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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to

Commission File Number: 001-38594

 

Tilray, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

82-4310622

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1100 Maughan Road

Nanaimo, BC, Canada, V9X IJ2

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (844) 845-7291

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class 2 Common Stock, $0.0001 par value per share

 

TLRY

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of May 7, 2021, the registrant had 447,371,310 shares of Class 2 Common Stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

1

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

1

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

1

 

 

Condensed Consolidated Statements of Net Loss and Comprehensive Loss (Unaudited)

 

2

 

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

 

3

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

4

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)s

 

5

Item 2.

 

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

 

21

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

Item 4.

 

Controls and Procedures

 

33

PART II.

 

OTHER INFORMATION

 

34

Item 1.

 

Legal Proceedings

 

34

Item 1A.

 

Risk Factors

 

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

Item 3.

 

Defaults Upon Senior Securities

 

38

Item 4.

 

Mine Safety Disclosures

 

38

Item 5.

 

Other Information

 

38

Item 6.

 

Exhibits

 

39

Signatures

 

40

 

 

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TILRAY, INC.

Condensed Consolidated Balance Sheets

(in thousands of United States dollars, except for share and par value data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

416,370

 

 

$

189,702

 

Accounts receivable, net of allowance for credit losses of $1,267 and provision for sales returns of $727 (December 31, 2020 - $887 and $1,651, respectively)

 

 

28,304

 

 

 

29,033

 

Inventory

 

 

96,544

 

 

 

93,645

 

Prepayments and other current assets

 

 

30,751

 

 

 

34,640

 

Total current assets

 

 

571,969

 

 

 

347,020

 

Property and equipment, net

 

 

197,771

 

 

 

199,559

 

Operating lease, right-of-use assets

 

 

17,478

 

 

 

17,985

 

Intangible assets, net

 

 

186,222

 

 

 

186,445

 

Goodwill

 

 

169,079

 

 

 

166,915

 

Equity method investments

 

 

8,100

 

 

 

9,300

 

Other investments

 

 

12,083

 

 

 

14,369

 

Other assets

 

 

5,542

 

 

 

4,356

 

Total assets

 

$

1,168,244

 

 

$

945,949

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

48,289

 

 

 

17,776

 

Accrued expenses and other current liabilities

 

 

60,461

 

 

 

39,946

 

Accrued lease obligations

 

 

2,888

 

 

 

2,913

 

Senior Facility, net of transaction costs - current

 

 

49,547

 

 

 

 

Warrant liability

 

 

122,804

 

 

 

120,647

 

Total current liabilities

 

 

283,989

 

 

 

181,282

 

Accrued lease obligations

 

 

30,521

 

 

 

30,623

 

Deferred tax liability

 

 

49,293

 

 

 

49,274

 

Convertible notes, net of issuance costs

 

 

259,443

 

 

 

257,789

 

Senior Facility, net of transaction costs

 

 

 

 

 

48,470

 

Other liabilities

 

 

4,367

 

 

 

4,612

 

Total liabilities

 

$

627,613

 

 

$

572,050

 

Commitments and contingencies (refer to Note 16)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Class 1 common stock ($0.0001 par value, 233,333,333 shares authorized; 0 shares issued and outstanding)

 

 

 

 

 

 

Class 2 common stock ($0.0001 par value; 500,000,000 shares authorized;

   179,118,980 and 158,486,087 shares issued and outstanding, respectively

 

 

18

 

 

 

16

 

Additional paid-in capital

 

 

1,599,713

 

 

 

1,095,781

 

Accumulated other comprehensive (loss) income

 

 

11,958

 

 

 

8,205

 

Accumulated deficit

 

 

(1,071,058

)

 

 

(730,103

)

Total stockholders’ equity

 

 

540,631

 

 

 

373,899

 

Total liabilities and stockholders’ equity

 

$

1,168,244

 

 

$

945,949

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


TILRAY, INC.

Condensed Consolidated Statements of Net Loss and Comprehensive Loss

(in thousands of United States dollars, except for share and per share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

$

48,021

 

 

$

52,102

 

Cost of sales

 

 

34,518

 

 

 

41,232

 

Gross profit

 

 

13,503

 

 

 

10,870

 

General and administrative expenses

 

 

25,587

 

 

 

27,269

 

Sales and marketing expenses

 

 

9,739

 

 

 

18,326

 

Research and development expenses

 

 

1,202

 

 

 

1,347

 

Depreciation and amortization expenses

 

 

3,498

 

 

 

3,591

 

Impairment of assets

 

 

 

 

 

29,839

 

Loss from equity method investments

 

 

1,787

 

 

 

1,748

 

Litigation settlement

 

 

45,000

 

 

 

 

Operating loss

 

 

(73,310

)

 

 

(71,250

)

Foreign exchange (gain) loss, net

 

 

(699

)

 

 

28,069

 

Change in fair value of warrant liability

 

 

263,201

 

 

 

71,978

 

Interest expenses, net

 

 

6,916

 

 

 

9,146

 

Other (income) expenses, net

 

 

(1,516

)

 

 

4,651

 

Loss before income taxes

 

 

(341,212

)

 

 

(185,094

)

Deferred income tax recoveries

 

 

(635

)

 

 

(1,272

)

Current income tax expenses

 

 

378

 

 

 

301

 

Net loss

 

$

(340,955

)

 

$

(184,123

)

Net loss per share - basic and diluted

 

 

(2.01

)

 

 

(1.73

)

Weighted average shares used in computation of net loss per share - basic and diluted

 

 

169,489,223

 

 

 

106,463,352

 

Net loss

 

$

(340,955

)

 

$

(184,123

)

Foreign currency translation gain (loss), net

 

 

3,753

 

 

 

(16,633

)

Unrealized loss on investments

 

 

 

 

 

(74

)

Other comprehensive loss

 

 

3,753

 

 

 

(16,707

)

Comprehensive loss

 

$

(337,202

)

 

$

(200,830

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

2


 

TILRAY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands of United States dollars, except for share data, unaudited)

 

 

 

Common stock

 

 

 

 

 

 

Accumulated other

 

 

 

 

 

 

 

 

 

 

 

Number of

shares

 

 

Amount

 

 

Additional paid-in

capital

 

 

comprehensive (loss)

income

 

 

Accumulated

deficit

 

 

Total stockholders' equity

(deficit)

 

Balance as of December 31, 2019

 

 

102,781,225

 

 

$

11

 

 

$

705,671

 

 

$

9,719

 

 

$

(430,130

)

 

$

285,271

 

Proceeds from ABG Profit Participation Arrangement

 

 

 

 

 

 

 

 

1,353

 

 

 

 

 

 

 

 

 

1,353

 

Write-off of ABG finance receivable

 

 

 

 

 

 

 

 

28,900

 

 

 

 

 

 

(28,900

)

 

 

 

Escrow shares released from downstream merger

 

 

(7,659

)

 

 

 

 

 

(151

)

 

 

 

 

 

 

 

 

(151

)

Shares issued for common stock at-the-market, net of issuance costs

 

 

2,265,115

 

 

 

 

 

 

27,027

 

 

 

 

 

 

 

 

 

27,027

 

Shares issued for investments

 

 

6,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued under stock-based compensation plans

 

 

597,868

 

 

 

 

 

 

1,079

 

 

 

 

 

 

 

 

 

1,079

 

Stock-based compensation expenses

 

 

 

 

 

 

 

 

7,677

 

 

 

 

 

 

 

 

 

7,677

 

Shares issued under registered offering, net of issuance costs

 

 

7,250,000

 

 

 

1

 

 

 

19,827

 

 

 

 

 

 

 

 

 

19,828

 

Shares issued for exercise of pre-funded warrants

 

 

11,750,000

 

 

 

1

 

 

 

49,053

 

 

 

 

 

 

 

 

 

49,054

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(16,707

)

 

 

 

 

 

(16,707

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(184,123

)

 

 

(184,123

)

Balance as of March 31, 2020

 

 

124,643,483

 

 

$

13

 

 

$

840,436

 

 

$

(6,988

)

 

$

(643,153

)

 

$

190,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

158,046,087

 

 

$

16

 

 

$

1,095,781

 

 

$

8,205

 

 

$

(730,103

)

 

$

373,899

 

Escrow shares released from downstream merger

 

 

(6,342

)

 

 

 

 

 

(135

)

 

 

 

 

 

 

 

 

(135

)

Shares issued for common stock at-the-market, net of issuance costs

 

 

6,254,980

 

 

 

1

 

 

 

156,029

 

 

 

 

 

 

 

 

 

156,030

 

Shares issued under stock-based compensation plans

 

 

1,623,255

 

 

 

 

 

 

3,746

 

 

 

 

 

 

 

 

 

3,746

 

Stock-based compensation expenses

 

 

 

 

 

 

 

 

7,141

 

 

 

 

 

 

 

 

 

7,141

 

Shares issued for exercise of warrants

 

 

12,791,000

 

 

 

1

 

 

 

337,151

 

 

 

 

 

 

 

 

 

337,152

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

3,753

 

 

 

 

 

 

3,753

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(340,955

)

 

 

(340,955

)

Balance at March 31, 2021

 

 

178,708,980

 

 

$

18

 

 

$

1,599,713

 

 

$

11,958

 

 

$

(1,071,058

)

 

$

540,631

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

TILRAY, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands of United States dollars, unaudited)

 

 

 

Three months ended March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(340,955

)

 

$

(184,123

)

Adjusted for the following items:

 

 

 

 

 

 

 

 

Inventory valuation adjustments

 

 

2,062

 

 

 

4,044

 

Depreciation and amortization expenses

 

 

4,908

 

 

 

4,561

 

Impairment of assets

 

 

 

 

 

29,839

 

Stock-based compensation expenses

 

 

7,193

 

 

 

7,677

 

Change in fair value of warrant liability

 

 

263,201

 

 

 

71,978

 

Loss from equity method investments

 

 

1,787

 

 

 

1,748

 

(Gain) loss from equity investments measured at fair value

 

 

(300

)

 

 

1,534

 

(Gain) loss from sale of investment

 

 

(75

)

 

 

65

 

Interest on debt securities

 

 

 

 

 

(221

)

Deferred taxes

 

 

(635

)

 

 

(1,272

)

Amortization of discount on convertible notes

 

 

1,653

 

 

 

2,597

 

Amortization of transaction costs on Senior Facility

 

 

436

 

 

 

131

 

Foreign currency (gain) loss

 

 

(699

)

 

 

28,069

 

Accretion related to obligations under finance leases

 

 

485

 

 

 

151

 

Issuance costs on registered offering recorded to net loss

 

 

 

 

 

3,953

 

Credit loss expenses

 

 

805

 

 

 

46

 

Provision for sales returns

 

 

(924

)

 

 

(262

)

Loss on disposal of property and equipment

 

 

82

 

 

 

457

 

Other non-cash items

 

 

 

 

 

138

 

Changes in non-cash working capital:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,000

)

 

 

(1,906

)

Inventory

 

 

(4,893

)

 

 

(11,594

)

Prepayments and other current assets

 

 

2,703

 

 

 

6,749

 

Accounts payable

 

 

30,513

 

 

 

(15,218

)

Accrued expenses and other current liabilities

 

 

20,645

 

 

 

(3,172

)

Net cash used in operating activities

 

 

(13,008

)

 

 

(54,031

)

Investing activities

 

 

 

 

 

 

 

 

Change in deposits and other assets

 

 

 

 

 

(927

)

Investment in equity method investees

 

 

(493

)

 

 

 

Proceeds from the sale of other investments

 

 

2,719

 

 

 

437

 

Purchases of property and equipment

 

 

(2,466

)

 

 

(18,290

)

Proceeds from disposal of property and equipment

 

 

171

 

 

 

661

 

Net cash used in investing activities

 

 

(69

)

 

 

(18,119

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from at-the-market equity offering, net of costs

 

 

156,029

 

 

 

27,027

 

Proceeds from ABG Profit Participation Arrangement

 

 

 

 

 

1,353

 

Proceeds from issuance of registered offering, net of issuance costs

 

 

 

 

 

85,465

 

Payment of ABG finance liability

 

 

(375

)

 

 

(1,000

)

Proceeds from exercise of warrants

 

 

76,106

 

 

 

 

Proceeds from exercise of stock options

 

 

6,117

 

 

 

1,813

 

Payment of obligations under finance lease

 

 

 

 

 

(105

)

Payment on the settlement of stock options

 

 

(2,487

)

 

 

(748

)

Proceeds from issuance of Senior Facility, net of transaction costs

 

 

 

 

 

46,395

 

Repayment of Senior Facility

 

 

(1,309

)

 

 

(414

)

Net cash provided by financing activities

 

 

234,081

 

 

 

159,786

 

Effect of foreign currency translation on cash and cash equivalents

 

 

5,664

 

 

 

(10,437

)

Cash and cash equivalents

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

 

226,668

 

 

 

77,199

 

Cash and cash equivalents, beginning of period

 

 

189,702

 

 

 

96,791

 

Cash and cash equivalents, end of period

 

$

416,370

 

 

$

173,990

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


Tilray, Inc.

Notes to Condensed Consolidated Financial Statements

(in thousands of United States dollars, except for shares, warrants, per share amounts and per warrant amounts, unaudited)

1.

Summary of Significant Accounting Policies

Description of the business

Tilray, Inc., a Delaware corporation, and its wholly owned subsidiaries (collectively “Tilray”, the “Company”, “we”, “our”, or “us”), is a global medical cannabis research, cultivation, processing and distribution organization, and is one of the leading suppliers of adult-use cannabis in Canada. The Company also markets and distributes food products from hemp seed and offers a broad range of natural and organic hemp based food products and ingredients that are sold through retailers and websites globally.

On December 15, 2020, we entered into an Arrangement Agreement (as amended, the “Arrangement Agreement” with Aphria Inc. (“Aphria”), pursuant to which Tilray acquired all of the issued and outstanding common shares of Aphria pursuant to a plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (the “Arrangement”). The Arrangement was completed on April 30, 2021.   Each outstanding common share of Aphria outstanding immediately prior to the effective time of the Arrangement was transferred to Tilray in exchange for 0.8381 of a share (of Tilray Class 2 common stock). As of March 31, 2021, the Arrangement had not yet been completed and as such, the financial statements do not reflect the effect of the transaction.

 

Basis of presentation and going concern

The accompanying unaudited condensed 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 (“U.S. 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 December 31, 2020 (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.

These financial statements have been prepared on a 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.

Reclassifications

The Company reclassified previously disclosed amounts related to inventory valuation adjustments and stock-based compensation expenses to conform with the disclosures as of March 31, 2021.

Inventory valuation adjustments were previously disclosed as a separate component of cost of sales on the Company’s Consolidated Statements of Net Loss and Comprehensive Loss. As of March 31, 2021, these amounts are included under the caption of cost of sales.

 

 

 

For the three months

ended March 31, 2020

 

Inventory valuation adjustment no longer disclosed separately from cost of sales

 

$

4,044

 

 

Stock-based compensation expenses was previously presented as a separate line item in the Company’s Consolidated Statements of Net Loss and Comprehensive Loss. As of March 31, 2021, the Company includes its stock-based compensation expense under the respective caption in financial statements where compensation paid to the same employees is recorded. These reclassifications are summarized as follows:

 

 

 

For the three months

ended March 31, 2020

 

General and administrative expenses

 

$

7,138

 

Sales and marketing expenses

 

 

450

 

Research and development expenses

 

 

89

 

 

The statement of net loss and comprehensive loss for the three months ended March 31, 2020 was reclassified to conform to the current period’s presentation. Acquisition-related expenses, net, formerly presented as a separate line item, is now presented in general and administrative expenses.

Net loss per share

Basic net loss per share is computed by dividing reported net loss by the weighted average number of common shares outstanding for the reported period. Diluted net loss per share reflects the potential dilution that could occur if securities or other

5


contracts to issue common stock were exercised or converted into common stock of the Company during the reporting period. Diluted net loss per share is computed by dividing net loss by the sum of the weighted average number of common shares and the number of potential dilutive common share equivalents outstanding during the period. Potential dilutive common share equivalents consist of the incremental common shares issuable upon the exercise of vested share options and the incremental shares issuable upon conversion of the convertible notes. Potential dilutive common share equivalents consist of warrants, stock options, restricted stock units (“RSUs”) and restricted stock awards.

In computing diluted earnings per share, common share equivalents are not considered in periods in which a net loss is reported, as the inclusion of the common share equivalents would be anti-dilutive. As of March 31, 2021, there were 14,243,733 common share equivalents with potential dilutive impact (March 31, 2020 – 21,266,707). Since the Company is in a net loss for all periods presented in these financial statements, there is no difference between the Company’s basic and diluted net loss per share for the periods presented.

 

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 is intended to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for the Company beginning January 1, 2022. The Company is currently evaluating the effect of adopting this ASU.

2.

Inventory

Inventory is comprised of the following items:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Raw materials

 

$

15,263

 

 

$

15,223

 

Work-in-process

 

 

60,197

 

 

 

61,867

 

Finished goods

 

 

21,084

 

 

 

16,555

 

Total

 

$

96,544

 

 

$

93,645

 

 

Inventory is written down for any obsolescence, spoilage and excess inventory or when the net realizable value of inventory is less than the carrying value. During the three months ended March 31, 2021, the Company recorded charges for inventory and inventory-related write downs as a component of cost of sales. Cannabis products were written down by $1,720 and hemp products were written down by $342 (2020: $3,247 and $797).

 

3.

Prepayments and Other Current Assets

 

Prepayments and other current assets are comprised of the following items:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Deposits

 

$

9,285

 

 

$

15,976

 

Prepayments

 

 

5,117

 

 

 

6,542

 

Taxes receivable

 

 

16,349

 

 

 

12,122

 

Total

 

$

30,751

 

 

$

34,640

 

 

    

4.

Investments

Other investments

Long-term investments are comprised of the following items:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Equity investments at fair value

 

$

633

 

 

$

477

 

Equity investments under measurement alternative

 

 

11,450

 

 

 

11,392

 

Debt securities classified under available-for-sale method

 

 

 

 

 

2,500

 

Total other investments

 

$

12,083

 

 

$

14,369

 

 

Unrealized gains recognized in other expenses, net during the three months ended March 31, 2021 on equity investments still held at March 31, 2021 is $300 (2020 – loss of $1,534). There were no impairments or adjustments to equity investments under the measurement alternative for the three months ended March 31, 2021 and March 31, 2020.

6


The Company collected a cash settlement of its only debt security classified under available-for-sale method instrument with the lender prior to its contractual maturity for $2,500 in February 2021.

 

Equity method investments

As of March 31, 2021, there are no changes to the status of the Company’s assessment of its joint ventures with Anheuser-Busch InBev (“AB InBev”) in Plain Vanilla Research Limited Partnership (“Fluent”) and the Company’s joint venture with Cannfections Group Inc. (“Cannfections”).

During the three months ended March 31, 2021, the Company made $493 capital contributions to Fluent (2020 - $0). The Company provides production support services to Fluent on a cost recovery basis. For the three months ended March 31, 2021, total fees charged were $372, (2020 - $1,880). The total amount included in accounts payable is $1,785 at March 31, 2021 (December 31, 2020 - $674). At March 31, 2021, the maximum exposure to loss is limited to the Company’s equity investment in Fluent.

During the three months ended March 31, 2021, the Company made $0 capital contributions to Cannfections (2020 - $0). At March 31, 2021, the maximum exposure to loss is limited to the Company’s equity investment in Cannfections. During the three months ended March 31, 2021, the Company incurred $448 in expenses for purchases from Cannfections (2020 - $80).

The Company’s ownership interests in its equity method investments as of March 31, 2020 and December 31, 2019 and loss from equity method investments for the three months ended March 31, 2020 were as follows:

 

 

 

Approximate

 

 

Carrying value

 

 

Gain (loss) from

equity method

investments for

the three months

ended

 

 

 

ownership %

 

 

March 31, 2021

 

 

March 31, 2021

 

Investment in Fluent

 

50%

 

 

$

4,039

 

 

$

(1,802

)

Investment in Cannfections

 

50%

 

 

 

4,061

 

 

 

15

 

Total equity method investments

 

 

 

 

 

$

8,100

 

 

$

(1,787

)

 

 

 

Approximate

 

 

Carrying value

 

 

Gain (loss) from

equity method

investments for

the three months

ended

 

 

 

ownership %

 

 

December 31, 2020

 

 

March 31, 2020

 

Investment in Fluent

 

50%

 

 

$

5,291

 

 

$

(1,819

)

Investment in Cannfections

 

50%

 

 

 

4,009

 

 

 

71

 

Total equity method investments

 

 

 

 

 

$

9,300

 

 

$

(1,748

)

 

Summary financial information for the equity method investments on an aggregate basis was as follows:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Current assets

 

$

8,440

 

 

$

12,644

 

Noncurrent assets

 

$

7,033

 

 

$

6,608

 

Current liabilities

 

$

4,505

 

 

$

5,663

 

 

 

 

Three months ended March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

$

1,061

 

 

$

1,392

 

Gross profit

 

$

224

 

 

$

583

 

Net loss

 

$

(3,574

)

 

$

(3,496

)

 

7


 

5.

Allowance for Credit Losses

 

Accounts receivable

 

The Company 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. The following table provides activity in the allowance for credit losses for the three months ended March 31, 2021 and March 31, 2020:

 

 

 

For the three months ended March 31,

 

 

 

2021

 

 

2020

 

Allowance for credit losses, January 1

 

$

887

 

 

$

615

 

Provision for expected credit losses (1)

 

 

805

 

 

 

46

 

Write-offs charged against allowance

 

 

(439

)

 

 

(19

)

Foreign currency translation adjustment

 

 

14

 

 

 

(47

)

Allowance for credit losses, March 31

 

$

1,267

 

 

$

595

 

Accounts receivable balance before allowance for credit losses and provision for sales returns, March 31, 2021 and 2020

 

$

30,298

 

 

$

40,057

 

(1)

The provision for expected credit losses is recorded in general and administrative expenses

 

 

6.

Property and Equipment, Net

Property and equipment, net consists of the following:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Land

 

$

6,674

 

 

$

6,771

 

Buildings and leasehold improvements

 

 

117,597

 

 

 

117,325

 

Laboratory and manufacturing equipment

 

 

37,254

 

 

 

37,176

 

Office and computer equipment

 

 

2,001

 

 

 

1,710

 

Right-of-use ("ROU") assets under finance lease

 

 

15,270

 

 

 

15,072

 

Construction-in-process, not yet available for use

 

 

49,562

 

 

 

49,380

 

 

 

 

228,358

 

 

 

227,434

 

Less: accumulated depreciation

 

 

(30,587

)

 

 

(27,875

)

Total

 

$

197,771

 

 

$

199,559

 

 

Refer to Note 16 for contractual commitments related to construction-in-process.

 

7.

Intangible Assets

Intangible assets are comprised of the following items:

 

 

 

 

 

 

March 31,

 

 

December 31,