May 23, 2019
Torsten Kuenzlen
Chief Executive Officer
Sundial Growers Inc.
#200, 919 11 Avenue SW
Calgary, AB
Canada T2R 1P3
Re: Sundial Growers Inc.
Draft Registration Statement on Form F-1
Submitted April 29, 2019
CIK No. 0001766600
Dear Mr. Kuenzlen:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form F-1
Prospectus Summary
Our Company, page 1
1. Please balance your disclosure regarding your supply agreements, your
tailored supply
chains and your strong distribution partnerships to clarify, if true,
that only the agreement
with the Alberta Gaming, Liquor and Cannabis Commission contains an
initial purchase
commitment, that your other supply agreements do not require a minimum
or fixed
volume of products, that you have had to settle a breach of contract
claim related to the
non-delivery of cannabis pursuant to a supply agreement and that you
have received a
notice of a legal proceeding alleging a breach of a supply agreement.
Torsten Kuenzlen
FirstName LastNameTorsten Kuenzlen
Sundial Growers Inc.
Comapany NameSundial Growers Inc.
May 23, 2019
May 23, 2019 Page 2
Page 2
FirstName LastName
Our Industry, page 2
2. Please revise your industry description here and elsewhere in the
prospectus so as not to
lead with information about the global cannabis market. In this
regard, we note that
currently regulations appears to prevent you from legally
participating in most of this
market. Instead, please focus your industry description on the markets
you are currently
addressing or have a reasonable expectation of being able to address
in the near future,
providing estimated timetable for market entry if feasible and why you
believe the market
is legally available to you.
3. We note your disclosure that CBD products have become available in the
United
Kingdom, Germany, Spain and many other countries and that by 2023 the
European CBD
will reach $2.3 billion. However, your world map on page 2 seems to
indicate that in
Europe marijuana is only allowed for medical purposes. Please revise
for clarity and
consistency.
Help, page 3
4. Please balance your disclosure here and elsewhere in the prospectus
about your intent to
leverage Bridge Farm's legacy relationships with retailers such as
Tesco, Morrisons, Asda
(a Walmart subsidiary), Lidl, Amazon and Aldi by, for example,
clarifying whether you
have communicated with any of these retailers about selling your
products and the
responses your received, or by otherwise clarifying the basis for your
belief that these
retailers currently would be open to selling your products. Please add
related risk factor
disclosure as necessary.
Play, page 3
5. We note your disclosure that you intend to sell additional products in
a wide-range of
formats, such as pre-rolls, tinctures, capsules, vape cartidges and
sublinguals. Please
clarify whether these formats are currently permitted in Canada.
Heal, page 4
6. Please disclose whether you or Pathway Rx has submitted any potential
drug candidates to
the appropriate regulatory body or bodies to receive approval for any
of the indications
disclosed on page 4, and, if you have submitted any drug candidates,
please identify the
country or countries in which you seek approval, and include a brief
summary of the
approval process, including the current stage of any such drug
candidates. In addition, if
developing pharmaceuticals is or is intended to be a material part of
your business, please
revise your Regulatory section to discuss the drug approval process in
the relevant
jurisdictions.
Torsten Kuenzlen
FirstName LastNameTorsten Kuenzlen
Sundial Growers Inc.
Comapany NameSundial Growers Inc.
May 23, 2019
May 23, 2019 Page 3
Page 3
FirstName LastName
Our Strengths
Experienced management team brings a differentiated, holistic CPG approach to
the emerging
cannabis industry, page 4
7. Please tell us the basis for your belief that you are the only
cannabis company with a
leadership team that has holistic CPG expertise in the areas specified
on page 4.
Our Growth Strategies
Acquisition of Bridge Farm, page 7
8. We note your disclosure that you intend to leverage Bridge Farm's
legacy relationships
with retailers such as Tesco, Morrisons, Asda (a Walmart subsidiary),
Lidl, Amazon and
Aldi to launch CBD product sales in the United Kingdom. Please revise
to clarify, if true,
that these retailers sell Bridge Farms's other products and do not
currently sell Bridge
Farm's CBD. In addition, please disclose, here, if true that you
intend to transition Bridge
Farm's existing revenue producing facilities to hemp cultivation.
Acquisition of Interest in Pathway Rx, page 8
9. Please identify the other party or parties in the Pathway Rx joint
venture, and provide
disclosure regarding the material terms of the the joint venture,
including how the profits,
losses, votes and expenses of the joint venture are allocated between
the parties. In
addition, please provide quantitative information regarding the
royalty percentages you
are required pay under the Pathway Rx License Agreement. Also, in an
appropriate
section of your prospectus, please disclose the material terms of your
Professional
Services Agreement with AppColony Inc. and your credit agreement with
the Bank of
Montreal, and file your Note Purchase Agreement with Auxly as an
exhibit to your
registration statement, if required by Item 601 of Regulation S-K.
Implications of Being an Emerging Growth Company and a Foreign Private Issuer,
page 9
10. Please provide us with copies of all written communications, as
defined in Rule 405 under
the Securities Act, that you, or anyone authorized to do so on your
behalf, present to
potential investors in reliance on Section 5(d) of the Securities Act,
whether or not they
retain copies of the communications.
Risk Factors
Risks Related to Our Business and Our Industry
Our business is subject to a variety of U.S. and foreign laws, page 22
11. We note your disclosure that you believe that you are not subject to
the CSA or CSIEA
because you have no business operations in the United States and you
do not
distribute any products in the United Statement. Please expand your
discussion in this
risk factor to clarify whether you believe listing your company in the
U.S. and raising
capital in the U.S. exposes you to potential liability under U.S.
federal laws and
Torsten Kuenzlen
FirstName LastNameTorsten Kuenzlen
Sundial Growers Inc.
Comapany NameSundial Growers Inc.
May 23, 2019
May 23, 2019 Page 4
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FirstName LastName
regulations.
Use of Proceeds, page 49
12. Please provide the amount of the proceeds you intend to use for each
of the specified uses
on page 49. In addition, we note your disclosure on page 60 regarding
your plans to
expand your capacity at the Olds, Merritt and Bridge Farm facilities.
Please provide an
estimate of whether the net proceeds are sufficient to fully fund your
current expansion
plans, and, if not, please provide an estimate of the amount and
sources of other funds
needed. Finally, please disclose whether you currently have any plans,
arrangements or
understandings to acquire any other businesses or assets, and, if so,
please briefly describe
any businesses or assets to be purchased.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies and Estimates
Share-Based Compensation, page 77
13. Please disclose how you estimate the value of common stock underlying
the share-based
compensation. In addition, once you have an estimated offering price
or range, please
explain to us any differences between the recent valuations of your
common stock leading
up to the IPO and the estimated offering price. This information will
help facilitate our
review of your accounting for equity issuances including stock
compensation and
beneficial conversion features.
Our Company, page 80
14. Please revise here and in your prospectus summary to clarify, if true,
that you currently
only produce and sell cannabis for adult-use in Canada and that you
have yet to produce
or sell medical marijuana or CBD in Canada or any other jurisdiction.
Our Approach, page 82
15. In the last paragraph on page 82, please disclose the timetable for
the phased transition of
Bridge Farm's existing revenue-producing facilities to hemp
cultivation. If there currently
is no timetable, please disclose that. Please provide this disclosure
in the prospectus
summary, too.
Business
Our Growth Strategies, page 84
16. We note that many of your plans depend on increasing your capacity.
Please disclose here
your current capacity and provide an estimate of the required capacity
necessary for
the growth strategies you list on pages 84 and 85. For example, on
page 85 you state that
"[a]s capacity allows, [you] will launch additional products under
[the] Sundial brand in
Canada. In addition, please disclose when you anticipate expanding the
Sundial brand
Torsten Kuenzlen
FirstName LastNameTorsten Kuenzlen
Sundial Growers Inc.
Comapany NameSundial Growers Inc.
May 23, 2019
May 23, 2019 Page 5
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FirstName LastName
and discuss where you currently sell this product.
Our Brands and Products, page 87
17. To provide investors with context for your business, please add a
discussion of the
different types of cannabis plants you are using or intend to use for
your products, such as
hemp and marijuana, and describe their qualities. In addition, please
provide the
cannabinoid profiles for your products and explain the legal
significance of the THC and
CBD levels.
Our Research Partnerships, page 90
18. If material to your business, please disclose the key terms of your
research partnerships,
including the term of the agreement, the amount each party is required
to invest in the
research, the ownership of any intellectual property created, and any
milestone or royalty
payments related to the products developed, and please file these
agreements as exhibits to
your registration statement if required by Item 601 of Regulation S-K.
In addition, please
identify the phase of the research you are in with each drug candidate
or product, and
whether you intend to seek approval from Canada or elsewhere in order
to sell these
products, if approved.
Legal Proceedings, page 94
19. We note your disclosure on page 34 that you have received notice of a
legal proceeding
commenced against you in the province of Quebec by a corporate
customer alleging
breach of a supply agreement. However, you do not list the province of
Quebec as one of
the provinces with which you have a supply agreement and your
disclosure on page 96
states that Quebec has adopted a government-run model for retail and
distribution of
adult-use cannabis. Please revise your business section to clarify
whether you have a
supply agreement or have been approved to supply cannabis directly to
retailers for adult-
use cannabis by the province of Quebec.
Executive Compensation
Employment Agreements, page 113
20. Please disclose the material terms of the employment agreements you
have with each of
your NEOs.
Description of Capital
Other Important Provisions of our Amended Articles of Incorporation, By-Laws
and the ABCA
Choice of Forum, page 127
21. We note your disclosure here and on page 45 that your bylaws contain
an exclusive forum
provision. Please disclose whether this provision applies to actions
arising under the
Securities Act or Exchange Act. If these provisions do not apply to
actions arising under
Torsten Kuenzlen
FirstName LastNameTorsten Kuenzlen
Sundial Growers Inc.
Comapany NameSundial Growers Inc.
May 23, 2019
May 23, 2019 Page 6
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FirstName LastName
the Securities Act or the Exchange Act, please ensure that the
exclusive forum provisions
in the bylaws state this clearly. Please also file a copy of your
bylaws with your next
amendment or tell us when you plan to do so. Note that we may have
further comment
after review of this document and your revised disclosure.
Consolidated Financial Statements, page F-2
22. We note starting on page F-43 that you identify February 28, 2018
financial statements are
restated. Please tell us why you do not identify February 28, 2018
financial statements as
restated here.
Consolidated Statements of Loss and Comprehensive Loss, page F-7
23. It appears as though you have elected under paragraph 99 of IAS 1 to
classify expenses
using the function of expense method described in paragraph 103 of IAS
1. However,
share-based compensation expense would fall under the nature of
expense method under
paragraph 102 of IAS 1. Therefore, please revise your presentation to
classify share-based
compensation expense by functional expense and disclose the
share-based compensation
expense amounts in the notes to the financial statements rather than
on the face of the
statement of comprehensive loss.
24. Please revise the line item "Net effect of changes in fair value of
biological assets and
inventory" on page F-7 and throughout the filing to clarify that the
change in fair value
solely relates to the change in fair value of biological assets. Refer
to paragraph 40 of
IAS 41 and your disclosure on pages F-19 and F-55. In the future,
separately present any
write-downs of inventory pursuant to paragraph 36 of IAS 2.
Project Seed Topco Limited, page F-72
25. The predecessor financial statements are presented for the periods
from July 1, 2015
through August 10, 2017. Please tell us why the successor financial
statements are not
presented for the period of August 11, 2017 to June 30, 2018.
Reference an accounting
guidance to support your presentation.
General
26. Please provide us mockups of any pages that include any additional
pictures or graphics to
bepresented, including any accompanying captions. Please keep in mind,
in scheduling
your printing and distribution of the preliminary prospectus, that we
may have comments
after our review of these materials.
Torsten Kuenzlen
Sundial Growers Inc.
May 23, 2019
Page 7
You may contact Keira Nakada at 202-551-3659 or Mary Mast at
202-551-3613 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Sonia Bednarowski at 202-551-3666 or Dietrich King at 202-551-8071 with
any other
questions.
FirstName LastNameTorsten Kuenzlen Sincerely,
Comapany NameSundial Growers Inc.
Division of Corporation
Finance
May 23, 2019 Page 7 Office of Healthcare &
Insurance
FirstName LastName