SNDL (SNDL) Risk Analysis

Investors may purchase our common shares to hedge existing exposure in our common shares or to speculate on the price of our common shares. Speculation on the price of our common shares may involve long and short exposures. To the extent aggregate short exposure exceeds the number of our common shares available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common shares for delivery to lenders of such common shares. Those repurchases may, in turn, dramatically increase the price of our common shares until investors with short exposure are able to purchase additional common shares to cover their short position. This phenomenon is often referred to as a "short squeeze". A short squeeze could lead to or exacerbate volatile price movements in our common shares that are not directly correlated to the performance or prospects of our Company. Once investors purchase the shares necessary to cover their short position, our share price will likely decline rapidly and substantially relative to its levels during the short squeeze, and may not return to levels at or above those during the short squeeze for a long time or at all. As a result, if you purchase our shares during a short squeeze, you will be at an increased risk of failing to sell our shares at a price greater than what you paid for them and losing some or all of your investment. While we currently have no reason to believe our shares would be the target of a short squeeze, there can be no assurance that we will not in the future be a target of a short squeeze, and you may lose a significant portion or all of your investment if you purchase our shares at a price that is significantly disconnected from the underlying value of our Company.

Common shares are equity interests in our Company and do not constitute indebtedness. As such, our common shares will rank junior to our future indebtedness, if any, and other non-equity claims on our Company with respect to assets available to satisfy claims on our Company, including in a liquidation of our Company. Additionally, our board of directors is authorized to issue series of preferred shares without any action on the part of shareholders of our common shares. Holders of our common shares are subject to the prior dividend, liquidation preferences, terms of redemption, conversion rights and voting rights, if any, of any holders of our preferred shares or depositary shares representing such preferred shares then outstanding.

Our shareholders may experience significant dilution as a result of our issuance of common shares pursuant to the New Warrants, the 2020 Series A Warrants, the New Investor Warrants and our other outstanding warrants, restricted share units and deferred share units. As of March 17, 2021, the New Warrants were exercisable into up to 98,333,334 common shares at an exercise price of US$1.50 per warrant; the 2020 Series A Warrants were exercisable into up to 500,000 common shares at an exercise price of US$0.75 and the New Investor Warrants were exercisable into up to 500,000 common shares at an exercise price of US$0.1766 per warrant, in each case subject to adjustment pursuant to the terms of the respective instrument. The New Warrants and the New Investor Warrants expire on the 42-month anniversary of the date on which the shares underlying such warrants become freely tradeable and the 2020 Series A Warrants expire on the fifth anniversary of issuance. As of March 17, 2021, there were also 645,600 stock options and 4,803,800 warrants for the purchase of our common shares outstanding, of which 159,017 stock options and 3,091,267 warrants were vested and exercisable into an aggregate number of 3,250,284 common shares, at weighted average exercise prices of $2.14 and $2.25, respectively. In addition, 13,519,016 restricted share units and 4,573,263 deferred share units were outstanding and exchangeable for an equal number of common shares.

The New Warrants, the New Investor Warrants, the 2020 Series A Warrants and the 2021 Series A Warrants prohibit us from engaging in Fundamental Transactions (as defined in such instruments), including specified transactions related to Change of Control (as defined in such instruments), unless the successor entity assumes all of our obligations under such instruments under a written agreement in form and substance satisfactory to, and approved by, the holder thereof. These restrictions could impede a merger, amalgamation, takeover or other business combination involving us or discourage a potential acquiror from making a tender offer for our common shares, which, under certain circumstances, could reduce the market price of our common shares.

Our common shares are listed on the Nasdaq. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least US$1.00 per share. On May 12, 2020, we were notified by the Listing Qualifications Department of the Nasdaq that the closing bid price of our common shares for the last 30 consecutive business days from March 30, 2020 to May 11, 2020 did not meet the minimum bid price of US$1.00 per share as set forth in the minimum bid requirement. At that time, we had until December 28, 2020 to regain compliance with the minimum bid requirement. Effective December 21, 2020, we transferred our listing from the Nasdaq Global Select Market to the Nasdaq Capital Market, so as to take advantage of an additional period of 180 days during which to achieve compliance. Nasdaq granted us the foregoing extension on December 29, 2020. The extension allowed us to regain compliance with the Nasdaq minimum bid requirement if for a minimum of 10 consecutive business days before June 28, 2021 the bid price for our common shares closes at or above US$1.00 per share. On February 16, 2021, Nasdaq notified us that the Company regained compliance with the minimum bid requirement because the bid price for our common shares closed at or above US$1.00 per share for the 10 consecutive business days between February 1, 2021, and February 12, 2021. If we fail to maintain compliance with the minimum bid price rule or fail to maintain compliance with any other applicable Nasdaq continued listing requirements, Nasdaq may determine to delist our common stock, at which time our common stock would be quoted on the over-the-counter markets. If we fail to comply with the applicable listing standards and Nasdaq delists our common shares, we and our shareholders could face significant material adverse consequences, including: - a limited availability of market quotations for our common shares;- reduced liquidity for our common shares;- a determination that our common shares are "penny stock", which would require brokers trading in our common shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common shares;- a limited amount of news about us and analyst coverage of us;- defaults or breaches of covenants in our financing agreements; and - a decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future. We cannot assure you that we will be able to maintain compliance with the continued listing standards of Nasdaq in the future.

We may raise additional funds in the future pursuant to a registration statement or otherwise, by issuing common shares, or securities exercisable or convertible into common shares, including preferred shares, warrants, rights or units comprising two or more of the foregoing securities. Holders of our common shares do not have preemptive rights in connection with such further issuances. Our board of directors has the discretion to determine if an issuance of securities is warranted, the price at which such issuance is effected and the other terms of any such future issuance. In addition, additional common shares may be issued by us in connection with the exercise of options and exchange of restricted share units ("RSUs") and deferred share units ("DSUs") granted by us or as part of an employee compensation plan or agreement. Such additional equity issuances have in the past, and could in the future, depending on the price at which such securities are issued, substantially dilute the interests of the holders of our common shares. Additionally, as of March 3, 2021, there were 645,600 stock options and 4,803,800 warrants for the purchase of our common shares outstanding, of which 159,017 stock options and 3,091,267 warrants were vested and exercisable into an aggregate number of 3,250,284 common shares, at weighted average exercise prices of $2.14 and $2.25, respectively. In addition, 13,519,016 RSUs and 4,573,263 DSUs were outstanding and exchangeable for an equal number of common shares. Furthermore, as of March 3, 2021, (i) the outstanding warrants issued pursuant to a securities purchase agreement, dated June 5, 2020 (the "Securities Purchase Agreement") (the "New Investor Warrants") were exercisable into 500,000 common shares at an exercise price of US$0.1766; (ii) the Series A warrants issued in connection with a unit offering on August 18, 2020 (the "2020 Series A Warrants") were exercisable into 500,000 common shares at an exercise price of US$0.1766; and (iii) the warrants issued pursuant to the warrant exercise agreement dated February 19, 2021 (the "New Warrants") were exercisable into 98,333,334 common shares at an exercise price of US$1.50 per warrant. The conversion and exercise prices, as applicable, of the New Investor Warrants, the 2020 Series A Warrants and the New Warrants are subject to customary anti-dilution protections and certain other adjustments contained in such instruments.

We may sell a substantial number of our common shares, or securities convertible or exercisable into our common shares, in the public market at any time, without consent of existing shareholders. Such sales, or the perception in the market that they may occur, could reduce the market price of our common shares rapidly and substantially. Accordingly, you may become unable to resell our shares at a price greater than you paid for them for a long time or at all, and may lose some or all of your investment. The foregoing could also impair our ability to raise capital through the sale of additional equity securities.

We are an "emerging growth company" as defined in the JOBS Act. We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have total annual gross revenue of US$1.07 billion or more; (ii) December 31, 2024 (the last day of the fiscal year ending after the fifth anniversary of the date of the completion of the our IPO); (iii) the date on which we have issued more than US$1.0 billion in non-convertible debt securities during the prior three-year period or (iv) the last day of the fiscal year during which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For so long as we remain an emerging growth company, we are permitted to and intend to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include: - not being required to comply with the auditor attestation requirements of SOX 404;- not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis);- being permitted to present only two years of audited financial statements in contrast to other reporting companies that must provide audited financial statements for three fiscal years;- reduced disclosure about executive compensation arrangements; and - exemptions from the requirements to obtain a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute arrangements not previously approved. We may take advantage of some, but not all, of the available exemptions described above. We have taken advantage of reduced reporting burdens in this Annual Report. We cannot predict whether investors will find our common shares less attractive if we rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.

Cannabis-related financial transactions, including investment in the securities of cannabis companies and receipt of any associated benefits, such as dividends, are currently subject to anti-money laundering and a variety of other laws that vary by jurisdiction, many of which are unsettled and still developing. While the interpretation of these laws are unclear, in some jurisdictions, such as the United Kingdom, financial benefit directly or indirectly arising from conduct that would be considered unlawful in such jurisdiction may be viewed to be within the purview of these laws, and persons receiving any such benefit, including investors in an applicable jurisdiction, may be subject to liability under such laws. Each prospective investor should therefore contact his, her or its own legal advisor regarding the ownership of our common shares and any related potential liability.

The trading market for our common shares will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our shares would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our shares or publish inaccurate or unfavorable research about our business, our share price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our shares could decrease, which might cause our share price and trading volume to decline.

Our articles permit the issuance of an unlimited number of common shares, and shareholders will have no pre-emptive rights in connection with such further issuance. Additional issuances of our securities may involve the issuance of a significant number of common shares at prices less than the current market price for the common shares. Issuances of substantial numbers of common shares, or the perception that such issuances could occur, may adversely affect prevailing market prices of our common shares. Any transaction involving the issuance of previously authorized but unissued common shares, or securities convertible into common shares, would result in dilution, possibly substantial, to security holders.