period January 1, 2022, to March 30, 2022, revenue would have increased by $162.5 million and net loss would have increased by $25.5 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, 2022.

The Company incurred costs related to the Alcanna Transaction of $7.0 million which have been included in transaction costs.

The Company recorded adjustments to the fair value in the fourth quarter of 2022 to reflect additional information and greater certainty with respect to management estimates pertaining to facts and circumstances that were either unknown or uncertain at the date of acquisition. These adjustments related to changes in preliminary valuation assumptions, including refinement of right of use assets, property, plant and equipment, intangible assets, accounts payable and accrued liabilities, lease liabilities, derivative warrants and non-controlling interest. All measurement period adjustments were offset to goodwill.

goodwill impairment

For the purpose of impairment testing at December 31, 2022, intangible assets with indefinite lives were allocated to the Company’s CGUs as follows: i) $2.7 million to the cannabis retail CGU, ii) $18.3 million to the cannabis franchise CGU and iii) $43.1 million to the liquor retail CGU. Goodwill from the Alcanna acquisition was allocated as follows: i) $126.6 million to the cannabis retail CGU and ii) $24.3 million to the liquor retail CGU. The remaining goodwill from the Inner Spirit acquisition of $4.6 million was allocated to the group CGU containing the cannabis retail and cannabis franchise CGUs. The impairment test for the Company’s cannabis retail CGU used its fair value less costs of disposal and the fair value measurement was categorized as a Level 1 fair value based on the inputs in the valuation technique used. The impairment test for the Company’s cannabis franchise and liquor retail CGUs used a value in use approach based on internal cash flow estimates at December 31, 2022, and a discount rate of 12.0%. The discount rate was estimated based on the Company’s weighted average cost of capital, adjusted for risks specific to the CGUs. The estimated cash flows were based on a 5-year model taking into account the overall forecasted Canadian cannabis and

F-26

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

liquor industry market sizes and the Company’s forecasted market share. A terminal value thereafter was applied. Based on the analysis, there was an impairment of the Company’s retail cannabis CGU of $88.0 million as at December 31, 2022 as the estimated recoverable amount for this CGU of $84.8 million was lower than the respective carrying amount. The impairment loss was fully allocated to goodwill and included in asset impairment. The impairment was recognized in the Company’s cannabis retail reportable segment.

Inner Spirit

On May 5, 2021, the Company and Inner Spirit Holdings Ltd. (“Inner Spirit”) announced that they had entered into an arrangement agreement pursuant to which the Company acquired all of the issued and outstanding common shares of Inner Spirit (the “Inner Spirit Transaction”). The Inner Spirit Transaction closed on July 20, 2021. Inner Spirit is a retailer and franchisor of Spiritleaf adult-use cannabis stores across Canada, with a network that included more than 100 franchised and corporate-owned locations at the acquisition date.

The Inner Spirit Transaction consideration was comprised of (i) an aggregate $92.6 million cash ($0.30 in cash for each Inner Spirit common share), (ii) an aggregate 2.4 million SNDL common shares valued at $26.2 million based on the fair value of each common share of the Company on the closing date (0.00835 of a SNDL common share for each Inner Spirit common share) and (iii) contingent consideration valued at $1.2 million representing the fair value of Inner Spirit warrants.

The Company 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 fair value of consideration paid was as follows:


	Provisional		Adjustments		Final
Cash		92,583		—		92,583
Issuance of common shares		26,216		—		26,216
Contingent consideration		1,150		—		1,150
		119,949		—		119,949

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


	Provisional			Adjustments			Final
Cash		9,808			—			9,808
Accounts receivable		750			(327	)		423
Prepaid expenses and deposits		853			—			853
Inventory		2,733			2,011			4,744
Right of use assets		—			5,730			5,730
Property, plant and equipment		12,108			(5,730	)		6,378
Intangible assets		—			46,000			46,000
Net investment in subleases		23,751			50			23,801
Goodwill		114,537			(42,041	)		72,496
Accounts payable and accrued liabilities		(2,678	)		—			(2,678	)
Convertible debentures		(12,025	)		—			(12,025	)
Lease liabilities		(29,481	)		(50	)		(29,531	)
Financial guarantee liability		(407	)		—			(407	)
Deferred tax liability		—			(5,643	)		(5,643	)
		119,949			—			119,949

On August 4, 2021, the Company settled the convertible debenture liability through the issuance of 2.5 million common shares valued at $2.7 million and a cash payment of $9.3 million. Due to the change of control from the Inner Spirit Transaction, debenture holders were entitled to receive SNDL common shares and a cash payment based on a prescribed formula.

F-27

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

The fair value of the Inner Spirit warrants has been estimated as $1.2 million and is made up of the following components: (i) equity component of $1.8 million (note 23(c)), (ii) liability component of $0.3 million and (iii) asset component of $0.9 million.

The consolidated financial statements incorporate the operations of Inner Spirit commencing July 20, 2021. During the period July 20, 2021, to December 31, 2021, the Company recorded revenues of $16.1 million and net earnings of $1.1 million. Had the acquisition closed on January 1, 2021, management estimates that for the period January 1, 2021, to July 19, 2021, revenue would have increased by $20.4 million and net earnings would have been reduced by $7.4 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, 2021.

The Company incurred acquisition-related costs of $1.9 million which have been included in transaction costs.

The Company recorded adjustments to the fair value in the third quarter of 2022 to reflect additional information and greater certainty with respect to management estimates pertaining to facts and circumstances that were either unknown or uncertain at the date of acquisition. These adjustments related to changes in preliminary valuation assumptions, including refinement of accounts receivable, inventory, net investment in subleases, lease liabilities and amounts allocated to intangible assets and deferred tax liability. All measurement period adjustments were offset to goodwill.

The Company made retrospective adjustments to provisional amounts in the comparative period as follows:

•

The carrying amount of intangible assets as at December 31, 2021 was increased by $45.4 million, representing the increase in fair value of $46.0 million less additional amortization from the acquisition date to December 31, 2021 of $0.6 million.

•

The deferred tax liability of $5.6 million was adjusted to nil with a corresponding adjustment recorded to income tax recovery, on the basis that the Company and Inner Spirit are subject to income tax under the same taxation authority.

•

Amortization expense for 2021 was increased by $0.6 million (Q3 2021 — $0.3 million and Q4 2021 — $0.3 million).

•

Cost of sales for 2021 was increased by $2.0 million, representing the increase in fair value of acquired inventory that was sold during 2021.

•

General and administrative expenses was decreased by $0.3 million, representing the decrease in fair value of acquired accounts receivable.

•

Goodwill was decreased by $42.0 million.

Inner Spirit goodwill and intangible asset impairment

For the purpose of impairment testing at September 30, 2022, intangible assets with indefinite lives consisting of the Inner Spirit brands and trademarks were allocated to the Company’s CGUs as follows: i) $17.7 million to the cannabis retail CGU and ii) $18.3 million to the cannabis franchise CGU. The impairment test for the Company’s cannabis retail and cannabis franchise CGUs used a value in use approach based on internal cash flow estimates at September 30, 2022, and a discount rate of 19.5%. The discount rate was estimated based on the Company’s weighted average cost of capital, adjusted for risks specific to the CGUs. The estimated cash flows were based on a 5-year model taking into account the overall forecasted Canadian cannabis industry market size and the Company’s forecasted market share. A terminal value thereafter was applied. Based on the analysis, there was an impairment of the Company’s retail cannabis CGU of $16.4 million as at September 30, 2022 as the estimated recoverable amount for this CGU of $1.9 million was lower than the respective carrying amount. The impairment loss was fully allocated to intangible assets with indefinite lives and included in asset impairment. The impairment was recognized in the Company’s cannabis retail reportable segment.

For the purpose of impairment testing at September 30, 2022, goodwill of $72.5 million from the Inner Spirit acquisition was allocated to the group CGU containing the cannabis retail and cannabis franchise CGUs. The impairment test for the Company’s group CGU used a value in use approach based on internal cash flow estimates at September 30, 2022, and a discount rate of 19.5%. The discount rate was estimated based on the Company’s weighted average cost of capital, adjusted for risks specific to the CGUs. The estimated cash flows were based on a 5-year model

F-28

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

taking into account the overall forecasted Canadian cannabis industry market size and the Company’s forecasted market share. A terminal value thereafter was applied. Based on the analysis, there was an impairment of the Company’s group CGU of $67.9 million as at September 30, 2022 as the estimated recoverable amount for this group CGU of $40.0 million was lower than the respective carrying amount. The impairment loss was fully allocated to goodwill and included in asset impairment. The estimated value in use for the Company’s group CGU was sensitive to an increase in the discount rate. An increase to the discount rate by 1% would increase the impairment by approximately $1.1 million. The impairment was recognized in the Company’s cannabis retail reportable segment.

Zenabis

On November 1, 2022, the Company announced that, in the context of proceedings pursuant to the Zenabis Group’s (as defined below) filing under the Companies’ Creditors Arrangement Act (“CCAA”), it had successfully acquired all of the assets of the business of the Zenabis Group, subject to certain exclusions, (the “Zenabis Business”), pursuant to an approval order of the Québec Superior Court (the “Court”).

The order of the Court approved the acquisition by a wholly owned subsidiary of SNDL of all issued and outstanding shares of Zenabis Ltd., a corporation resulting from the amalgamation of select Zenabis entities (collectively, the “Zenabis Group”), as part of the consideration for the senior secured debt of the Zenabis Group due to the SNDL subsidiary. Zenabis Ltd. owns all of the Zenabis Business, free and clear of any encumbrances except certain permitted encumbrances (namely the security of the wholly owned subsidiary of SNDL, which was preserved).

The Zenabis acquisition consideration was comprised of (i) the extinguishment of the Company’s senior loan.

The Company engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts, if any.

The fair value of consideration paid was as follows:


	Final
Extinguishment of senior loan		18,215
		18,215

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


	Final
Cash		2,509
Accounts receivable		888
Biological assets		909
Prepaid expenses and deposits		1,856
Inventory		4,512
Assets held for sale		6,375
Right of use assets		32
Property, plant and equipment		4,658
Accounts payable and accrued liabilities		(3,437	)
Lease liabilities		(87	)
		18,215

Assets held for sale are comprised of a processing facility in Stellarton, Nova Scotia, whose primary purpose was the packaging and processing of value added and derivative products for the adult-use cannabis market.

These consolidated financial statements incorporate the operations of Zenabis commencing November 1, 2022. During the period November 1, 2022 to December 31, 2022, the Company recorded revenues of $0.4 million and net loss of $1.8 million from the Zenabis operations. Had the acquisition closed on January 1, 2022, management estimates that for the period January 1, 2022, to October 31, 2022, revenue would have increased by $2.0 million and net loss would have increased by $9.0 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, 2022.

F-29

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

The Company incurred costs related to the Zenabis acquisition of $0.8 million which have been included in transaction costs.

Segment information

The Company’s reportable segments are organized by business line, and with the acquisition of Alcanna, 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. 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 (1)		Cannabis Retail (1)			Cannabis Operations (2)			Investments (3)			Corporate			Total
As at December 31, 2022
Total assets		351,338		200,393			163,130			825,151			19,338			1,559,350
Year ended December 31, 2022
Net revenue		462,180		205,610			44,407			—			—			712,197
Gross margin		106,307		47,334			(13,266	)		—			—			140,375
Interest and fee revenue		—		—			—			16,739			—			16,739
Investment (loss) income		—		—			—			(65,164	)		—			(65,164	)
Share of loss of equity-accounted investees		—		—			—			(43,002	)		—			(43,002	)
Depreciation and amortization		17,025		9,920			199			—			13,801			40,945
Income (loss) before income tax		17,726		(183,055	)		(29,618	)		(127,362	)		(57,461	)		(379,770	)

(1)

Liquor retail includes operations for the period March 31, 2022 to December 31, 2022 and cannabis retail includes the operations of Nova retail stores for the period March 31, 2022 to December 31, 2022 (note 5(a)).

(2)

Cannabis operations includes the operations of Zenabis for the period November 1, 2022 to December 31, 2022 (note 5(c)).

(3)

Total assets include cash and cash equivalents.


	Liquor Retail		Cannabis Retail (1)			Cannabis Operations			Investments (2)			Corporate			Total
As at December 31, 2021
Total assets (3)		—		157,022			147,887			1,093,596			29,155			1,427,660
Year ended December 31, 2021
Net revenue		—		16,091			40,037			—			—			56,128
Gross margin (3)		—		6,498			(15,499	)		—			—			(9,001	)
Interest and fee revenue		—		—			—			13,149			—			13,149
Investment loss		—		—			—			(44,501	)		—			(44,501	)
Share of profit of equity-accounted investees		—		—			—			32,913			—			32,913
Depreciation and amortization (3)		—		1,282			3,108			—			897			5,287
Income (loss) before income tax (3)		—		(410	)		(117,990	)		(5,837	)		(110,461	)		(234,698	)

(1)

Cannabis retail includes the operations of Inner Spirit retail and franchise stores for the period July 20, 2021 to December 31, 2021.

(2)

Total assets include cash and cash equivalents.

(3)

Adjustments to provisional amounts — refer to note 5(b)

Geographical disclosure

As at December 31, 2022, the Company had non-current assets related to investment credit operations in the United States of $519.3 million (December 31, 2021 — $412.9 million). For the year ended December 31, 2022, share of profit of equity-accounted investees related to investment credit operations in the United States was a loss of $43.0 million (year ended December 31, 2021 — gain of $32.9 million).

13.

Property, plant and equipment


	Land			Production facilities			Leasehold improvements			Equipment			Construction in progress (“CIP”)			Total
Cost
Balance at December 31, 2020		8,640			152,935			2			28,894			8,819			199,290
Acquisition (note 5(b))		—			—			4,169			2,209			—			6,378
Additions		—			467			126			1,975			1,209			3,777
Transfers from CIP		3,748			—			—			—			(3,748	)		—
Dispositions		—			(70	)		(398	)		(301	)		(177	)		(946	)
Balance at December 31, 2021		12,388			153,332			3,899			32,777			6,103			208,499
Acquisition (note 5(a), note5(c))		130			2,982			65,605			44,263			2,369			115,349
Additions		57			256			3,465			5,907			982			10,667
Dispositions		(611	)		(3,844	)		(647	)		(4,025	)		—			(9,127	)
Balance at December 31, 2022		11,964			152,726			72,322			78,922			9,454			325,388

Accumulated depreciation and impairment
Balance at December 31, 2020		—			69,364			—			8,500			5,821			83,685
Depreciation		—			2,503			411			5,438			—			8,352
Impairment		—			60,000			—			—			—			60,000
Dispositions		—			—			—			(10	)		—			(10	)
Balance at December 31, 2021		—			131,867			411			13,928			5,821			152,027
Depreciation		—			1,288			7,212			11,373			—			19,873
Impairment		—			—			7,794			7,415			—			15,209
Dispositions		—			(1,324	)		(610	)		(3,196	)		—			(5,130	)
Balance at December 31, 2022		—			131,831			14,807			29,520			5,821			181,979

Net book value
Balance at December 31, 2021		12,388			21,465			3,488			18,849			282			56,472
Balance at December 31, 2022		11,964			20,895			57,515			49,402			3,633			143,409

During the year ended December 31, 2022, depreciation expense of $6.4 million was capitalized to biological assets and inventory (year ended December 31, 2021 – $4.9 million).

During the year ended December 31, 2022, proceeds of $3.5 million were received for the disposition of the Company’s Merritt facility and a gain on disposal of $0.5 million was recognized. At December 31, 2021, the Merritt facility was classified as assets held for sale.

During the year ended December 31, 2022, proceeds of $3.9 million were received for the disposition of the Company’s Rocky View facility and no gain on disposal was recognized.

During the year ended December 31, 2022, the Company determined that indicators of impairment existed relating to idle machinery and equipment. The estimated recoverable amount of the assets was determined to be nil and an impairment of $2.4 million was recorded. The impairment was recognized in the Company’s cannabis operations reporting segment.

During the year ended December 31, 2022, the Company determined that indicators of impairment existed relating to its retail stores due to underperforming operating results of certain stores. For impairment testing of retail property, plant and equipment and right of use assets, the Company determined that a CGU was defined as each individual retail store. The Company completed impairment tests for each store location determined to have an indicator of potential impairment using a discounted cash flow methodology. The recoverable amounts for each CGU were based on the higher of its estimated value in use (“VIU”) and fair value less costs of disposal (“FVLCD”) using level 3 inputs (refer to note 31 for further discussion of each input level). The significant assumptions applied in the impairment test are described below:

F-34

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

•

Cash flows: Estimated cash flows are based on forecasted EBITDA. The forecast is extended to a total of five years based on an analysis of the industry’s expected growth rates, historical and forecast volume changes, and inflation rates, except where a CGU has a defined life due to lease expiration. Management determined forecasted growth rates of sales based on past performance and its expectations of future performance for each location. Expenditures were based upon a combination of historical percentages of revenue, sales growth rates, and contractual lease payments.

•

Discount rate: The weighted average cost of capital was estimated to be 12.0% and 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.

•

Long-term growth rate: Five years of cash flows have been included in the discounted cash flow models. Where a CGU’s lease terms do not define the forecast period, maintainable debt-free net cash flow beyond the forecast period is estimated to approximate the fifth-year cash flows increased by a terminal growth rate of 2.5% and is based on the industry’s expected growth rates, forecast inflation rates and management’s experience.

As at December 31, 2022, the Company recorded impairment losses of property, plant and equipment of $12.8 million with $5.3 million in the cannabis retail reporting segment and $7.5 million in the liquor retail reporting segment.

Due to curtailment in the utilization of a portion of the capacity in the Company’s Olds facility to align cannabis production with current demand estimates, the Company determined that indicators of impairment existed at June 30, 2021. The impairment test for the Company’s Olds CGU used a value in use approach based on internal cash flow estimates at June 30, 2021, and a discount rate of 25%. The discount rate was estimated based on the Company’s weighted average cost of capital, adjusted for risks specific to the CGU. The estimated cash flows were based on a 5-year model taking into account the overall forecasted Canadian cannabis industry market size and the Company’s forecasted market share. A terminal value thereafter was applied. Based on the analysis, there was an impairment of the Company’s Olds CGU of $60.0 million as at June 30, 2021, as the estimated recoverable amount for this CGU of $70.0 million was lower than the respective carrying amount. The estimated value in use for the Company’s Olds CGU was sensitive to an increase in the discount rate. An increase to the discount rate by 1% would increase the impairment by approximately $7.3 million. The impairment was recognized in the Company’s cannabis operations reporting segment.

15.

Intangible assets


	Brands and trademarks			Franchise agreements		Software		Retail Licenses		Total
Cost
Balance at December 31, 2020		5,445			—		—		—		5,445
Acquisition (note 5(b)) (1)		36,000			10,000		—		—		46,000
Balance at December 31, 2021		41,445			10,000		—		—		51,445
Acquisition (note 5(a))		38,950			—		5,400		750		45,100
Additions		55			—		142		—		197
Dispositions		(50	)		—		—		—		(50	)
Balance at December 31, 2022		80,400			10,000		5,542		750		96,692

Accumulated amortization and impairment
Balance at December 31, 2020		382			—		—		—		382
Amortization (1)		354			561		—		—		915
Balance at December 31, 2021		736			561		—		—		1,297
Amortization		293			1,250		679		—		2,222
Impairment		18,288			—		—		—		18,288
Balance at December 31, 2022		19,317			1,811		679		—		21,807

Net book value
Balance at December 31, 2021		40,709			9,439		—		—		50,148
Balance at December 31, 2022		61,083			8,189		4,863		750		74,885

(1)

Adjustment to provisional amounts — refer to note 5(b).

Brands and trademarks are related to intellectual property purchased from Sun 8 Holdings Inc. (“Sun 8”) with a useful life of 15 years, other intellectual property with a useful life of 12 years, intellectual property acquired through the acquisition of Inner Spirit consisting of proprietary rights to brands and trademarks with an indefinite useful life, and intellectual property acquired through the acquisition of Alcanna with an indefinite useful life. The Inner Spirit and Alcanna brands and trademarks were determined to have an indefinite useful life due to the fact that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Franchise agreements consist of intellectual property acquired through the acquisition of Inner Spirit consisting of franchise relationships with a useful life of 8 years. Software is comprised of licenses acquired through the acquisition of Alcanna and are amortized using the straight-line method over the life of the license. Retail licenses acquired through the acquisition of Alcanna have an indefinite life and are therefore not amortized. The retail licenses do not expire, but rather are subject to an administrative extension process each year indefinitely.

During the three months ended September 30, 2022, the Company determined that indicators of impairment existed regarding the Sun 8 intellectual property due to decreasing market competition. The estimated recoverable amount of the intangible asset was determined to be $2.5 million and an impairment of $1.9 million was recorded. The impairment was recognized in the Company’s cannabis operations reporting segment.

At September 30, 2022, the Company recorded impairments to intangible assets with indefinite useful lives of $16.4 million due to changes in circumstances since the date of the Inner Spirit acquisition, mainly caused by the continued oversaturation of the cannabis retail market (note 5(b)).

At December 31, 2022, the Company tested intangible assets with indefinite useful lives and goodwill for impairment based on changes in circumstances since the date of the Alcanna and Nova acquisition, mainly caused by the continued oversaturation of the cannabis retail market (note 5(a)).

17.

Equity-accounted investees


As at	December 31, 2022		December 31, 2021
Interest in joint venture (A)		519,255		412,858
Interest in associate (B)		—		—
		519,255		412,858

Interest in joint venture

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 global 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.

As at December 31, 2022, the Company had funded $514.7 million out of the total $538.0 million that was originally committed to SunStream. Subsequent to December 31, 2022, the Company contributed $10.9 million to SunStream.

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


	Carrying amount
Balance at December 31, 2020		—
Capital contributions		395,569
Share of net earnings		32,913
Share of other comprehensive income		9,878
Distributions		(25,502	)
Balance at December 31, 2021		412,858
Capital contributions		119,137
Share of net earnings (loss)		(43,002	)
Share of other comprehensive income		31,923
Distributions		(1,661	)
Balance at December 31, 2022		519,255

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.

F-38

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

The following table summarizes the financial information of SunStream:


As at	December 31, 2022			December 31, 2021
Current assets (including cash and cash equivalents - 2022: $1.5 million, 2021: $0.2 million)		5,437			789
Non-current assets		509,418			407,860
Current liabilities		(1,146	)		(1,596	)
Net assets (liabilities) (100%)		513,709			407,053

Year ended December 31	2022			2021
Revenue (loss)		(35,046	)		36,203
Profit (loss) from operations		(42,627	)		32,841
Other comprehensive income		31,923			9,878
Total comprehensive income (loss)		(10,619	)		42,747

Interest in associate

The Company holds a 25% equity interest in its associate Pathway RX Inc. (“Pathway”). Pathway is a private company focused on developing cannabis-based pharmaceutical drugs to treat symptoms associated with a range of medical cannabis. The carrying amount of the Company’s interest in Pathway is nil.

22.

Income taxes

The following table reconciles the expected income tax expense (recovery) at the Canadian federal and provincial statutory income tax rates to the amounts recognized in profit and loss for the years ended December 31, 2022, December 31, 2021 and December 31, 2020:


	December 31, 2022			December 31, 2021			December 31, 2020
Loss before taxes		(379,770	)		(234,698	)		(206,317	)
Statutory income tax rates		23.0	%		23.0	%		24.0	%
Expected income tax recovery		(87,347	)		(53,981	)		(49,516	)
Non-deductible share-based compensation		2,508			2,308			1,970
Non-deductible finance expense		—			2			2,130
Revaluation of the fair value of warrant liabilities		(2,461	)		17,902			—
Non-controlling interest		8,167			—			—
Non-deductible portion of capital losses		7,458			5,118			—
Other non-deductible expenses		5,409			610			348
Goodwill impairment		35,919			—			—
Change in tax rates		—			—			1,528
Deferred tax benefits not recognized		23,005			20,127			43,540
Income tax (recovery) expense		(7,342	)		(7,914	)		—

Details of the deferred tax assets (liabilities) are as follows:


	December 31, 2022			December 31, 2021
Deferred tax assets (liabilities):
Inventory		23,329			20,472
Biological assets		(9,451	)		(9,509	)
Net investment in subleases		(5,363	)		(6,119	)
Intangible assets		(16,632	)		—
Lease liabilities		(5,488	)		(8,361	)
Marketable securities		14,981			7,442
Equity-accounted investee		(1,376	)		(3,925	)
Net deferred tax asset (liability)		—			—

Deferred tax assets have not been recognized for the following deductible temporary differences:


	December 31, 2022		December 31, 2021
Unrecognized deductible temporary differences:
Property, plant and equipment		7,413		81,583
Intangible assets		183		(45,256	)
Share issue costs		28,926		23,835
Investments		18,239		3,300
Lease liabilities		193,691		69,865
Financial obligations and other		2,300		4,100
Non-capital losses & scientific research and experimental development		490,326		220,596
Unrecognized deductible temporary differences		741,078		358,023

F-42

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

The movement in deferred income tax liability is as follows:


	December 31, 2022			December 31, 2021
Balance, beginning of year		—			—
Recognized in profit and loss		(7,342	)		(7,914	)
Recognized in other comprehensive income		7,342			7,914
Balance, end of year		—			—

The Company has $490.3 million (December 31, 2021 - $218.5 million) of non-capital losses available for future periods that will expire prior to 2037-2042.

23.

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.

On July 26, 2022, the Board approved a 1 to 10 share consolidation of the Company’s issued and outstanding common shares (the “Share Consolidation”). Each shareholder of record of the Company as of the close of business on the record date of July 25, 2022, received 1 common share for each 10 shares held on such date.

All references to common shares, warrants, derivative warrant liabilities, simple warrants, performance warrants, stock options, RSUs and DSUs (excluding the Nova RSUs and DSUs) have been fully retrospectively adjusted to reflect the Share Consolidation.

Issued and outstanding


		December 31, 2022						December 31, 2021
	Note	Number of Shares			Carrying Amount			Number of Shares		Carrying Amount
Balance, beginning of year			206,040,836			2,035,704			91,884,413		762,046
Share issuances			370,179			2,870			95,680,666		977,425
Share issuance costs			—			—			—		(16,371	)
Share repurchases			(4,252,489	)		(41,617	)		—		—
Acquisition	5		32,060,135			287,129			2,443,128		26,216
Convertible debenture settlement			—			—			248,875		2,671
Derivative warrants exercised			—			—			15,214,695		277,136
Warrants exercised			—			—			19,571		178
Employee awards exercised (1)			975,575			8,724			549,488		6,403
Balance, end of year			235,194,236			2,292,810			206,040,836		2,035,704

(1)

Included in employee awards exercised are 87,500 RSUs that vested and were exercised in December 2020; however, the common shares were not issued until January 2021. Included in employee awards exercised are 50,000 RSUs that vested and were exercised in December 2021; however, the common shares were not issued until January 2022.

For the year ended December 31, 2022, the Company purchased and cancelled 4.3 million common shares at a weighted average price of $3.12 (US$2.33) per common share for a total cost of $13.3 million. Accumulated deficit was reduced by $28.3 million, representing the excess of the average carrying value of the common shares over their purchase price.

Subsequent to December 31, 2022, the Company purchased and cancelled 0.5 million common shares at a weighted average price of $2.78 (US$2.04) per common share for a total cost of $1.5 million.

F-43

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

(C)

Common share purchase warrants


	Number of Warrants			Carrying Amount
Balance at December 31, 2020		102,400			6,138
Acquisition (note 5(b))		209,783			1,771
Warrants issued		64,000			361
Warrants exercised		(19,571	)		(178	)
Balance at December 31, 2021		356,612			8,092
Warrants expired		(48,000	)		(5,832	)
Balance at December 31, 2022		308,612			2,260

During the year ended December 31, 2022, the warrants issued in relation to the acquisition of a financial obligation expired.

During the year ended December 31, 2021, the Company issued 64,000 warrants to Sun 8 Holdings Inc. (“Sun 8”) with an exercise price of $9.40 per unit, in conjunction with achieving minimum thresholds of revenue derived from the brands or cultivars that the Company acquired from Sun 8 during the year ended December 31, 2019.

During the year ended December 31, 2021, 19,571 warrants that formed part of the contingent consideration from the Inner Spirit Transaction, were exercised resulting in a net payment of $0.2 million representing the difference between the exercise prices and the cash consideration (note 5(b)). The carrying value of the exercised warrants was adjusted from warrants to share capital.

The following table summarizes outstanding warrants as at December 31, 2022:


	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		6.6
Acquired from Inner Spirit (1)		3.37		190,212		1.2
Sun 8		9.40		64,000		3.0
	$	12.13		308,612		2.5

(1)

Inner Spirit warrants are exchangeable for 0.00835 SNDL common shares in accordance with the Inner Spirit Transaction consideration (note 5(b)) and have been presented based on the number of SNDL common shares that are issuable.

24.

Share-based compensation

The Company has a number of share-based compensation plans which include simple and performance warrants, stock options, RSUs and DSUs. Further detail on each of these plans is outlined below. 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.

F-44

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

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


	Year ended December 31
	2022			2021			2020
Equity-settled expense
Simple warrants (A)		1,299			2,899			1,539
Performance warrants (A)		—			361			(42	)
Stock options (B)		78			(14	)		651
Restricted share units (1) (C)		9,423			6,789			4,069
Cash-settled expense
Deferred share units (1)(2) (D)		(1,129	)		2,272			2,349
		9,671			12,307			8,566

(1)

For the year ended December 31, 2022, the Company recognized share-based compensation recovery under Nova’s RSU plan of $107 and share-based compensation expense under Nova’s DSU plan of $404.

(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 reporting period. 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 year ended December 31, 2022 and the year ended December 31, 2021:


	Simple warrants outstanding			Weighted average exercise price		Performance warrants outstanding			Weighted average exercise price
Balance at December 31, 2020		342,460		$	44.13		167,200		$	41.89
Forfeited		(66,880	)		33.62		(20,480	)		54.80
Exercised		(12,000	)		9.38		(8,000	)		10.94
Expired		(4,160	)		34.51		—			0.00
Balance at December 31, 2021		259,420		$	48.60		138,720		$	41.77
Forfeited		(82,400	)		57.77		(15,520	)		37.86
Expired		(11,200	)		6.25		—			0.00
Balance at December 31, 2022		165,820		$	46.91		123,200		$	42.26

F-45

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

The following table summarizes outstanding simple and performance warrants as at December 31, 2022:


	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		75,340		7.25		1.40		75,340		7.25		1.40
$29.69 - $45.31		27,120		31.26		1.61		26,320		31.02		1.54
$62.50 - $93.75		49,920		63.50		4.05		49,920		63.50		4.05
$125.00 - $375.00		13,440		239.15		4.62		7,040		205.18		3.70
		165,820	$	46.91		2.49		158,620	$	37.68		2.36
Performance warrants
$6.25 - $9.38		45,066		6.71	n/a			45,066		6.71		2.00
$12.50 - $18.75		17,334		15.15	n/a			17,334		15.15		0.93
$29.69 - $45.31		42,400		31.99	n/a			42,400		31.99		1.22
$62.50 - $93.75		9,334		77.68	n/a			1,334		93.75		1.10
$125.00 - $375.00		9,066		282.36	n/a			—		—	n/a
		123,200	$	42.26	n/a			106,134	$	19.28		1.91

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 year ended December 31, 2022 and the year ended December 31, 2021:


	Stock options outstanding			Weighted average exercise price
Balance at December 31, 2020		72,060		$	18.18
Forfeited		(27,500	)		26.05
Expired		(100	)		31.50
Balance at December 31, 2021		44,460		$	13.28
Expired		(100	)		31.50
Balance at December 31, 2022		44,360		$	13.24

The following table summarizes outstanding stock options as at December 31, 2022:


	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		32,500		7.41		21,667		7.41
$11.90		8,160		7.49		8,160		7.49
$31.50		3,700		5.51		3,025		5.38
		44,360		7.27		32,852		7.24

F-46

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

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 year ended December 31, 2022 and the year ended December 31, 2021:


	RSUs outstanding
Balance at December 31, 2020		165,692
Granted		1,238,152
Forfeited		(158,263	)
Exercised		(491,988	)
Balance at December 31, 2021		753,593
Granted		1,728,557
Forfeited		(175,245	)
Exercised		(925,575	)
Balance at December 31, 2022		1,381,330

Subsequent to December 31, 2022, the Company granted 7.8 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. 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.

As at December 31, 2022, the Company recognized a liability of $2.3 million relating to the fair value of cash-settled DSUs (December 31, 2021 – $4.0 million). The liability is included as a non-current liability within other liabilities (note 21).

The following table summarizes changes in DSUs during the year ended December 31, 2022 and the year ended December 31, 2021:


	DSUs outstanding
Balance at December 31, 2020		332,331
Granted		248,919
Exercised		(30,000	)
Balance at December 31, 2021		551,250
Granted		1,216,076
Exercised		(58,943	)
Balance at December 31, 2022		1,708,383

As at December 31, 2022, nil (December 31, 2021 – 0.6 million) DSUs were exercisable.

29.

Supplemental cash flow disclosures


	Year ended December 31
	2022			2021			2020
Cash provided by (used in):
Accounts receivable		(5,815	)		9,339			(2,037	)
Biological assets		533			3,829			13,789
Inventory		4,243			(18,318	)		(12,315	)
Prepaid expenses and deposits		5,782			(3,922	)		2,280
Investments		918			(402	)		—
Right of use assets		(17,510	)		—			—
Property, plant and equipment		38			(305	)		—
Accounts payable and accrued liabilities		(27,864	)		9,665			(20,793	)
Lease liabilities		19,296			—			—
		(20,379	)		(114	)		(19,076	)

Changes in non-cash working capital relating to:
Operating		(22,073	)		150			(5,259	)
Investing		74			(612	)		(11,319	)
Financing		1,620			348			(2,498	)
		(20,379	)		(114	)		(19,076	)

Cash interest paid		—			—			6,094

31.

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.

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


			Fair value measurements using
December 31, 2022	Carrying amount		Level 1		Level 2		Level 3
Recurring measurements:
Financial assets
Marketable securities		21,926		21,926		—		—
Investments at FVTPL		72,761		—		—		72,761
Financial liabilities
Derivative warrants (1)		11,002		—		—		11,002

			Fair value measurements using
December 31, 2021	Carrying amount		Level 1		Level 2		Level 3
Recurring measurements:
Financial assets
Marketable securities		83,724		83,724		—		—
Investments at FVTPL		48,576		—		—		48,576
Financial liabilities
Derivative warrants (1)		21,700		—		—		21,700

(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.

Marketable securities are designated as FVTPL. The fair value of marketable securities is re-measured each reporting period with changes in fair value recognized in profit and loss. The fair value of marketable securities is estimated by using current quoted prices in active markets for identical assets.

As at December 31, 2022, the Company did not have any financial instruments measured at Level 2 fair value.

Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Investments designated as FVTPL are re-measured each reporting period with changes in the fair value recognized in profit and loss within finance costs. The fair values of the investments were estimated by using a discounted

F-51

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

cash flow analysis. The main assumptions used in the calculation were the determination of a credit-adjusted discount rate.

Derivative warrants are designated as FVTPL. The fair value of derivative warrants is re-measured each reporting period with changes in fair value recognized in profit and loss within finance costs. The fair value of derivative warrants is estimated by using a valuation model. Assumptions used in these calculations include volatility, discount rate and various probability factors.

At December 31, 2022, a 10% change in the material assumptions would change the estimated fair value of derivative warrant liabilities by approximately $1.3 million.

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

Credit risk management

Credit risk is the risk of financial loss if the counterparty to a financial transaction fails to meet its obligations. 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 to accounts receivable and has calculated ECLs based on lifetime expected credit losses, taking into consideration historical credit loss experience and financial factors specific to the debtors and general economic conditions.

Impairment losses on accounts receivable recognized in profit or loss were as follows:


As at	December 31, 2022		December 31, 2021
Impairment loss (reversal) on trade receivables		642		214
Impairment loss (reversal) on other receivables		674		798
		1,316		1,012

The movement in the allowance for impairment in respect of accounts receivable during the year ended December 31, 2022 was as follows:


	December 31, 2022		December 31, 2021
Balance, beginning of year		1,132		120
Net remeasurement of impairment loss allowance		1,316		1,012
Balance, end of year		2,448		1,132

The Company applies the general approach under IFRS 9 to investments, which is an assessment of whether the credit risk of a financial instrument has increased significantly since initial recognition. The general approach compares the risk of a default occurring at the reporting date with the risk of a default occurring at the date of initial recognition. The Company has evaluated the credit risk of its investments, taking into consideration the risk of default, historical credit loss experience, financial factors specific to the debtors and general economic conditions and determined the expected credit loss to be $0.5 million for the year ended December 31, 2022.

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 by investing only in financial institutions with investment grade credit ratings or secured investments.

Market risk management

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

F-52

SNDL Inc.

Notes to the Consolidated Financial Statements

For the year ended December 31, 2022

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

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 held of publicly traded entities and put and call options.

At December 31, 2022, a 10% change in the market prices would change the fair value of marketable securities by approximately $2.1 million.

The Company had no risk management contracts relating to marketable securities outstanding as at December 31, 2022.

Liquidity risk management

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. Management believes its current capital resources and its ability to manage cash flow and working capital levels will be sufficient to satisfy cash requirements associated with funding the Company’s operating expenses to maintain capacity and fund 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.

The timing of expected cash outflows relating to financial liabilities at December 31, 2022 is as follows:


	Less than one year		One to three years		Three to five years		Thereafter		Total
Accounts payable and accrued liabilities		48,153		—		—		—		48,153
Financial guarantee liability (note 21)		—		407		—		—		407
Balance, end of year		48,153		407		—		—		48,560


Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Emerging growth company ☐


Auditor Name:	Location:	Auditor Firm ID:
Marcum LLP	New York, New York, United States	688


Exhibit Number	Description	Method of Filing

12.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed together with this Annual Report on Form 20-F for the year ended December 31, 2022
12.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed together with this Annual Report on Form 20-F for the year ended December 31, 2022
13.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished together with this Annual Report on Form 20-F for the year ended December 31, 2022
13.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished together with this Annual Report on Form 20-F for the year ended December 31, 2022
15.1	Consent of Marcum LLP	Filed together with this Annual Report on Form 20-F for the year ended December 31, 2022
101.INS	Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document

101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

104	Cover page formatted as Inline XBRL and contained in Exhibit 101


	SNDL Inc.

Date: March 20, 2024	By:	/s/ Zachary George
		Name: Zachary George
		Title: Chief Executive Officer


Approved by the Board:
“Signed” Bryan Pinney		“Signed” Zachary George
Director		Director


☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934


☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


U.S. GAAP ☐		International Financial Reporting Standards as issued by the International Accounting Standards Board ☒		Other ☐


	Note	Share capital			Warrants			Contributed surplus			Contingent consideration		Accumulated deficit (1)			Accumulated other comprehensive income			Non- controlling interest			Total equity
Balance at December 31, 2019			509,654			27,831			30,192			2,279		(360,338	)		6,866			4,714			221,198
Net loss			—			—			—			—		(233,246	)		—			(6,698	)		(239,944	)
Other comprehensive income			—			—			—			—		—			600			—			600
Share issuances			176,931			—			—			—		—			—			—			176,931
Share issuance costs			(5,593	)		—			—			—		—			—			—			(5,593	)
Convertible debt - conversions			63,002			—			—			—		—			—			—			63,002
Derivative warrants exercised			55,912			—			—			—		—			—			—			55,912
Warrants issued			—			306			—			—		—			—			—			306
Warrants expired			—			(21,999	)		21,999			—		—			—			—			—
Dispositions			(38,447	)		—			—			—		35,456			(7,466	)		—			(10,457	)
Share-based compensation			52			—			7,688			—		—			—			—			7,740
Employee awards exercised			535			—			(535	)		—		—			—			—			—
Balance at December 31, 2020			762,046			6,138			59,344			2,279		(558,128	)		—			(1,984	)		269,695
Net loss (1)			—			—			—			—		(226,984	)		—			200			(226,784	)
Other comprehensive income			—			—			—			—		—			7,607			—			7,607
Loss of control of subsidiary			—			—			—			—		—			—			2,013			2,013
Share issuances	23(b)		977,425			—			—			—		—			—			—			977,425
Share issuance costs	23(b)		(16,371	)		—			—			—		—			—			—			(16,371	)
Derivative warrants exercised			277,136			—			—			—		—			—			—			277,136
Acquisition	5(b)		26,216			1,771			—			—		—			—			—			27,987
Convertible debenture settlement	5(b)		2,671			—			—			—		—			—			—			2,671
Warrants issued	23(c)		—			361			—			—		—			—			—			361
Warrants exercised	23(c)		178			(178	)		—			—		—			—			—			—
Share-based compensation	24		8			—			12,715			—		—			—			—			12,723
Employee awards exercised			6,395			—			(6,194	)		—		—			—			—			201
Modification of equity-settled plan			—			—			(5,131	)		—		—			—			—			(5,131	)
Balance at December 31, 2021			2,035,704			8,092			60,734			2,279		(785,112	)		7,607			229			1,329,533
Net loss			—			—			—			—		(335,114	)		—			(37,314	)		(372,428	)
Other comprehensive income			—			—			—			—		—			24,581			—			24,581
Share issuances	23(b)		2,870			—			—			—		—			—			—			2,870
Share repurchases	23(b)		(41,617	)		—			—			—		28,227			—			—			(13,390	)
Share issuances by subsidiaries			—			—			72			—		—			—			43			115
Acquisition	5(a)		287,129			—			—			—		—			—			58,222			345,351
Warrants expired	23(c)		—			(5,832	)		5,832			—		—			—			—			—
Share-based compensation	24		—			—			11,047			—		—			—			—			11,047
Employee awards exercised			8,724			—			(8,724	)		—		—			—			—			—
Distribution declared by subsidiaries			—			—			—			—		—			—			(24	)		(24	)
Balance at December 31, 2022			2,292,810			2,260			68,961			2,279		(1,091,999	)		32,188			21,156			1,327,655


Assumption	Input	Weighted average input				Effect of 10% change ($000s)
		December 31 2022		December 31 2021		December 31 2022		December 31 2021
Yield per square foot of growing space (1)	Grams		48		49		279		435
Average net selling price (2)	$/gram		4.66		4.49		687		1,014
After harvest cost to complete and sell	$/gram		1.27		1.06		187		249


Cost
Balance at December 31, 2020	1,894
Acquisition (note 5(b))	5,730
Additions	579
Dispositions	(165	)
Balance at December 31, 2021	8,038
Acquisition (note 5(a), note5(c))	140,781
Additions	6,103
Tenant inducement allowances	(46	)
Dispositions and remeasurements	12,191
Balance at December 31, 2022	167,067

Accumulated depreciation and impairment
Balance at December 31, 2020	571
Depreciation	897
Dispositions	(147	)
Balance at December 31, 2021	1,321
Depreciation	25,227
Impairment	6,365
Balance at December 31, 2022	32,913

Net book value
Balance at December 31, 2021	6,717
Balance at December 31, 2022	134,154


	Exercise price (USD)		Number of warrants		Weighted average contractual life
2020 Series A Warrants (1)		1.77		50,000		2.6
Unsecured Convertible Notes Warrants (1)		1.77		50,000		1.0
New Warrants (2)		2.29		9,833,333		1.6
December 2018 Performance Warrants	CAD 5.51			118,067		1.0
				10,051,400		1.6


	December 31, 2022
Less than one year		39,255
One to three years		64,892
Three to five years		48,955
Thereafter		47,468
Minimum lease payments		200,570


	Year ended December 31
	2022		2021 (1)		2020
Salaries and wages		80,134		18,675		11,634
Consulting fees		1,934		1,112		2,193
Office and general		37,061		7,560		9,843
Professional fees		11,563		6,530		4,658
Merchant processing fees		4,748		—		—
Director fees		472		351		365
Other		4,256		3,815		3,336
		140,168		38,043		32,029


	2022
Current assets		18,732
Current liabilities		19,892
Current net assets		(1,160	)

Non-current assets		94,419
Non-current liabilities		45,443
Non-current net assets		48,976
Net assets		47,816


	2022
Net cash provided by operating activities		5,848
Net cash used in investing activities		(5,549	)
Net cash used in financing activities		(183	)
Increase in cash		116