SNDL Inc. Condensed Consolidated Interim Financial Statements For the three and nine months ended

Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2023

(Unaudited expressed in thousands of Canadian dollars)

Condensed Consolidated Interim Statement of Financial Position

(Unaudited - expressed in thousands of Canadian dollars)

Commitments (note 27)

Subsequent events (notes 18 and 28)

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Loss and Comprehensive Loss

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

(1) Recast - refer to note 20.

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Changes in Shareholders' Equity

(Unaudited - expressed in thousands of Canadian dollars)

Condensed Consolidated Interim Statement of Changes in Shareholders' Equity

(Unaudited - expressed in thousands of Canadian dollars)

See accompanying notes to the condensed consolidated interim financial statements.

Condensed Consolidated Interim Statement of Cash Flows

(Unaudited - expressed in thousands of Canadian dollars)

See accompanying notes to the condensed consolidated interim financial statements.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2023

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

1.Description of business

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

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

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

SNDL and its subsidiaries operate solely in Canada. Through its joint venture, SunStream Bancorp Inc. ( SunStream ) (note 15), the Company provides growth capital that pursues indirect investment and financial services opportunities in the cannabis sector, as well as other investment opportunities. The Company also makes strategic portfolio investments in debt and equity securities.

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

2.Basis of presentation

Statement of compliance

The condensed consolidated interim financial statements ( financial statements ) have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee. These financial statements were prepared using the same accounting policies and methods as those disclosed in the annual consolidated financial statements for the year ended December 31, 2022. These financial statements should be read in conjunction with the annual consolidated financial statements for the Company for the year ended December 31, 2022.

These financial statements were approved and authorized for issue by the Board of Directors ( Board ) on November 10, 2023.

3.Business acquisitions

On January 17, 2023, the Company acquired all of the issued and outstanding common shares of The Valens Company Inc. ( Valens ), other than those owned by SNDL and its subsidiaries, by way of a statutory plan of arrangement (the Valens Transaction ). The Valens Transaction consideration was comprised of (i) the assumption of Valens' $60 million non-revolving term loan facility from its then existing lender, (ii) an aggregate 27.6 million SNDL common shares valued at $84.0 million based on the fair value of each common share of the Company on the closing date (0.3334 of a SNDL common share for each Valens common share), and (iii) contingent consideration valued at $0.6 million representing the fair value of Valens stock options.

Valens is a manufacturer of cannabis products providing proprietary cannabis processing services, in addition to product development, manufacturing, and commercialization of cannabis consumer packaged goods. Valens products are formulated for the medical, health and wellness, and recreational consumer segments.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2023

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

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

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

The fair value of consideration paid was as follows:

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

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

Valens subsidiary Green Roads, Inc. ( Green Roads ) was sold and has been classified as held for sale and discontinued operations (note 4).

The financial statements incorporate the operations of Valens commencing January 18, 2023. During the period January 18, 2023 to September 30, 2023 the Company recorded gross revenues of $63.1 million and net loss of $37.9 million from the Valens operations. Had the Valens Transaction closed on January 1, 2023, management estimates that for the period January 1, 2023, to January 17, 2023, revenue would have increased by $4.2 million and net loss would have increased by $2.1 million. In determining these amounts, management assumes the fair values on the date of acquisition would have been the same as if the acquisition had occurred on January 1, 2023.

The Company incurred costs related to the Valens Transaction of $2.8 million which have been included in transaction costs.

On February 7, 2023, the Company acquired the right, title and interest in (i) five Superette retail locations within Toronto and Ottawa; (ii) the intellectual property rights related to the Superette brand; and (iii) the shares of Superette Ontario (collectively, the Superette Transaction ).

Notes to the Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2023

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

The Superette acquisition consideration was comprised of the extinguishment of the Company's promissory note.

The fair value of consideration paid was as follows:

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

The financial statements incorporate the operations of Superette commencing February 8, 2023. During the period February 8, 2023 to September 30, 2023 the Company recorded gross revenues of $2.8 million and net loss of $1.2 million from the Superette operations. Had the Superette Transaction closed on January 1, 2023, management estimates that for the period January 1, 2023, to February 7, 2023, revenue would have increased by $0.5 million and net loss would have increased by $0.1 million. In determining these amounts, management assumes the fair values on the date of acquisition would have been the same as if the acquisition had occurred on January 1, 2023.

The Company incurred costs related to the Superette Transaction of $0.7 million which have been included in transaction costs.

4.Discontinued operations

The Green Roads operations acquired as part of the Valens acquisition were classified as held for sale and discontinued operations as the carrying amount of the disposal group was expected to be recovered through a sale transaction rather than through continued use.

Green Roads filed for bankruptcy on March 6, 2023. A successful bid of US$3.1 million was accepted and the sale was approved at a court hearing on May 10, 2023. The disposition of Green Roads closed on May 31, 2023 and a loss on disposition of $2.3 million was recorded.

The consolidated statement of loss and comprehensive loss and consolidated statement of cash flows have been presented to show the discontinued operations separately from continuing operations.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2023

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

Results of discontinued operations

5.Segment information

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

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

Notes to the Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2023

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

(1)Cannabis retail includes the operations of Superette for the period February 8, 2023 to September 30, 2023.

(2)Cannabis operations includes the operations of Valens for the period January 18, 2023 to September 30, 2023.

(3)Total assets include cash and cash equivalents.

(4)Recast - refer to note 20.

(1)Liquor retail includes operations of Alcanna Inc. ( Alcanna ) retail stores for the period March 31, 2022 to September 30, 2022, and cannabis retail includes operations of Nova retail stores for the period March 31, 2022 to September 30, 2022.

(2)Total assets include cash and cash equivalents.

Notes to the Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2023

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

Geographical disclosure

As at September 30, 2023, the Company had non-current assets related to investment credit operations in the United States of $550.5 million (December 31, 2022 $519.3 million). For the three and nine months ended September 30, 2023, share of profit of equity-accounted investees related to operations in the United States was a gain of $6.6 million and $15.2 million, respectively (three and nine months ended September 30, 2022 gain of $9.2 million and a loss of $24.7 million, respectively). All other non-current assets relate to operations in Canada and revenues from external customers relate to operations in Canada.

6.Marketable securities

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

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: