EXHIBIT 99.1
SNDL Inc.
Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited – expressed in thousands of Canadian dollars)
SNDL Inc.
Condensed Consolidated Interim Statement of Financial Position
(Unaudited - expressed in thousands of Canadian dollars)
As at | Note | June 30, 2023 |
| December 31, 2022 |
| ||
|
|
|
|
|
| ||
Assets |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and cash equivalents |
|
| 185,455 |
|
| 279,586 |
|
Restricted cash |
|
| 19,456 |
|
| 19,338 |
|
Marketable securities | 6 |
| 3,535 |
|
| 21,926 |
|
Accounts receivable |
|
| 32,661 |
|
| 22,636 |
|
Biological assets | 7 |
| 1,330 |
|
| 3,477 |
|
Inventory | 8 |
| 160,407 |
|
| 127,782 |
|
Prepaid expenses and deposits |
|
| 21,792 |
|
| 10,110 |
|
Investments | 14 |
| 23,038 |
|
| 6,552 |
|
Assets held for sale | 3(a),9 |
| 8,391 |
|
| 6,375 |
|
Net investment in subleases | 12 |
| 3,656 |
|
| 3,701 |
|
|
| 459,721 |
|
| 501,483 |
| |
Non-current assets |
|
|
|
|
| ||
Long-term deposits |
|
| 9,766 |
|
| 8,584 |
|
Right of use assets | 10 |
| 136,947 |
|
| 134,154 |
|
Property, plant and equipment | 11 |
| 181,841 |
|
| 143,409 |
|
Net investment in subleases | 12 |
| 18,918 |
|
| 19,618 |
|
Intangible assets | 13 |
| 74,446 |
|
| 74,885 |
|
Investments | 14 |
| 9,638 |
|
| 90,702 |
|
Equity-accounted investees | 15 |
| 532,818 |
|
| 519,255 |
|
Goodwill | 3(a) |
| 147,680 |
|
| 67,260 |
|
Total assets |
|
| 1,571,775 |
|
| 1,559,350 |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Current liabilities |
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
| 62,557 |
|
| 48,153 |
|
Lease liabilities | 17 |
| 35,982 |
|
| 30,206 |
|
Derivative warrants | 16 |
| 3,960 |
|
| 11,002 |
|
|
| 102,499 |
|
| 89,361 |
| |
Non-current liabilities |
|
|
|
|
| ||
Lease liabilities | 17 |
| 136,136 |
|
| 139,625 |
|
Other liabilities |
|
| 5,252 |
|
| 2,709 |
|
Total liabilities |
|
| 243,887 |
|
| 231,695 |
|
|
|
|
|
|
| ||
Shareholders’ equity |
|
|
|
|
| ||
Share capital | 18(b) |
| 2,365,845 |
|
| 2,292,810 |
|
Warrants |
|
| 2,260 |
|
| 2,260 |
|
Contributed surplus |
|
| 73,636 |
|
| 68,961 |
|
Contingent consideration |
|
| 2,279 |
|
| 2,279 |
|
Accumulated deficit |
|
| (1,156,279 | ) |
| (1,091,999 | ) |
Accumulated other comprehensive income |
|
| 20,182 |
|
| 32,188 |
|
Total shareholders’ equity |
|
| 1,307,923 |
|
| 1,306,499 |
|
Non-controlling interest |
|
| 19,965 |
|
| 21,156 |
|
Total liabilities and shareholders’ equity |
|
| 1,571,775 |
|
| 1,559,350 |
|
Commitments (note 27)
Subsequent events (notes 19 and 28)
See accompanying notes to the condensed consolidated interim financial statements.
1
SNDL Inc.
Condensed Consolidated Interim Statement of Loss and Comprehensive Loss
(Unaudited - expressed in thousands of Canadian dollars, except per share amounts)
|
|
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| Note |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Gross revenue |
| 20 |
|
| 257,425 |
|
|
| 227,557 |
|
|
| 470,324 |
|
|
| 247,684 |
|
Excise taxes |
|
|
|
| 12,914 |
|
|
| 3,862 |
|
|
| 23,361 |
|
|
| 6,392 |
|
Net revenue |
|
|
|
| 244,511 |
|
|
| 223,695 |
|
|
| 446,963 |
|
|
| 241,292 |
|
Cost of sales |
| 8 |
|
| 188,922 |
|
|
| 174,291 |
|
|
| 347,071 |
|
|
| 188,617 |
|
Inventory impairment and obsolescence |
| 8 |
|
| 4,291 |
|
|
| 3,871 |
|
|
| 13,468 |
|
|
| 5,852 |
|
Gross margin before fair value adjustments |
|
|
|
| 51,298 |
|
|
| 45,533 |
|
|
| 86,424 |
|
|
| 46,823 |
|
Change in fair value of biological assets |
|
|
|
| (1,413 | ) |
|
| (388 | ) |
|
| (4,948 | ) |
|
| 3,302 |
|
Change in fair value realized through inventory |
|
|
|
| 2,048 |
|
|
| (2,066 | ) |
|
| 2,998 |
|
|
| (3,627 | ) |
Gross margin |
|
|
|
| 51,933 |
|
|
| 43,079 |
|
|
| 84,474 |
|
|
| 46,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and fee revenue |
| 21 |
|
| 3,421 |
|
|
| 2,577 |
|
|
| 7,632 |
|
|
| 6,438 |
|
Investment loss |
| 21 |
|
| (4,020 | ) |
|
| (35,073 | ) |
|
| (9,189 | ) |
|
| (52,783 | ) |
Share of profit (loss) of equity-accounted investees |
| 15 |
|
| (936 | ) |
|
| (37,978 | ) |
|
| 8,580 |
|
|
| (33,887 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
|
|
|
| 52,727 |
|
|
| 40,293 |
|
|
| 101,300 |
|
|
| 50,975 |
|
Sales and marketing |
|
|
|
| 4,104 |
|
|
| 3,132 |
|
|
| 7,490 |
|
|
| 4,243 |
|
Research and development |
|
|
|
| 20 |
|
|
| 390 |
|
|
| 160 |
|
|
| 485 |
|
Depreciation and amortization |
| 10,11,13 |
|
| 13,443 |
|
|
| 8,800 |
|
|
| 29,911 |
|
|
| 9,539 |
|
Share-based compensation |
| 19 |
|
| 3,893 |
|
|
| 438 |
|
|
| 6,102 |
|
|
| 4,642 |
|
Restructuring costs |
|
|
|
| 4,042 |
|
|
| (882 | ) |
|
| 5,578 |
|
|
| (882 | ) |
Asset impairment |
| 11,13 |
|
| 1,658 |
|
|
| 1,850 |
|
|
| 2,465 |
|
|
| 1,850 |
|
Loss from operations |
|
|
|
| (29,489 | ) |
|
| (81,416 | ) |
|
| (61,509 | ) |
|
| (104,586 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Transaction costs |
|
|
|
| (173 | ) |
|
| 7,938 |
|
|
| (2,213 | ) |
|
| 1,457 |
|
Finance costs, net |
| 22 |
|
| (2,458 | ) |
|
| (26,505 | ) |
|
| (7,631 | ) |
|
| (26,444 | ) |
Change in estimate of fair value of derivative warrants |
| 16 |
|
| 2,240 |
|
|
| 23,656 |
|
|
| 7,042 |
|
|
| 15,356 |
|
Foreign exchange gain (loss) |
|
|
|
| (31 | ) |
|
| 161 |
|
|
| (194 | ) |
|
| 11 |
|
Gain (loss) on disposition of assets |
|
|
|
| (77 | ) |
|
| 402 |
|
|
| (261 | ) |
|
| 402 |
|
Loss before income tax |
|
|
|
| (29,988 | ) |
|
| (75,764 | ) |
|
| (64,766 | ) |
|
| (113,804 | ) |
Income tax recovery |
|
|
|
| — |
|
|
| 1,791 |
|
|
| — |
|
|
| 1,791 |
|
Net loss from continuing operations |
|
|
|
| (29,988 | ) |
|
| (73,973 | ) |
|
| (64,766 | ) |
|
| (112,013 | ) |
Net loss from discontinued operations |
| 4 |
|
| (3,170 | ) |
|
| — |
|
|
| (4,535 | ) |
|
| — |
|
Net loss |
|
|
|
| (33,158 | ) |
|
| (73,973 | ) |
|
| (69,301 | ) |
|
| (112,013 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Equity-accounted investees - share of other comprehensive income (loss) |
| 15 |
|
| (11,621 | ) |
|
| 12,727 |
|
|
| (12,006 | ) |
|
| 5,994 |
|
Gain on translation of foreign operations |
|
|
|
| (5 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Comprehensive loss |
|
|
|
| (44,784 | ) |
|
| (61,246 | ) |
|
| (81,307 | ) |
|
| (106,019 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss from continuing operations attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owners of the Company |
|
|
|
| (29,350 | ) |
|
| (73,301 | ) |
|
| (63,553 | ) |
|
| (111,205 | ) |
Non-controlling interest |
|
|
|
| (638 | ) |
|
| (672 | ) |
|
| (1,213 | ) |
|
| (808 | ) |
|
|
|
|
| (29,988 | ) |
|
| (73,973 | ) |
|
| (64,766 | ) |
|
| (112,013 | ) |
Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owners of the Company |
|
|
|
| (32,520 | ) |
|
| (73,301 | ) |
|
| (68,088 | ) |
|
| (111,205 | ) |
Non-controlling interest |
|
|
|
| (638 | ) |
|
| (672 | ) |
|
| (1,213 | ) |
|
| (808 | ) |
|
|
|
|
| (33,158 | ) |
|
| (73,973 | ) |
|
| (69,301 | ) |
|
| (112,013 | ) |
Comprehensive income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owners of the Company |
|
|
|
| (44,146 | ) |
|
| (60,574 | ) |
|
| (80,094 | ) |
|
| (105,211 | ) |
Non-controlling interest |
|
|
|
| (638 | ) |
|
| (672 | ) |
|
| (1,213 | ) |
|
| (808 | ) |
|
|
|
|
| (44,784 | ) |
|
| (61,246 | ) |
|
| (81,307 | ) |
|
| (106,019 | ) |
Net loss per common share attributable to owners of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted |
| 24 |
| $ | (0.12 | ) |
| $ | (0.31 | ) |
| $ | (0.26 | ) |
| $ | (0.50 | ) |
See accompanying notes to the condensed consolidated interim financial statements.
2
SNDL Inc.
Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity
(Unaudited - expressed in thousands of Canadian dollars)
| Note | Share capital |
| Warrants |
| Contributed surplus |
| Contingent consideration |
| Accumulated deficit |
| Accumulated other comprehensive income |
| Non-controlling interest |
| Total |
| ||||||||
Balance at December 31, 2022 |
|
| 2,292,810 |
|
| 2,260 |
|
| 68,961 |
|
| 2,279 |
|
| (1,091,999 | ) |
| 32,188 |
|
| 21,156 |
|
| 1,327,655 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (68,088 | ) |
| — |
|
| (1,213 | ) |
| (69,301 | ) |
Other comprehensive loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (12,006 | ) |
| — |
|
| (12,006 | ) |
Share repurchases | 18(b) |
| (5,344 | ) |
| — |
|
| — |
|
| — |
|
| 3,808 |
|
| — |
|
| — |
|
| (1,536 | ) |
Share issuances by subsidiaries |
|
| — |
|
| — |
|
| 25 |
|
| — |
|
| — |
|
| — |
|
| 26 |
|
| 51 |
|
Acquisition | 3(a) |
| 83,953 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 83,953 |
|
Shares acquired and cancelled | 18(b) |
| (6,615 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,615 | ) |
Share-based compensation | 19 |
| — |
|
| — |
|
| 5,691 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,691 |
|
Employee awards exercised | 18(b) |
| 1,041 |
|
| — |
|
| (1,041 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distribution declared by subsidiaries |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (4 | ) |
| (4 | ) |
Balance at June 30, 2023 |
|
| 2,365,845 |
|
| 2,260 |
|
| 73,636 |
|
| 2,279 |
|
| (1,156,279 | ) |
| 20,182 |
|
| 19,965 |
|
| 1,327,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at March 31, 2023 |
|
| 2,365,319 |
|
| 2,260 |
|
| 70,716 |
|
| 2,279 |
|
| (1,123,759 | ) |
| 31,808 |
|
| 20,587 |
|
| 1,369,210 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (32,520 | ) |
| — |
|
| (638 | ) |
| (33,158 | ) |
Other comprehensive income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (11,626 | ) |
| — |
|
| (11,626 | ) |
Share issuances by subsidiaries |
|
| — |
|
| — |
|
| 37 |
|
| — |
|
| — |
|
| — |
|
| 22 |
|
| 59 |
|
Share-based compensation | 19 |
| — |
|
| — |
|
| 3,409 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 3,409 |
|
Employee awards exercised | 18(b) |
| 526 |
|
| — |
|
| (526 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Distribution declared by subsidiaries |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6 | ) |
| (6 | ) |
Balance at June 30, 2023 |
|
| 2,365,845 |
|
| 2,260 |
|
| 73,636 |
|
| 2,279 |
|
| (1,156,279 | ) |
| 20,182 |
|
| 19,965 |
|
| 1,327,888 |
|
3
SNDL Inc.
Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity
(Unaudited - expressed in thousands of Canadian dollars)
| Note | Share capital |
| Warrants |
| Contributed surplus |
| Contingent consideration |
| Accumulated deficit |
| Accumulated |
| Non- |
| Total equity |
| ||||||||
Balance at December 31, 2021 |
|
| 2,035,704 |
|
| 8,092 |
|
| 60,734 |
|
| 2,279 |
|
| (785,112 | ) |
| 7,607 |
|
| 229 |
|
| 1,329,533 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (111,205 | ) |
| — |
|
| (808 | ) |
| (112,013 | ) |
Other comprehensive income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 5,994 |
|
| — |
|
| 5,994 |
|
Share issuances |
|
| 2,870 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,870 |
|
Share repurchases |
|
| (5,170 | ) |
| — |
|
| — |
|
| — |
|
| 3,117 |
|
| — |
|
| — |
|
| (2,053 | ) |
Share issuances by subsidiaries |
|
| — |
|
| — |
|
| 57 |
|
| — |
|
| — |
|
| — |
|
| 35 |
|
| 92 |
|
Acquisition |
|
| 287,129 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 58,250 |
|
| 345,379 |
|
Share-based compensation |
|
| — |
|
| — |
|
| 5,992 |
|
| — |
|
| — |
|
| — |
|
| 95 |
|
| 6,087 |
|
Employee awards exercised |
|
| 1,740 |
|
| — |
|
| (1,740 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Balance at June 30, 2022 |
|
| 2,322,273 |
|
| 8,092 |
|
| 65,043 |
|
| 2,279 |
|
| (893,200 | ) |
| 13,601 |
|
| 57,801 |
|
| 1,575,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at March 31, 2022 |
|
| 2,327,443 |
|
| 8,092 |
|
| 61,959 |
|
| 2,279 |
|
| (823,016 | ) |
| 874 |
|
| 58,343 |
|
| 1,635,974 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (73,301 | ) |
| — |
|
| (672 | ) |
| (73,973 | ) |
Other comprehensive income |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 12,727 |
|
| — |
|
| 12,727 |
|
Share repurchases |
|
| (5,170 | ) |
| — |
|
| — |
|
| — |
|
| 3,117 |
|
| — |
|
| — |
|
| (2,053 | ) |
Share issuances by subsidiaries |
|
| — |
|
| — |
|
| 57 |
|
| — |
|
| — |
|
| — |
|
| 35 |
|
| 92 |
|
Share-based compensation |
|
| — |
|
| — |
|
| 3,027 |
|
| — |
|
| — |
|
| — |
|
| 95 |
|
| 3,122 |
|
Balance at June 30, 2022 |
|
| 2,322,273 |
|
| 8,092 |
|
| 65,043 |
|
| 2,279 |
|
| (893,200 | ) |
| 13,601 |
|
| 57,801 |
|
| 1,575,889 |
|
See accompanying notes to the condensed consolidated interim financial statements.
4
SNDL Inc.
Condensed Consolidated Interim Statement of Cash Flows
(Unaudited - expressed in thousands of Canadian dollars)
|
|
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| Note |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss for the period |
|
|
|
| (33,158 | ) |
|
| (73,973 | ) |
|
| (69,301 | ) |
|
| (112,013 | ) |
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income tax recovery |
|
|
|
| — |
|
|
| (1,791 | ) |
|
| — |
|
|
| (1,791 | ) |
Interest and fee revenue |
| 21 |
|
| (3,421 | ) |
|
| (2,577 | ) |
|
| (7,632 | ) |
|
| (6,438 | ) |
Change in fair value of biological assets |
|
|
|
| 1,413 |
|
|
| 388 |
|
|
| 4,948 |
|
|
| (3,302 | ) |
Share-based compensation |
| 19 |
|
| 3,893 |
|
|
| 438 |
|
|
| 6,102 |
|
|
| 4,642 |
|
Depreciation and amortization |
| 10,11,13 |
|
| 14,674 |
|
|
| 10,538 |
|
|
| 32,933 |
|
|
| 12,977 |
|
Loss (gain) on disposition of assets |
|
|
|
| 77 |
|
|
| (402 | ) |
|
| 261 |
|
|
| (402 | ) |
Inventory obsolescence |
| 8 |
|
| 4,291 |
|
|
| 3,871 |
|
|
| 13,468 |
|
|
| 5,852 |
|
Finance costs |
| 22 |
|
| 2,458 |
|
|
| 26,505 |
|
|
| 7,631 |
|
|
| 26,444 |
|
Change in estimate of fair value of derivative warrants |
| 16 |
|
| (2,240 | ) |
|
| (23,656 | ) |
|
| (7,042 | ) |
|
| (15,356 | ) |
Unrealized foreign exchange loss (gain) |
|
|
|
| (72 | ) |
|
| 19 |
|
|
| (24 | ) |
|
| 35 |
|
Asset impairment |
|
|
|
| 1,658 |
|
|
| 1,850 |
|
|
| 2,465 |
|
|
| 1,850 |
|
Share of (profit) loss of equity-accounted investees |
| 15 |
|
| 936 |
|
|
| 37,978 |
|
|
| (8,580 | ) |
|
| 33,887 |
|
Loss on settlement of marketable securities |
| 6,21 |
|
| 48,988 |
|
|
| — |
|
|
| 92,792 |
|
|
| — |
|
Unrealized (gain) loss on marketable securities |
| 6,21 |
|
| (44,968 | ) |
|
| 35,338 |
|
|
| (83,603 | ) |
|
| 53,172 |
|
Additions to marketable securities |
|
|
|
| — |
|
|
| (2,899 | ) |
|
| — |
|
|
| (3,500 | ) |
Proceeds from settlement of marketable securities |
| 6 |
|
| 3,437 |
|
|
| — |
|
|
| 3,463 |
|
|
| — |
|
Income distributions from equity-accounted investees |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 685 |
|
Interest received |
|
|
|
| 3,217 |
|
|
| 2,084 |
|
|
| 6,920 |
|
|
| 5,799 |
|
Change in non-cash working capital |
| 23 |
|
| (14,193 | ) |
|
| (31,584 | ) |
|
| (56,755 | ) |
|
| (46,434 | ) |
Net cash used in operating activities from continuing operations |
|
|
|
| (13,010 | ) |
|
| (17,873 | ) |
|
| (61,954 | ) |
|
| (43,893 | ) |
Net cash provided by operating activities from discontinued operations |
| 4 |
|
| 4,167 |
|
|
| — |
|
|
| 4,314 |
|
|
| — |
|
Net cash used in operating activities |
|
|
|
| (8,843 | ) |
|
| (17,873 | ) |
|
| (57,640 | ) |
|
| (43,893 | ) |
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Additions to property, plant and equipment |
| 11 |
|
| (1,247 | ) |
|
| (3,554 | ) |
|
| (2,641 | ) |
|
| (4,535 | ) |
Additions to intangible assets |
| 13 |
|
| (39 | ) |
|
| 1 |
|
|
| (56 | ) |
|
| (55 | ) |
Additions to investments |
|
|
|
| 125 |
|
|
| 337 |
|
|
| (702 | ) |
|
| (14,094 | ) |
Additions to equity-accounted investees |
| 15 |
|
| (9,443 | ) |
|
| (36,880 | ) |
|
| (16,989 | ) |
|
| (94,200 | ) |
Proceeds from disposal of property, plant and equipment |
|
|
|
| 55 |
|
|
| 4,000 |
|
|
| 137 |
|
|
| 4,000 |
|
Acquisitions, net of cash acquired |
| 3 |
|
| — |
|
|
| — |
|
|
| 3,695 |
|
|
| (31,149 | ) |
Change in non-cash working capital |
| 23 |
|
| 1,586 |
|
|
| 294 |
|
|
| 1,127 |
|
|
| 259 |
|
Net cash used in investing activities from continuing operations |
|
|
|
| (8,963 | ) |
|
| (35,802 | ) |
|
| (15,429 | ) |
|
| (139,774 | ) |
Net cash used in investing activities from discontinued operations |
| 4 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net cash used in investing activities |
|
|
|
| (8,963 | ) |
|
| (35,802 | ) |
|
| (15,429 | ) |
|
| (139,774 | ) |
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in restricted cash |
|
|
|
| (76 | ) |
|
| 2,541 |
|
|
| (118 | ) |
|
| 7,607 |
|
Payments on lease liabilities, net |
|
|
|
| (10,116 | ) |
|
| (9,177 | ) |
|
| (19,607 | ) |
|
| (9,624 | ) |
Repurchase of common shares, net of costs |
| 18(b) |
|
| — |
|
|
| (2,053 | ) |
|
| (1,536 | ) |
|
| (2,053 | ) |
Repayment of long-term debt |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,000 | ) |
Change in non-cash working capital |
| 23 |
|
| 200 |
|
|
| 2,170 |
|
|
| 199 |
|
|
| 2,116 |
|
Net cash used in financing activities from continuing operations |
|
|
|
| (9,992 | ) |
|
| (6,519 | ) |
|
| (21,062 | ) |
|
| (11,954 | ) |
Net cash used in financing activities from discontinued operations |
| 4 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net cash used in financing activities |
|
|
|
| (9,992 | ) |
|
| (6,519 | ) |
|
| (21,062 | ) |
|
| (11,954 | ) |
Change in cash and cash equivalents |
|
|
|
| (27,798 | ) |
|
| (60,194 | ) |
|
| (94,131 | ) |
|
| (195,621 | ) |
Cash and cash equivalents, beginning of period |
|
|
|
| 213,253 |
|
|
| 422,824 |
|
|
| 279,586 |
|
|
| 558,251 |
|
Cash and cash equivalents, end of period |
|
|
|
| 185,455 |
|
|
| 362,630 |
|
|
| 185,455 |
|
|
| 362,630 |
|
See accompanying notes to the condensed consolidated interim financial statements.
5
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
SNDL Inc. (“SNDL” or the “Company”) was incorporated under the Business Corporations Act (Alberta) on August 19, 2006. On July 25, 2022, the Company’s shareholders approved a special resolution amending the articles of SNDL to change the name of the Company from “Sundial Growers Inc.” to “SNDL Inc.”.
The Company’s head office is located at 300, 919 11th Avenue SW, Calgary, Alberta, Canada.
The principal activities of the Company are the retailing of wines, beers and spirits, the operation and support of corporate-owned and franchise retail cannabis stores in Canadian jurisdictions where the private sale of recreational cannabis is permitted, the manufacturing of cannabis products providing proprietary cannabis processing services, the production, distribution and sale of cannabis domestically and for export pursuant to the Cannabis Act (Canada) (the “Cannabis Act”), and the deployment of capital to investment opportunities. The Cannabis Act regulates the production, distribution, and possession of cannabis for both medical and adult recreational access in Canada. The Company also owns approximately 63% of Nova Cannabis Inc. (“Nova”) (TSX: NOVC), whose principal activities are the retail sale of cannabis.
SNDL and its subsidiaries currently operate solely in Canada, with the exception of Green Roads, Inc. (“Green Roads”), a subsidiary acquired in the Valens Transaction (defined below) who sold CBD products in the United States and is classified as held for sale (note 9) and discontinued operations (note 4). Through its joint venture, SunStream Bancorp Inc. (“SunStream”) (note 15), the Company provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities. The Company also makes strategic portfolio investments in debt and equity securities.
The Company’s common shares trade on the Nasdaq Capital Market (“Nasdaq”) under the ticker symbol “SNDL”.
Statement of compliance
The condensed consolidated interim financial statements (“financial statements”) have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee. These financial statements were prepared using the same accounting policies and methods as those disclosed in the annual consolidated financial statements for the year ended December 31, 2022. These financial statements should be read in conjunction with the annual consolidated financial statements for the Company for the year ended December 31, 2022.
These financial statements were approved and authorized for issue by the Board of Directors (“Board”) on August 11, 2023.
On January 17, 2023, the Company acquired all of the issued and outstanding common shares of The Valens Company Inc. (“Valens”), other than those owned by SNDL and its subsidiaries, by way of a statutory plan of arrangement (the “Valens Transaction”). The Valens Transaction consideration was comprised of (i) the assumption of Valens’ $60 million non-revolving term loan facility from its then existing lender, and (ii) an aggregate 27.6 million SNDL common shares valued at $84.0 million based on the fair value of each common share of the Company on the closing date (0.3334 of a SNDL common share for each Valens common share).
6
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Valens is a manufacturer of cannabis products providing proprietary cannabis processing services, in addition to product development, manufacturing, and commercialization of cannabis consumer packaged goods. Valens products are formulated for the medical, health and wellness, and recreational consumer segments.
The Company has engaged independent valuation experts to assist in determining the fair value of certain assets acquired and liabilities assumed and related deferred income tax impacts. The purchase price allocation is not final as the Company is continuing to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes, if any, arising on their recognition.
Due to the inherent complexity associated with valuations and the timing of the acquisition, the amounts below are provisional and subject to adjustment.
The fair value of consideration paid was as follows:
| Provisional |
| Adjustments |
| Provisional |
| |||
Valens loan facility |
| 61,512 |
|
| — |
|
| 61,512 |
|
Issuance of common shares |
| 83,953 |
|
| — |
|
| 83,953 |
|
|
| 145,465 |
|
| — |
|
| 145,465 |
|
The preliminary fair value of the assets and liabilities acquired was as follows:
| Provisional |
| Adjustments |
| Provisional |
| |||
Cash |
| 3,615 |
|
| — |
|
| 3,615 |
|
Accounts receivable |
| 21,361 |
|
| — |
|
| 21,361 |
|
Investments |
| 876 |
|
| — |
|
| 876 |
|
Prepaid expenses and deposits |
| 4,980 |
|
| — |
|
| 4,980 |
|
Inventory |
| 14,140 |
|
| — |
|
| 14,140 |
|
Assets held for sale |
| 6,330 |
|
| — |
|
| 6,330 |
|
Right of use assets |
| 2,882 |
|
| — |
|
| 2,882 |
|
Property, plant and equipment |
| 63,030 |
|
| (10,938 | ) |
| 52,092 |
|
Intangible assets |
| 2,285 |
|
| (785 | ) |
| 1,500 |
|
Goodwill |
| 68,697 |
|
| 11,723 |
|
| 80,420 |
|
Accounts payable and accrued liabilities |
| (34,185 | ) |
| — |
|
| (34,185 | ) |
Contractual obligation |
| (5,339 | ) |
| — |
|
| (5,339 | ) |
Lease liabilities |
| (3,207 | ) |
| — |
|
| (3,207 | ) |
|
| 145,465 |
|
| — |
|
| 145,465 |
|
As new information is obtained within one year of the date of acquisition, about facts and circumstances that existed at the date of acquisition, identifies adjustments to the above amounts, the accounting for the acquisition will be revised.
Valens subsidiary Green Roads was sold and has been classified as held for sale and discontinued operations (note 4).
The financial statements incorporate the operations of Valens commencing January 18, 2023. During the period January 18, 2023 to June 30, 2023 the Company recorded revenues of $39.1 million and net loss of $25.8 million from the Valens operations. Had the Valens Transaction closed on January 1, 2023, management estimates that for the period January 1, 2023, to January 17, 2023, revenue would have increased by $4.2 million and net loss would have increased by $2.1 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, 2023.
The Company incurred costs related to the Valens Transaction of $2.6 million which have been included in transaction costs.
7
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
On February 7, 2023, the Company acquired the right, title and interest in (i) five Superette retail locations within Toronto and Ottawa; (ii) the intellectual property rights related to the Superette brand (the “Superette IP”); and (iii) the shares of Superette Ontario (collectively, the “Superette Transaction”).
The Superette acquisition consideration was comprised of the extinguishment of the Company’s promissory note.
The fair value of consideration paid was as follows:
|
|
| |
Extinguishment of promissory note |
| 2,625 |
|
|
| 2,625 |
|
The fair value of the assets and liabilities acquired was as follows:
|
|
| |
Cash |
| 80 |
|
Accounts receivable |
| 30 |
|
Prepaid expenses and deposits |
| 141 |
|
Inventory |
| 371 |
|
Right of use assets |
| 1,129 |
|
Property, plant and equipment |
| 2,077 |
|
Accounts payable and accrued liabilities |
| (74 | ) |
Lease liabilities |
| (1,129 | ) |
|
| 2,625 |
|
The financial statements incorporate the operations of Superette commencing February 8, 2023. During the period February 8, 2023 to June 30, 2023 the Company recorded revenues of $1.7 million and net loss of $0.7 million from the Superette operations. Had the Superette Transaction closed on January 1, 2023, management estimates that for the period January 1, 2023, to February 7, 2023, revenue would have increased by $0.5 million and net loss would have increased by $0.1 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, 2023.
The Company incurred costs related to the Superette Transaction of $0.6 million which have been included in transaction costs.
The Green Roads operations acquired as part of the Valens acquisition were classified as held for sale and discontinued operations as the carrying amount of the disposal group was expected to be recovered through a sale transaction rather than through continued use.
Green Roads filed for bankruptcy on March 6, 2023. Subject to the bid procedures, a successful bid of USD$3.1 million was accepted and the sale was approved at a court hearing on May 10, 2023. The disposition of Green Roads closed on May 31, 2023 and a loss on disposition of $2.3 million was recorded.
The consolidated statement of loss and comprehensive loss and consolidated statement of cash flows have been presented to show the discontinued operations separately from continuing operations.
8
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Results of discontinued operations
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net revenue |
|
| 2,978 |
|
|
| — |
|
|
| 7,510 |
|
|
| — |
|
Cost of sales |
|
| 1,640 |
|
|
| — |
|
|
| 3,841 |
|
|
| — |
|
Gross margin |
|
| 1,338 |
|
|
| — |
|
|
| 3,669 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
|
| 1,302 |
|
|
| — |
|
|
| 3,639 |
|
|
| — |
|
Sales and marketing |
|
| 687 |
|
|
| — |
|
|
| 1,817 |
|
|
| — |
|
Depreciation and amortization |
|
| 231 |
|
|
| — |
|
|
| 450 |
|
|
| — |
|
Loss from operations |
|
| (882 | ) |
|
| — |
|
|
| (2,237 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Finance costs |
|
| (6 | ) |
|
| — |
|
|
| (16 | ) |
|
| — |
|
Loss on disposition |
|
| (2,282 | ) |
|
| — |
|
|
| (2,282 | ) |
|
| — |
|
Net loss |
|
| (3,170 | ) |
|
| — |
|
|
| (4,535 | ) |
|
| — |
|
The Company’s reportable segments are organized by business line and are comprised of four reportable segments: liquor retail, cannabis retail, cannabis operations, and investments.
Liquor retail includes the sale of wines, beers and spirits through owned liquor stores. Cannabis retail includes the private sale of adult-use cannabis through owned and franchise retail cannabis stores. Cannabis operations include the cultivation, distribution and sale of cannabis for the adult-use and medical markets domestically and for export, and providing proprietary cannabis processing services, in addition to product development, manufacturing, and commercialization of cannabis consumer packaged goods. Investments include the deployment of capital to investment opportunities. Certain overhead expenses not directly attributable to any operating segment are reported as “Corporate”.
9
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
|
| Liquor |
|
| Cannabis |
|
| Cannabis |
|
| Investments (3) | Corporate |
|
| Total |
| ||||||||
As at June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total assets |
|
| 339,097 |
|
|
| 204,016 |
|
|
| 318,028 |
|
|
| 691,178 |
|
|
| 19,456 |
|
|
| 1,571,775 |
|
Six months ended June 30, 2023 |
| |||||||||||||||||||||||
Net revenue |
|
| 267,601 |
|
|
| 139,289 |
|
|
| 40,073 |
|
|
| — |
|
|
| — |
|
|
| 446,963 |
|
Gross margin |
|
| 61,627 |
|
|
| 33,599 |
|
|
| (10,752 | ) |
|
| — |
|
|
| — |
|
|
| 84,474 |
|
Interest and fee revenue |
|
| — |
|
|
| 58 |
|
|
| — |
|
|
| 7,397 |
|
|
| 177 |
|
|
| 7,632 |
|
Investment (loss) income |
|
| — |
|
|
| — |
|
|
| (497 | ) |
|
| (8,692 | ) |
|
| — |
|
|
| (9,189 | ) |
Share of profit (loss) of equity-accounted investees |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,580 |
|
|
| — |
|
|
| 8,580 |
|
Depreciation and amortization |
|
| 18,507 |
|
|
| 7,051 |
|
|
| 1,796 |
|
|
| — |
|
|
| 2,557 |
|
|
| 29,911 |
|
Earnings (loss) from operations |
|
| 6,271 |
|
|
| 2,287 |
|
|
| (32,821 | ) |
|
| 7,077 |
|
|
| (44,323 | ) |
|
| (61,509 | ) |
Income (loss) before income tax |
|
| 3,751 |
|
|
| 477 |
|
|
| (32,951 | ) |
|
| 3,453 |
|
|
| (39,496 | ) |
|
| (64,766 | ) |
Three months ended June 30, 2023 |
| |||||||||||||||||||||||
Net revenue |
|
| 151,690 |
|
|
| 71,881 |
|
|
| 20,940 |
|
|
| — |
|
|
| — |
|
|
| 244,511 |
|
Gross margin |
|
| 35,360 |
|
|
| 17,780 |
|
|
| (1,207 | ) |
|
| — |
|
|
| — |
|
|
| 51,933 |
|
Interest and fee revenue |
|
| — |
|
|
| 58 |
|
|
| — |
|
|
| 3,186 |
|
|
| 177 |
|
|
| 3,421 |
|
Investment (loss) income |
|
| — |
|
|
| — |
|
|
| (214 | ) |
|
| (3,806 | ) |
|
| — |
|
|
| (4,020 | ) |
Share of profit (loss) of equity-accounted investees |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (936 | ) |
|
| — |
|
|
| (936 | ) |
Depreciation and amortization |
|
| 8,161 |
|
|
| 3,361 |
|
|
| 650 |
|
|
| — |
|
|
| 1,271 |
|
|
| 13,443 |
|
Earnings (loss) from operations |
|
| 8,207 |
|
|
| 2,340 |
|
|
| (14,134 | ) |
|
| (1,660 | ) |
|
| (24,242 | ) |
|
| (29,489 | ) |
Income (loss) before income tax |
|
| 6,714 |
|
|
| 1,221 |
|
|
| (13,831 | ) |
|
| (1,917 | ) |
|
| (22,175 | ) |
|
| (29,988 | ) |
|
| Liquor |
|
| Cannabis |
|
| Cannabis |
|
| Investments (2) | Corporate |
|
| Total |
| ||||||||
As at December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total assets |
|
| 351,338 |
|
|
| 200,393 |
|
|
| 163,130 |
|
|
| 825,151 |
|
|
| 19,338 |
|
|
| 1,559,350 |
|
Six months ended June 30, 2022 |
| |||||||||||||||||||||||
Net revenue |
|
| 149,947 |
|
|
| 71,006 |
|
|
| 20,339 |
|
|
| — |
|
|
| — |
|
|
| 241,292 |
|
Gross margin |
|
| 33,812 |
|
|
| 17,190 |
|
|
| (4,504 | ) |
|
| — |
|
|
| — |
|
|
| 46,498 |
|
Interest and fee revenue |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,438 |
|
|
| — |
|
|
| 6,438 |
|
Investment loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (52,783 | ) |
|
| — |
|
|
| (52,783 | ) |
Share of profit (loss) of equity-accounted investees |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (33,887 | ) |
|
| — |
|
|
| (33,887 | ) |
Depreciation and amortization |
|
| 2,799 |
|
|
| 2,842 |
|
|
| 9 |
|
|
| — |
|
|
| 3,889 |
|
|
| 9,539 |
|
Earnings (loss) from operations |
|
| 11,215 |
|
|
| 1,196 |
|
|
| (11,257 | ) |
|
| (79,668 | ) |
|
| (26,072 | ) |
|
| (104,586 | ) |
Income (loss) before income tax |
|
| 8,306 |
|
|
| 167 |
|
|
| (11,000 | ) |
|
| (101,973 | ) |
|
| (9,304 | ) |
|
| (113,804 | ) |
Three months ended June 30, 2022 |
| |||||||||||||||||||||||
Net revenue |
|
| 148,637 |
|
|
| 63,494 |
|
|
| 11,564 |
|
|
| — |
|
|
| — |
|
|
| 223,695 |
|
Gross margin |
|
| 33,528 |
|
|
| 13,897 |
|
|
| (4,346 | ) |
|
| — |
|
|
| — |
|
|
| 43,079 |
|
Interest and fee revenue |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,577 |
|
|
| — |
|
|
| 2,577 |
|
Investment loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (35,073 | ) |
|
| — |
|
|
| (35,073 | ) |
Share of profit (loss) of equity-accounted investees |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (37,978 | ) |
|
| — |
|
|
| (37,978 | ) |
Depreciation and amortization |
|
| 2,799 |
|
|
| 2,247 |
|
|
| — |
|
|
| — |
|
|
| 3,754 |
|
|
| 8,800 |
|
Earnings (loss) from operations |
|
| 11,288 |
|
|
| 1,476 |
|
|
| (8,293 | ) |
|
| (69,973 | ) |
|
| (15,914 | ) |
|
| (81,416 | ) |
Income (loss) before income tax |
|
| 8,379 |
|
|
| 447 |
|
|
| (8,036 | ) |
|
| (92,278 | ) |
|
| 15,724 |
|
|
| (75,764 | ) |
10
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Geographical disclosure
As at June 30, 2023, the Company had non-current assets related to investment credit operations in the United States of $532.8 million (December 31, 2022 – $519.3 million). For the six months ended June 30, 2023, share of profit of equity-accounted investees related to operations in the United States was a gain of $8.6 million (six months ended June 30, 2022 – loss of $33.9 million). All other non-current assets relate to operations in Canada and revenues from external customers relate to operations in Canada.
As at | June 30, 2023 |
| December 31, 2022 |
| ||
Balance, beginning of year |
| 21,926 |
|
| 83,724 |
|
Acquisition (note 3(a)) |
| 876 |
|
| — |
|
Additions |
| — |
|
| 3,755 |
|
Dispositions |
| (10,078 | ) |
| — |
|
Change in fair value recognized in profit or loss |
| (9,189 | ) |
| (65,553 | ) |
Balance, end of period |
| 3,535 |
|
| 21,926 |
|
The Company’s biological assets consist of cannabis plants in various stages of vegetation, including plants which have not been harvested. The change in carrying value of biological assets is as follows:
As at | June 30, 2023 |
| December 31, 2022 |
| ||
Balance, beginning of year |
| 3,477 |
|
| 4,410 |
|
Increase in biological assets due to capitalized costs |
| 15,214 |
|
| 27,749 |
|
Acquisition |
| — |
|
| 909 |
|
Net change in fair value of biological assets |
| (4,948 | ) |
| (1,309 | ) |
Transferred to inventory upon harvest |
| (12,413 | ) |
| (28,282 | ) |
Balance, end of period |
| 1,330 |
|
| 3,477 |
|
Biological assets are valued in accordance with IAS 41 and are presented at their fair value less costs to sell up to the point of harvest. This is determined using a model which estimates the expected harvest yield in grams for plants currently being cultivated, and then adjusts that amount for the expected selling price less costs to produce and sell per gram.
The fair value measurements for biological assets have been categorized as Level 3 fair values based on the inputs to the valuation technique used. The Company’s method of accounting for biological assets attributes value accretion on a straight-line basis throughout the life of the biological asset from initial cloning to the point of harvest.
Management believes the most significant unobservable inputs and their impact on fair value of biological assets are as follows:
Assumption | Input | Weighted average input |
| Effect of 10% change ($000s) |
| ||||||||
|
| June 30 |
| December 31 |
| June 30 |
| December 31 |
| ||||
Yield per square foot of growing space (1) | Grams |
| 48 |
|
| 48 |
|
| 83 |
|
| 279 |
|
Average net selling price (2) | $/gram |
| 5.62 |
|
| 4.66 |
|
| 221 |
|
| 687 |
|
After harvest cost to complete and sell | $/gram |
| 1.15 |
|
| 1.27 |
|
| 47 |
|
| 187 |
|
11
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
These assumptions are estimates that are subject to volatility in market prices and several uncontrollable factors. The Company’s estimates are, by their nature, subject to change and differences from the anticipated yield will be reflected in the net change in fair value of biological assets in future periods.
The Company estimates the harvest yields for cannabis at various stages of growth. As at June 30, 2023, it is estimated that the Company’s biological assets will yield approximately 2,348 kilograms (December 31, 2022 – 3,904 kilograms) of dry cannabis when harvested. During the six months ended June 30, 2023, the Company harvested 10,865 kilograms of dry cannabis (six months ended June 30, 2022 – 12,263 kilograms).
As at | June 30, 2023 |
| December 31, 2022 |
| ||
Retail liquor |
| 105,520 |
|
| 82,589 |
|
Harvested cannabis |
|
|
|
| ||
Raw materials, packaging and components |
| 7,242 |
|
| 4,577 |
|
Extracted cannabis & hemp oils |
| 11,504 |
|
| — |
|
Work-in-progress |
| 13,332 |
|
| 19,927 |
|
Finished goods |
| 7,210 |
|
| 7,040 |
|
Retail cannabis |
| 15,599 |
|
| 13,373 |
|
Millwork |
| — |
|
| 276 |
|
|
| 160,407 |
|
| 127,782 |
|
During the three and six months ended June 30, 2023, inventories of $188.9 million and $347.1 million were recognized in cost of sales as an expense (three and six months ended June 30, 2022 – $174.3 million and $188.6 million).
During the three and six months ended June 30, 2023, the Company recognized inventory write downs of $4.4 million and $13.6 million (three and six months ended June 30, 2022 – $4.4 million and $7.2 million), of which $4.3 million and $13.5 million (three and six months ended June 30, 2022 – $3.9 million and $5.9 million) was recognized as an impaired and obsolete inventory provision, and $0.1 million and $0.1 million (six months ended June 30, 2022 – $0.5 million and $1.3 million) was included in the change in fair value realized through inventory as the fair value component of the impaired and obsolete inventory provision.
At June 30, 2023, assets held for sale was comprised of the following:
Stellarton facility |
|
| 6,375 |
|
Mission facility |
|
| 2,016 |
|
|
|
| 8,391 |
|
The Stellarton facility is located in Stellarton, Nova Scotia, and its primary purpose was the packaging and processing of value added and derivative products for the adult-use cannabis market. The Stellarton facility was acquired in the Zenabis acquisition.
The Mission facility is located in Mission, British Columbia, and its primary purpose was the cultivation of cannabis and the packaging of dried cannabis flower in consumer packaging. The Mission facility was acquired in the Valens Transaction (note 3(a)).
12
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Cost |
|
|
| |
Balance at December 31, 2022 |
|
| 167,067 |
|
Acquisition (note 3(a), note3(b)) |
|
| 4,011 |
|
Additions |
|
| 778 |
|
Renewals, remeasurements and dispositions |
|
| 13,683 |
|
Balance at June 30, 2023 |
|
| 185,539 |
|
|
|
|
| |
Accumulated depreciation and impairment |
|
|
| |
Balance at December 31, 2022 |
|
| 32,913 |
|
Depreciation |
|
| 15,679 |
|
Balance at June 30, 2023 |
|
| 48,592 |
|
|
|
|
| |
Net book value |
|
|
| |
Balance at December 31, 2022 |
|
| 134,154 |
|
Balance at June 30, 2023 |
|
| 136,947 |
|
During the six months ended June 30, 2023, renewals, remeasurements and dispositions of $13.7 million mainly related to lease renewals.
| Land |
| Production facilities |
| Leasehold improvements |
| Equipment |
| Construction |
| Total |
| ||||||
Cost |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance at December 31, 2022 |
| 11,964 |
|
| 154,234 |
|
| 70,814 |
|
| 78,922 |
|
| 9,454 |
|
| 325,388 |
|
Acquisition (note 3(a), note3(b)) |
| 8,661 |
|
| 24,330 |
|
| 3,660 |
|
| 17,518 |
|
| — |
|
| 54,169 |
|
Additions |
| — |
|
| — |
|
| 1,200 |
|
| 2,196 |
|
| (764 | ) |
| 2,632 |
|
Dispositions |
| — |
|
| (29 | ) |
| (289 | ) |
| (817 | ) |
| — |
|
| (1,135 | ) |
Balance at June 30, 2023 |
| 20,625 |
|
| 178,535 |
|
| 75,385 |
|
| 97,819 |
|
| 8,690 |
|
| 381,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accumulated depreciation and impairment |
| |||||||||||||||||
Balance at December 31, 2022 |
| — |
|
| 132,007 |
|
| 15,369 |
|
| 28,782 |
|
| 5,821 |
|
| 181,979 |
|
Depreciation |
| — |
|
| 1,124 |
|
| 6,377 |
|
| 8,567 |
|
| — |
|
| 16,068 |
|
Impairment |
| — |
|
| — |
|
| 458 |
|
| 1,362 |
|
| — |
|
| 1,820 |
|
Dispositions |
| — |
|
| — |
|
| (273 | ) |
| (381 | ) |
| — |
|
| (654 | ) |
Balance at June 30, 2023 |
| — |
|
| 133,131 |
|
| 21,931 |
|
| 38,330 |
|
| 5,821 |
|
| 199,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net book value |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance at December 31, 2022 |
| 11,964 |
|
| 22,227 |
|
| 55,445 |
|
| 50,140 |
|
| 3,633 |
|
| 143,409 |
|
Balance at June 30, 2023 |
| 20,625 |
|
| 45,404 |
|
| 53,454 |
|
| 59,489 |
|
| 2,869 |
|
| 181,841 |
|
During the six months ended June 30, 2023, depreciation expense of $3.0 million was capitalized to biological assets and inventory (six months ended June 30, 2022 – $3.4 million).
During the six months ended June 30, 2023, 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 $1.4 million was recorded. The impairment was recognized in the Company’s cannabis operations reporting segment.
During the six months ended June 30, 2023, 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
13
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
property, plant and equipment the Company determined that a cash generating unit (“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. The significant assumptions applied in the impairment test are described below:
As at June 30, 2023, the Company recorded impairment losses of property, plant and equipment of $0.5 million in the cannabis retail reporting segment.
| June 30, 2023 |
| December 31, 2022 |
| ||
Balance, beginning of year |
| 23,319 |
|
| 26,562 |
|
Additions |
| 832 |
|
| 1,408 |
|
Finance income |
| 435 |
|
| 833 |
|
Rents recovered (payments made directly to landlords) |
| (2,012 | ) |
| (4,141 | ) |
Dispositions and remeasurements |
| — |
|
| (1,343 | ) |
Balance, end of period |
| 22,574 |
|
| 23,319 |
|
|
|
|
|
| ||
Current portion |
| 3,656 |
|
| 3,701 |
|
Long-term |
| 18,918 |
|
| 19,618 |
|
Net investment in subleases represent leased retail stores that have been subleased to certain franchise partners. These subleases are classified as a finance lease as the sublease terms are for the remaining term of the head lease.
14
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
| Brands and trademarks |
| Franchise agreements |
| Software |
| Retail |
| Total |
| |||||
Cost |
|
|
|
|
|
|
|
|
|
| |||||
Balance at December 31, 2022 |
| 80,400 |
|
| 10,000 |
|
| 5,542 |
|
| 750 |
|
| 96,692 |
|
Acquisition (note 3(a)) |
| 1,500 |
|
| — |
|
| — |
|
| — |
|
| 1,500 |
|
Additions |
| — |
|
| — |
|
| 56 |
|
| — |
|
| 56 |
|
Balance at June 30, 2023 |
| 81,900 |
|
| 10,000 |
|
| 5,598 |
|
| 750 |
|
| 98,248 |
|
|
|
|
|
|
|
|
|
|
| ||||||
Accumulated amortization and impairment |
| ||||||||||||||
Balance at December 31, 2022 |
| 19,317 |
|
| 1,811 |
|
| 679 |
|
| — |
|
| 21,807 |
|
Amortization |
| 106 |
|
| 620 |
|
| 462 |
|
| — |
|
| 1,188 |
|
Impairment |
| 807 |
|
| — |
|
| — |
|
| — |
|
| 807 |
|
Balance at June 30, 2023 |
| 20,230 |
|
| 2,431 |
|
| 1,141 |
|
| — |
|
| 23,802 |
|
|
|
|
|
|
|
|
|
|
| ||||||
Net book value |
|
|
|
|
|
|
|
|
|
| |||||
Balance at December 31, 2022 |
| 61,083 |
|
| 8,189 |
|
| 4,863 |
|
| 750 |
|
| 74,885 |
|
Balance at June 30, 2023 |
| 61,670 |
|
| 7,569 |
|
| 4,457 |
|
| 750 |
|
| 74,446 |
|
During the six months ended June 30, 2023, the Company determined that indicators of impairment existed regarding the Sun 8 intellectual property due to decreasing market demand for the underlying strains and brand. The estimated recoverable amount of the intangible asset was determined to be $1.5 million and an impairment of $0.8 million was recorded.
As at | June 30, 2023 |
| December 31, 2022 |
| ||
Investments at amortized cost |
| 24,328 |
|
| 24,493 |
|
Investments at FVTPL |
| 8,348 |
|
| 72,761 |
|
|
| 32,676 |
|
| 97,254 |
|
|
|
|
|
| ||
Current portion |
| 23,038 |
|
| 6,552 |
|
Long-term |
| 9,638 |
|
| 90,702 |
|
Investments at fair value through profit and loss (“fvtpl”)
Valens
On January 17, 2023, the Company announced that it had successfully closed the Valens Transaction (note 3(a)). The $60.0 million non-revolving term loan formed part of the consideration (note 3(a)).
Superette
On February 7, 2023, the Company announced that it had successfully closed the Superette Transaction (note 3(b)). The Company has adjusted the fair value of the Superette promissory note downward by $5.4 million ($1.7 million during the six months ended June 30, 2023, and $3.7 million during the year ended December 31, 2022) (note 22) to management’s best estimate of the fair value of the Superette promissory note at February 7, 2023. The Superette promissory note was extinguished immediately preceding the business combination and forms the consideration transferred (note 3(b)).
15
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
As at | June 30, 2023 |
| December 31, 2022 |
| ||
Interest in joint venture |
| 532,818 |
|
| 519,255 |
|
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 June 30, 2023, the Company had funded $531.7 million out of the total $538.0 million that was originally committed to SunStream.
The following table summarizes the carrying amount of the Company’s interest in the joint venture:
|
| Carrying amount |
| |
Balance at December 31, 2022 |
|
| 519,255 |
|
Capital contributions |
|
| 16,989 |
|
Share of net earnings (loss) |
|
| 8,580 |
|
Share of other comprehensive income (loss) |
|
| (12,006 | ) |
Balance at June 30, 2023 |
|
| 532,818 |
|
SunStream is a related party due to it being classified as a joint venture of the Company. Capital contributions to the joint venture and distributions received from the joint venture are classified as related party transactions.
The following table summarizes the financial information of SunStream:
As at | June 30, 2023 |
| December 31, 2022 |
| ||
Current assets (including cash and cash equivalents - 2023: $2.0 million, 2022: $1.5 million) |
| 8,720 |
|
| 5,437 |
|
Non-current assets |
| 520,211 |
|
| 509,418 |
|
Current liabilities |
| (662 | ) |
| (1,146 | ) |
Net assets (liabilities) (100%) |
| 528,269 |
|
| 513,709 |
|
|
|
|
|
| ||
Six months ended June 30 | 2023 |
| 2022 |
| ||
Revenue (loss) |
| 12,280 |
|
| (29,853 | ) |
Profit (loss) from operations |
| 8,933 |
|
| (33,548 | ) |
Other comprehensive income (loss) |
| (12,006 | ) |
| 7,785 |
|
Total comprehensive income (loss) |
| (3,026 | ) |
| (25,751 | ) |
16
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
| June 30, 2023 |
| December 31, 2022 |
| ||
Balance, beginning of year |
| 11,002 |
|
| 21,700 |
|
Change in fair value recognized in profit or loss |
| (7,042 | ) |
| (10,783 | ) |
Acquisition |
| — |
|
| 85 |
|
Balance, end of period |
| 3,960 |
|
| 11,002 |
|
The following table summarizes outstanding derivative warrants as at June 30, 2023:
| Exercise price (USD) |
| Number of warrants |
| Weighted average contractual life |
| |||
2020 Series A Warrants (1) |
| 1.77 |
|
| 50,000 |
|
| 2.1 |
|
Unsecured Convertible Notes Warrants (1) |
| 1.77 |
|
| 50,000 |
|
| 0.5 |
|
New Warrants |
| 2.29 |
|
| 9,833,333 |
|
| 1.1 |
|
December 2018 Performance Warrants | CAD 5.51 |
|
| 118,067 |
|
| 0.5 |
| |
|
|
|
| 10,051,400 |
|
| 1.1 |
|
| June 30, 2023 |
| December 31, 2022 |
| ||
Balance, beginning of year |
| 169,831 |
|
| 33,470 |
|
Acquisitions (note 3(a), note3(b)) |
| 4,336 |
|
| 142,106 |
|
Additions |
| 1,610 |
|
| 7,497 |
|
Lease payments |
| (21,619 | ) |
| (31,834 | ) |
Renewals, remeasurements and dispositions |
| 13,721 |
|
| 10,890 |
|
Tenant inducement allowances received |
| — |
|
| 1,799 |
|
Accretion expense |
| 4,239 |
|
| 5,903 |
|
Balance, end of period |
| 172,118 |
|
| 169,831 |
|
|
|
|
|
| ||
Current portion |
| 35,982 |
|
| 30,206 |
|
Long-term |
| 136,136 |
|
| 139,625 |
|
During the six months ended June 30, 2023, renewals, remeasurements and dispositions of $13.7 million mainly related to lease renewals.
The following table presents the contractual undiscounted cash flows, excluding periods covered by lessee lease extension options that have been included in the determination of the lease term, related to the Company’s lease liabilities as at June 30, 2023:
|
| June 30, 2023 |
| |
Less than one year |
|
| 40,975 |
|
One to three years |
|
| 68,457 |
|
Three to five years |
|
| 50,294 |
|
Thereafter |
|
| 41,634 |
|
Minimum lease payments |
|
| 201,360 |
|
17
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
The authorized capital of the Company consists of an unlimited number of voting common shares and preferred shares with no par value.
|
| June 30, 2023 |
| December 31, 2022 |
| ||||||||
| Note | Number of |
| Carrying |
| Number of |
| Carrying |
| ||||
Balance, beginning of year |
|
| 235,194,236 |
|
| 2,292,810 |
|
| 206,040,836 |
|
| 2,035,704 |
|
Share issuances |
|
| — |
|
| — |
|
| 370,179 |
|
| 2,870 |
|
Share repurchases |
|
| (546,700 | ) |
| (5,344 | ) |
| (4,252,489 | ) |
| (41,617 | ) |
Acquisition | 3(a) |
| 27,605,782 |
|
| 83,953 |
|
| 32,060,135 |
|
| 287,129 |
|
Shares acquired and cancelled |
|
| (2,175,023 | ) |
| (6,615 | ) |
| — |
|
| — |
|
Employee awards exercised |
|
| 181,883 |
|
| 1,041 |
|
| 975,575 |
|
| 8,724 |
|
Balance, end of period |
|
| 260,260,178 |
|
| 2,365,845 |
|
| 235,194,236 |
|
| 2,292,810 |
|
For the six months ended June 30, 2023, 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. Accumulated deficit was reduced by $3.8 million, representing the excess of the average carrying value of the common shares over their purchase price.
In connection with the Valens Transaction (note 3(a)), the Company received and cancelled 2.2 million of its own common shares valued at $6.6 million based on the fair value on the closing date. At the time of the acquisition, the Company owned 6.5 million Valens common shares which were classified as marketable securities (note 6). In accordance with the Valens Transaction consideration, the Company received 2.2 million common shares (0.3334 of a SNDL common share for each Valens common share).
The Company has a number of share-based compensation plans which include simple and performance warrants, stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”). 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.
The components of share-based compensation expense are as follows:
| Three months ended |
| Six months ended |
| ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| ||||
Equity-settled expense |
|
|
|
|
|
|
|
| ||||
Simple warrants (A) |
| 2 |
|
| 599 |
|
| (335 | ) |
| 1,146 |
|
Performance warrants (A) |
| — |
|
| — |
|
| — |
|
| — |
|
Stock options (B) |
| 3 |
|
| 23 |
|
| (2 | ) |
| 52 |
|
Restricted share units (1) (C) |
| 3,485 |
|
| 2,253 |
|
| 6,109 |
|
| 4,642 |
|
Cash-settled expense |
|
|
|
|
|
|
|
| ||||
Deferred share units (1)(2) (D) |
| 403 |
|
| (2,437 | ) |
| 330 |
|
| (1,198 | ) |
| 3,893 |
|
| 438 |
|
| 6,102 |
|
| 4,642 |
|
18
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Equity-settled plans
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 six months ended June 30, 2023:
|
| Simple |
|
| Weighted |
|
| Performance |
|
| Weighted |
| ||||
Balance at December 31, 2022 |
|
| 165,820 |
|
| $ | 46.91 |
|
|
| 123,200 |
|
| $ | 42.26 |
|
Forfeited |
|
| (34,560 | ) |
|
| 64.99 |
|
|
| (44,800 | ) |
|
| 62.05 |
|
Expired |
|
| (12,480 | ) |
|
| 6.25 |
|
|
| (16,000 | ) |
|
| 14.07 |
|
Balance at June 30, 2023 |
|
| 118,780 |
|
| $ | 45.92 |
|
|
| 62,400 |
|
| $ | 35.28 |
|
The following table summarizes outstanding simple and performance warrants as at June 30, 2023:
|
| Warrants outstanding |
|
| Warrants exercisable |
| ||||||||||||||||||
Range of exercise prices |
| Number of |
|
| Weighted |
|
| Weighted |
|
| Number of |
|
| Weighted |
|
| Weighted |
| ||||||
Simple warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
$6.25 - $9.38 |
|
| 47,500 |
|
|
| 7.83 |
|
|
| 1.21 |
|
|
| 47,500 |
|
|
| 7.83 |
|
|
| 1.21 |
|
$29.69 - $45.31 |
|
| 27,120 |
|
|
| 31.26 |
|
|
| 1.11 |
|
|
| 26,320 |
|
|
| 31.02 |
|
|
| 1.05 |
|
$62.50 - $93.75 |
|
| 33,920 |
|
|
| 63.97 |
|
|
| 3.56 |
|
|
| 33,920 |
|
|
| 63.97 |
|
|
| 3.56 |
|
$125.00 - $312.50 |
|
| 10,240 |
|
|
| 201.58 |
|
|
| 3.69 |
|
|
| 8,640 |
|
|
| 200.71 |
|
|
| 3.40 |
|
|
| 118,780 |
|
| $ | 45.92 |
|
|
| 2.07 |
|
|
| 116,380 |
|
| $ | 43.76 |
|
|
| 2.02 |
| |
Performance warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
$6.25 - $9.38 |
|
| 21,866 |
|
|
| 6.63 |
|
| n/a |
|
|
| 21,866 |
|
|
| 6.63 |
|
|
| 1.63 |
| |
$12.50 - $18.75 |
|
| 5,334 |
|
|
| 14.07 |
|
| n/a |
|
|
| 5,334 |
|
|
| 14.07 |
|
|
| 1.94 |
| |
$29.69 - $45.31 |
|
| 23,200 |
|
|
| 32.60 |
|
| n/a |
|
|
| 23,200 |
|
|
| 32.60 |
|
|
| 1.78 |
| |
$62.50 - $93.75 |
|
| 9,334 |
|
|
| 77.68 |
|
| n/a |
|
|
| 1,334 |
|
|
| 93.75 |
|
|
| 2.67 |
| |
$125.00 - $218.75 |
|
| 2,666 |
|
|
| 187.50 |
|
| n/a |
|
|
| — |
|
|
| — |
|
| n/a |
| ||
|
|
| 62,400 |
|
| $ | 35.28 |
|
| n/a |
|
|
| 51,734 |
|
| $ | 21.29 |
|
|
| 1.76 |
|
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 expire ten years after the grant date.
The following table summarizes changes in stock options during the six months ended June 30, 2023:
19
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
|
| Stock options outstanding |
|
| Weighted |
| ||
Balance at December 31, 2022 |
|
| 44,360 |
|
| $ | 13.24 |
|
Forfeited |
|
| (11,741 | ) |
|
| 11.63 |
|
Expired |
|
| (100 | ) |
|
| 31.50 |
|
Balance at June 30, 2023 |
|
| 32,519 |
|
| $ | 13.77 |
|
The following table summarizes outstanding stock options as at June 30, 2023:
|
| Stock options outstanding |
|
| Stock options exercisable |
| ||||||||||
Exercise prices |
| Number of |
|
| Weighted |
|
| Number of |
|
| Weighted |
| ||||
$11.50 |
|
| 20,834 |
|
|
| 6.91 |
|
|
| 20,834 |
|
|
| 6.91 |
|
$11.90 |
|
| 8,160 |
|
|
| 6.99 |
|
|
| 8,160 |
|
|
| 6.99 |
|
$31.50 |
|
| 3,525 |
|
|
| 5.13 |
|
|
| 3,225 |
|
|
| 5.05 |
|
|
|
| 32,519 |
|
|
| 6.74 |
|
|
| 32,219 |
|
|
| 6.75 |
|
RSUs are granted to employees and the vesting requirements and maximum term are at the discretion of the Board. RSUs are exchangeable for an equal number of common shares.
The following table summarizes changes in RSUs during the six months ended June 30, 2023:
|
|
|
| RSUs |
| |
Balance at December 31, 2022 |
|
|
|
| 1,381,330 |
|
Granted |
|
|
|
| 7,836,492 |
|
Forfeited |
|
|
|
| (276,613 | ) |
Exercised |
|
|
|
| (195,052 | ) |
Balance at June 30, 2023 |
|
|
|
| 8,746,157 |
|
At June 30, 2023, no RSUs were vested or exercisable. Subsequent to June 30, 2023, 222,617 RSUs vested and were exercised.
Cash-settled plans
DSUs are granted to directors and generally vest in equal instalments over one year. DSUs are settled by making a cash payment to the holder equal to the fair value of the Company’s common shares calculated at the date of such payment.
As at June 30, 2023, the Company recognized a liability of $2.4 million relating to the fair value of cash-settled DSUs (December 31, 2022 – $2.3 million).
The following table summarizes changes in DSUs during the six months ended June 30, 2023:
|
|
|
| DSUs |
| |
Balance at December 31, 2022 |
|
|
|
| 1,708,383 |
|
Granted |
|
|
|
| 376,904 |
|
Balance at June 30, 2023 |
|
|
|
| 2,085,287 |
|
20
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
At June 30, 2023, 1.2 million DSUs were vested but none were exercisable.
Liquor retail revenue is derived from the sale of wines, beers and spirits to customers. Cannabis retail revenue is derived from retail cannabis sales to customers, franchise revenue consists of royalty, advertising and franchise fee revenue, and other revenue consists of millwork, supply and accessories revenue and proprietary licensing. Cannabis operations revenue is derived from contracts with customers and is comprised of sales to Provincial boards that sell cannabis through their respective distribution models, sales to licensed producers for further processing, provision of proprietary cannabis processing services, product development, manufacturing and commercialization of cannabis consumer products and sales to medical customers.
| Three months ended |
| Six months ended |
| ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| ||||
Liquor retail revenue |
| 151,690 |
|
| 148,637 |
|
| 267,601 |
|
| 149,947 |
|
Cannabis retail revenue |
|
|
|
|
|
|
|
| ||||
Retail |
| 67,423 |
|
| 60,082 |
|
| 131,523 |
|
| 65,521 |
|
Franchise |
| 1,799 |
|
| 2,065 |
|
| 3,566 |
|
| 4,115 |
|
Other |
| 2,659 |
|
| 1,347 |
|
| 4,200 |
|
| 1,370 |
|
Cannabis retail revenue |
| 71,881 |
|
| 63,494 |
|
| 139,289 |
|
| 71,006 |
|
Cannabis operations revenue |
|
|
|
|
|
|
|
| ||||
Provincial boards |
| 31,714 |
|
| 14,893 |
|
| 57,843 |
|
| 24,625 |
|
Medical |
| 3 |
|
| 3 |
|
| 24 |
|
| 6 |
|
Wholesale |
| 1,780 |
|
| 530 |
|
| 4,929 |
|
| 2,100 |
|
Analytical testing |
| 357 |
|
| — |
|
| 638 |
|
| — |
|
Cannabis operations revenue |
| 33,854 |
|
| 15,426 |
|
| 63,434 |
|
| 26,731 |
|
Gross revenue |
| 257,425 |
|
| 227,557 |
|
| 470,324 |
|
| 247,684 |
|
| Three months ended |
| Six months ended |
| ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| ||||
Interest and fee revenue |
|
|
|
|
|
|
|
| ||||
Interest revenue from investments at amortized cost |
| 980 |
|
| 818 |
|
| 1,986 |
|
| 1,813 |
|
Interest and fee revenue from investments at FVTPL |
| 250 |
|
| 543 |
|
| 874 |
|
| 2,659 |
|
Interest revenue from cash |
| 2,191 |
|
| 1,216 |
|
| 4,772 |
|
| 1,966 |
|
|
| 3,421 |
|
| 2,577 |
|
| 7,632 |
|
| 6,438 |
|
| Three months ended |
| Six months ended |
| ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| ||||
Investment loss |
|
|
|
|
|
|
|
| ||||
Realized (losses) gains (note 6) |
| (48,988 | ) |
| 265 |
|
| (92,792 | ) |
| 389 |
|
Unrealized gains (losses) (note 6) |
| 44,968 |
|
| (35,338 | ) |
| 83,603 |
|
| (53,172 | ) |
|
| (4,020 | ) |
| (35,073 | ) |
| (9,189 | ) |
| (52,783 | ) |
21
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
| Three months ended |
| Six months ended |
| ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| ||||
Cash finance expense |
|
|
|
|
|
|
|
| ||||
Other finance costs |
| 17 |
|
| 145 |
|
| 45 |
|
| 169 |
|
| 17 |
|
| 145 |
|
| 45 |
|
| 169 |
| |
Non-cash finance expense (income) |
|
|
|
|
|
|
|
| ||||
Change in fair value of investments at FVTPL |
| 257 |
|
| 22,305 |
|
| 3,625 |
|
| 22,305 |
|
Accretion on lease liabilities |
| 2,293 |
|
| 3,928 |
|
| 4,239 |
|
| 4,268 |
|
Financial guarantee liability (recovery) expense |
| — |
|
| 65 |
|
| (139 | ) |
| (77 | ) |
Other |
| 106 |
|
| 189 |
|
| 296 |
|
| 189 |
|
| 2,656 |
|
| 26,487 |
|
| 8,021 |
|
| 26,685 |
| |
Interest income |
| (215 | ) |
| (127 | ) |
| (435 | ) |
| (410 | ) |
|
| 2,458 |
|
| 26,505 |
|
| 7,631 |
|
| 26,444 |
|
| Three months ended |
| Six months ended |
| ||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| ||||
Cash provided by (used in): |
|
|
|
|
|
|
|
| ||||
Accounts receivable |
| 1,227 |
|
| (715 | ) |
| 9,323 |
|
| (2,565 | ) |
Biological assets |
| (948 | ) |
| 813 |
|
| (2,801 | ) |
| 5,182 |
|
Inventory |
| (11,506 | ) |
| (4,543 | ) |
| (31,932 | ) |
| (12,949 | ) |
Prepaid expenses and deposits |
| (1,938 | ) |
| (1,543 | ) |
| (7,765 | ) |
| 58 |
|
Investments |
| 148 |
|
| 383 |
|
| 480 |
|
| 431 |
|
Right of use assets |
| 8,488 |
|
| (1,151 | ) |
| (764 | ) |
| (1,151 | ) |
Property, plant and equipment |
| 61 |
|
| — |
|
| 73 |
|
| — |
|
Accounts payable and accrued liabilities |
| 551 |
|
| (24,578 | ) |
| (22,818 | ) |
| (35,279 | ) |
Lease liabilities |
| (8,490 | ) |
| 2,214 |
|
| 775 |
|
| 2,214 |
|
|
| (12,407 | ) |
| (29,120 | ) |
| (55,429 | ) |
| (44,059 | ) |
|
|
|
|
|
|
|
|
| ||||
Changes in non-cash working capital relating to: |
|
|
|
|
|
|
|
| ||||
Operating |
| (14,193 | ) |
| (31,584 | ) |
| (56,755 | ) |
| (46,434 | ) |
Investing |
| 1,586 |
|
| 294 |
|
| 1,127 |
|
| 259 |
|
Financing |
| 200 |
|
| 2,170 |
|
| 199 |
|
| 2,116 |
|
|
| (12,407 | ) |
| (29,120 | ) |
| (55,429 | ) |
| (44,059 | ) |
22
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
|
| Three months ended |
|
| Six months ended |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Weighted average shares outstanding (000s) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted (1) |
|
| 260,228 |
|
|
| 238,436 |
|
|
| 257,905 |
|
|
| 222,380 |
|
Continuing operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss attributable to owners of the Company |
|
| (29,350 | ) |
|
| (73,301 | ) |
|
| (63,553 | ) |
|
| (111,205 | ) |
Per share - basic and diluted |
| $ | (0.11 | ) |
| $ | (0.31 | ) |
| $ | (0.24 | ) |
| $ | (0.50 | ) |
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss attributable to owners of the Company |
|
| (3,170 | ) |
|
| — |
|
|
| (4,535 | ) |
|
| — |
|
Per share - basic and diluted |
|
| (0.01 | ) |
|
| — |
|
| $ | (0.02 | ) |
| $ | — |
|
Net loss attributable to owners of the Company |
|
| (32,520 | ) |
|
| (73,301 | ) |
|
| (68,088 | ) |
|
| (111,205 | ) |
Per share - basic and diluted |
| $ | (0.12 | ) |
| $ | (0.31 | ) |
| $ | (0.26 | ) |
| $ | (0.50 | ) |
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.
23
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
Fair value measurements of marketable securities, investments at FVTPL and derivative warrants are as follows:
|
|
| Fair value measurements using |
| ||||||||
June 30, 2023 | Carrying |
| Level 1 |
| Level 2 |
| Level 3 |
| ||||
Recurring measurements: |
|
|
|
|
|
|
|
| ||||
Financial assets |
|
|
|
|
|
|
|
| ||||
Marketable securities |
| 3,535 |
|
| 3,535 |
|
| — |
|
| — |
|
Investments at FVTPL |
| 8,348 |
|
| — |
|
| — |
|
| 8,348 |
|
Financial liabilities |
|
|
|
|
|
|
|
| ||||
Derivative warrants (1) |
| 3,960 |
|
| — |
|
| — |
|
| 3,960 |
|
|
|
|
|
|
|
|
|
| ||||
|
|
| Fair value measurements using |
| ||||||||
December 31, 2022 | Carrying |
| 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 |
|
At June 30, 2023, a 10% change in the material assumptions would change the estimated fair value of derivative warrant liabilities by approximately $0.8 million.
There were no transfers between Levels 1, 2 and 3 inputs during the period.
The Company entered into the following related party transactions during the periods noted, in addition to those disclosed in note 15 relating to the Company’s joint venture.
A member of key management personnel jointly controls a company that owns property leased to SNDL for one of its retail liquor stores. The lease term is from November 1, 2017 to October 31, 2027 and includes extension terms from November 1, 2027 to October 31, 2032 and November 1, 2032 to October 31, 2037. Monthly rent for the location includes base rent, common area costs and sign rent. The rent amounts are subject to increases in accordance with the executed lease agreement. For the six months ended June 30, 2023, the Company paid $83.4 thousand in total rent with respect to this lease.
The following table summarizes contractual commitments at June 30, 2023:
| Less than |
| One to three |
| Three to five |
| Thereafter |
| Total |
| |||||
Accounts payable and accrued liabilities |
| 62,557 |
|
| — |
|
| — |
|
| — |
|
| 62,557 |
|
Financial guarantee liability |
| — |
|
| 268 |
|
| — |
|
| — |
|
| 268 |
|
Contractual obligation |
| — |
|
| 2,553 |
|
| — |
|
| — |
|
| 2,553 |
|
Balance, end of year |
| 62,557 |
|
| 2,821 |
|
| — |
|
| — |
|
| 65,378 |
|
24
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
The Company has entered into certain supply agreements to provide dried cannabis and cannabis products to third parties. The contracts require the provision of various amounts of dried cannabis on or before certain dates. Should the Company not deliver the product in the agreed timeframe, financial penalties apply which may be paid either in product in-kind or cash. Under these agreements, the Company has accrued financial penalties payable as at June 30, 2023 of $2.5 million (December 31, 2022 – $2.5 million). The corresponding expenses were recognized during the years ended December 31, 2019 ($1.5 million) and December 31, 2021 ($1.0 million).
From time to time, the Company is involved in various claims and legal actions which occurred in the ordinary course of operations, the losses from which, if any, are not anticipated to be material to the financial statements.
On December 20, 2022, the Company and Nova announced that they had entered into an implementation agreement pursuant to which the Company and Nova agreed to implement a strategic transaction in the Canadian retail cannabis industry (the “Nova Transaction”).
As part of the Nova Transaction, the Company and Nova agreed to complete the following transactions, subject to certain terms and conditions (including receipt of the requisite regulatory approvals and approval of Nova shareholders under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions): (i) the Company will transfer or cause to be transferred its 26 corporate-owned cannabis retail stores to Nova; (ii) Nova will transfer its intellectual property related to the “Value Buds” retail banner to the Company; (iii) the parties and certain of their subsidiaries will enter into a strategic partnership agreement and store level license agreement with respect to the “Spiritleaf”, “Superette” and “Value Buds” retail banners to implement certain collaborative retail initiatives; (iv) the parties will amend certain existing governance documents (to which Alcanna was a predecessor party), including their investor rights agreement; (v) the Company will reduce its equity ownership interest in Nova to approximately 19.9%; and (vi) the parties will replace Nova’s existing credit facility with SNDL with a $15.0 million credit facility, with a $10.0 million “accordion” feature.
On May 5, 2023, Nova’s shareholders approved the previously announced agreement with SNDL to implement a strategic partnership to create a well-capitalized cannabis retail platform in Canada, pursuant to the implementation agreement entered into between SNDL and Nova dated December 20, 2022, as amended on April 3, 2023 (the “Implementation Agreement”).
On June 1, 2023, SNDL announced that it had amended the terms of the plan of arrangement (the “Original Plan of Arrangement”), and such amended form of the Original Plan of Arrangement being (the “Amended Plan of Arrangement”) approved by the SNDL shareholders at its annual and special meeting of shareholders held on July 25, 2022, pursuant to which SNDL intends to distribute certain of its Nova common shares (“Nova Shares”) to SNDL shareholders. Under the terms of the Amended Plan of Arrangement, among other things, (i) SNDL shareholders who would have been entitled to receive at least one “lot” of Nova Shares from the Nova Shares being distributed (the “Distributed Nova Shares”) had they been distributed to all SNDL shareholders on a pro rata basis (the “Eligible Holders”) will receive Nova Shares with the new SNDL common shares to which they were entitled under the Original Plan of Arrangement (“New SNDL Shares”), and (ii) all SNDL shareholders other than the Eligible Holders will receive, together with their New SNDL Shares, cash in lieu of the fractional Nova Shares that they would have been entitled to receive had the Distributed Nova Shares been distributed to all SNDL shareholders on a pro rata basis. The number of Nova Shares that would be considered a “lot” will be determined by SNDL’s Board of Directors (the “SNDL Board”), provided that a “lot” must be between one Nova Share and 500 Nova Shares. All other terms of the Amended Plan of Arrangement remain substantially similar to those of the Original Plan of Arrangement. A Final Order (the “Final Order”) of the Court of Kings Bench of Alberta (the “Court”) approving the Amended Plan of Arrangement and transactions contemplated thereby (collectively, the “Share Distribution”) was granted on May 26, 2023, and, subject
25
SNDL Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the three and six months ended June 30, 2023
(Unaudited, expressed in thousands of Canadian dollars, except where otherwise noted)
to the SNDL Board determining the meaning of a “lot” of Nova Shares, the Company is now authorized by the Court to complete the Share Distribution.
The completion of the Share Distribution remains subject to certain closing conditions set out in the Implementation Agreement, including the receipt of certain key regulatory approvals and the amendment to certain terms of the Nova Transaction that are mutually satisfactory to SNDL and Nova. SNDL continues to work with regulators to ensure that the Nova Transaction is in compliance with regulations in all relevant jurisdictions. Pursuant to the Final Order and the Implementation Agreement, the Share Distribution is expected to be completed as part of the closing of the Nova Transaction. Subject to the satisfaction or waiver of all of the conditions precedent which include, but are not limited to, the receipt of certain key regulatory approvals from applicable provincial cannabis regulators and the Toronto Stock Exchange, the Nova Transaction was expected to close on or before June 30, 2023.
Due to ongoing review by regulators with respect to required approvals, on June 30, 2023, SNDL and Nova extended the outside date for closing of the Nova Transaction to on or before July 25, 2023, and on July 25, 2023, SNDL and Nova extended the outside date for closing of the Nova Transaction to on or before August 25, 2023.
26