Item 1. Financial Statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1. Description of business
Tilray, Inc., and its wholly owned subsidiaries (collectively “Tilray”, the “Company”, “we”, or “us”) is a leading global cannabis-lifestyle and consumer packaged goods company headquartered in Leamington and New York, with operations in Canada, the United States, Europe, Australia, and Latin America that is changing people’s lives for the better – one person at a time – by inspiring and empowering the worldwide community to live their very best life by providing them with products that meet the needs of their mind, body, and soul and invoke a sense of wellbeing. Tilray’s mission is to be the trusted partner for its patients and consumers by providing them with a cultivated experience and health and wellbeing through high-quality, differentiated brands and innovative products. A pioneer in cannabis research, cultivation and distribution, Tilray’s production platform supports over 20 brands in over 20 countries, including comprehensive cannabis offerings, hemp-based foods, and alcoholic beverages.
On April 30, 2021, Tilray acquired all of the issued and outstanding common shares of Aphria Inc. (“Aphria”), an international organization with a focus on building a global cannabis-lifestyle consumer packaged goods company and involved in the manufacturing and distribution of beer and beer derivative products in the United States, and in the distribution of (non-Cannabis) pharmaceutical products in Germany, pursuant to a plan of arrangement (the “Arrangement”) under the Business Corporations Act (Ontario).
Note 2. Basis of presentation and summary of significant accounting policies
The accompanying unaudited consolidated financial statements (the “financial statements”) reflect the accounts of the Company. The financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. The information included in this Form 10-Q should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended May 31, 2021 (the “Annual Financial Statements”). These financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The Company’s balance sheet at May 31, 2021 was derived from the audited Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements.
These consolidated financial statements have been prepared on the going concern basis which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due, under the historical cost convention except for certain financial instruments that are measured at fair value, as detailed in the Company’s accounting policies.
As a result of the April 30, 2021 business combination with Aphria, the reported results do not include the results of operations of Tilray and its subsidiaries on and prior to April 30, 2021, in accordance with the accounting treatment applicable to the Arrangement. Accordingly, comparisons between the Company's first quarter 2022 results and prior periods may not be meaningful.
Information about the accounting treatment of the Arrangement including details of the transaction, determination of the total fair value consideration, and allocation of the purchase price, are included in the Company's Annual Report for the year ended May 31, 2021 filed in Form 10-K with the U.S. Securities and Exchange Commission on July 28, 2021 (“Annual Report”).
The purchase price allocation for the Arrangement is open for adjustments and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date. In the event that more information is obtained, the purchase price allocation may change. Any future adjustments to the purchase price allocation, including changes within identifiable intangible assets or estimation uncertainty impacted by market conditions, may impact future net earnings. The purchase price allocation adjustments can be made through the end of the measurement period, which is not to exceed one year from the acquisition date.
Basis of consolidation
Subsidiaries are entities controlled by the Company. Control exists when the Company either has a controlling voting interest or is the primary beneficiary of a variable interest entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. A complete list of our subsidiaries that existed prior to our most recent year end is included in the Company's Annual Report for the year ended May 31, 2021 filed in Form 10-K with the U.S. Securities and Exchange Commission on July 28, 2021 (“Annual Report”).
On August 13, 2021, the Company and other investors formed Superhero Acquisition L.P., a Delaware limited partnership, (“SH Acquisition”). SH Acquisition was formed for the purpose of acquiring approximately $165.8 principal amount of senior secured
5
convertible notes (the “MM Notes”) originally issued by MedMen Enterprises Inc. (“MedMen”) and certain warrants (the “MM Warrants”) to acquire Class B subordinate voting shares of Medmen (the “MedMen Shares”) issued in connection with the original issuance of the MM Notes. The MM Notes mature on August 17, 2028. Pursuant to an Assignment and Assumption Agreement dated as of August 17, 2021, SH Acquisition completed its acquisition (the “MM Transaction”) of the MM Notes and MM Warrants from certain funds affiliated with Gotham Green Partners. As partial consideration for the MM Notes and MM Warrants, on September 17, 2021, the Company issued 9,817,061 shares of its common stock. The balance of the consideration for the MM Notes and MM Warrants was paid in cash by the other partners of SH Acquisition.
The Company’s interest in SH Acquisition represents its right to 68% of the MM Notes and related MM Warrants held by SH Acquisition, which are convertible into approximately 21% of the MedMen Shares outstanding upon closing of the MM Transaction. The Company’s ability to convert the MM Notes and exercise the MM Warrants is dependent upon federal laws in the United States being amended to permit the general cultivation, distribution and possession of cannabis (a “Triggering Event”) or the Company’s waiver of the need for a Triggering Event and the receipt of any additional regulatory approvals.
The Company is a limited partner under the SH Acquisition partnership agreement; however, material events conducted by the partnership require the approval of the Company, and, upon a Triggering Event, the Company has the ability to appoint two of the three members of the board of directors of the general partner of the partnership. As a result, we have consolidated SH Acquisition as a subsidiary of Tilray beginning on August 17, 2021. Additional information about the MM Transaction is included in Note 7, Long-term investments.
Long-term investments
Debt securities are classified as available-for-sale and are recorded at fair value and are subject to impairment testing. Other than impairment losses, unrealized gains and losses during the period, net of the related tax effect, are excluded from income and reflected in other comprehensive income (loss), and the cumulative effect is reported as a separate component of shareholders’ equity until realized. Upon sale, realized gain and losses are reported in net income. Debt securities are impaired when a decline in fair value is determined to be other-than-temporary. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, and the duration and extent to which the fair value is less than cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the statements of net loss and a new cost basis for the investment is established. The Company also evaluates whether there is a plan to sell the security or it is more likely than not that the Company will be required to sell the security before recovery. If neither of the conditions exist, then only the portion of the impairment loss attributable to credit loss is recorded in the statements of net loss and the remaining amount is recorded in other comprehensive income (loss).
Investments in equity securities of entities over which the Company does not have a controlling financial interest or significant influence are accounted for at fair value. Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”). In applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the equity investments are less than carrying values. Changes in value are recorded in the statement of net loss and comprehensive loss, within the line, “Non-operating income (expense)”.
Investments in entities over which the Company does not have a controlling financial interest but has significant influence, are accounted for using the equity method, with the Company’s share of earnings or losses reported in earnings or losses from equity method investments on the statements of net loss and comprehensive loss. Equity method investments are recorded at cost, plus the Company’s share of undistributed earnings or losses, and impairment, if any, within “Interest in Equity Investees” on the balance sheets. The Company assesses investments in equity method investments when events or circumstances indicate that the carrying amount of the investment may be impaired. If it is determined that the current fair value of an equity method investment is less than the carrying value of the investment, the Company will assess if the shortfall is other than temporary (OTTI). Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the equity investee to sustain an earnings capacity that would justify the carrying amount of the investment. Once a determination is made that an OTTI exists, the investment is written down to its fair value in accordance with ASC 820 at the reporting date, which establishes a new cost basis.
New accounting pronouncements not yet adopted
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which amends and simplifies existing guidance in an effort to reduce the complexity of
6
accounting for convertible instruments and to provide financial statement users with more meaningful information. ASU 2020-06 is effective for the Company beginning June 1, 2022. This update may be applied retrospectively or on a modified retrospective basis with the cumulative effect recognized as an adjustment to the opening balance of retained earnings on the date of adoption. The Company is currently evaluating the effect of adopting this ASU.
In May 2021, the FASB issued ASU 2021-04, Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”), which amends existing guidance for earnings per share (EPS) in accordance with Topic 260. ASU 2021-04 is effective for the Company beginning June 1, 2022. This update should be applied prospectively on or after the effective date of the amendments. The Company is currently evaluating the effect of adopting this ASU.
New accounting pronouncements recently adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The standard is effective for annual reporting periods beginning after December 15, 2021 and including interim periods within those fiscal years. The Company adopted the ASU beginning June 1, 2021 and the adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The Company adopted the ASU beginning June 1, 2021 and the adoption of ASU 2020-01 did not have a material impact on our consolidated financial statements.
Note 3. Inventory
Inventory is comprised of:
|
|
|
August 31,
2021
|
|
|
May 31,
2021
|
|
|
Plants
|
|
$
|
19,605
|
|
|
$
|
23,083
|
|
|
Dried cannabis
|
|
|
113,180
|
|
|
|
118,269
|
|
|
Cannabis trim
|
|
|
3,448
|
|
|
|
2,931
|
|
|
Cannabis derivatives
|
|
|
38,613
|
|
|
|
24,158
|
|
|
Cannabis vapes
|
|
|
3,543
|
|
|
|
3,791
|
|
|
Packaging and other inventory items
|
|
|
25,595
|
|
|
|
31,462
|
|
|
Wellness inventory
|
|
|
14,042
|
|
|
|
15,171
|
|
|
Beverage alcohol inventory
|
|
|
4,796
|
|
|
|
5,402
|
|
|
Distribution inventory
|
|
|
28,685
|
|
|
|
32,162
|
|
|
Total
|
|
$
|
251,507
|
|
|
$
|
256,429
|
|
|
|
|
|
|
|
|
|
|
|
7
Note 4. Capital assets
Capital asset consisted of the following:
|
|
|
August 31, 2021
|
|
|
May 31, 2021
|
|
|
Land
|
|
$
|
31,467
|
|
|
$
|
28,549
|
|
|
Production facility
|
|
|
413,711
|
|
|
|
346,510
|
|
|
Equipment
|
|
|
231,290
|
|
|
|
215,408
|
|
|
Leasehold improvement
|
|
|
7,477
|
|
|
|
17,059
|
|
|
ROU-assets under finance lease
|
|
|
35,290
|
|
|
|
34,726
|
|
|
Construction in progress
|
|
|
19,174
|
|
|
|
85,322
|
|
|
|
|
$
|
738,408
|
|
|
$
|
727,574
|
|
|
Less: accumulated amortization
|
|
|
(117,070
|
)
|
|
|
(76,876
|
)
|
|
Total
|
|
$
|
621,339
|
|
|
$
|
650,698
|
|
Note 5. Intangible Assets
Intangible assets are comprised of the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intellectual
|
|
|
|
|
|
|
|
|
Customer
|
|
|
|
|
|
|
|
|
|
|
property,
|
|
|
|
|
|
|
|
|
relationships
|
|
|
Licenses,
|
|
|
Non-
|
|
|
trademarks,
|
|
|
Total
|
|
|
|
|
& distribution
|
|
|
permits &
|
|
|
compete
|
|
|
know how
|
|
|
intangible
|
|
|
|
|
channel
|
|
|
applications
|
|
|
agreements
|
|
|
& brands
|
|
|
assets
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At May 31, 2021
|
|
$
|
239,810
|
|
|
$
|
414,930
|
|
|
$
|
12,453
|
|
|
$
|
990,917
|
|
|
$
|
1,658,110
|
|
|
Additions
|
|
|
—
|
|
|
|
182
|
|
|
|
—
|
|
|
|
856
|
|
|
|
1,038
|
|
|
Effect of foreign exchange
|
|
|
(9,300
|
)
|
|
|
(17,346
|
)
|
|
|
(659
|
)
|
|
|
(51,738
|
)
|
|
|
(79,043
|
)
|
|
At August 31, 2021
|
|
$
|
230,510
|
|
|
|
397,766
|
|
|
|
11,794
|
|
|
|
940,035
|
|
|
$
|
1,580,105
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At May 31, 2021
|
|
$
|
18,302
|
|
|
|
1,167
|
|
|
|
4,299
|
|
|
|
28,424
|
|
|
$
|
52,192
|
|
|
Amortization
|
|
|
9,466
|
|
|
116
|
|
|
833
|
|
|
|
14,684
|
|
|
|
25,099
|
|
|
At August 31, 2021
|
|
$
|
27,768
|
|
|
$
|
1,283
|
|
|
$
|
5,132
|
|
|
$
|
43,108
|
|
|
$
|
77,291
|
|
|
Net book value at May 31, 2021
|
|
$
|
221,508
|
|
|
$
|
413,763
|
|
|
$
|
8,154
|
|
|
$
|
962,493
|
|
|
$
|
1,605,918
|
|
|
Net book value at August 31, 2021
|
|
$
|
202,742
|
|
|
$
|
396,483
|
|
|
$
|
6,662
|
|
|
$
|
896,927
|
|
|
$
|
1,502,814
|
|
As of August 31, 2021, included in Licenses, permits & applications is $408,000 of indefinite-lived intangible assets (May 31, 2021 - $412,000).
Expected future amortization expense for intangible assets as of August 31, 2021 are as follows:
|
|
|
Amortization
|
|
|
2022 (remaining nine months)
|
|
$
|
48,820
|
|
|
2023
|
|
|
67,556
|
|
|
2024
|
|
|
64,084
|
|
|
2025
|
|
|
61,297
|
|
|
2026
|
|
|
61,297
|
|
|
Thereafter
|
|
|
791,760
|
|
|
Total
|
|
$
|
1,094,814
|
|
8
Note 6. Goodwill
The following table shows the change in the carrying amount of goodwill:
|
|
|
|
|
August 31,
|
|
|
May 31,
|
|
|
|
|
Segment
|
|
2021
|
|
|
2021
|
|
|
Broken Coast Cannabis Ltd.
|
|
Cannabis business
|
|
$
|
105,963
|
|
|
$
|
105,963
|
|
|
Nuuvera Corp.
|
|
Cannabis business
|
|
|
273,606
|
|
|
|
273,606
|
|
|
LATAM Holdings Inc.
|
|
Cannabis business
|
|
|
63,239
|
|
|
|
63,239
|
|
|
CC Pharma GmbH
|
|
Distribution business
|
|
|
4,458
|
|
|
|
4,458
|
|
|
SweetWater
|
|
Beverage alcohol business
|
|
|
100,202
|
|
|
|
100,202
|
|
|
Tilray
|
|
Cannabis business
|
|
|
2,144,143
|
|
|
|
2,144,143
|
|
|
Tilray
|
|
Wellness business
|
|
|
77,470
|
|
|
|
77,470
|
|
|
Effect of foreign exchange
|
|
|
|
|
40,050
|
|
|
|
63,713
|
|
|
Total
|
|
|
|
$
|
2,809,131
|
|
|
$
|
2,832,794
|
|
Note 7. Long term investments
Long term investments are comprised of:
|
|
|
August 31, 2021
|
|
|
May 31, 2021
|
|
|
Debt securities classified under available-for-sale method
|
|
$
|
170,799
|
|
|
$
|
—
|
|
|
Equity investments measured at fair value
|
|
|
10,108
|
|
|
|
12,185
|
|
|
Equity investments under measurement alternative
|
|
|
5,500
|
|
|
|
5,500
|
|
|
Total investments in debt and equity securities
|
|
$
|
186,407
|
|
|
$
|
17,685
|
|
The Company’s debt securities under available-for-sale method include the MM Notes, described in Note 2. Basis of presentation and summary of significant accounting policies, originally issued by unrelated third parties, MedMen with an interest rate of LIBOR plus 6%, with a LIBOR floor of 2.5% and with contractual maturity in 2028, which are held by its majority-owned subsidiary Superhero Acquisition. SH Acquisition has the ability, at its own discretion, to transfer its partnership interest, and/or the pro rata portion of the MM Notes and the corresponding portion of accrued and unpaid interest, and/or cause the redemption of the partnership interest and/or the pro rata portion of the MM Notes held by the minority interest at any time.
The Company’s equity investments at fair value consist of publicly traded shares and warrants held by the Company including certain warrants acquired conjunctively with the MM Notes and exercisable for equity securities of MedMen’s Class B subordinate voting shares. The Company’s equity investment under measurement alternative includes equity investments without readily determinable fair values.
The following table summarizes the activity related to equity investments for the three months ended August 31, 2021.
|
|
|
|
|
|
|
Changes in fair
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31, 2021
|
|
|
value recorded in
|
|
|
Sales / purchases /
|
|
|
August 31, 2021
|
|
|
|
|
Carrying value
|
|
|
net loss
|
|
|
other
|
|
|
Carrying value
|
|
|
Debt securities classified under available-for-sale
method
|
|
$
|
—
|
|
|
|
—
|
|
|
|
170,799
|
|
|
$
|
170,799
|
|
|
Equity investments with readily determinable value
|
|
$
|
12,185
|
|
|
|
(2,077
|
)
|
|
|
—
|
|
|
$
|
10,108
|
|
|
Equity investments without readily determinable
value
|
|
$
|
5,500
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
5,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Note 8. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities are comprised of:
|
|
|
August 31,
|
|
|
May 31,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
Trade payables
|
|
$
|
61,990
|
|
|
$
|
57,706
|
|
|
Accrued liabilities
|
|
|
85,977
|
|
|
|
112,594
|
|
|
Accrued payroll and employment related taxes
|
|
|
23,486
|
|
|
|
19,390
|
|
|
Income taxes payable
|
|
|
14,023
|
|
|
|
14,764
|
|
|
Accrued interest
|
|
|
3,440
|
|
|
|
148
|
|
|
Other accruals
|
|
|
1,297
|
|
|
|
8,211
|
|
|
Total
|
|
$
|
190,213
|
|
|
$
|
212,813
|
|
Note 9. Bank indebtedness
The Company secured an operating line of credit in the amount of C$1,000 which bears interest at the lender’s prime rate plus 75 basis points. As of August 31, 2021, the Company has not drawn on the line of credit. The operating line of credit is secured by a first charge on the property at 265 Talbot St. West, Leamington, Ontario and a first ranking position on a general security agreement.
The Company’s subsidiary, CC Pharma, has two operating lines of credit for €5,000 and €3,500 each, which bear interest at Euro Over Night Index Average plus 1.79% and Euro Interbank Offered Rate plus 3.682% respectively. As of August 31, 2021, a total of €7,000 ($8,413) was drawn down from the available credit of €8,500. The operating lines of credit are secured by a first charge on the inventory held by CC Pharma.
The Company’s subsidiary, Four Twenty Corporation (“420”), has a revolving credit facility of $20,000 which bears interest at EURIBOR plus an applicable margin. As of August 31, 2021, the Company has not drawn any amount on the revolving line of credit. The revolving credit facility is secured by all of 420 and SweetWater’s assets and includes a corporate guarantee by a subsidiary of the Company.
10
Note 10. Long-term debt
The following table sets forth the net carrying amount of long-term debt instruments:
|
|
|
August 31,
|
|
|
May 31,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
Credit facility - C$80,000 - Canadian prime interest rate plus an applicable margin,
3-year term, with a 10-year amortization, repayable in blended monthly payments,
due in November 2022
|
|
$
|
58,730
|
|
|
$
|
62,964
|
|
|
Term loan - C$25,000 - Canadian 5-year bond interest rate plus 2.73% with a minimum
4.50%, 5-year term, with a 15-year amortization, repayable in blended monthly
payments, due in July 2023
|
|
|
13,454
|
|
|
|
14,335
|
|
|
Term loan - C$25,000 - 3.95%, compounded monthly, 5-year term with a 15-year
amortization, repayable in equal monthly instalments of $188 including interest,
due in April 2022
|
|
|
16,011
|
|
|
|
17,117
|
|
|
Term loan - C$1,250 - 3.85%, 5-year term, with a 10-year amortization, repayable in
equal monthly instalments of $13 including interest, due in August 2026
|
|
|
538
|
|
|
|
587
|
|
|
Mortgage payable - C$3,750 - 3.85%, 5-year term, with a 20-year amortization,
repayable in equal monthly instalments of $23 including interest, due in August 2026
|
|
|
2,425
|
|
|
|
2,562
|
|
|
Vendor take-back mortgage - C$2,850 - 6.75%, 5-year term, repayable in equal
monthly instalments of $56 including interest, due in June 2021
|
|
|
-
|
|
|
|
92
|
|
|
Term loan ‐ €5,000 ‐ Euro Interbank Offered Rate + 1.79%, 5‐year term, repayable in
quarterly instalments of €250 plus interest, due in December 2023
|
|
|
3,239
|
|
|
|
3,356
|
|
|
Term loan ‐ €5,000 ‐ Euro Interbank Offered Rate + 2.68%, 5‐year term, repayable
in quarterly instalments of €250 plus interest, due in December 2023
|
|
|
3,239
|
|
|
|
3,356
|
|
|
Term loan ‐ €1,500 ‐ Euro Interbank Offered Rate + 2.00%, 5‐year term, repayable in
quarterly instalments of €98 including interest, due in April 2025
|
|
|
1,767
|
|
|
|
1,831
|
|
|
Term loan ‐ €1,500 ‐ Euro Interbank Offered Rate + 2.00%, 5‐year term, repayable in
quarterly instalments of €98 including interest, due in June 2025
|
|
|
1,767
|
|
|
|
1,831
|
|
|
Term loan - $100,000 - EUROBIR rate plus an applicable margin, 3-year term, repayable
in quarterly instalments beginning March 31, 2021 of $7,500 in its first twelve months
and $10,000 in each of the next two years, due in March 2024
|
|
|
96,250
|
|
|
|
98,138
|
|
|
Carrying amount of long-term debt
|
|
|
197,420
|
|
|
|
206,169
|
|
|
Unamortized financing fees
|
|
|
(1,672
|
)
|
|
|
(2,061
|
)
|
|
Net carrying amount
|
|
|
195,748
|
|
|
|
204,108
|
|
|
Less principal portion included in current liabilities
|
|
|
(30,837
|
)
|
|
|
(36,622
|
)
|
|
Total noncurrent portion of long-term debt
|
|
$
|
164,911
|
|
|
$
|
167,486
|
|
As of August 31, 2021, the Company was in compliance with all the long-term debt covenants.
Note 11. Convertible debentures
The following table sets forth the net carrying amount of the convertible debentures:
|
|
|
August 31,
|
|
|
May 31,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
5.25% Convertible Notes ("APHA 24")
|
|
$
|
342,499
|
|
|
$
|
399,444
|
|
|
5.00% Convertible Notes ("TLRY 23")
|
|
|
269,147
|
|
|
|
268,180
|
|
|
Total
|
|
$
|
611,646
|
|
|
$
|
667,624
|
|
11
APHA 24
|
|
|
August 31,
|
|
|
May 31,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
5.25% Contractual debenture
|
|
$
|
350,000
|
|
|
$
|
350,000
|
|
|
Debt settlement
|
|
|
(90,760
|
)
|
|
|
(90,760
|
)
|
|
Fair value adjustment
|
|
|
83,259
|
|
|
|
140,204
|
|
|
Net carrying amount of APHA 24
|
|
$
|
342,499
|
|
|
$
|
399,444
|
|
The Company estimated the fair value of the APHA 24 convertible debenture at August 31, 2021 at $1,321 per convertible debenture using the Black-Scholes model (Level 3) with the following weighted-average assumptions:
|
Risk-free interest rate
|
|
|
0.84
|
%
|
|
Expected volatility
|
|
|
70
|
%
|
|
Expected term
|
|
2.75 years
|
|
|
Expected dividend yield
|
|
|
0.0
|
%
|
Expected volatility is based on the historical volatility of the Company's common stock since its initial public offering in 2018.
TLRY 23
|
|
|
August 31,
|
|
|
May 31,
|
|
|
|
|
2021
|
|
|
2021
|
|
|
5.00% Contractual debenture
|
|
$
|
277,856
|
|
|
$
|
277,856
|
|
|
Unamortized discount
|
|
|
(8,709
|
)
|
|
|
(9,676
|
)
|
|
Net carrying amount of TLRY 23
|
|
$
|
269,147
|
|
|
$
|
268,180
|
|
Note 12. Warrant liability
Warrants outstanding at August 31, 2021:
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
Classification
|
|
Exercise Price
|
|
May 31, 2021
|
|
|
Issued
|
|
|
Exercised
|
|
|
August 31, 2021
|
|
|
Warrant – September 26, 2021
|
|
Equity
|
|
3.14
|
|
|
166,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
166,000
|
|
|
Warrant – January 30, 2022
|
|
Equity
|
|
9.26
|
|
|
5,828,651
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,828,651
|
|
|
Warrant – March 17, 2025
|
|
Liability
|
|
5.95
|
|
|
6,209,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,209,000
|
|
|
|
|
|
|
|
|
|
12,203,651
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,203,651
|
|
|
|
|
August 31, 2021
|
|
|
August 31, 2020
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
average
|
|
|
Number of
|
|
|
average
|
|
|
|
|
warrants
|
|
|
price
|
|
|
warrants
|
|
|
price
|
|
|
Outstanding, opening
|
|
|
12,203,651
|
|
|
$
|
7.41
|
|
|
|
5,994,651
|
|
|
$
|
8.91
|
|
|
Exercised during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Issued during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Outstanding, ending
|
|
|
12,203,651
|
|
|
$
|
7.41
|
|
|
|
5,994,651
|
|
|
$
|
8.91
|
|
12
The Company estimated the fair value of the Warrant liability at August 31, 2021 at $9.74 per warrant using the Black-Scholes pricing model (Level 3) with the following weighted-average assumptions:
|
Risk-free interest rate
|
|
|
0.84
|
%
|
|
Expected volatility
|
|
|
70
|
%
|
|
Expected term
|
|
4.05 years
|
|
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
Strike price
|
|
$
|
5.95
|
|
|
Fair value of common stock
|
|
$
|
13.69
|
|
Note 13. Stock-based compensation
For the three months ended August 31, 2021, the total stock-based compensation was $9,417 (2020 - $2,850). The Company operates the following stock-based compensation plans:
Tilray 2018 Equity Incentive Plan and Original Plan
The 2018 Equity Incentive Plan (EIP) authorizes the award of stock options, restricted stock units (“RSUs”) and stock appreciation rights (“SARs”) to employees, including officers, non-employee directors and consultants and the employees and consultants of our affiliates. Certain employees and other service providers of the Company participate in the equity-based compensation plan of Privateer Holdings, Inc (the “Original Plan”).
No stock options were granted under the EIP during the three months ended August 31, 2021, and three months ended August, 31, 2020.
Stock-based activity under the EIP and Original Plan for the year ended August 31, 2021 is as follows:
|
EIP Time-based stock option activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
remaining
|
|
|
|
|
|
|
|
|
Stock
|
|
|
exercise
|
|
|
contractual
|
|
|
Aggregate
|
|
|
|
|
Options
|
|
|
price
|
|
|
term (years)
|
|
|
intrinsic value
|
|
|
Balance, May 31, 2021
|
|
|
3,180,226
|
|
|
$
|
14.19
|
|
|
1.3
|
|
|
$
|
25,171
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
(67,750
|
)
|
|
|
7.76
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
(112,306
|
)
|
|
|
21.40
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled
|
|
|
(2,498
|
)
|
|
|
65.20
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, August 31, 2021
|
|
|
2,997,672
|
|
|
$
|
14.02
|
|
|
6.5
|
|
|
$
|
15,843
|
|
|
Original plan time-based stock option activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
remaining
|
|
|
|
|
|
|
|
|
Stock
|
|
|
exercise
|
|
|
contractual
|
|
|
Aggregate
|
|
|
|
|
Options
|
|
|
price
|
|
|
term (years)
|
|
|
intrinsic value
|
|
|
Balance, May 31, 2021
|
|
|
917,545
|
|
|
$
|
3.97
|
|
|
1.7
|
|
|
$
|
11,886
|
|
|
Exercised
|
|
|
(411,742
|
)
|
|
|
3.41
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
(4,250
|
)
|
|
|
4.79
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled
|
|
|
(16,093
|
)
|
|
|
26.30
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, August 31, 2021
|
|
|
485,460
|
|
|
$
|
3.69
|
|
|
|
2.7
|
|
|
$
|
4,954
|
|
13
|
EIP Time-based RSU activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
average
|
|
|
Weighted-
average
|
|
|
|
|
|
|
|
|
|
|
|
|
grant-date
|
|
|
remaining
|
|
|
|
|
|
|
|
|
Time-based
|
|
|
fair value
|
|
|
contractual
|
|
|
Aggregate
|
|
|
|
|
RSUs
|
|
|
per share
|
|
|
term (years)
|
|
|
intrinsic value
|
|
|
Balance, May 31, 2021
|
|
|
1,205,243
|
|
|
$
|
15.16
|
|
|
|
—
|
|
|
$
|
20,091
|
|
|
Granted
|
|
|
981,229
|
|
|
|
14.39
|
|
|
|
—
|
|
|
|
—
|
|
|
Vested
|
|
|
(126,393
|
)
|
|
|
19.52
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
(121,295
|
)
|
|
|
16.39
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, August 31, 2021
|
|
|
1,938,784
|
|
|
$
|
14.41
|
|
|
|
—
|
|
|
$
|
28,709
|
|
|
EIP Performance-based RSU activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
average
|
|
|
Weighted-
average
|
|
|
|
|
|
|
|
|
|
|
|
|
grant-date
|
|
|
remaining
|
|
|
|
|
|
|
|
|
Performance-based
|
|
|
fair value
|
|
|
contractual
|
|
|
Aggregate
|
|
|
|
|
RSUs
|
|
|
per share
|
|
|
term (years)
|
|
|
intrinsic value
|
|
|
Balance, May 31, 2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
Granted
|
|
|
1,345,158
|
|
|
|
13.13
|
|
|
|
—
|
|
|
|
17,668
|
|
|
Vested
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, August 31, 2021
|
|
|
1,345,158
|
|
|
$
|
13.13
|
|
|
|
2.9
|
|
|
$
|
17,668
|
|
For the three months ended August 31, 2021, the Company granted 1,345,158 performance-based RSUs, with none vesting in the period (2020 – none).
Predecessor Plan – Aphria
Prior to the reverse acquisition disclosed in our annual report, Aphria had established the Aphria Omnibus Incentive Plan (the “Predecessor Plan”). Following stockholder approval of the EIP, no new awards have been granted under the Predecessor Plan. In connection with the reverse acquisition Aphria stock options, Aphria RSUs and DSUs issued under the Predecessor Plan were exchanged for options, RSUs under the EIP.
Stock option, RSU and DSU activity for the Company under the Predecessor Plan is as follows:
Predecessor plan time-based stock option activity
|
|
|
August 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
grant
|
|
|
remaining
|
|
|
Aggregate
|
|
|
|
|
Number of
|
|
|
exercise
|
|
|
date fair
|
|
|
contractual
|
|
|
Intrinsic
|
|
|
|
|
options
|
|
|
price
|
|
|
value
|
|
|
term (years)
|
|
|
Amount
|
|
|
Balance May 31, 2021
|
|
|
2,499,185
|
|
|
$
|
12.48
|
|
|
$
|
6.51
|
|
|
|
2.4
|
|
|
|
(10,472
|
)
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
(56,301
|
)
|
|
|
9.34
|
|
|
|
4.50
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
(638
|
)
|
|
|
8.95
|
|
|
|
4.15
|
|
|
|
—
|
|
|
|
—
|
|
|
Expired
|
|
|
(405,455
|
)
|
|
|
19.94
|
|
|
|
9.29
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, August 31, 2021
|
|
|
2,036,790
|
|
|
$
|
11.08
|
|
|
$
|
6.02
|
|
|
|
2.67
|
|
|
$
|
5,321
|
|
|
Vested and exercisable, August 31, 2021
|
|
|
1,821,178
|
|
|
$
|
11.17
|
|
|
$
|
6.10
|
|
|
|
2.65
|
|
|
$
|
4,588
|
|
14
During the three months ended August 31, 2021, the Company did not grant any further stock options out of the Predecessor plan. The total intrinsic values of the stock options exercised during the three months ended August 31, 2021 was $430 (2020 - $238). The total fair value of time-based stock options vested during the three months ended August 31, 2021 was $1,797 (2020 - $1,723).
Predecessor plan time-based and Performance-based RSU activity
|
|
|
August 31, 2021
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
grant -
|
|
|
|
|
|
|
grant -
|
|
|
|
|
|
|
|
|
date fair
|
|
|
Performance-
|
|
|
date fair
|
|
|
|
|
Time- based
|
|
|
value per
|
|
|
based
|
|
|
value per
|
|
|
|
|
RSUs
|
|
|
share
|
|
|
RSUs
|
|
|
share
|
|
|
Balance, May 31, 2021
|
|
|
2,794,972
|
|
|
$
|
6.88
|
|
|
|
—
|
|
|
|
—
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Exercised
|
|
|
(1,574,381
|
)
|
|
|
6.56
|
|
|
|
—
|
|
|
|
—
|
|
|
Forfeited
|
|
|
(46,171
|
)
|
|
|
15.09
|
|
|
|
—
|
|
|
|
—
|
|
|
Balance, August 31, 2021
|
|
|
1,174,419
|
|
|
$
|
6.98
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of August 31, 2021, the total remaining unrecognized compensation expenses related to non-vested time-based RSUs amounted to $789 (2021 - $15,111), which will be amortized over the weighted-average remaining requisite service period of approximately 1.04 years (2020 – 1.85 years). The total fair value of time-based RSUs vested during the three months ended August 31, 2021 was $12,063 (2020 - $862). During the period, the Company accelerated the vesting of 679,000 RSUs to fully vested.
Note 14. Accumulated other comprehensive income (loss)
Accumulated other comprehensive loss includes the following components:
|
|
|
Foreign
currency
translation
gain (loss)
|
|
|
Unrealized
loss on
convertible
notes
receivables
|
|
|
Total
|
|
|
Balance May 31, 2021
|
|
$
|
156,417
|
|
|
$
|
(3,749
|
)
|
|
$
|
152,668
|
|
|
Other comprehensive loss
|
|
|
(100,772
|
)
|
|
|
(649
|
)
|
|
|
(101,421
|
)
|
|
Balance August 31, 2021
|
|
$
|
55,645
|
|
|
$
|
(4,398
|
)
|
|
$
|
51,247
|
|
Note 15. Non-controlling interests
The following tables summarize the information relating to the Company’s subsidiaries, Superhero LP, CC Pharma Nordic ApS, Aphria Diamond, and ColCanna S.A.S. before intercompany eliminations.
Non-controlling interests as of August 31, 2021:
|
|
|
Superhero
|
|
|
CC Pharma
|
|
|
Aphria
|
|
|
ColCanna
|
|
|
August 31,
|
|
|
|
|
LP
|
|
|
Nordic ApS
|
|
|
Diamond
|
|
|
S.A.S.
|
|
|
2021
|
|
|
Current assets
|
|
$
|
52,995
|
|
|
$
|
951
|
|
|
$
|
26,058
|
|
|
$
|
527
|
|
|
$
|
80,531
|
|
|
Non-current assets
|
|
|
170,799
|
|
|
|
132
|
|
|
|
156,839
|
|
|
|
141,387
|
|
|
|
469,157
|
|
|
Current liabilities
|
|
|
(170,799
|
)
|
|
|
(1,033
|
)
|
|
|
(16,047
|
)
|
|
|
(66
|
)
|
|
|
(187,945
|
)
|
|
Non-current liabilities
|
|
|
—
|
|
|
|
(392
|
)
|
|
|
(80,543
|
)
|
|
|
(23,581
|
)
|
|
|
(104,516
|
)
|
|
Net assets
|
|
$
|
52,995
|
|
|
$
|
(343
|
)
|
|
$
|
86,307
|
|
|
$
|
118,267
|
|
|
$
|
257,227
|
|
15
Non-controlling interests as of May 31, 2021:
|
|
|
CC Pharma
|
|
|
Aphria
|
|
|
ColCanna
|
|
|
May 31,
|
|
|
|
|
Nordic ApS
|
|
|
Diamond
|
|
|
S.A.S.
|
|
|
2021
|
|
|
Current assets
|
|
$
|
919
|
|
|
$
|
19,531
|
|
|
$
|
315
|
|
|
$
|
20,765
|
|
|
Non-current assets
|
|
|
103
|
|
|
|
153,696
|
|
|
|
146,587
|
|
|
|
300,386
|
|
|
Current liabilities
|
|
|
(956
|
)
|
|
|
(28,511
|
)
|
|
|
(62
|
)
|
|
|
(29,529
|
)
|
|
Non-current liabilities
|
|
|
(406
|
)
|
|
|
(69,332
|
)
|
|
|
(6,606
|
)
|
|
|
(76,344
|
)
|
|
Net assets
|
|
$
|
(340
|
)
|
|
$
|
75,384
|
|
|
$
|
140,234
|
|
|
$
|
215,278
|
|
Non-controlling interests for the three months ended August 31, 2021:
|
|
|
Superhero
|
|
|
CC Pharma
|
|
|
Aphria
|
|
|
ColCanna
|
|
|
August 31,
|
|
|
|
|
LP
|
|
|
Nordic ApS
|
|
|
Diamond
|
|
|
S.A.S.
|
|
|
2021
|
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,325
|
|
|
$
|
—
|
|
|
$
|
20,325
|
|
|
Total expenses
|
|
|
—
|
|
|
|
4
|
|
|
|
13,274
|
|
|
|
2
|
|
|
|
13,280
|
|
|
Net (loss) income
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
7,051
|
|
|
|
(2
|
)
|
|
|
7,045
|
|
|
Other comprehensive (loss) income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net comprehensive income
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
7,051
|
|
|
$
|
(2
|
)
|
|
$
|
7,045
|
|
Non-controlling interests for the three months ended August 31, 2020:
|
|
|
CC Pharma
|
|
|
Aphria
|
|
|
ColCanna
|
|
|
August 31,
|
|
|
|
|
Nordic ApS
|
|
|
Diamond
|
|
|
S.A.S.
|
|
|
2020
|
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
30,035
|
|
|
$
|
—
|
|
|
$
|
30,035
|
|
|
Total expenses (recovery)
|
|
|
—
|
|
|
|
17,675
|
|
|
|
(239
|
)
|
|
|
17,436
|
|
|
Net (loss) income
|
|
|
—
|
|
|
|
12,360
|
|
|
|
239
|
|
|
|
12,599
|
|
|
Other comprehensive (loss) income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net comprehensive income
|
|
$
|
—
|
|
|
$
|
12,360
|
|
|
$
|
239
|
|
|
$
|
12,599
|
|
Note 16. Commitments and contingencies
Purchase and other commitments
The Company has payments on long-term debt (refer to Note 10 Long-term debt), convertible notes (refer to Note 11 Convertible Debentures), ABG finance liability material purchase commitments and construction commitments as follows:
|
|
|
Total
|
|
|
2022
(remaining
nine
months)
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
Thereafter
|
|
|
Long-term debt repayment
|
|
$
|
198,253
|
|
|
$
|
32,981
|
|
|
$
|
78,820
|
|
|
$
|
80,838
|
|
|
$
|
2,157
|
|
|
$
|
2,516
|
|
|
$
|
941
|
|
|
Convertible notes, principal and
interest
|
|
|
571,989
|
|
|
|
13,893
|
|
|
|
13,893
|
|
|
|
284,803
|
|
|
|
259,400
|
|
|
|
—
|
|
|
|
—
|
|
|
ABG finance liability
|
|
|
6,000
|
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
—
|
|
|
|
—
|
|
|
Material purchase obligations
|
|
|
29,523
|
|
|
|
24,222
|
|
|
|
4,185
|
|
|
|
937
|
|
|
|
179
|
|
|
|
—
|
|
|
|
—
|
|
|
Construction commitments
|
|
|
2,012
|
|
|
|
2,012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
807,776
|
|
|
$
|
74,608
|
|
|
$
|
98,398
|
|
|
$
|
368,077
|
|
|
$
|
263,236
|
|
|
$
|
2,516
|
|
|
$
|
941
|
|
Escrow payable was settled on September 17, 2021, when the Company issued 9,817,061 shares of its common stock, while non-controlling interest holders contributed cash.
16
The following table presents the future undiscounted payment associated with lease liabilities as of August 31, 2021:
|
|
|
Operating
|
|
|
Finance
|
|
|
|
|
leases
|
|
|
leases
|
|
|
2022 (remaining nine months)
|
|
|
3,832
|
|
|
|
1,672
|
|
|
2023
|
|
|
4,437
|
|
|
|
7,088
|
|
|
2024
|
|
|
3,840
|
|
|
|
2,061
|
|
|
2025
|
|
|
3,321
|
|
|
|
2,122
|
|
|
2026
|
|
|
3,472
|
|
|
|
2,186
|
|
|
Thereafter
|
|
|
8,522
|
|
|
|
39,586
|
|
|
Total minimum lease payments
|
|
$
|
27,423
|
|
|
$
|
54,715
|
|
|
Imputed interest
|
|
|
(5,778
|
)
|
|
|
(19,167
|
)
|
|
Obligations recognized
|
|
$
|
21,645
|
|
|
$
|
35,548
|
|
Legal proceedings
From time to time, the Company and/or its subsidiaries may become defendants in legal actions arising out of the ordinary course and conduct of its business. As of August 31, 2021, in the opinion of management, no claims meet the criteria to record or disclose a loss contingency.
Note 17. Net revenue
The Company reports four segments: cannabis, distribution, beverage alcohol and wellness, in accordance with ASC 280 Segment Reporting. The Company generates revenues from these segments through contracts with customers, each with a single performance obligation, being the sale of products. The Company determines that revenue information disclosed in business segment information in (Note 22 Segment reporting) disaggregates revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Net revenue is comprised of:
|
|
|
For the three months ended August 31.
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Cannabis revenue
|
|
$
|
89,933
|
|
|
$
|
67,120
|
|
|
Cannabis excise taxes
|
|
|
(19,484
|
)
|
|
|
(15,918
|
)
|
|
Net cannabis revenue
|
|
|
70,449
|
|
|
|
51,202
|
|
|
Beverage alcohol revenue
|
|
|
16,483
|
|
|
|
—
|
|
|
Beverage alcohol excise taxes
|
|
|
(1,022
|
)
|
|
|
—
|
|
|
Net beverage alcohol revenue
|
|
|
15,461
|
|
|
|
—
|
|
|
Distribution revenue
|
|
|
67,186
|
|
|
|
66,288
|
|
|
Wellness revenue
|
|
|
14,927
|
|
|
|
—
|
|
|
Total
|
|
$
|
168,023
|
|
|
$
|
117,490
|
|
Note 18. Cost of goods sold
Cost of goods sold is comprised of:
|
|
|
For the three months
ended August 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Cannabis costs
|
|
$
|
40,190
|
|
|
$
|
25,775
|
|
|
Beverage alcohol costs
|
|
|
6,662
|
|
|
|
—
|
|
|
Distribution costs
|
|
|
59,290
|
|
|
|
56,770
|
|
|
Wellness costs
|
|
|
10,925
|
|
|
|
—
|
|
|
Total
|
|
$
|
117,068
|
|
|
$
|
82,545
|
|
17
Note 19. General and administrative expenses
General and administrative expenses are comprised of:
|
|
|
For the three months ended
August 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Executive compensation
|
|
$
|
3,090
|
|
|
$
|
2,250
|
|
|
Office and general
|
|
|
12,769
|
|
|
|
4,421
|
|
|
Salaries and wages
|
|
|
15,311
|
|
|
|
9,343
|
|
|
Stock-based compensation
|
|
|
9,417
|
|
|
|
2,850
|
|
|
Insurance
|
|
|
4,631
|
|
|
|
3,206
|
|
|
Professional fees
|
|
|
2,713
|
|
|
|
2,935
|
|
|
Travel and accommodation
|
|
|
790
|
|
|
|
727
|
|
|
Rent
|
|
|
766
|
|
|
|
240
|
|
|
Total
|
|
$
|
49,487
|
|
|
$
|
25,972
|
|
Note 20. Non-operating income (expense)
Non-operating income (expense) is comprised of:
|
|
|
For the three months ended
August 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Change in fair value of convertible debenture
|
|
$
|
39,370
|
|
|
$
|
340
|
|
|
Change in fair value of warrant liability
|
|
|
17,535
|
|
|
|
—
|
|
|
Foreign exchange loss
|
|
|
(5,724
|
)
|
|
|
(16,331
|
)
|
|
Loss on long-term investments
|
|
|
(1,675
|
)
|
|
|
(1,120
|
)
|
|
Gain from equity investees
|
|
|
1,356
|
|
|
|
—
|
|
|
Other non-operating (losses) gains, net
|
|
|
(2,002
|
)
|
|
|
3,752
|
|
|
Total
|
|
$
|
48,860
|
|
|
$
|
(13,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Note 21.
|
Financial risk management and financial instruments
|
Financial instruments
The Company has classified its financial instruments as described in Note 3 Significant accounting policies in our Annual Report.
The carrying values of accounts receivable, bank indebtedness and accounts payable and accrued liabilities approximate their fair values due to their short periods to maturity.
The Company’s long-term debt of $18,974 (2021 - $20,358) is subject to fixed interest rates. The Company’s long-term debt is valued based on discounting the future cash outflows associated with the long-term debt. The discount rate is based on the incremental premium above market rates for Government of Canada securities of similar duration. In each period thereafter, the incremental premium is held constant while the Government of Canada security is based on the then current market value to derive the discount rate.
Fair value hierarchy
The Company complies with ASC 820, Fair Value Measurements, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.
18
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of August 31, 2021 and May 31, 2021 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 31,
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
2021
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
376,297
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
376,297
|
|
|
Convertible notes receivable
|
|
|
—
|
|
|
|
2,370
|
|
|
|
—
|
|
|
|
2,370
|
|
|
Long-term investments
|
|
|
7,174
|
|
|
|
173,733
|
|
|
|
—
|
|
|
|
180,907
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
|
—
|
|
|
|
—
|
|
|
|
60,476
|
|
|
|
60,476
|
|
|
Contingent consideration
|
|
|
—
|
|
|
|
—
|
|
|
|
61,494
|
|
|
|
61,494
|
|
|
APHA 24 Convertible debenture
|
|
|
—
|
|
|
|
—
|
|
|
|
342,499
|
|
|
|
342,499
|
|
|
Total recurring fair value measurements
|
|
$
|
383,471
|
|
|
$
|
176,103
|
|
|
$
|
464,468
|
|
|
$
|
1,024,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 31,
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
2021
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
488,466
|
|
|
—
|
|
|
—
|
|
|
$
|
488,466
|
|
|
Convertible notes receivable
|
|
—
|
|
|
|
2,485
|
|
|
—
|
|
|
|
2,485
|
|
|
Long-term investments
|
|
|
9,251
|
|
|
|
2,934
|
|
|
—
|
|
|
|
12,185
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
—
|
|
|
—
|
|
|
|
78,168
|
|
|
|
78,168
|
|
|
Contingent consideration
|
|
—
|
|
|
—
|
|
|
|
60,657
|
|
|
|
60,657
|
|
|
APHA 24 Convertible debenture
|
|
—
|
|
|
—
|
|
|
|
399,444
|
|
|
|
399,444
|
|
|
Total recurring fair value measurements
|
|
$
|
497,717
|
|
|
$
|
5,419
|
|
|
$
|
538,269
|
|
|
$
|
1,041,405
|
|
The Company’s financial assets and liabilities required to be measured on a recurring basis are its equity investments measured at fair value, debt securities classified as available-for-sale, acquisition-related contingent consideration, and warrant liability.
Convertible notes receivable and long-term investments recorded at fair value: The estimated fair value is determined using quoted market prices, broker or dealer quotations or discounted cash flows and is classified as Level 2.
Warrant liability: The warrants associated with the warrant liability are classified as Level 3 derivatives. Consequently, the estimated fair value of the warrant liability is determined using the Black-Scholes pricing model. Until the warrants are exercised, expire, or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity, the warrant liability (which relates to warrants to purchase shares of common stock) is marked-to-market each reporting period with the change in fair value recorded in change in fair value of warrant liability. Any significant adjustments to the unobservable inputs disclosed in the table below would have a direct impact on the fair value of the warrant liability.
APHA 24: This instrument is held at fair value. The estimated fair value is determined using the Black-Scholes option pricing model and is classified as Level 3.
Contingent consideration: The contingent consideration from the acquisition of SweetWater is determined by discounting future expected cash outflows at a discount rate of 5%. The inputs into the future expected cash outflows are classified as Level 3.
19
The balances of assets and liabilities categorized within Level 3 of the fair value hierarchy measured at fair value on a recurring basis are reconciled, as follows:
|
|
|
APHA 24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
|
|
|
Warrant
|
|
|
Contingent
|
|
|
|
|
|
|
|
|
Debt
|
|
|
Liability
|
|
|
Consideration
|
|
|
Total
|
|
|
Balance, May 31, 2021
|
|
|
(399,444
|
)
|
|
|
(78,168
|
)
|
|
|
(60,657
|
)
|
|
|
(538,269
|
)
|
|
Additions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Disposals
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Unrealized gain (loss) on fair value
|
|
|
56,945
|
|
|
|
17,692
|
|
|
|
(837
|
)
|
|
|
73,800
|
|
|
Balance, August 31, 2021
|
|
|
(342,499
|
)
|
|
|
(60,476
|
)
|
|
|
(61,494
|
)
|
|
|
(464,469
|
)
|
The unrealized gain (loss) on fair value for the Convertible Debenture and the warrant liability is recognized in non-operating income (loss) using the following inputs:
|
Financial asset / financial liability
|
|
Valuation
technique
|
|
Significant
unobservable
input
|
|
Inputs
|
|
APHA Convertible debentures
|
|
Black-Scholes
|
|
Volatility,
expected life
|
|
70%
3 years
|
|
Warrant liability
|
|
Black-Scholes
|
|
Volatility,
expected life
|
|
70%
4 years
|
|
Contingent consideration
|
|
Discounted
cash flows
|
|
Discount
rate,
achievement
|
|
5%
100%
|
Items measured at fair value on a non-recurring basis
The Company's prepaids and other current assets, long lived assets, including property and equipment, goodwill and intangible assets are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.
Financial risk management
The Company has exposure to the following risks from its use of financial instruments: credit; liquidity; currency rate; interest rate price; equity price risk; and capital management risk.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The maximum credit exposure at August 31, 2021, is the carrying amount of cash and cash equivalents, accounts receivable, prepaids and other current assets, and convertible notes receivable. All cash and cash equivalents are placed with major financial institutions in Canada, Australia, Portugal, Germany, Colombia, Argentina and the United States. To date, the Company has not experienced any losses on its cash deposits. Accounts receivable are unsecured, and the Company does not require collateral from its customers.
The Company evaluates the collectability of its accounts receivable and maintains an allowance for credit losses at an amount sufficient to absorb losses inherent in the existing accounts receivable portfolio as of the reporting dates based on the estimate of expected net credit losses.
Due to the uncertainties associated with COVID-19, the Company may be unable to accurately predict the creditworthiness of its counterparties and their ability to meet their obligations. This may result in unforeseen additional credit losses.
As of August 31, 2021, the Company’s financial liabilities consist of bank indebtedness and accounts payable and accrued liabilities, which have contractual maturity dates within one-year, long-term debt, and convertible debentures which have contractual maturities over the next five years.
20
The Company maintains a debt service charge covenant on certain loans secured by its Aphria One facilities that is measured at year-end only. The Company maintains debt service charge and leverage covenants on certain loans secured by its Aphria Diamond facilities and 420 that are measured quarterly. The Company believes that it has sufficient operating room with respect to its financial covenants for the next fiscal year and does not anticipate being in breach of any of its financial covenants.
The Company manages its liquidity risk by reviewing its capital requirements on an ongoing basis. Based on the Company’s working capital position at August 31, 2021, management regards liquidity risk to be low.
As of August 31, 2021, a portion of the Company’s financial assets and liabilities held in Canadian dollars and Euros consist of cash and cash equivalents, convertible notes receivable, and long-term investments. The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in the functional currency. The Company is exposed to currency rate risk in other comprehensive income, relating to foreign subsidiaries which operate in a foreign currency. The Company does not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point in time.
|
|
(d)
|
Interest rate price risk
|
The Company’s exposure to changes in interest rates relates primarily to the Company’s outstanding debt. The Company manages interest rate risk by restricting the type of investments and varying the terms of maturity and issuers of marketable securities. Varying the terms to maturity reduces the sensitivity of the portfolio to the impact of interest rate fluctuations.
As of August 31, 2021, the Company held long-term equity investments at fair value and equity investments under the measurement alternative. These investment in equities were acquired as part of our strategic transactions. Accordingly, the changes in fair values of investment in equities measured at fair value or under the measurement alternative are recognized through gain (loss) on long-term investment in the statements of net loss and comprehensive loss. Based on the fair value of investment in equities held as of August 31, 2021, a hypothetical decrease of 10% in the prices for these companies would reduce the fair values of the investments and result in unrealized loss recorded in gain (loss) on long-term investment by $18,641.
Similarly, based on the fair value of our warrant liability as of August 31, 2021, a hypothetical increase of 10% in the price for our common stock would increase the change in fair value of warrant liability and result in unrealized gain recorded in non-operating income by $6,047.
The Company’s objectives when managing its capital are to safeguard its ability to continue as a going concern, to meet its capital expenditures for its continued operations, and to maintain a flexible capital structure which optimizes the cost of capital within a framework of acceptable risk. The Company manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust its capital structure, the Company may issue new shares, issue new debt, or acquire or dispose of assets. The Company is not subject to externally imposed capital requirements.
Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. There have been no changes to the Company’s capital management approach in the year. The Company considers its cash and cash equivalents and marketable securities as capital.
|
Note 22.
|
Segment reporting
|
Information reported to the Chief Operating Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment performance focuses on the nature of the operations. The Company operates in four segments. 1) cannabis operations, which encompasses the production, distribution and sale of both medical and adult-use cannabis, 2) beverage alcohol operations, which encompasses cultivation, distribution and sale of beverage alcohol products, 3) distribution operations, which encompasses the purchase and resale of pharmaceuticals products to customers, and 4) wellness products, which encompasses hemp foods and cannabidiol (“CBD”) products. Operating segments have not been aggregated and no asset information is provided for the segments because the Company’s CODM does not receive asset information by segment on a regular basis. While the Company reported “business under development” as a fifth operating segment in its previous Annual Report, management determined that this no longer met the definition of an operating segment. The Company will continually review its operations and reporting structure in order to disclose its operating segments.
21
Segment net revenue from external customers:
|
|
|
For the three months ended
August 31,
|
|
|
|
|
|
2021
|
|
|
|
2020
|
|
|
Cannabis business
|
|
$
|
70,449
|
|
|
$
|
51,202
|
|
|
Distribution business
|
|
|
67,186
|
|
|
|
66,288
|
|
|
Beverage alcohol business
|
|
|
15,461
|
|
|
|
—
|
|
|
Wellness business
|
|
|
14,927
|
|
|
|
—
|
|
|
Total
|
|
$
|
168,023
|
|
|
$
|
117,490
|
|
Segment gross profit from external customers:
|
|
|
For the three months ended
August 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Cannabis business
|
|
$
|
30,258
|
|
|
$
|
25,427
|
|
|
Distribution business
|
|
|
7,896
|
|
|
|
9,518
|
|
|
Beverage alcohol business
|
|
|
8,799
|
|
|
|
—
|
|
|
Wellness business
|
|
|
4,002
|
|
|
|
—
|
|
|
Total
|
|
$
|
50,955
|
|
|
$
|
34,945
|
|
Channels of Cannabis revenue were as follows:
|
|
|
For the three months ended
August 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Revenue from medical cannabis products
|
|
$
|
8,374
|
|
|
$
|
6,380
|
|
|
Revenue from adult-use cannabis products
|
|
|
69,593
|
|
|
|
56,948
|
|
|
Revenue from wholesale cannabis products
|
|
|
1,700
|
|
|
|
3,792
|
|
|
Revenue from international cannabis products
|
|
|
10,266
|
|
|
|
—
|
|
|
Less excise taxes
|
|
|
(19,484
|
)
|
|
|
(15,918
|
)
|
|
Total
|
|
$
|
70,449
|
|
|
$
|
51,202
|
|
Geographic net revenue:
|
|
|
For the three months ended
August 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
North America
|
|
$
|
90,543
|
|
|
$
|
51,192
|
|
|
EMEA
|
|
|
76,009
|
|
|
|
65,077
|
|
|
Latin America
|
|
|
1,471
|
|
|
|
1,221
|
|
|
Total
|
|
$
|
168,023
|
|
|
$
|
117,490
|
|
Geographic capital assets:
|
|
|
August 31, 2021
|
|
|
May 31, 2021
|
|
|
North America
|
|
$
|
477,278
|
|
|
$
|
504,575
|
|
|
EMEA
|
|
|
139,958
|
|
|
|
140,838
|
|
|
Latin America
|
|
|
4,103
|
|
|
|
5,285
|
|
|
Total
|
|
$
|
621,339
|
|
|
$
|
650,698
|
|
Major customers are defined as customers that each individually account for greater than 10% of the Company’s annual revenues. For the three months ended August 31, 2021 and 2020, there were no major customers representing greater than 10% of our annual revenues.
22