SNDL Inc (SNDL) 6-K, filed May 16, 2022

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

SECURITIES EXCHANGE ACT OF 1934

For the month of May 2022

Commission File Number 001-39005

SUNDIAL GROWERS INC.

(Registrant’s name)

#300, 919 - 11 Avenue SW

Calgary, AB T2R 1P3

Tel.: (403) 948-5227

(Address of principal executive offices)

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

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

SIGNATURES

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

	SUNDIAL GROWERS INC.
Date: May 15, 2022	By:	/s/ Zach George
	Name:	Zach George
	Title:	Chief Executive Officer and Director

EXHIBIT

Exhibit	Description of Exhibit
99.1	Condensed Consolidated Interim Financial Statements for the Three Months Ended March 31, 2022 and 2021
99.2	Management’s Discussion and Analysis for the Three Months Ended March 31, 2022 and 2021
99.3	Form 52-109F2 Certificate of Interim Filings by CEO (pursuant to Canadian regulations)
99.4	Form 52-109F2 Certificate of Interim Filings by CFO (pursuant to Canadian regulations)

sndl-ex991_9.htm

EXHIBIT 99.1

Sundial Growers Inc.

Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

(Unaudited – expressed in thousands of Canadian dollars)

Sundial Growers Inc.

Condensed Consolidated Interim Statement of Financial Position

(Unaudited - expressed in thousands of Canadian dollars)

As at	Note
Assets
Current Assets
Cash and cash equivalents		422,824		558,251
Restricted cash	5	21,947		27,013
Marketable securities	6	66,491		83,724
Accounts receivable		14,583		10,865
Biological assets	7	3,731		4,410
Inventory	8	140,950		29,503
Prepaid expenses and deposits		12,461		4,355
Investments	12	3,554		3,065
Assets held for sale		2,998		2,998
Net investment in subleases	10	4,137		3,991
		693,676		728,175
Non-current assets
Long-term deposits		8,988		7,725
Property, plant and equipment	9	319,747		63,189
Net investment in subleases	10	23,005		22,571
Intangible assets	11	4,674		4,709
Investments	12	84,551		70,498
Equity-accounted investees	13	466,851		412,858
Goodwill	3	394,780		114,537
Total assets		1,996,272		1,424,262
Liabilities
Current liabilities
Accounts payable and accrued liabilities	18(d)	62,123		38,452
Current portion of lease obligations	15	23,975		5,701
Derivative warrants	14	30,058		21,700
		116,156		65,853
Non-current liabilities
Lease obligations	15	242,453		27,769
Other liabilities	16	5,087		4,505
Total liabilities		363,696		98,127
Shareholders’ equity
Share capital	17(b)	2,327,443		2,035,704
Warrants	17(c)	8,092		8,092
Contributed surplus		61,959		60,734
Contingent consideration		2,279		2,279
Accumulated deficit		(826,414	)	(788,510	)
Accumulated other comprehensive income		874		7,607
Total shareholders’ equity		1,574,233		1,325,906
Non-controlling interest		58,343		229
Total liabilities and shareholders’ equity		1,996,272		1,424,262

Commitments (note 24)

Subsequent events (note 13)

See accompanying notes to the condensed consolidated interim financial statements.

Sundial Growers Inc.

Condensed Consolidated Interim Statement of Loss and Comprehensive Loss

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

		Three months ended<br><br><br>March 31
	Note	2022			2021
Gross revenue	19		20,127			11,748
Excise taxes			2,530			1,857
Net revenue			17,597			9,891
Cost of sales	8		14,326			11,445
Inventory obsolescence	8		1,981			1,754
Gross margin before fair value adjustments			1,290			(3,308	)
Change in fair value of biological assets	7		3,690			(94	)
Change in fair value realized through inventory			(1,561	)		(50	)
Gross margin			3,419			(3,452	)
Interest and fee revenue	20		3,861			2,849
Investment (loss) income	20		(17,710	)		12,900
Share of profit of equity-accounted investees	13		4,091			—
General and administrative			10,682			7,093
Sales and marketing			1,111			950
Research and development			95			235
Depreciation and amortization	9,11		739			1,058
Share-based compensation	18		4,204			3,456
Government subsidies			—			(2,180	)
(Loss) income from operations			(23,170	)		1,685
Transaction costs			(6,481	)		(3,648	)
Finance income (costs), net	21		61			(51	)
Change in estimate of fair value of derivative warrants	14		(8,300	)		(129,944	)
Foreign exchange loss			(150	)		(440	)
Loss on disposition of PP&E			—			(117	)
Other expenses			—			(1,930	)
Loss before income tax			(38,040	)		(134,445	)
Income tax recovery			—			—
Net loss			(38,040	)		(134,445	)
Equity-accounted investees - share of OCI	13		(6,733	)		—
Comprehensive loss			(44,773	)		(134,445	)
Net loss attributable to:
Sundial Growers Inc.			(37,904	)		(134,416	)
Non-controlling interest			(136	)		(29	)
			(38,040	)		(134,445	)
Comprehensive loss attributable to:
Sundial Growers Inc.			(44,637	)		(134,416	)
Non-controlling interest			(136	)		(29	)
			(44,773	)		(134,445	)
Net loss per common share attributable to Sundial Growers Inc.
Basic and diluted	22	$	(0.02	)	$	(0.09	)

See accompanying notes to the condensed consolidated interim financial statements.

Sundial Growers Inc.

Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity

(Unaudited - expressed in thousands of Canadian dollars)

	Note	Share capital		Warrants		Contributed<br><br><br>surplus			Contingent consideration		Accumulated deficit
Balance at December 31, 2021			2,035,704		8,092		60,734			2,279		(788,510	)	7,607		229		1,326,135
Net loss			—		—		—			—		(37,904	)	—		(136	)	(38,040	)
Other comprehensive loss			—		—		—			—		—		(6,733	)	—		(6,733	)
Share issuances	17(b)		2,870		—		—			—		—		—		—		2,870
Acquisition	3		287,129		—		—			—		—		—		58,250		345,379
Share-based compensation	18		—		—		2,965			—		—		—		—		2,965
Employee awards exercised	17(b)		1,740		—		(1,740	)		—		—		—		—		—
Balance at March 31, 2022			2,327,443		8,092		61,959			2,279		(826,414	)	874		58,343		1,632,576
Balance at December 31, 2020	762,046		6,138	59,344		2,279	(558,128	)	—	(1,984	)	269,695
---	---	---	---	---	---	---	---	---	---	---	---	---	---
Net loss	—		—	—		—	(134,416	)	—	(29	)	(134,445	)
Loss of control of subsidiary	—		—	—		—	—		—	2,013		2,013
Share issuances	647,315		—	—		—	—		—	—		647,315
Share issuance costs	(13,483	)	—	—		—	—		—	—		(13,483	)
Derivative warrants exercised	277,136		—	—		—	—		—	—		277,136
Share-based compensation	1		—	3,455		—	—		—	—		3,456
Employee warrants exercised	2,580		—	(2,429	)	—	—		—	—		151
Balance at March 31, 2021	1,675,595		6,138	60,370		2,279	(692,544	)	—	—		1,051,838

See accompanying notes to the condensed consolidated interim financial statements.

Sundial Growers Inc.

Condensed Consolidated Interim Statement of Cash Flows

(Unaudited - expressed in thousands of Canadian dollars)

		Three months ended<br><br><br>March 31
	Note	2022			2021
Cash provided by (used in):
Operating activities
Net loss for the period			(38,040	)		(134,445	)
Adjustments for:
Interest and fee revenue	20		(3,861	)		—
Change in fair value of biological assets			(3,690	)		94
Share-based compensation	18		4,204			3,456
Depreciation and amortization	9,11		2,439			2,407
Loss on disposition of PP&E			—			117
Inventory obsolescence	8		1,981			1,754
Finance (income) costs	21		(61	)		23
Change in estimate of fair value of derivative warrants	14		8,300			129,944
Unrealized foreign exchange loss			16			1,905
Share of profit of equity-accounted investees	13		(4,091	)		—
Other expenses			—			1,862
Gain on disposition of marketable securities	6,20		—			(8,019	)
Unrealized loss (gain) on marketable securities	6,20		17,834			(4,881	)
Additions to marketable securities	6		(601	)		(36,740	)
Proceeds from disposal of marketable securities	6		—			16,058
Income distributions from equity-accounted investees			685			—
Interest received			3,715			—
Change in non-cash working capital			(14,850	)		(7,901	)
Net cash used in operating activities			(26,020	)		(34,366	)
Investing activities
Additions to property, plant and equipment	9		(981	)		(119	)
Additions to intangible assets	11		(56	)		—
Additions to investments	12		(14,431	)		(10,560	)
Additions to equity-accounted investees	13		(57,320	)		—
Proceeds from disposal of PP&E			—			60
Acquisition, net of cash acquired	3		(31,149	)		—
Change in non-cash working capital			(35	)		(240	)
Net cash used in investing activities			(103,972	)		(10,859	)
Financing activities
Change in restricted cash	5		5,066			5,233
Payments on lease obligations, net			(447	)		(123	)
Proceeds from issuance of shares and registered offerings, net of costs	17(b)		—			735,088
Proceeds from exercise of derivative warrants			—			119,318
Proceeds from exercise of employee warrants			—			151
Repayment of long-term debt			(10,000	)		—
Change in non-cash working capital			(54	)		579
Net cash (used in) provided by financing activities			(5,435	)		860,246
Effect of exchange rate changes on cash held in foreign currency			—			(1,952	)
Change in cash and cash equivalents			(135,427	)		813,069
Cash and cash equivalents, beginning of period			558,251			60,376
Cash and cash equivalents, end of period			422,824			873,445

See accompanying notes to the condensed consolidated interim financial statements.

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

1.	Description of business

Sundial Growers Inc. (“Sundial” or the “Company”) was incorporated under the Business Corporations Act (Alberta) on August 19, 2006.

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

The principal activities of the Company are the production, distribution and sale of cannabis in Canada pursuant to the Cannabis Act (Canada) (the “Cannabis Act”), 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 retailing of wines, beers and spirits 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.

Sundial and its subsidiaries currently operate solely in Canada. Through its joint venture SunStream Bancorp Inc. (note 13), the Company also provides growth capital that pursues indirect investment and financial services opportunities in the global 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”.

COVID-19

The global impact of COVID-19 has contributed to uncertainty as to the health of the global economy. The Company has implemented several pandemic-related procedures and protocols at its facilities, including enhanced screening measures, enhanced cleaning and sanitation processes with increased frequency and encouraging social distancing measures. At the retail store level, the Company has implemented enhanced in-store procedures including increased frequency of cleaning, installing safety shields and reducing paper materials. The Company has also adapted its business model by moving toward online sales platforms that enable customers to order products online for fast pickup and payment in store. The Company believes that it can maintain safe operations with these pandemic-related procedures and protocols in place.

2.	Basis of presentation
a)	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 (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). 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, 2021. These financial statements should be read in conjunction with the annual consolidated financial statements for the Company for the year ended December 31, 2021.

These financial statements were approved and authorized for issue by the Board of Directors (“Board”) on May 15, 2022.

3.	Business acquisition
A)	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. The Company is deemed to control Nova through its equity

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

interest and Nova’s results are included in the 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 320.6 million Sundial common shares valued at $287.0 million based on the fair value of each common share of the Company on the closing date (8.85 of a Sundial common share for each Alcanna common share).

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 arising on their recognition.

Due to the inherent complexity associated with valuations and the timing of the acquisition, the numbers below are provisional.

The fair value of consideration paid was as follows:

Cash	54,339
Issuance of common shares	287,129
	341,468

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

Cash	23,190
Accounts receivable	1,868
Prepaid expenses and deposits	10,986
Inventory	105,022
Property, plant and equipment	257,925
Goodwill	280,243
Accounts payable and accrued liabilities	(36,703	)
Long-term debt	(10,000	)
Lease liabilities	(232,755	)
Derivative warrants	(58	)
Non-controlling interest	(58,250	)
	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 share price on the day of the Alcanna Transaction of $2.66.

As new information 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, then the accounting for the acquisition will be revised.

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

The financial statements incorporate the operations of Alcanna commencing March 31, 2022. During the one-day period of March 31, 2022, the Company recorded revenues of $2.0 million and net loss of $0.1 million. 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 $6.1 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, 2022.

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

The Company incurred acquisition-related costs of $6.5 million which have been included in transaction costs.

B)	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 recreational cannabis stores across Canada, with a network that includes more than 100 franchised and corporate-owned locations. As new information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of acquisition identifies adjustments, then the accounting for the acquisition will be revised. At March 31, 2022, no adjustments were made to the preliminary estimates of the fair value of assets and liabilities acquired presented at December 31, 2021.

4.	Segment information

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

Cannabis operations include the cultivation, distribution and sale of cannabis for the adult-use market and medical markets in Canada. Cannabis retail includes the private sale of recreational cannabis through wholly owned and franchise retail cannabis stores. Liquor retail includes the sale of wines, beers and spirits through wholly owned liquor stores. Investments include the deployment of capital to investment opportunities. Certain overhead expenses not directly attributable to any operating segment are reported as “Corporate”.

	Cannabis			Cannabis Retail^(1)^		Liquor Retail^(1)^			Investments^(2)^			Corporate			Total
As at March 31, 2022
Total assets		153,612			254,514		582,808			982,306			23,032			1,996,272
Three months ended March 31, 2022
Net revenue		8,775			7,512		1,310			—			—			17,597
Gross margin		(158	)		3,293		284			—			—			3,419
Interest and fee revenue		—			—		—			3,861			—			3,861
Loss on marketable securities		—			—		—			(17,710	)		—			(17,710	)
Share of profit of equity-accounted investees		—			—		—			4,091			—			4,091
Depreciation and amortization		68			595		—			—			76			739
Earnings (loss) before tax		(9,190	)		131		(73	)		(9,758	)		(19,150	)		(38,040	)
(1)	Cannabis retail includes one day of operations of Nova retail stores and liquor retail includes one day of operations of Alcanna retail stores.
---	---
(2)	Total assets include cash and cash equivalents.
---	---
	Cannabis			Cannabis Retail		Liquor Retail		Investments^(1)^		Corporate			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
As at December 31, 2021
Total assets		147,887			153,624		—		1,093,596		29,155			1,424,262
Three months ended March 31, 2021
Net revenue		9,891			—		—		—		—			9,891
Gross margin		(3,452	)		—		—		—		—			(3,452	)
Interest and fee revenue		—			—		—		2,849		—			2,849
Gain on marketable securities		—			—		—		12,900		—			12,900
Share of profit of equity-accounted investees		—			—		—		—		—			—
Depreciation and amortization		954			—		—		—		104			1,058
Earnings (loss) before tax		(9,172	)		—		—		14,300		(139,573	)		(134,445	)
(1)	Total assets include cash and cash equivalents.
---	---

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

Geographical disclosure

As at March 31, 2022, the Company had non-current assets related to operations in the United States of $466.9 million (December 31, 2021 – $412.9 million). For the three months ended March 31, 2022, share of profit of equity-accounted investees related to operations in the United States was $4.1 million (three months ended March 31, 2021 – nil).

5.	Restricted cash
As at	March 31, 2022		December 31, 2021
---	---	---	---	---
Securities collateral		2,549		7,773
Captive insurance		19,098		19,240
Other		300		—
		21,947		27,013

Securities collateral is comprised of a cash balance to satisfy margin requirements on the Company’s option trading position.

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

6.	Marketable securities
As at	March 31, 2022			December 31, 2021
---	---	---	---	---	---	---
Balance, beginning of year		83,724			—
Additions		601			158,101
Dispositions		—			(9,663	)
Change in fair value recognized in profit or loss		(17,834	)		(64,714	)
Balance, end of period		66,491			83,724

During the three months ended March 31, 2021, proceeds of $16.1 million were received for the dispositions of marketable securities and a gain on disposition of $8.0 million was recognized.

Marketable securities have been designated as Fair Value Through Profit or Loss (“FVTPL”) (note 23).

The components of marketable securities are as follows:

As at	March 31, 2022
Equity securities		66,676		83,802
Put and call options		(185	)	(78	)
		66,491		83,724
7.	Biological assets
---	---

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

As at
Balance, beginning of year	4,410		3,531
Increase in biological assets due to capitalized costs	6,615		25,880
Net change in fair value of biological assets	3,690		4,708
Transferred to inventory upon harvest	(10,984	)	(29,709	)
Balance, end of period	3,731		4,410

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

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				Effect of 10% change (000s)
			December 31<br><br><br>2021		March 31<br>2022	December 31<br><br><br>2021
Yield per square foot of growing space^(1)^	Grams	50		49			435
Average net selling price^(2)^	/gram	4.66		4.49			1,014
After harvest cost to complete and sell	/gram	1.06		1.06			249

All values are in US Dollars.

(1)	Varies by strain; obtained through historical growing results or grower estimate if historical results are not available.
(2)	Varies by strain and sales market; obtained through average selling prices or estimated future selling prices if historical results are not available.
---	---

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 March 31, 2022, it is estimated that the Company’s biological assets will yield approximately 5,554 kilograms (December 31, 2021 – 5,672 kilograms) of dry cannabis when harvested. During the three months ended March 31, 2022, the Company harvested 6,636 kilograms of dry cannabis (three months ended March 31, 2021 – 5,387 kilograms).

8.	Inventory
As at	March 31, 2022		December 31, 2021
---	---	---	---	---
Retail liquor		96,684		—
Cannabis
Raw materials, packaging and components		4,531		4,354
Work-in-progress		22,851		19,751
Finished goods		4,698		2,966
Retail cannabis		12,157		2,397
Millwork		29		35
		140,950		29,503

During the three months ended March 31, 2022, inventories of $14.3 million were recognized in cost of sales as an expense (three months ended March 31, 2021 – $11.4 million). During the three months ended March 31, 2022, the Company recognized inventory write downs of $2.7 million (three months ended March 31, 2021 – $1.8 million), of which $2.0 million (three months ended March 31, 2021 – $1.8 million) was recognized as an impaired and obsolete inventory provision, and $0.7 million (three months ended March 31, 2021 – nil) was included in the change in fair value realized through inventory as the fair value component of the impaired and obsolete inventory provision.

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

9.	Property, plant and equipment
	Land		Facilities and leasehold improvements		Equipment		Right of<br><br><br>use assets		Construction<br><br><br>in progress<br><br><br>(“CIP”)		Total
---	---	---	---	---	---	---	---	---	---	---	---	---
Cost
Balance at December 31, 2021		12,388		157,231		32,777		8,038		6,103		216,537
Acquisition (note 3)		—		45,935		37,755		171,866		2,369		257,925
Additions		4		242		178		1		556		981
Balance at March 31, 2022		12,392		203,408		70,710		179,905		9,028		475,443
Accumulated amortization and impairment
Balance at December 31, 2021		—		132,278		13,928		1,321		5,821		153,348
Depreciation		—		524		1,419		405		—		2,348
Balance at March 31, 2022		—		132,802		15,347		1,726		5,821		155,696
Net book value
Balance at December 31, 2021		12,388		24,953		18,849		6,717		282		63,189
Balance at March 31, 2022		12,392		70,606		55,363		178,179		3,207		319,747

During the three months ended March 31, 2022, depreciation expense of $1.7 million was capitalized to biological assets and inventory (three months ended March 31, 2021 – $1.3 million).

At March 31, 2022, the Company determined that no indicators of impairment existed or indicators that a previous impairment should be reversed, and no impairment test was required.

10.	Net investment in subleases
	March 31, 2022			December 31, 2021
---	---	---	---	---	---	---
Balance, beginning of year		26,562			—
Acquisition		—			23,751
Additions		1,408			3,951
Finance income		270			573
Rents recovered (payments made directly to landlords)		(1,098	)		(1,713	)
Balance, end of period		27,142			26,562
Current portion		4,137			3,991
Long-term		23,005			22,571

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

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

11.	Intangible assets
	Brands and trademarks		Patents		Total
---	---	---	---	---	---	---
Cost
Balance at December 31, 2021		5,445		13,551		18,996
Additions		56		—		56
Balance at March 31, 2022		5,501		13,551		19,052
Accumulated amortization and impairment
Balance at December 31, 2021		736		13,551		14,287
Depreciation		91		—		91
Balance at March 31, 2022		827		13,551		14,378
Net book value
Balance at December 31, 2021		4,709		—		4,709
Balance at March 31, 2022		4,674		—		4,674

Brands and trademarks consist of intellectual property purchased from Sun 8 Holdings Inc. with a useful life of 15 years and other intellectual property with a useful life of 12 years.

12.	Investments
As at	March 31, 2022		December 31, 2021
---	---	---	---	---
Investments at amortized cost		24,926		24,987
Investments at FVTPL		63,179		48,576
		88,105		73,563
Current portion		3,554		3,065
Long-term		84,551		70,498

Investments at fvtpl

On February 9, 2022, the Company closed a $5.0 million promissory note with a maturity date of February 9, 2025, and an interest rate of 15% per annum. On March 30, 2022, the Company closed a $10.0 million convertible debenture with Delta 9 Cannabis Inc. with a maturity date of March 30, 2025, and an interest rate of 10% per annum.

13.	Equity-accounted investees
As at	March 31, 2022		December 31, 2021
---	---	---	---	---
Interest in joint venture		466,851		412,858

Interest in joint venture

SunStream Bancorp Inc. (“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.

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

The current investment portfolio of SunStream is comprised of secured debt and 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 risks and other risks specific to each investment.

As at March 31, 2022, the Company had contributed $452.9 million out of the total $538.0 million that has been committed. Subsequent to March 31, 2022, SunStream realized $27.0 million from the final settlement of one of its credit arrangements and these funds with an additional $28.8 million were invested in incremental loans to existing SunStream credit arrangements.

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


Balance at December 31, 2021	412,858
Capital contributions	57,320
Share of net earnings	4,091
Share of other comprehensive income	(6,733	)
Distributions	(685	)
Balance at March 31, 2022	466,851

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
Current assets (including cash and cash equivalents: 4.5 million)	5,060
Non-current assets	457,791
Current liabilities	(2,060	)
Non-current liabilities	—
Net assets (liabilities) (100%)	460,791
Three months ended March 31, 2022
Revenue	6,549
Profit from operations	4,003
Other comprehensive loss	(6,733	)
Total comprehensive loss	(2,738	)

All values are in US Dollars.

14.	Derivative warrants
	March 31, 2022
---	---	---
Balance, beginning of year		21,700
Change in fair value recognized in profit or loss		8,300
Acquisition (note 3)		58
Balance, end of period		30,058

The carrying amount is an estimate of the fair value of the derivative warrants and is presented as a current liability. The derivative warrants are classified as a liability due to the Company’s share price being denominated in USD, which creates variability as to the value in CAD when they are exercised. The derivative warrants are recorded as a current liability, however, the Company has no cash obligation nor is there any cash loss with respect to the derivative warrants, rather it will deliver common shares if and when warrants are exercised.

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

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

	Exercise price ()
2020 Series A Warrants ^(1)^		500,000	3.4
Unsecured Convertible Notes Warrants ^(1)^		500,000	1.8
New Warrants		98,333,334	2.4
December 2018 Performance Warrants	CAD 5.51	118,067	1.7
		99,451,401	2.4

All values are in US Dollars.

(1)

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

In connection with the Alcanna Transaction (note 3), the Company acquired warrants previously issued by Nova (the “December 2018 Performance Warrants”) that are classified as a liability.

The December 2018 Performance Warrants became immediately exercisable upon issuance. Each performance warrant includes a performance incentive that entitles the warrant holders to additional common shares of Nova upon exercise provided that the 20-day volume weighted average trading price of Nova’s common shares (the “Market Price”) equals or exceeds $19.27 at any time prior to the expiration date of the warrants. The Market Price condition has not been met. As such, the fair value of the December 2018 Performance Warrants was recognized as a warrant liability, inclusive of a probability weighting associated with the performance incentive being met. Under the terms of the warrant agreements, each performance warrant can be exercised for 0.05449 to 0.08174 of a Nova common share (depending on whether performance conditions are met) prior to the expiration date of December 18, 2023, at an exercise price of $5.51 per Nova common share. At March 31, 2022, there were 118,067 December 2018 Performance Warrants outstanding.

15.	Lease obligations
	March 31, 2022			December 31, 2021
---	---	---	---	---	---	---
Balance, beginning of year		33,470			1,440
Acquisition (note 3)		232,755			29,481
Liabilities incurred		1,408			4,514
Lease payments		(1,545	)		(2,721	)
Dispositions		—			(20	)
Interest expense		340			776
Balance, end of period		266,428			33,470
Current portion		23,975			5,701
Long-term		242,453			27,769

The Company has short-term leases with lease terms of 12 months or less as well as low-value leases. As these costs are incurred, they are recognized as general and administrative expense. These costs were immaterial in 2022.

16.	Other liabilities
	March 31, 2022		December 31, 2021
---	---	---	---	---
Financial guarantee liability (A)		324		466
DSU liability (B)		4,763		4,039
		5,087		4,505

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

(A)	FINANCIAL GUARANTEE LIABILITY

For franchise operated locations where the Company provided an indemnity for its franchisees, lease payments are made directly to the landlord by the franchisee, and the obligation to make lease payments would only revert to the Company if a franchisee defaulted on their obligations under the terms of the sub-lease or lease. The Company has made an estimate of expected credit losses in the event of default by the franchisees in making lease payments. This amount is recognized as a financial guarantee liability in the consolidated statement of financial position, and changes in the estimated liability are recognized as a financial guarantee liability expense within finance costs in the consolidated statement of loss and comprehensive loss.

(B)	DSU LIABILITY

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. Changes in the fair value are recognized within share-based compensation expense (note 18(d)).

17.	Share capital and warrants
(a)	Authorized
---	---

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

(b)	Issued and outstanding
		March 31, 2022				December 31, 2021
---	---	---	---	---	---	---	---	---	---	---
	Note	Number of<br><br><br>Shares		Carrying<br><br><br>Amount		Number of<br><br><br>Shares		Carrying<br><br><br>Amount
Balance, beginning of year			2,060,408,357		2,035,704		918,844,133		762,046
Share issuances			3,701,793		2,870		956,806,648		977,425
Share issuance costs			—		—		—		(16,371	)
Acquisition	3		320,601,352		287,129		24,431,278		26,216
Convertible debenture settlement			—		—		2,488,754		2,671
Derivative warrants exercised			—		—		152,146,950		277,136
Warrants exercised			—		—		195,711		178
Employee awards exercised^(1)^			500,000		1,740		5,494,883		6,403
Balance, end of period			2,385,211,502		2,327,443		2,060,408,357		2,035,704
(1)	Included in employee awards exercised are 500,000 RSUs that vested and were exercised in December 2021, however, the common shares were not issued until January 2022.
---	---
(c)	Common share purchase warrants
---	---
	Number of Warrants		Carrying Amount
---	---	---	---	---
Balance at December 31, 2021, and March 31, 2022		3,566,117		8,092

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

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

	Warrants outstanding and exercisable
Issued in relation to	Weighted average exercise price		Number of warrants		Weighted average<br><br><br>contractual remaining life (years)
Acquisition of financial obligation		15.94		480,000		0.3
Financial services		4.60		544,000		7.3
Acquired from Inner Spirit^(1)^		0.34		1,902,117		2.0
Sun 8		0.94		640,000		3.8
		3.20		3,566,117		2.9
(1)	Inner Spirit warrants are exchangeable for 0.0835 Sundial common shares in accordance with the transaction consideration and have been presented based on the number of Sundial common shares that are issuable.
---	---
18.	Share-based compensation
---	---

The Company has a number of share-based compensation plans which include simple and performance warrants, stock options, restricted share units (“RSUs”) and 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<br><br><br>March 31
	2022		2021
Equity-settled expense
Simple warrants (A)		547		597
Stock options (B)		29		70
Restricted share units (C)		2,389		1,644
Cash-settled expense
Deferred share units^(^^i^^)^ (D)		1,239		1,145
		4,204		3,456
(i)	Cash-settled DSUs are accounted for as a liability and are measured at fair value based on the market value of the Company’s common shares at each period end. Fluctuations in the fair value are recognized during the period in which they occur.
---	---

Equity-settled plans

a)	Simple and performance warrants

The Company issued simple warrants and performance warrants to employees, directors and others at the discretion of the Board. Simple and performance warrants granted generally vest annually over a three-year period, simple warrants expire five years after the grant date and performance warrants do not expire.

The following table summarizes changes in the simple and performance warrants during the three months ended March 31, 2022:

			Weighted<br><br><br>average<br><br><br>exercise price			Weighted<br><br><br>average<br><br><br>exercise price
Balance at December 31, 2021	2,594,200		$	4.86	1,387,200	$	4.18
Forfeited	(32,000	)		2.97	—		0.00
Balance at March 31, 2022	2,562,200		$	4.88	1,387,200	$	4.18

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

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

						Warrants exercisable
Range of exercise prices		Weighted<br><br><br>average<br><br><br>exercise<br><br><br>price		Weighted<br><br><br>average<br><br><br>contractual<br><br><br>life (years)		Number of<br><br><br>warrants		Weighted<br><br><br>average<br><br><br>exercise<br><br><br>price		Weighted<br><br><br>average<br><br><br>contractual<br><br><br>life (years)
Simple warrants
0.63 - 0.94	889,400		0.72		1.97		889,400		0.72		1.97
2.97 - 4.53	319,200		3.10		2.53		303,200		3.06		2.42
6.25 - 9.38	1,219,200		6.29		4.48		499,200		6.35		4.45
12.50 - 37.50	134,400		23.91		5.28		52,800		18.65		4.14
	2,562,200	$	4.88		3.40		1,744,600	$	3.28		2.82
Performance warrants
0.63 - 0.94	458,667		0.68	n/a			458,667		0.68	n/a
1.25 - 1.88	189,333		1.51	n/a			181,333		1.50	n/a
2.97 - 4.53	504,000		3.16	n/a			504,000		3.16	n/a
6.25 - 9.38	144,533		7.23	n/a			38,400		6.25	n/a
12.50 - 37.50	90,667		28.24	n/a			—		—	n/a
	1,387,200	$	4.18	n/a			1,182,400	$	2.04	n/a

All values are in US Dollars.

b)	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 expire ten years after the grant date.

The following table summarizes changes in stock options during the three months ended March 31, 2022:

	Stock options outstanding		Weighted<br><br><br>average<br><br><br>exercise price
Balance at December 31, 2021 and March 31, 2022		444,600	$	1.33

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

				Stock options exercisable
Exercise prices		Weighted<br><br><br>average<br><br><br>contractual<br><br><br>life (years)		Number of<br><br><br>options		Weighted<br><br><br>average<br><br><br>contractual<br><br><br>life (years)
1.15	325,000		8.16		108,332		8.16
1.19	81,600		8.24		81,600		8.24
3.15	38,000		6.11		20,500		5.81
	444,600		8.00		210,432		7.96

All values are in US Dollars.

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

c)	Restricted share units

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

The following table summarizes changes in RSUs during the three months ended March 31, 2022:


Balance at December 31, 2021	7,535,930
Granted	15,646,309
Forfeited	(337,000	)
Balance at March 31, 2022	22,845,239

Cash-settled plans

d)	Deferred share units

DSUs are granted to directors and generally vest in equal instalments over one year. DSUs are settled by making a cash payment to the holder equal to the fair value of the Company’s common shares calculated at the date of such payment. 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 March 31, 2022, the Company recognized a liability of $5.3 million relating to the fair value of cash-settled DSUs (December 31, 2021 – $4.0 million). The current portion of $0.5 million is included within accounts payable and accrued liabilities and $4.8 million is included as a non-current liability within other liabilities (note 16).

The following table summarizes changes in DSUs during the three months ended March 31, 2022:

	DSUs<br><br><br>outstanding
Balance at December 31, 2021		5,512,436
Granted		522,050
Balance at March 31, 2022		6,034,486
19.	Gross revenue
---	---

Cannabis 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, and sales to medical customers. Cannabis retail revenue is derived from retail cannabis sales to customers, franchise revenue consisting of royalty, advertising and franchise fee revenue, and other revenue consisting of millwork, supply and accessories revenue. Liquor retail revenue is derived from the sale of wines, beers and spirits to customers.

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

	Three months ended<br><br><br>March 31
	2022		2021
Cannabis revenue
Provincial boards		9,732		9,042
Medical		3		2
Licensed producers		1,570		2,704
Cannabis revenue^(1)^		11,305		11,748
Cannabis retail revenue
Retail^(2)^		5,439		—
Franchise		2,050		—
Other (millwork, supply, accessories)		23		—
Cannabis retail revenue		7,512		—
Liquor retail revenue^(3)^		1,310		—
Gross revenue		20,127		11,748
(1)	The Company had four major customers each with revenue in excess of 10% of total cannabis revenue. Sales to major customers totaled $7.8 million for the three months ended March 31, 2022 (three months ended March 31, 2021 – four major customers with total sales of $8.1 million).
---	---
(2)	Includes revenue of $705 from Nova retail stores for the one-day period March 31, 2022 (note 3).
---	---
(3)	One-day period March 31, 2022 (note 3).
---	---

The following table disaggregates cannabis revenue by form for the periods noted:

	Three months ended<br><br><br>March 31
	2022		2021
Revenue from dried flower		8,853		9,716
Revenue from vapes		531		1,413
Revenue from oil		27		181
Revenue from edibles and concentrates		1,536		438
Revenue from service		358		—
Gross cannabis revenue		11,305		11,748
20.	Investment revenue
---	---
	Three months ended<br><br><br>March 31
---	---	---	---	---
	2022		2021
Interest and fee revenue
Interest revenue from investments at amortized cost		995		113
Interest and fee revenue from investments at FVTPL		2,116		2,182
Interest revenue from cash		750		554
		3,861		2,849
	Three months ended<br><br><br>March 31
---	---	---	---	---	---
	2022			2021
Investment revenue
Realized gains		124			8,019
Unrealized (losses) gains (note 6)		(17,834	)		4,881
		(17,710	)		12,900

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

21.	Finance costs
	Three months ended<br><br><br>March 31
---	---	---	---	---	---
	2022			2021
Cash finance expense
Other finance costs		24			28
		24			28
Non-cash finance expense (income)
Interest on lease liabilities		340			23
Financial guarantee liability recovery		(142	)		—
		198			23
Interest income		(283	)		—
		(61	)		51
22.	loss per share
---	---
	Three months ended<br><br><br>March 31
---	---	---	---	---	---	---
	2022			2021
Weighted average shares outstanding (000s)
Basic and diluted^(1)^		2,061,462			1,439,597
Net loss attributable to Sundial Growers Inc.		(37,904	)		(134,416	)
Per share - basic and diluted	$	(0.02	)	$	(0.09	)
(1)	For the three months ended March 31, 2022, there were 3.6 million equity classified warrants, 99.3 million derivative warrants, 2.6 million simple warrants, 1.4 million performance warrants, 0.4 million stock options and 22.8 million RSUs that were excluded from the calculation as the impact was anti-dilutive (three months ended March 31, 2021– 1.0 million equity classified warrants, 99.3 million derivative warrants, 3.2 million simple warrants, 1.6 million performance warrants, 0.6 million stock options and 13.6 million RSUs).
---	---
23.	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.

a)	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

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

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
March 31, 2022	Carrying<br><br><br>amount		Level 1		Level 2		Level 3
Recurring measurements:
Financial assets
Marketable securities		66,491		66,491		—		—
Investments at FVTPL		63,179		—		—		63,179
Financial liabilities
Derivative warrants^(1)^		30,058		—		—		30,058
			Fair value measurements using
December 31, 2021	Carrying<br><br><br>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.
---	---

At March 31, 2022, a 10% change in the material assumptions would change the estimated fair value of derivative warrant liabilities by approximately $4.8 million.

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

24.	Commitments and contingencies

The following table summarizes contractual commitments at March 31, 2022:


Accounts payable and accrued liabilities	62,123	—	—	—	62,123
Lease obligations	38,137	66,634	49,645	65,007	219,423
Financial guarantee liability	—	324	—	—	324
Balance, end of period	100,260	66,958	49,645	65,007	281,870

Sundial Growers Inc.

Notes to the Condensed Consolidated Interim Financial Statements

For the three months ended March 31, 2022

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

(a)	Commitments

The Company has entered into certain supply agreements to provide dried cannabis and cannabis products to third parties. The contracts require the provision of various amounts of dried cannabis on or before certain dates. Should the Company not deliver the product in the agreed timeframe, financial penalties apply which may be paid either in product in-kind or cash. Under these agreements, the Company has accrued financial penalties payable as at March 31, 2022 of $2.5 million (December 31, 2021 – $2.5 million).

(b)	Contingencies

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.

sndl-ex992_13.htm

EXHIBIT 99.2

Sundial Growers Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

For the three months ended March 31, 2022

Management’s Discussion and Analysis

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and performance of Sundial Growers Inc. (“Sundial” or the “Company”) for the three months ended March 31, 2022 is dated May 15, 2022. This MD&A should be read in conjunction with the Company’s condensed consolidated interim financial statements and the notes thereto for the three months ended March 31, 2022 and the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 (the “Audited Financial Statements”) and the risks identified under “Risk Factors” below and in the Company’s Annual Report on Form 20-F for the year ended December 31, 2021 (the “Annual Report”). This MD&A has been prepared in accordance with National Instrument 51-102 - Continuous Disclosure Obligations and is presented in thousands of Canadian dollars, except where otherwise indicated.

MD&A – Table of Contents

COMPANY OVERVIEW	2
RECENT DEVELOPMENTS	3
OTHER DEVELOPMENTS	3
OPERATIONAL AND FINANCIAL HIGHLIGHTS	4
CONSOLIDATED RESULTS	5
OPERATING SEGMENTS	7
CANNABIS SEGMENT RESULTS	8
RETAIL CANNABIS SEGMENT RESULTS	11
RETAIL LIQUOR SEGMENT RESULTS	12
INVESTMENTS SEGMENT RESULTS	12
SELECTED QUARTERLY INFORMATION	13
LIQUIDITY AND CAPITAL RESOURCES	14
CONTRACTUAL COMMITMENTS AND CONTINGENCIES	17
SPECIFIED FINANCIAL MEASURES	18
RELATED PARTIES	19
OFF BALANCE SHEET ARRANGEMENTS	19
CRITICAL ACCOUNTING POLICIES AND ESTIMATES	19
NEW ACCOUNTING PRONOUNCEMENTS	20
RISK FACTORS	20
DISCLOSURE CONTROLS AND PROCEDURES	20
INTERNAL CONTROL OVER FINANCIAL REPORTING	20
REMEDIATION	20
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING	21
ABBREVIATIONS	21
FORWARD-LOOKING INFORMATION	21
ADDITIONAL INFORMATION	22

COMPANY OVERVIEW

Sundial (“SNDL”, “Sundial” or the “Company”) is a licensed producer that grows cannabis using state-of-the-art indoor facilities with corporate-owned and franchised cannabis retail operations focused on the retail sale of cannabis products and accessories, liquor retail operations focused on the retail sale of wines, beers and spirits and investments targeting the global cannabis industry. Sundial was incorporated under the Business Corporations Act (Alberta) on August 19, 2006. The Company’s common shares are listed under the symbol “SNDL” on the NASDAQ Capital Market (“Nasdaq”).

Sundial is headquartered in Calgary, Alberta, with operations in Olds, Alberta, and Rocky View County, Alberta, and corporate-owned and franchised retail stores in five provinces across Canada.

Sundial currently produces and markets cannabis products for the Canadian adult-use market. Sundial’s purpose-built indoor modular grow rooms create consistent, highly controlled cultivation environments and are the foundation of the Company’s production of high-quality, strain-specific cannabis products. Sundial’s operations cultivate cannabis using an individualized “room” approach, in approximately 448,000 square feet of total space. The Company has established supply agreements with nine Canadian provinces and has a distribution network that covers 98% of the national adult-use cannabis industry.

The Company’s primary focus has been on producing and distributing premium inhalable products and brands. Upon receiving a licence from Health Canada to sell cannabis oil products, the Company began the sale and distribution of cannabis vape products in December 2019. The Company is currently marketing its adult-use products under its Top Leaf (Premium), Sundial Cannabis (Premium Core), Palmetto (Core) and Grasslands (Value) brands and intends to introduce new products under these brands as it expands its brand portfolio. The Company also operates the Spiritleaf retail banner. Spiritleaf aims to be the most knowledgeable and trusted source of recreational cannabis by offering a premium consumer experience and quality curated cannabis products.

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

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 Cannabis Inc. (“Nova”), a Canadian cannabis retailer operating stores across Alberta, Saskatchewan and Ontario.

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

RECENT DEVELOPMENTS

ALCANNA INC. ACQUISITION

On October 7, 2021, the Company announced that it had entered into an arrangement agreement with 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 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.

OTHER DEVELOPMENTS

Initiation of share repurchase program

On November 11, 2021, the Company announced that the board of directors of Sundial (the “Board”) approved a new share repurchase program (the "Share Repurchase Program") which authorizes the Company to repurchase, from time to time, up to an aggregate of $100.0 million (the "Share Repurchase Amount") of its outstanding common shares through open market purchases at prevailing market prices. Notwithstanding the Share Repurchase Amount, Sundial may only purchase a maximum of 102.8 million common shares under the Share Repurchase Program, representing approximately 5% of the issued and outstanding common shares as at the date of announcement.

Subject to the foregoing limitations, the Share Repurchase Program commenced on November 19, 2021 and will expire on November 19, 2022. The Share Repurchase Program does not require the Company to purchase any minimum number of common shares and repurchases may be suspended or terminated at any time at the Company's discretion. The actual number of common shares which may be purchased pursuant to the Share Repurchase Program and the timing of any purchases will be determined by Sundial’s management and the Board. All common shares purchased pursuant to the Share Repurchase Program will be returned to treasury for cancellation.

No common shares were repurchased during the three months ended March 31, 2022.

COVID-19

The Company is monitoring daily developments in the COVID-19 pandemic and actions taken by the government authorities in response thereto. As the safety of employees, communities and family is a priority for the Company, it will continue to commit to all current safety protocols in place, which include physical distancing, enhanced cleaning and sanitation processes and frequency, installation of safety shields in retail outlets and enhanced screening measures prior to allowing employees and visitors into the facilities. The Company believes that it can maintain safe operations with these pandemic-related procedures and protocols in place.

NASDAQ MINIMUM BID REQUIREMENT

On August 9, 2021, the Company was notified by the Nasdaq Listing Qualifications Department that the closing bid price of the Company’s common shares for the 30 consecutive business day period from June 25, 2021, to August 6, 2021 did not meet the minimum bid price of US$1.00 per share requirement, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”). The notice has no immediate effect on the trading of the Company’s common shares on the Nasdaq.

Pursuant to the Nasdaq Listing Rules, the Company had been provided with a compliance period of 180 calendar days from the date of notification in which to regain compliance with the Minimum Bid Requirement. As a result, the Company had until February 7, 2022, to regain compliance with the Minimum Bid Requirement. On February 8, 2022, the Company received a 180-day extension to regain compliance with the Minimum Bid Requirement. As a result, the Company has until August 8, 2022, to regain compliance with the Minimum Bid Requirement. If at any time prior to August 8, 2022, the closing bid price of the Company’s common stock is at least US$1.00 per share for a minimum of ten consecutive business days, the Company will be considered by Nasdaq to have regained compliance with the Minimum Bid Requirement.

If the Company does not regain compliance with the Minimum Bid Requirement by August 8, 2022, it intends to implement a reverse share split in the third quarter of 2022, subject to prior shareholder approval, which is expected to be obtained at the Company’s 2022 Annual General Meeting.

OPERATIONAL AND FINANCIAL HIGHLIGHTS

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

($000s, except as indicated)	YTD 2022
Financial
Gross revenue		20,127		11,748		8,379		71	%
Net revenue		17,597		9,891		7,706		78	%
Cost of sales		14,326		11,445		2,881		25	%
Gross margin		3,419		(3,452	)	6,871		199	%
Gross margin %		19	%	-35	%			54	%
Gross margin before fair value adjustments^(1)(2)^		1,290		(3,308	)	4,598		139	%
Gross margin before fair value adjustments %^(2)^		7	%	-33	%			122	%
Interest and fee revenue		3,861		2,849		1,012		36	%
Investment (loss) income		(17,710	)	12,900		(30,610	)	237	%
(Loss) income from operations		(23,170	)	1,685		(24,855	)	1475	%
Net loss^(3)^		(37,904	)	(134,416	)	96,512		72	%
Per share, basic and diluted^(3)^		(0.02	)	(0.09	)	0.07		78	%
Adjusted EBITDA^(2)^		(675	)	3,327		(4,002	)	120	%
Statement of Financial Position
Cash and cash equivalents		422,824		873,445		(450,621	)	-52	%
Biological assets		3,731		2,835		896		32	%
Inventory		140,950		32,837		108,113		329	%
Property, plant and equipment		319,747		114,039		205,708		180	%
Total assets		1,996,272		1,149,689		846,583		74	%
Operational
Kilogram equivalents sold		3,371		3,989		(618	)	-15	%
Average gross selling price per gram ^(4)^		3.35		2.95		0.40		14	%
Average net selling price per gram ^(5)^		2.60		2.48		0.12		5	%
(1)	Includes inventory obsolescence and impairment of $2.0 million for the three months ended March 31, 2022, and $1.8 million for the three months ended March 31, 2021.
---	---
(2)	Adjusted EBITDA, gross margin before fair value adjustments and gross margin before fair value adjustments percentage are specified financial measures that do not have standardized meanings prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. Refer to the “Specified Financial Measures” section of this MD&A for further information.
---	---
(3)	Net loss and related per share amounts are attributable to owners of the Company.
---	---
(4)	Net of payment discounts with respect to sales under Sundial’s supply agreements with Canadian provincial boards.
---	---
(5)	Net of excise tax.
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CONSOLIDATED RESULTS

General and administrative

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Salaries and wages		6,346		3,934
Consulting fees		412		337
Office and general		1,698		1,319
Professional fees		2,087		882
Director compensation		88		88
Other		51		533
		10,682		7,093

General and administrative expenses for the three months ended March 31, 2022 were $10.7 million compared to $7.1 million for the three months ended March 31, 2021. The increase of $3.6 million was mainly due to increases in salaries and wages, office and general and professional fees. The increases in salaries and wages and office and general expenses were due to the Inner Spirit Transaction. The increase in professional fees was largely due to an increase in accounting services fees relating to audit and quarterly review fees and an increase in legal fees relating to public filings and corporate governance.

Share-based compensation

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Equity-settled expense
Simple warrants		547		597
Stock options		29		70
Restricted share units		2,389		1,644
Cash-settled expense
Deferred share units		1,239		1,145
		4,204		3,456

Share-based compensation expense includes the expense related to the Company’s issuance of simple and performance warrants, stock options, restricted share units (“RSUs”) and deferred share units (“DSUs”) to employees, directors, and others at the discretion of the Company’s Board.

The fair value of the Company’s common shares is based on public trading data. The estimated fair value of the Company’s common shares at the time of grant is used to determine the associated share-based compensation expense. The Company determines the amount of share-based compensation expense for equity settled awards by utilizing the Black-Scholes pricing model with inputs based on the terms of the award, including the strike price, and other estimates and assumptions, including 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 the awards granted.

Share-based compensation expense for the three months ended March 31, 2022 was $4.2 million compared to $3.5 million for the three months ended March 31, 2021. The increase of $0.7 million was primarily due to an increase in RSU expense caused by an increase in the number of units granted.

Transaction costs

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Transaction costs		6,481		3,648

Transaction costs for the three months ended March 31, 2022 were $6.5 million compared to $3.6 million for the three months ended March 31, 2021. Transaction costs include costs associated with the Alcanna Transaction. Transaction costs in the comparative period included costs associated with legal costs and various financing initiatives.

Finance (income) costs

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Cash finance expense
Other finance costs		24			28
		24			28
Non-cash finance expense
Interest on lease liabilities		340			23
Financial guarantee liability recovery		(142	)		—
		198			23
Interest income		(283	)		—
		(61	)		51

Finance costs include interest expense related to lease obligations, finance income related to net investment in subleases, change in fair value of investment at FVTPL and certain other expenses.

Finance income for the three months ended March 31, 2022 was $0.1 million compared to costs of $0.1 million for the three months ended March 31, 2021. The increase of $0.2 million was due to interest income related to net investment in subleases and the financial guarantee liability recovery, partially offset by an increase in interest expense on lease liabilities.

Change in estimate of fair value of derivative warrants

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Change in estimate of fair value of derivative warrants		8,300		129,944

Change in estimate of fair value of derivative warrants for the three months ended March 31, 2022 was an expense of $8.3 million compared to an expense of $129.9 million for the three months ended March 31, 2021. The expense in the current period relates to an increase in the fair value of the 98.3 million derivative warrants, mainly due to an increase in the Company’s share price from USD$0.58 at December 31, 2021, to USD$0.70 at March 31, 2022 . No derivative warrants were issued in the current period. The expense in the comparative period related to the granting of 249.6 million derivative warrants and the corresponding changes in fair value.

The carrying amount is an estimate of the fair value of the derivative warrants and is presented as a current liability, pursuant to IFRS requirements due to the warrant exercise prices being denominated in United States dollars. Refer to note 23 in the condensed consolidated interim financial statements for valuation methodology. The Company has no cash obligation with respect to the derivative warrants, and its only obligation is to deliver common shares if, and when, warrants are exercised.

Net loss

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Net loss		(38,040	)		(134,445	)

Net loss for the three months ended March 31, 2022 was $38.0 million compared to a net loss of $134.4 million for the three months ended March 31, 2021. The decreased loss of $96.4 million was mostly due to higher net revenue ($7.7 million), the inclusion of share of profit of equity-accounted investees ($4.1 million) and decreased expense associated with the change in fair value of derivative warrant liabilities ($121.6 million), partially offset by investment losses ($30.6 million) and higher general and administrative expenses ($3.6 million).

Adjusted EBITDA

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Adjusted EBITDA^(1)^		(675	)		3,327
(1)	Adjusted EBITDA is a specified financial measure that does not have standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. Refer to the “Specified Financial Measures” section of this MD&A for further information.
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Adjusted EBITDA was a loss of $0.7 million for the three months ended March 31, 2022 compared to $3.3 million for the three months ended March 31, 2021. The decrease was due to the following:

•	an increase in cost of sales, due to the inclusion of cannabis retail cost of sales;
•	an increase in general and administrative expenses, primarily as a result of increases in salaries and wages, office and admin expense and professional fees; and
---	---
•	a decrease in realized gains on marketable securities.
---	---

The decrease was partially offset by:

•	an increase in net revenue, primarily as a result of the inclusion of cannabis retail revenue; and
•	share of profit of equity-accounted investees.
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OPERATING SEGMENTS

($000s)	Cannabis			Cannabis Retail^(1)^		Liquor Retail^(1)^			Investments^(2)^			Corporate			Total
As at March 31, 2022
Total assets		153,612			254,514		582,808			982,306			23,032			1,996,272
Three months ended March 31, 2022
Net revenue		8,775			7,512		1,310			—			—			17,597
Gross margin		(158	)		3,293		284			—			—			3,419
Interest and fee revenue		—			—		—			3,861			—			3,861
Loss on marketable securities		—			—		—			(17,710	)		—			(17,710	)
Share of profit of equity-accounted investees		—			—		—			4,091			—			4,091
Depreciation and amortization		68			595		—			—			76			739
Earnings (loss) before tax		(9,190	)		131		(73	)		(9,758	)		(19,150	)		(38,040	)
(1)	Cannabis retail includes one day of operations of Nova retail stores and liquor retail includes one day of operations of Alcanna retail stores.
---	---
(2)	Total assets include cash and cash equivalents.
---	---
($000s)	Cannabis			Cannabis Retail		Liquor Retail		Investments^(1)^		Corporate			Total
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
As at December 31, 2021
Total assets		147,887			153,624		—		1,093,596		29,155			1,424,262
Three months ended March 31, 2021
Net revenue		9,891			—		—		—		—			9,891
Gross margin		(3,452	)		—		—		—		—			(3,452	)
Interest and fee revenue		—			—		—		2,849		—			2,849
Gain on marketable securities		—			—		—		12,900		—			12,900
Share of profit of equity-accounted investees		—			—		—		—		—			—
Depreciation and amortization		954			—		—		—		104			1,058
Earnings (loss) before tax		(9,172	)		—		—		14,300		(139,573	)		(134,445	)
(1)	Total assets include cash and cash equivalents.
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CANNABIS SEGMENT RESULTS

Kilogram equivalents sold

	Three months ended<br><br><br>March 31
	2022		2021
Provincial boards		2,550		2,874
Medical		1		—
Licensed producers		820		1,115
Total kilogram equivalents sold		3,371		3,989

For the three months ended March 31, 2022, the Company sold 3,371 kilogram equivalents of cannabis compared to 3,989 kilogram equivalents for the three months ended March 31, 2021. The decrease of 618 kilogram equivalents sold was due to a decrease in kilogram equivalents sold to other licensed producers (“LPs”) and a slight decrease in kilogram equivalents sold to provincial boards. The Company’s sales growth strategy is to continue targeting branded sales to provincial boards.

The Company’s calculation of kilogram equivalents (or other measurement equivalents stated in this MD&A, such as gram equivalents) is based upon internal estimates and may not be comparable to similar measures used by other companies.

Selling price

	Three months ended<br><br><br>March 31
($/gram equivalent)	2022			2021
Provincial boards	$	3.82		$	3.15
Medical	$	3.00		$	7.62
Licensed producers	$	1.91		$	2.43
Average gross selling price	$	3.35		$	2.95
Excise taxes	$	(0.75	)	$	(0.47	)
Average net selling price	$	2.60		$	2.48

For the three months ended March 31, 2022, the average net selling price was $2.60 per gram equivalent compared to $2.48 for the three months ended March 31, 2021. The increase of $0.12 per gram equivalent was due to higher prices for provincial board sales, partially offset by lower prices for sales to other LPs. Provincial board prices have increased due to the shift from value products to core products and lower price discounts and concessions compared to the prior period.

The principal drivers of the Company’s realized prices are the formats of the products sold (currently both bulk and packaged flower, inhalables and accessories, trim, bulk extracted oil, edibles and concentrates) and the channels in which products are sold (principally Canadian provincial boards and LPs).

Excise taxes are the federal excise duties and additional provincial or territorial duties payable on adult-use cannabis products. Excise taxes for the three months ended March 31, 2022 and 2021 are only calculated based on adult-use end-consumer packaged cannabis sales.

Revenue

Revenue by form

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Revenue from dried flower		8,853		9,716
Revenue from vapes		531		1,413
Revenue from oil		27		181
Revenue from edibles and concentrates		1,536		438
Revenue from services		358		—
Gross revenue		11,305		11,748

Revenue by channel

	Three months ended<br><br><br>March 31
($000s, except as indicated)	2022			2021
Provincial boards		9,732			9,042
Medical		3			2
Licensed producers		1,570			2,704
Gross revenue		11,305			11,748
Excise taxes		(2,530	)		(1,857	)
Net revenue		8,775			9,891
Gross revenue per gram sold	$	3.35		$	2.95
Net revenue per gram sold	$	2.60		$	2.48

The Company’s revenue comprises bulk and packaged sales under the Cannabis Act pursuant to its supply agreements with Canadian provincial boards and to other LPs. The Company’s sales growth strategy is to continue targeting branded sales to provincial boards.

The Company has entered into a concentrates licensing agreement with a third party based out of its Rocky View facility. Administrative fees and facility fees charged under the licensing agreement are recorded as revenue from services.

Gross revenue for the three months ended March 31, 2022 was $11.3 million compared to $11.7 million for the three months ended March 31, 2021. The decrease of $0.4 million was due to a decrease in kilogram equivalents sold, partially offset by an increase in selling prices. Provincial board revenue increased by $0.7 million due to an increase in selling prices, partially offset by a decrease in kilogram equivalents sold. LP revenue decreased by $1.1 million due to a decrease in kilogram equivalents sold and a decrease in selling prices.

Excise taxes are the federal excise duties and additional provincial or territorial duties payable on adult-use cannabis products at the time such product is shipped from the production facility in its final consumer-facing packaging. Federal duties on adult-use cannabis products are calculated as the greater of (i) $0.25 per gram of flowering material, (ii) $0.75 per gram of non-flowering material or $0.25 per viable seed or seedling and (iii) 2.5% of the dutiable amount as calculated in accordance with the Excise Act, 2001. The rates of provincial or territorial duties vary.

Excise taxes for the three months ended March 31, 2022 were $2.5 million compared to $1.9 million for the three months ended March 31, 2021. The increase of $0.6 million was due to expanded sales in provinces with higher provincial duties than the comparable period.

Cost of sales

	Three months ended<br><br><br>March 31
($000s, except as indicated)	2022		2021
Cost of sales		9,081		11,445
Cost of sales per gram sold	$	2.69	$	2.87

Cost of sales includes three main categories: pre-harvest, post-harvest and shipment and fulfillment costs. These costs are incurred in respect of cultivating, harvesting, processing and packaging cannabis products. Pre-harvest costs include all direct and indirect costs incurred between initial recognition and the point of harvest, including labour-related costs, grow consumables, materials, utilities, facilities costs and depreciation related to production facilities. Post-harvest costs include all direct and indirect costs incurred subsequent to the point of harvest, including labour-related costs, consumables, materials, utilities and facilities costs. Shipment and fulfillment costs include packaging, transportation, quality control and testing costs.

Cost of sales for the three months ended March 31, 2022 were $9.1 million compared to $11.4 million for the three months ended March 31, 2021. The decrease of $2.3 million was due to a decrease in kilogram equivalents sold compared to the prior period and a decrease in the cost of sales per gram sold compared to the prior period. Cost of sales per gram sold for the three months ended March 31, 2022 were $2.69 compared to $2.87 for the three months ended March 31, 2021. The decrease of $0.18 per gram sold was due to a decrease in per gram costs across branded product formats, reflecting the Company’s focus on cost optimization and offering the most competitive and profitable strains and brands to customers.

Gross margin

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Net revenue		8,775			9,891
Cost of sales		9,081			11,445
Inventory obsolescence and impairment		1,981			1,754
Gross margin before fair value adjustments ^(1)^		(2,287	)		(3,308	)
Change in fair value of biological assets		3,690			(94	)
Change in fair value realized through inventory		(1,561	)		(50	)
Gross margin		(158	)		(3,452	)
(1)	Gross margin before fair value adjustments is a specified financial measure that does not have standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. Refer to the “Specified Financial Measures” section of this MD&A for further information.
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Gross margin before fair value adjustments

Gross margin before fair value adjustments is defined as net revenue less cost of sales and inventory obsolescence and impairment before adjusting for the non-cash changes in the fair value adjustments on the sale of inventory and the growth of biological assets.

Gross margin before fair value adjustments for the three months ended March 31, 2022 was negative $2.3 million compared to negative $3.3 million for the three months ended March 31, 2021. The lower cost of sales was partially offset by lower net revenue. The inventory obsolescence provision was applied across all product formats. The inventory obsolescence provision in the comparative period was applied primarily to concentrates due to price compression in the market.

The total inventory obsolescence and impairment recognized during the three months ended March 31, 2022 was $2.7 million, with $2.0 million relating to cost of sales and $0.7 million relating to the change in fair value realized through inventory. The total inventory obsolescence and impairment recognized during the three months ended March 31, 2021 was $1.8 million, with $1.8 million relating to cost of sales and nil relating to the change in fair value realized through inventory.

Change in fair value of biological assets

Biological assets consist of cannabis plants in various stages of vegetation, including clones, which have not been harvested. Net unrealized changes in fair value of biological assets less cost to sell during the period are included in the results of operations for the related period. Biological assets 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 adjusted for the amount for the expected selling price less costs to sell per gram.

Change in fair value realized through inventory

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Change in fair value realized through inventory sold		(825	)		(50	)
Change in fair value recognized through inventory obsolescence provision		(736	)		—
Change in fair value realized through inventory		(1,561	)		(50	)

Change in fair value realized through inventory comprises fair value adjustments associated with the cost of inventory when such inventory is sold. Inventories are carried at the lower of cost and net realizable value. When sold, the cost of inventory is recorded as cost of sales, while fair value adjustments are recorded as change in fair value realized through inventory.

The change in fair value realized through inventory for the three months ended March 31, 2022 was a decrease of $1.6 million compared to a decrease of $0.1 million for the three months ended March 31, 2021. The decrease of $1.5 million was due to the fair value component of the excess and obsolete inventory provision and the reversal of larger prior period changes in fair value of biological assets as they are transferred to inventory and sold.

RETAIL CANNABIS SEGMENT RESULTS

GROSS revenue

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Retail		5,439		—
Franchise		2,050		—
Other (millwork, supply, accessories)		23		—
Gross revenue		7,512		—

Gross revenue for the three months ended March 31, 2022 was $7.5 million. Retail revenue is comprised of retail cannabis sales to private customers from corporate-owned stores. Franchise revenue is comprised of royalty revenue, advertising revenue and franchise fees. Prior to opening, Spiritleaf franchised retail cannabis stores purchase millwork (store fixtures) from the Company. Once a franchise Spiritleaf retail cannabis store is open and operating, it purchases supplies and Spiritleaf accessories from the Company to sell to customers.

GROSS MARGIN

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Gross revenue		7,512		—
Cost of sales		4,219		—
Gross margin		3,293		—

Gross margin for the three months ended March 31, 2022 was $3.3 million. Cost of sales for cannabis retail operations is comprised of the cost of pre-packaged cannabis and related accessories.

RETAIL LIQUOR SEGMENT RESULTS

The retail liquor segment results are comprised of one day of operations representing the one day for March 31, 2022.

GROSS MARGIN

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Gross revenue		1,310		—
Cost of sales		1,026		—
Gross margin		284		—

Gross margin for the one day ended March 31, 2022 was $0.3 million. Cost of sales for liquor retail operations is comprised of the cost of wine, beer and spirits.

INVESTMENTS SEGMENT RESULTS

Interest and fee revenue

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Interest and fee revenue
Interest revenue from investments at amortized cost		995		113
Interest and fee revenue from investments at Fair Value Through Profit or Loss		2,116		2,182
Interest revenue from cash		750		554
		3,861		2,849

Interest and fee revenue for the three months ended March 31, 2022, was $3.9 million compared to $2.8 million for the three months ended March 31, 2021. The increase of $1.1 million was due to an increase in the number and amount of investments at amortized cost compared to the prior period. The Company continues to build its investment portfolio with a focus on maximizing risk-adjusted cash flows and shareholder value.

Investment revenue

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Investment revenue
Realized gains		124			8,019
Unrealized (losses) gains		(17,834	)		4,881
		(17,710	)		12,900

Investment revenue is comprised of realized and unrealized gains and losses on marketable securities. Investment revenue for the three months ended March 31, 2022, was negative $17.7 million compared to $12.9 million for the three months ended March 31, 2021. The change from an unrealized gain in the comparative period to an unrealized loss in the current period was mostly due to decreasing share prices of the Company’s investments in Village Farms International, Inc. and The Valens Company. The Company also realized a gain on disposition of $8.0 million in the comparative period from the disposition of all its shares held in another Canadian LP. The Company continues to strategically deploy capital with a focus on maximizing risk-adjusted cash flows and shareholder value.

Share of profit of equity-accounted investees

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Net profit		4,091		—

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

During the three months ended March 31, 2022, the Company recognized $4.1 million as its share of profit of equity-accounted investees.

SELECTED QUARTERLY INFORMATION

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

	2022			2021												2020
($000s, except as indicated)	Q1			Q4			Q3			Q2			Q1			Q4 ^(2)^			Q3			Q2
Gross revenue ^(1)^		20,127			25,630			17,162			12,739			11,748			16,865			15,525			24,341
Gross investment revenue (loss)		(13,849	)		(38,108	)		(14,699	)		5,706			15,749			—			—			—
Gross margin		3,419			(2,499	)		1,782			(2,821	)		(3,452	)		(4,695	)		(19,544	)		(15,137	)
Net income (loss) from continuing operations attributable to owners of the Company		(37,904	)		(54,990	)		11,311			(52,287	)		(134,416	)		(57,622	)		(71,386	)		(32,750	)
Per share, basic		(0.02	)		(0.03	)		0.006			(0.03	)		(0.09	)		(0.11	)		(0.53	)		(0.31	)
Per share, diluted		(0.02	)		(0.03	)		0.005			(0.03	)		(0.09	)		(0.11	)		(0.53	)		(0.31	)
Net loss from discontinued operations attributable to owners of the Company		—			—			—			—			—			—			—			(27,593	)
Per share, basic and diluted		—			—			—			—			—			—			—			(0.26	)
Net loss attributable to owners of the Company		(37,904	)		(54,990	)		11,311			(52,287	)		(134,416	)		(57,622	)		(71,386	)		(60,343	)
Per share, basic		(0.02	)		(0.03	)		0.006			(0.03	)		(0.09	)		(0.11	)		(0.53	)		(0.57	)
Per share, diluted		(0.02	)		(0.03	)		0.005			(0.03	)		(0.09	)		(0.11	)		(0.53	)		(0.57	)
Adjusted EBITDA from continuing operations (3)		(675	)		18,425			10,539			(205	)		3,327			(5,633	)		(4,409	)		(3,898	)
(1)	Gross revenue from continuing operations.
---	---
(2)	Q4 2020 net loss from continuing operations, net loss attributable to owners of the Company and the per share amounts have been recast to attribute 50% of the impairment of intangible assets recorded to non-controlling interest.
---	---
(3)	Adjusted EBITDA from continuing operations is a specified financial measure that does not have standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures used by other companies. Refer to the “Specified Financial Measures” section of this MD&A for further information.
---	---

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

•	disposition of Bridge Farm;
•	issuance and conversion of convertible notes and warrants;
---	---
•	extinguishment and repayment of the Company’s long-term debt;
---	---
•	implementing several streamlining and efficiency initiatives which included workforce optimizations;
---	---
•	issuance of equity securities in various registered offerings;
---	---
•	issuance of common shares under various at-the-market programs;
---	---
•	entering into and acquiring several cannabis-related investments;
---	---
•	investing and disposing of marketable securities;
---	---
•	decreasing ownership in Pathway;
---	---
•	shift to include investment strategy as part of operations;
---	---
•	price discounts and provisions for product returns;
---	---
•	impairment of property, plant and equipment;
---	---
•	provisions for inventory obsolescence;
---	---
•	investing in SunStream;
---	---
•	acquisition of Inner Spirit; and
---	---
•	acquisition of Alcanna
---	---

LIQUIDITY AND CAPITAL RESOURCES

($000s)	March 31, 2022		December 31, 2021
Cash and cash equivalents		422,824		558,251

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

The Company’s primary need for liquidity is to fund investment opportunities, capital expenditures, working capital requirements and for general corporate purposes. The Company’s lease obligations have increased significantly due to both the Inner Spirit Transaction and the Alcanna Transaction as corporate stores have leased retail space. Refer to “Contractual Commitments and Contingencies – Commitments” for an estimate of the contractual maturities of the Company’s lease obligations. The Company’s primary source of liquidity historically has been from funds received from the proceeds of common share issuances and debt financing. The Company’s ability to fund operations and investments and make planned capital expenditures depends on future operating performance and cash flows, as well as the availability of future financing – all of which is subject to prevailing economic conditions and financial, business and other factors.

Management believes its current capital resources 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.

Debt

As at March 31, 2022, the Company was debt free.

Equity

As at March 31, 2022, the Company had the following share capital instruments outstanding:

(000s)	March 31, 2022
Common shares		2,385,212	2,060,408
Common share purchase warrants^(1)^		3,566	3,566
Simple warrants ^(2)^		2,562	2,594
Performance warrants ^(3)^		1,387	1,387
Stock options^(4)^		445	445
Restricted share units		22,845	7,536
(1)	3.6 million warrants were exercisable as at March 31, 2022.
---	---
(2)	1.7 million simple warrants were exercisable as at March 31, 2022.
---	---
(3)	1.2 million performance warrants were exercisable as at March 31, 2022.
---	---
(4)	0.2 million stock options were exercisable as at March 31, 2022.
---	---

As at March 31, 2022, the Company had 2.39 billion shares outstanding (December 31, 2021 – 2.06 billion shares).

Common shares were issued during the three months ended March 31, 2022 in connection with the following transactions:

•	The Company issued 3.7 million common shares related to the termination of the service and sale agreement with Sun 8 Holdings Inc; and
•	The Company issued 320.6 million common shares related to the Alcanna Transaction.
---	---

As at May 15, 2022, a total of 2.39 billion common shares were outstanding.

Capital Expenditures

	Three months ended<br><br><br>March 31
($000s)	2022		2021
Olds facility		802		(513	)
Equipment and other		179		119
Total		981		(394	)

Cash Flow Summary

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Cash provided by (used in):
Operating activities		(26,020	)		(34,366	)
Investing activities		(103,972	)		(10,859	)
Financing activities		(5,435	)		860,246
Effect of exchange rate changes		—			(1,952	)
Change in cash and cash equivalents		(135,427	)		813,069

Cash Flow – Operating Activities

Net cash used in operating activities was $26.0 million for the three months ended March 31, 2022 compared to $34.4 million used in operating activities for the three months ended March 31, 2021. The decrease of $8.4 million was due to a decrease in additions to marketable securities and interest received, partially offset by an increase in net loss adjusted for non-cash items, lower proceeds from the disposition of marketable securities and change in non-cash working capital. The change in non-cash working capital is comprised of changes in inventory, accounts receivable, prepaid expenses and deposits and accounts payable.

Cash Flow – Investing Activities

Net cash used in investing activities was $104.0 million for the three months ended March 31, 2022 compared to $10.9 million used in investing activities for the three months ended March 31, 2021. The increase of $93.1 million was primarily due to the acquisition of Alcanna, additions to equity-accounted investees and additions to investments.

Cash Flow – Financing Activities

Net cash used in financing activities was $5.4 million for the three months ended March 31, 2022 compared to $860.2 million provided by financing activities for the three months ended March 31, 2021. The decrease of $865.6 billion was largely due to proceeds from the issuance of shares, proceeds from registered offerings and proceeds from the exercise of derivative warrants in the comparative period.

Liquidity risks associated with financial instruments

Credit risk

Credit risk is the risk of financial loss if the counterparty to a financial transaction fails to meet its obligations. The Company manages risk over its accounts receivable by issuing credit only to credit worthy counterparties. The Company limits its exposure to credit risk over its investments by ensuring the agreements governing the investments are secured in the event of counterparty default. The Company considers financial instruments to have low credit risk when its credit risk rating is equivalent to investment grade. The Company assumes that the credit risk on a financial asset has increased significantly if it is outstanding past the contractual payment terms. The Company considers a financial asset to be in default when the debtor is unlikely to pay its credit obligations to the Company.

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

The Company has evaluated the credit risk of its investments, taking into consideration historical credit loss experience, financial factors specific to the debtors and general economic conditions, and determined the expected credit loss to be nil.

The maximum amount of the Company’s credit risk exposure is the carrying amounts of cash and cash equivalents, accounts receivable, and investments. The Company attempts to mitigate such exposure to its cash and cash equivalents by investing only in financial institutions with investment grade credit ratings or secured investments. The Company manages risk over its accounts receivable by issuing credit only to credit worthy counterparties.

Liquidity risk

Liquidity risk is the risk that the Company cannot meet its financial obligations when due. The Company manages liquidity risk by monitoring operating and growth requirements. The Company prepares forecasts to ensure sufficient liquidity to fulfil obligations and operating plans. Management believes its current capital resources 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.

Market risk

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

CONTRACTUAL COMMITMENTS AND CONTINGENCIES

a)	Commitments

The information presented in the table below reflects managements estimate of the contractual maturities of the Company’s obligations at March 31, 2022.

($000s)
Accounts payable and accrued liabilities	62,123	—	—	—	62,123
Lease obligations	38,137	66,634	49,645	65,007	219,423
Financial guarantee liability	—	324	—	—	324
Total	100,260	66,958	49,645	65,007	281,870

b)	Contingencies

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of our business. Such proceedings, certain of which have been threatened against us, could include commercial litigation related to breach of contract claims brought by our customers, suppliers and contractors, as well as litigation related to termination of certain of our employees. The outcome of any litigation is inherently uncertain. Although we believe we have meritorious defenses against all currently pending and threatened proceedings and intend to vigorously defend all claims if they are brought, unfavorable rulings, judgments or settlement terms could have a material adverse impact on our business and results of operations.

In connection with our initial public offering (“IPO”), we and certain of our current and former officers and directors, as well as the underwriters of our IPO, were named as defendants in several putative shareholder class action lawsuits filed between September 9, 2019 and November 1, 2019. The cases were consolidated in two separate actions depending on the court in which they were first filed, one in the Supreme Court of New York, New York County, captioned In re Sundial Growers Inc. Securities Litigation, Index No. 655178/2019 (the “New York IPO Action”), and the other in the United States District Court for the Southern District of New York, captioned In re Sundial Growers Inc. Securities Litigation, Master Case No. 1:19-cv-08913-ALC (the “Federal IPO Action”). The complaints in each of the two consolidated actions assert claims under Sections 11, 12(a)(2), and 15 of the U.S. Securities Act of 1933, as amended (the “Securities Act”). They generally allege that we made material misstatements and omissions in the prospectus and registration statement in connection with the IPO with respect to, among other things, the failure to disclose systemic quality control issues as well as the return of cannabis and termination of the supply agreement by one of the Company’s customers. The complaint in the Federal IPO Action also includes allegations that we made misstatements as to revenue. The New York IPO Action was dismissed on May 15, 2020 and the dismissal was affirmed on February 16, 2021, by the Appellate Division, First Judicial Department, of the Supreme Court of New York.

In the Federal IPO Action, the court denied defendants’ motion to dismiss on March 30, 2021. On August 27, 2021, following a mediation, the parties notified the court that they had reached an agreement in principle to settle the Federal IPO Action. On December 2, 2021, the parties executed a settlement agreement, which was submitted to the court for approval on December 3, 2021 and remains subject to such court approval.

In addition, on May 7, 2020, the Company and certain of its current and former directors and officers were named as defendants in a lawsuit, captioned SUN, a Series of E Squared Investment Fund, LLC et al. v. Sundial Growers Inc. et al., Case No. 1:20-cv-03579-ALC, in the United States District Court for the Southern District of New York. The complaint asserts claims for alleged violations of U.S. federal securities laws, including Sections 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) the Securities Exchange Act of 1934, as well as claims for breach of contract, fraud in the inducement and negligent misrepresentation. Among other things, the complaint alleges that the company made misrepresentations regarding the licensing and ability of Bridge Farm to export hemp and CBD to Europe, as well as regarding the quality of the Company’s cannabis. On September 30, 2021, the court granted defendants’

motion to dismiss and dismissed the case, dismissing the claims under the U.S. federal securities laws with prejudice and the remaining claims without prejudice.

The Company can provide no assurance as to the outcome of these proceedings or any other litigation matter in which we are a party. In particular, securities class action lawsuits are typically costly to defend, and divert the attention of management and other resources from operations and, accordingly, even if resolved in our favor, could have a material adverse effect on our business, financial condition, results of operations and liquidity and may force us to reduce or cease operations or seek relief under the applicable bankruptcy or insolvency laws.

SPECIFIED FINANCIAL MEASURES

Certain specified financial measures in this MD&A including adjusted EBITDA, gross margin before fair value adjustments and gross margin before fair value adjustments percentage are non-IFRS measures. These terms are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-IFRS financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS.

Non-IFRS Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a non-IFRS financial measure which the Company uses to evaluate its operating performance. Adjusted EBITDA provides information to investors, analysts, and others to aid in understanding and evaluating the Company’s operating results in a similar manner to its management team. Adjusted EBITDA is defined as net income (loss) before finance costs, depreciation and amortization, accretion expense, income tax recovery and excluding change in fair value of biological assets, change in fair value realized through inventory, unrealized foreign exchange gains or losses, share-based compensation expense, asset impairment, gain or loss on disposal of property, plant and equipment and certain one-time non-operating expenses, as determined by management.

The following table reconciles adjusted EBITDA to net income (loss) for the periods noted.

	Three months ended<br><br><br>March 31
($000s)	2022			2021
Net loss		(38,040	)		(134,445	)
Adjustments
Finance (income) costs		(61	)		51
Change in estimate of fair value of derivative warrants		8,300			129,944
Depreciation and amortization		739			1,058
Change in fair value of biological assets		(3,690	)		94
Change in fair value realized through inventory		1,561			50
Unrealized foreign exchange (gain) loss		16			1,905
Unrealized loss on marketable securities		17,834			(4,881	)
Share-based compensation		4,204			3,456
Loss on disposition of PP&E		—			117
Cost of sales non-cash component ^(1)^		—			826
Inventory obsolescence		1,981			1,754
Restructuring costs		—			—
Transaction costs^(2)^		6,481			3,648
Government subsidies		—			(2,180	)
Other expenses		—			1,930
Adjusted EBITDA		(675	)		3,327
(1)	Cost of sales non-cash component is comprised of depreciation expense.
---	---
(2)	Transaction costs relate to financing activities.
---	---

Gross margin before fair value adjustments

Gross margin before fair value adjustments is a non-IFRS financial measure which the Company uses to evaluate its operating performance in the Company’s cannabis operations segment. Gross margin before fair value adjustments provides useful information to investors, analysts and others in understanding and evaluating the Company’s operating results as it removes non-cash fair value metrics. Gross margin before fair value adjustments is defined as gross margin less the non-cash changes in the fair value adjustments on the sale of inventory and the growth of biological assets. Gross margin before fair value adjustments is comprised of net revenue less cost of sales and inventory obsolescence and impairment.

See “Cannabis Operations Segment Results – Gross Margin” for a table reconciling gross margin before fair value adjustments to gross margin for the periods noted.

Non-IFRS Financial Ratios

Gross margin before fair value adjustments percentage

Gross margin before fair value adjustments percentage is a non-IFRS financial ratio which the Company uses to evaluate its operating performance in the Company’s cannabis operations segment. Gross margin before fair value adjustments percentage is defined as gross margin before fair value adjustments divided by net revenue.

RELATED PARTIES

The Company did not enter into any related party transactions during the three months ended March 31, 2022 and 2021, other than those disclosed in note 13 of the condensed consolidated interim financial statements relating to the Company’s joint venture.

OFF BALANCE SHEET ARRANGEMENTS

As at March 31, 2022, the Company did not have any off-balance sheet arrangements. The Company has certain operating or rental lease agreements, as disclosed in the “Contractual Commitments and Obligations” section of this MD&A, which are entered into in the normal course of operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company makes assumptions in applying critical accounting estimates that are uncertain at the time the accounting estimate is made and may have a significant effect on the consolidated financial statements. Critical accounting estimates include the classification and recoverable amounts of CGUs, value of biological assets and inventory, estimating potential future returns on revenue, share-based compensation, convertible instruments, acquisitions and fair value of assets acquired and liabilities assumed in a business combination. Critical accounting estimates are based on variable inputs including but not limited to:

•	Demand for cannabis for recreational and medical purposes;
•	Price of cannabis;
---	---
•	Expected sales volumes;
---	---
•	Changes in market discount rates;
---	---
•	Future development and operating costs;
---	---
•	Costs to convert harvested cannabis to finished goods;
---	---
•	Expected yields from cannabis plants;
---	---
•	Potential returns and pricing adjustments;
---	---
•	Facts and circumstances supporting the likelihood and amount of contingent liabilities; and
---	---
•	Assumptions and methodologies for the valuation of derivative financial instruments.
---	---

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

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

NEW ACCOUNTING PRONOUNCEMENTS

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

RISK FACTORS

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

DISCLOSURE CONTROLS AND PROCEDURES

The Company has designed disclosure controls and procedures to provide reasonable assurance that: (i) material information relating to the Company is made known to the Company’s Chief Executive Officer and Chief Financial Officer by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in securities legislation. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”)). Based upon evaluation of the Company’s disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of such date, as a result of the material weaknesses described in our MD&A for the year ended December 31, 2021.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in NI 52-109 and Rule 13a-15(f) under the Exchange Act. Refer to our MD&A for the year ended December 31, 2021, for a discussion regarding internal control over financial reporting and material weaknesses identified.

REMEDIATION

As previously described in our MD&A for the year ended December 31, 2021, management, with oversight from the Audit Committee, has initiated, and will continue to implement, remediation measures including the analysis of changes in the business and assessment of the key controls that are responsive to those changes.

At May 15, 2022, the above remediation measures are in progress and controls related to documentation of ITGCs, restricting privileged-level access and monitoring of software upgrades have been designed and implemented. Additionally, the Company continues to evaluate roles, resourcing requirements and add personnel who can assist with the Company’s financial reporting requirements. Management will continue to work to recruit and retain additional resources as needed. The deficiencies will not be considered remediated, however, until the applicable controls operate for a sufficient period, and management has concluded through testing, that these controls are operating effectively.

Additionally, the Company has implemented, and tested workflows designed to remediate the lack of segregation of duties in its information technology systems and processes. The Company believes that this remediation is complete; however, it will not be considered fully remediated until the other deficiencies related to the ITGCs material weakness described above are fully remediated and tested.

The Company is pursuing remediation of all of the above material weaknesses during the 2022 fiscal year.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Except for the remediation activities described above, as of March 31, 2022, there have been no other changes in our internal control over financial reporting (as defined in NI 52-109 and Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In accordance with guidance issued by the Canadian Securities Administrators and the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has limited the evaluation of our internal control over financial reporting to exclude controls, policies and procedures and internal control over financial reporting of the recently acquired operations of Inner Spirit Holdings (acquired July 20, 2021) and Alcanna Inc. (acquired on March 31, 2022).

ABBREVIATIONS

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

Financial and Business Environment		Measurement
$ or C$	Canadian dollars	G or GM	Gram
IFRS	International Financial Reporting Standards	sq ft	Square feet
MD&A	Management’s Discussion and Analysis
U.S.	United States
US$	United States dollars
CBD	Cannabidiol
THC	Tetrahydrocannabinol

FORWARD-LOOKING INFORMATION

This document may contain forward-looking information concerning the Company’s business, operations and financial performance and condition, as well as its plans, objectives and expectations for its business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim”, “anticipate”, “assume”, “believe”, “contemplate”, “continue”, “could”, “due”, “estimate”, “expect”, “goal”, “intend”, “may”, “objective”, “plan”, “predict”, “potential”, “positioned”, “pioneer”, “seek”, “should”, “target”,

“will”, “would”, and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable technology.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the Company’s business and the industry in which it operates and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond its control. As a result, any or all of the forward-looking information in this document may turn out to be inaccurate. Factors that may case actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” herein. Although management believes that its underlying assessments and assumptions are reasonable based on currently available information, given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements in this MD&A are qualified by these cautionary statements. These statements are made as of the date of this MD&A and, except as required by applicable law, the Company assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. Additionally, the Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its financial or operating results or its securities.

This document contains estimates, projections and other information concerning the Company’s industry, business and the markets for its products. Information that is based on estimates, forecasts, projections, market research of similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, the Company obtained this industry, business, market and other data from its own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

In addition, assumptions and estimates of the Company’s and industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section “Risk Factors” herein. These and other factors could cause the Company’s future performance to differ materially from the Company’s assumptions and estimates.

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

Certain information in this MD&A is “financial outlook” within the meaning of applicable Canadian securities laws. The purpose of the financial outlook is to provide readers with disclosure of the Company’s reasonable expectations of its anticipated results. The financial outlook is provided as of the date of this MD&A. Readers are cautioned that the financial outlook may not be appropriate for other purposes.

ADDITIONAL INFORMATION

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

22

sndl-ex993_8.htm

EXHIBIT 99.3

Form 52-109F2

Certification of Interim Filings

Full Certificate

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

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Sundial Growers Inc. (the “issuer”) for the interim period ended March 31, 2022.
2.	No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
---	---
3.	Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
---	---
4.	Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
---	---
5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
---	---
(a)	designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
---	---
(i)	material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
---	---
(ii)	information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
---	---
(b)	designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
---	---
5.1	Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is “Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)”.
---	---
5.2	ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
---	---
(a)	a description of the material weakness;
---	---
(b)	the impact of the material weakness on the issuer’s financial reporting and its ICFR; and
---	---
(c)	the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.
---	---
5.3	Limitation on scope of design: N/A
---	---
6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
---	---

Date: May 15, 2022

/s/ Zachary George

_______________________

Zachary George

Chief Executive Officer

sndl-ex994_6.htm

EXHIBIT 99.4

Form 52-109F2

Certification of Interim Filings

Full Certificate

I, James Keough, Chief Financial Officer of Sundial Growers Inc., certify the following:

1.	Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Sundial Growers Inc. (the “issuer”) for the interim period ended March 31, 2022.
2.	No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
---	---
3.	Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
---	---
4.	Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
---	---
5.	Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
---	---
(a)	designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
---	---
(i)	material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
---	---
(ii)	information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
---	---
(b)	designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
---	---
5.1	Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is “Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)”.
---	---
5.2	ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
---	---
(a)	a description of the material weakness;
---	---
(b)	the impact of the material weakness on the issuer’s financial reporting and its ICFR; and
---	---
(c)	the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.
---	---
5.3	Limitation on scope of design: N/A
---	---
6.	Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2022 and ended on March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
---	---

Date: May 15, 2022

/s/ James Keough

_______________________

James Keough

Chief Financial Officer

SNDL Inc 6-K, filed May 16, 2022

About this 6-K