Item 1. Financial Statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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.
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
|
|
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.
Intangible assets are comprised of the following items:
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Weighted
Average
Amortization
Period
(in years)
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Impairment
|
|
|
Net
|
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Impairment
|
|
|
Net
|
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patent
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
669
|
|
|
|
131
|
|
|
|
538
|
|
|
|
—
|
|
Customer relationships
|
|
16
|
|
|
|
140,709
|
|
|
|
18,455
|
|
|
|
—
|
|
|
|
122,255
|
|
|
|
138,885
|
|
|
|
16,030
|
|
|
|
—
|
|
|
|
122,855
|
|
Developed technology
|
|
10
|
|
|
|
7,322
|
|
|
|
1,525
|
|
|
|
—
|
|
|
|
5,797
|
|
|
|
7,227
|
|
|
|
1,325
|
|
|
|
—
|
|
|
|
5,902
|
|
Websites
|
|
3
|
|
|
|
4,710
|
|
|
|
3,985
|
|
|
|
—
|
|
|
|
725
|
|
|
|
5,332
|
|
|
|
4,348
|
|
|
|
—
|
|
|
|
984
|
|
Trademarks and licenses
|
|
5
|
|
|
|
182
|
|
|
|
70
|
|
|
|
—
|
|
|
|
112
|
|
|
|
9,009
|
|
|
|
1,245
|
|
|
|
7,650
|
|
|
|
114
|
|
Total
|
|
|
|
|
|
152,923
|
|
|
|
24,035
|
|
|
|
—
|
|
|
|
128,889
|
|
|
|
161,122
|
|
|
|
23,079
|
|
|
|
8,188
|
|
|
|
129,855
|
|
Indefinite-lived intangible
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cultivation license
|
Indefinite
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,239
|
|
|
|
—
|
|
|
|
10,239
|
|
|
|
—
|
|
Trademarks
|
Indefinite
|
|
|
|
57,333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,333
|
|
|
|
56,590
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,590
|
|
Rights under ABG Profit
Participation
Arrangement
|
Indefinite
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,765
|
|
|
|
—
|
|
|
|
16,765
|
|
|
|
—
|
|
Total
|
|
|
|
|
|
57,333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
57,333
|
|
|
|
83,594
|
|
|
|
—
|
|
|
|
27,004
|
|
|
|
56,590
|
|
Total intangible assets
|
|
|
|
|
$
|
210,256
|
|
|
$
|
24,035
|
|
|
$
|
—
|
|
|
$
|
186,222
|
|
|
$
|
244,716
|
|
|
$
|
23,079
|
|
|
$
|
35,192
|
|
|
$
|
186,445
|
|
8
Amortization expenses for intangibles was $2,271 for the three months ended March 31, 2021 (2020 - $1,857). Expected future amortization expenses for intangible assets as at March 31, 2021 are as follows:
Year ending December 31,
|
|
|
Amortization
|
|
2021 (remaining nine months)
|
|
|
$
|
7,684
|
|
2022
|
|
|
$
|
9,868
|
|
2023
|
|
|
$
|
9,625
|
|
2024
|
|
|
$
|
9,619
|
|
2025
|
|
|
$
|
9,589
|
|
Thereafter
|
|
|
$
|
82,504
|
|
Total
|
|
|
$
|
128,889
|
|
The following table shows the change in carrying amount of goodwill:
|
|
Hemp
|
|
|
Cannabis
|
|
|
Total
|
|
Balance as of December 31, 2020
|
|
$
|
136,332
|
|
|
$
|
30,583
|
|
|
$
|
166,915
|
|
Foreign currency translation adjustment
|
|
|
1,762
|
|
|
|
402
|
|
|
|
2,164
|
|
Balance as of March 31, 2021
|
|
$
|
138,094
|
|
|
$
|
30,985
|
|
|
$
|
169,079
|
|
Goodwill is tested for impairment annually, or more frequently when events or circumstances indicate that impairment may have occurred. No triggers have been identified in the quarter to perform additional quantitative tests.
9.
|
Accrued Expenses and Other Current Liabilities
|
Accrued expenses and other current liabilities are comprised of the following items:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Other accrued expenses and current liabilities
|
|
$
|
27,171
|
|
|
$
|
24,181
|
|
Accrued litigation settlement
|
|
|
20,000
|
|
|
|
—
|
|
Accrued payroll and employment related withholding taxes
|
|
|
9,314
|
|
|
|
9,282
|
|
Accrued interest on convertible notes
|
|
|
1,158
|
|
|
|
3,473
|
|
ABG finance liability - current
|
|
|
1,500
|
|
|
|
1,500
|
|
Accrued legal and professional fees
|
|
|
905
|
|
|
|
1,091
|
|
Accrued interest on Senior Facility
|
|
|
413
|
|
|
|
419
|
|
Total accrued expenses and other current liabilities
|
|
$
|
60,461
|
|
|
$
|
39,946
|
|
The Company has outstanding convertible senior notes with a face value of $277,857 as described in the Annual Financial Statements.
As of March 31, 2021, the convertible notes are not yet convertible, and the Company is in compliance with all covenants.
The following table sets forth the net carrying amount of the convertible notes:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
5.00% Convertible Notes
|
|
$
|
277,857
|
|
|
$
|
277,857
|
|
Unamortized discount
|
|
|
(13,977
|
)
|
|
|
(15,229
|
)
|
Unamortized transaction costs
|
|
|
(4,437
|
)
|
|
|
(4,839
|
)
|
Net carrying amount
|
|
$
|
259,443
|
|
|
$
|
257,789
|
|
The following table sets forth total interest expense recognized related to the convertible notes:
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Contractual coupon interest
|
|
$
|
3,473
|
|
|
$
|
5,938
|
|
Amortization of discount
|
|
|
1,253
|
|
|
|
2,009
|
|
Amortization of transaction costs
|
|
|
401
|
|
|
|
588
|
|
Total
|
|
$
|
5,127
|
|
|
$
|
8,535
|
|
9
On February 28, 2020, High Park Holdings Ltd., a wholly owned subsidiary of the Company (the “Borrower” or “High Park”) entered into a credit agreement, denominated in Canadian dollars (“C$”), for a senior secured credit facility in a maximum aggregate principal amount of $59,600 (C$79,800) (the “Senior Facility”).
On June 5, 2020, High Park entered into the First Amendment of the Senior Facility (the “Amendment”) which provided for interest-only payments for the remainder of its term with all outstanding principal payments due at February 28, 2022.
The Senior Facility bears interest on the outstanding principal balance at an annual rate equal to the Canadian prime rate plus 8.05%, calculated based on the daily outstanding balance of the Senior Facility calculated and compounded monthly in arrears and with no deemed reinvestment of monthly payments. Interest is due monthly throughout the term. The Company has the option to voluntarily prepay, without penalty, the outstanding amounts, in full or in part, at any time starting 6 months from the closing date subsequent to providing 75 days’ notice.
The Senior Facility has first priority claims on all North American assets of the Company and contains certain affirmative and negative covenants. The operational covenant includes a minimum unrestricted cash threshold of $29,466 (C$40,000) in order for the Company to make additional capital expenditures and investments. The Senior Facility is collateralized against all real and personal property owned, leased and operated by the Company in North America, and any and all other property of the Company now existing and acquired in North America after the closing date.
As of March 31, 2021, the Company was in compliance with all covenants set forth under the Senior Facility.
The following table sets forth the net carrying amount of the Senior Facility:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Senior Facility
|
|
$
|
51,161
|
|
|
$
|
50,498
|
|
Unamortized transaction costs
|
|
|
(1,614
|
)
|
|
|
(2,028
|
)
|
Net carrying amount
|
|
$
|
49,547
|
|
|
$
|
48,470
|
|
Less: current portion of Senior Facility
|
|
|
(49,547
|
)
|
|
|
—
|
|
Total noncurrent portion of Senior Facility
|
|
$
|
—
|
|
|
$
|
48,470
|
|
The following table sets forth total interest expense recognized related to the Senior Facility:
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Contractual interest at Canadian prime plus 8.05%
|
|
$
|
1,325
|
|
|
$
|
480
|
|
Amortization of transaction costs
|
|
|
436
|
|
|
|
131
|
|
Total
|
|
$
|
1,761
|
|
|
$
|
611
|
|
12.
|
Registered Offering and Warrants
|
The Company has outstanding warrants as described in the Annual Financial Statements. Warrants outstanding at March 31, 2021, and related activity for the three months ended March 31, 2021 is as follows (reflects the number of Class 2 common stock as if the warrants were converted to Class 2 common stock):
Description
|
|
Classification
|
|
Exercise
price
|
|
|
Expiration
date
|
|
Balance
December 31,
2020
|
|
|
Issued
|
|
|
Exercised
|
|
|
Balance
March 31,
2021
|
|
Warrants
|
|
Liability
|
|
$
|
5.95
|
|
|
March 17, 2025
|
|
|
19,000,000
|
|
|
|
—
|
|
|
|
12,791,000
|
|
|
|
6,209,000
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
19,000,000
|
|
|
|
—
|
|
|
|
12,791,000
|
|
|
|
6,209,000
|
|
During the quarter ended March 31, 2021 12,791,000 warrants were exercised by warrant holders resulting in cash proceeds to the Company of $76,106.
The Company estimated the fair value of the Warrant liability at March 31, 2021 using the Monte Carlo pricing model (Level 3) with the following weighted-average assumptions:
10
Risk-free interest rate
|
|
|
0.92
|
%
|
Expected volatility
|
|
|
100
|
%
|
Expected term
|
|
4.5 years
|
|
Expected dividend yield
|
|
|
0
|
%
|
Strike price
|
|
$
|
5.95
|
|
Fair value of common stock
|
|
$
|
22.73
|
|
Discount due to exercise restrictions
|
|
|
0
|
%
|
Expected volatility is based on the historical volatility of the Company's common stock since its initial public offering in 2018.
Common and preferred stock
The Company’s certificate of incorporation authorized the Company to issue the following classes of shares with the following par value and voting rights as of March 31, 2021. The liquidation and dividend rights are identical among Class 1 common stock and Class 2 common stock, and all classes of common stock share equally in the Company’s earnings and losses.
|
|
Par Value
|
|
|
Authorized
|
|
|
Voting Rights
|
Class 1 common stock
|
|
$
|
0.0001
|
|
|
|
233,333,333
|
|
|
10 votes for each share
|
Class 2 common stock
|
|
$
|
0.0001
|
|
|
|
500,000,000
|
|
|
1 vote for each share
|
Preferred stock
|
|
$
|
0.0001
|
|
|
|
10,000,000
|
|
|
N/A
|
During the three months ended March 31, 2021, the Company issued 6,254,980 shares of Class 2 common stock for gross proceeds of $159,213 under its at-the-market equity offering program (2020 - $27,579). Transaction costs of $3,184 were recorded net against the allocated gross proceeds in additional paid-in-capital. As described in the Annual Financial Statements, the warrants’ anti-dilution price protection features allow, for the period the warrants are outstanding, the Company to only issue up to $20,000 in aggregate gross proceeds under the Company’s at-the-market offering program at prices less than the exercise price of the warrants, and in no event more than $6,000 per quarter, at prices below the exercise price of the warrants, without triggering the warrant’s anti-dilution price protection features.
The Company’s future ability to pay cash dividends on Class 2 common stock is limited by the terms of the Senior Facility and cannot be paid without the consent of the lender.
14.
|
Stock-based Compensation
|
Original Stock Option Plan
Certain employees of the Company participate in the equity-based compensation plan of Privateer Holdings, Inc. (the “Original Plan”) under the terms and valuation method detailed in our annual financial statements. For the three months ended March 31, 2021, the total stock-based compensation expense associated with the Original Plan was $57 (2020 – $162). As of March 31, 2021 the total remaining unrecognized stock-based compensation expense related to non-vested stock options under the Original Plan amounted to $193 which will be recognized over the weighted-average remaining requisite service period of approximately 0.6 years.
11
Stock option activity under the Original Plan is as follows:
|
|
Stock
options
|
|
|
Weighted-
average
exercise
price
|
|
|
Weighted-
average
remaining
contractual
term (years)
|
|
|
Aggregate
intrinsic value
|
|
Balance December 31, 2020
|
|
|
1,789,750
|
|
|
$
|
3.62
|
|
|
|
3.8
|
|
|
$
|
25,077
|
|
Exercised
|
|
|
(757,318
|
)
|
|
|
3.17
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(80
|
)
|
|
|
4.72
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2021
|
|
|
1,032,352
|
|
|
$
|
3.93
|
|
|
|
4.3
|
|
|
$
|
13,660
|
|
Vested and expected to vest, March 31, 2021
|
|
|
986,020
|
|
|
$
|
3.91
|
|
|
|
4.3
|
|
|
$
|
13,618
|
|
Vested and exercisable, March 31, 2021
|
|
|
945,951
|
|
|
$
|
3.72
|
|
|
|
4.2
|
|
|
$
|
13,200
|
|
No stock options were granted under the Original Plan during the three months ended March 31, 2021 and March 31, 2020. The total fair value of stock options vested as of March 31, 2021 was $61 (2020 – $169).
New Stock Option and Restricted Stock Unit Plan
The Company adopted the 2018 Equity Incentive Plan (the “2018 EIP”) as amended and approved by stockholders in May 2018 under the terms and valuation methods detailed in the Annual Financial Statements. The number of shares of Class 2 common stock reserved for issuance under the 2018 EIP automatically increases on January 1 of each calendar year, for a period of not more than ten years, starting on January 1, 2019 and ending on and including January 1, 2027, in an amount equal to 4% of the total number of shares of our common stock outstanding on December 31 of the prior calendar year, or a lesser number of shares determined by our Board of Directors. The shares reserved include only the outstanding shares related to stock options and RSUs and excludes stock options outstanding under the Original Plan. The number of shares reserved for issuance under the 2018 EIP is 23,375,665, effective as of January 1, 2021 (December 31, 2020 – 17,037,421). For the three months ended March 31, 2021, total stock-based compensation expense associated with the 2018 EIP was $7,084 (2020 – $7,515). As of March 31, 2021, the total remaining unrecognized stock-based compensation expense related to non-vested stock options and restricted stock units (“RSUs”) under the 2018 EIP amounted to $29,883 which will be recognized over the weighted average remaining requisite service period of approximately 1.63 years.
Stock option and RSU activity under the 2018 EIP are as follows:
Time-based stock option activity
|
|
Stock
options
|
|
|
Weighted-
average
exercise
price
|
|
|
Weighted-
average
remaining
contractual
term (years)
|
|
|
Aggregate
intrinsic value
|
|
Balance December 31, 2020
|
|
|
3,909,559
|
|
|
$
|
15.25
|
|
|
|
7.4
|
|
|
$
|
1,700,194
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(471,211
|
)
|
|
|
7.76
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(33,291
|
)
|
|
|
8.46
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(36,414
|
)
|
|
|
42.61
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2021
|
|
|
3,368,643
|
|
|
$
|
16.02
|
|
|
|
7.2
|
|
|
$
|
43,421
|
|
Vested and expected to vest, March 31, 2021
|
|
|
3,360,695
|
|
|
$
|
15.87
|
|
|
|
7.2
|
|
|
$
|
43,213
|
|
Vested and exercisable, March 31, 2021
|
|
|
2,902,957
|
|
|
$
|
13.77
|
|
|
|
7.2
|
|
|
$
|
38,916
|
|
The weighted-average fair values of stock options granted during the three months ended March 31, 2021 was $0 per share (2020 – $0). The total fair value of stock options vested in 2021 was $2,547 (2020 – $25,426).
Time-based RSU activity
|
|
Time-based
RSUs
|
|
|
Weighted-average
grant-date
fair value
per share
|
|
Non-vested December 31, 2020
|
|
|
1,884,390
|
|
|
$
|
15.22
|
|
Granted
|
|
|
350,311
|
|
|
|
20.02
|
|
Vested
|
|
|
(289,388
|
)
|
|
|
15.59
|
|
Forfeited
|
|
|
(170,641
|
)
|
|
|
11.84
|
|
Non-vested March 31, 2021
|
|
|
1,774,672
|
|
|
$
|
16.33
|
|
12
During the three months ended March 31, 2021, 350,311 (2020 – 752,283) time-based RSUs were granted. During the three months ended March 31, 2021, 289,388 (2020 – 154,642) time-based RSUs vested.
Performance-based RSUs activity
|
|
Performance-based
RSUs
|
|
|
Weighted-average
grant-date
fair value
per share
|
|
Non-vested December 31, 2020
|
|
|
540,836
|
|
|
$
|
7.13
|
|
Vested
|
|
|
(341,543
|
)
|
|
|
7.18
|
|
Non-vested March 31, 2021
|
|
|
199,293
|
|
|
$
|
7.05
|
|
No performance-based RSUs were granted during the three months ended March 31, 2021 (2020 – none). During the three months ended March 31, 2021, 341,543 (2020 – 53,125) performance-based RSUs vested .
15.
|
Accumulated Other Comprehensive (Loss) Income (“AOCI”)
|
The component of AOCI, net of tax, was as follows:
|
|
Foreign
Currency
Translation
Adjustments
|
|
Balance as at December 31, 2020
|
|
$
|
8,205
|
|
Other comprehensive loss:
|
|
|
|
|
Change in foreign currency translation
|
|
|
3,753
|
|
Balance as at March 31, 2021
|
|
$
|
11,958
|
|
16.
|
Commitments and Contingencies
|
Legal proceedings
In the normal course of business, the Company may become involved in legal disputes regarding various litigation matters. The Company records a loss contingency if the information available indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. As of March 31, 2021, in the opinion of management, no claims meet the criteria to record a loss contingency.
Lease commitments
The Company leases various facilities, under non-cancelable finance and operating leases, which expire at various dates through September 2027.
Maturities of lease liabilities:
Year ending December 31,
|
|
Operating Leases
|
|
|
Finance Leases
|
|
2021 (remaining nine months)
|
|
$
|
2,861
|
|
|
$
|
893
|
|
2022
|
|
|
3,498
|
|
|
|
6,165
|
|
2023
|
|
|
3,351
|
|
|
|
12,438
|
|
2024
|
|
|
2,758
|
|
|
|
—
|
|
2025
|
|
|
2,179
|
|
|
|
—
|
|
Thereafter
|
|
|
6,428
|
|
|
|
—
|
|
Total minimum lease payments
|
|
|
21,075
|
|
|
|
19,496
|
|
Less: amounts related to interest payments
|
|
|
3,260
|
|
|
|
3,902
|
|
Present value of minimum lease payments
|
|
|
17,815
|
|
|
|
15,594
|
|
Less: current accrued lease obligation
|
|
|
2,888
|
|
|
|
—
|
|
Obligations recognized
|
|
$
|
14,927
|
|
|
$
|
15,594
|
|
Purchase commitments
The following table reflects the Company’s future non-cancellable minimum purchase commitments for inventory as of March 31, 2021:
13
|
|
Total
|
|
|
2021
(remaining
nine months)
|
|
|
|
|
2022
|
|
|
|
|
2023
|
|
|
|
|
2024
|
|
|
|
|
2025
|
|
|
|
|
Thereafter
|
|
Purchase commitments
|
|
$
|
17,359
|
|
|
$
|
17,359
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Total
|
|
$
|
17,359
|
|
|
$
|
17,359
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Due to the termination of a supply agreement, the Company removed $59,700 of purchase commitments from its commitments and contingencies as of March 31, 2021.
In 2018, the Company signed an agreement with Rose Lifescience Inc. (“Rose”) for distribution and marketing of product in Quebec in exchange for a minimum fee of $384 per annum for an initial term of five years. In September 2020, the Company signed an amendment to this agreement under which the Company is no longer obligated to purchase product from Rose nor pay the minimum fee. The Company will pay Rose a compensation fee based on net revenue sold in Quebec for an estimated compensation fee of approximately $8,000 through 2023. As there is no firm commission fee commitment, it is excluded from the above schedule. Compensation fee expense is recorded as incurred.
In 2018, the Company entered into a Product and Trademark License Agreement with Docklight LLC, a related party (refer to Note 20), to use certain intellectual property rights in exchange for payment of royalty depending upon specified percentage of licensed product net sales, with a minimum royalty of $493 per quarter. As the purchase commitment is an undeterminable variable amount, it is excluded from the above schedule.
Other commitments
The Company has payments on the convertible notes (refer to Note 10), the Senior Facility (refer to Note 11), ABG finance liability and Portugal construction purchase commitments as follows:
|
|
Total
|
|
|
2021
(remaining
nine months)
|
|
|
|
|
2022
|
|
|
|
|
2023
|
|
|
|
|
2024
|
|
|
|
|
2025
|
|
|
|
|
Thereafter
|
|
Convertible notes, principal
and interest
|
|
$
|
319,535
|
|
|
$
|
13,893
|
|
|
|
|
$
|
13,893
|
|
|
|
|
$
|
291,749
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Senior Facility, principal and
interest
|
|
|
56,533
|
|
|
|
4,029
|
|
|
|
|
|
52,504
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
ABG finance liability
|
|
|
7,500
|
|
|
|
1,500
|
|
|
|
|
|
1,500
|
|
|
|
|
|
1,500
|
|
|
|
|
|
1,500
|
|
|
|
|
|
1,500
|
|
|
|
|
|
—
|
|
Portugal construction
commitments
|
|
|
2,778
|
|
|
|
2,778
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
Total
|
|
$
|
386,346
|
|
|
$
|
22,200
|
|
|
|
|
$
|
67,897
|
|
|
|
|
$
|
293,249
|
|
|
|
|
$
|
1,500
|
|
|
|
|
$
|
1,500
|
|
|
|
|
$
|
—
|
|
17.
|
Revenue from Contracts with Customers
|
The Company reports two segments: cannabis and hemp, in accordance with ASC 280 Segment Reporting. The Company generates revenues from the cannabis and hemp 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 23 disaggregates revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
For certain long-term arrangements, the Company has performance obligations for goods it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered goods. The Company has determined that any unbilled consideration relates entirely to the value of undelivered goods. Accordingly, the Company has not recognized revenue, and has elected not to disclose amounts, related to these undelivered goods. As of March 31, 2021 and December 31, 2020, other than accounts receivable, net of allowance for doubtful debts, the Company has no contract balances in the balance sheets.
14
18.
|
General and Administrative Expenses
|
General and administrative expenses are comprised of the following items:
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Other expenses
|
|
$
|
7,613
|
|
|
$
|
6,848
|
|
Salaries and benefits
|
|
|
7,013
|
|
|
|
7,296
|
|
Stock-based compensation expenses
|
|
|
6,493
|
|
|
|
7,138
|
|
Professional fees
|
|
|
3,577
|
|
|
|
4,521
|
|
Credit loss expenses
|
|
|
742
|
|
|
|
46
|
|
Loss on disposal of property and equipment
|
|
|
83
|
|
|
|
457
|
|
Travel expenses
|
|
|
66
|
|
|
|
963
|
|
Total
|
|
$
|
25,587
|
|
|
$
|
27,269
|
|
19.
|
Supplemental Cash Flow Information
|
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for income taxes
|
|
$
|
103
|
|
|
$
|
—
|
|
Cash paid for interest
|
|
|
912
|
|
|
|
704
|
|
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
994
|
|
|
$
|
854
|
|
Operating cash flows from finance leases
|
|
|
264
|
|
|
|
142
|
|
Financing cash flows from finance leases
|
|
|
—
|
|
|
|
105
|
|
Non-cash additions to Right-of-use assets and lease liabilities
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
33
|
|
|
|
423
|
|
20.
|
Related Party Transactions
|
In the normal course of business, the Company enters into related party transactions with certain entities under common control and joint ventures as described in the Annual Financial Statements and detailed below.
Leafly Holdings, Inc. (“Leafly”)
The Company has a series of agreements with Leafly providing for, among other things, data licensing, advertising and marketing activities. During the three months ended March 31, 2021, no operational expenses was recorded within general and administrative expenses in the statements of net loss and comprehensive loss (2020 - $129).
Docklight LLC (“Docklight”)
The Company pays Docklight a royalty fee pursuant to a brand licensing agreement which provides the Company with exclusive rights in Canada for the use of certain adult-use brands. During the three months ended March 31, 2021, royalty fees of $493 were recorded within general and administrative expenses in the statements of net loss and comprehensive loss (2020 - $221). Refer to Note 16 for purchase commitments with Docklight.
Fluent and Cannfections
The Company has joint venture arrangements with a 50% ownership and voting interest in each Fluent and Cannfections. Refer to Note 4 for details over transactions with these entities for the three months ended March 31, 2021.
21.
|
Financial Instruments
|
Credit 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, and arises principally from the Company’s cash and cash equivalents and accounts receivable.
The Company’s cash and cash equivalents are deposited in major financial institutions in Canada, Australia, Portugal, Germany 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 is also exposed to credit risk from the potential default by any of its counterparties on its financial assets.
15
The Company evaluates the collectability of its accounts receivable and provides an allowance for credit losses as necessary (refer to Note 5).
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.
Foreign currency risk
The Company conducts its business in several countries and in a variety of currencies, the most significant of which are the Canadian dollar and the Euro. Consequently, the Company is exposed to foreign currency risk. A significant portion of the Company’s assets, liabilities, revenue, and expenses are denominated in Canadian dollars. A 10% change in the exchange rates for the Canadian dollar would affect the carrying value of net assets by approximately $47,220 as of March 31, 2021, with a corresponding impact to accumulated other comprehensive (loss) income. The Company is also exposed to risk related to changes in the value of the Euro due to its construction commitments in Portugal.
Interest rate risk
The Company’s exposure to changes in interest rates relates primarily to the Company’s outsanding debt. The Company is exposed to changes to the Canadian prime rate as the Senior Facility bears interest based on the Canadian prime rate plus 8.05%. The convertible notes bear interest at a fixed rate of 5% and are not publicly traded and is therefore are not affected by changes in the market interest rates. A 1% change in the Canadian prime rate would have an impact of $134 to the statements of net loss and comprehensive loss for the three months ended March 31, 2021.
Liquidity risk
The Company’s objective is to have sufficient liquidity to meet its liabilities when due. The Company monitors its cash balances and cash flows generated from operations to meet its requirements. As of March 31, 2021, the most significant financial liabilities are accounts payable, accrued expenses and other current liabilities, convertible notes and the Senior Facility.
Equity price risks
As of March 31, 2021, we 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 other expense (income), net in the statements of net loss and comprehensive loss. Based on the fair value of investment in equities held as of March 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 other expense (income), net by $1,132. Similarly, based on the fair value of our warrant liability as of March 31, 2021, a hypothetical increase of 10% in the price for our common stock would increase the change in fair value of warrant liability by $12,290.
22.
|
Fair Value Measurement
|
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.
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
|
|
Quoted prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in active
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
identical
|
|
|
observable
|
|
|
unobservable
|
|
|
|
|
|
|
|
assets
|
|
|
inputs
|
|
|
inputs
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments measured at fair value
|
|
$
|
633
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
633
|
|
Warrant liability
|
|
|
—
|
|
|
|
—
|
|
|
|
(122,804
|
)
|
|
|
(122,804
|
)
|
Convertible Debt
|
|
|
—
|
|
|
|
(269,223
|
)
|
|
|
—
|
|
|
|
(269,223
|
)
|
Total recurring fair value measurements
|
|
$
|
633
|
|
|
$
|
(269,223
|
)
|
|
$
|
(122,804
|
)
|
|
$
|
(391,394
|
)
|
16
|
|
Quoted prices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in active
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
identical
|
|
|
observable
|
|
|
unobservable
|
|
|
|
|
|
|
|
assets
|
|
|
inputs
|
|
|
inputs
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments measured at fair value
|
|
$
|
477
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
477
|
|
Debt securities classified as available-for-sale
|
|
|
—
|
|
|
|
—
|
|
|
|
2,500
|
|
|
|
2,500
|
|
Warrant liability
|
|
|
—
|
|
|
|
—
|
|
|
|
(120,647
|
)
|
|
|
(120,647
|
)
|
Convertible Debt
|
|
|
—
|
|
|
|
(239,652
|
)
|
|
|
—
|
|
|
|
(239,652
|
)
|
Total recurring fair value measurements
|
|
$
|
477
|
|
|
$
|
(239,652
|
)
|
|
$
|
(118,147
|
)
|
|
$
|
(357,322
|
)
|
Items measured at fair value on a recurring basis
The Company’s financial assets and liabilities required to be measured on a recurring basis are its equity investments measured at fair value, convertible debt and warrant liability.
Equity investments recorded at fair value: The estimated fair value is determined using quoted market prices, broker or dealer quotations or discounted cash flows. These are classified as Level 1.
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 Monte Carlo pricing model (refer to Note 12). 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 Class 2 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.
Convertible Debt: This instrument is held at amortized cost. The estimated fair value is determined using quoted market prices near the reporting date and is classified as Level 2.
The opening balances of assets and liabilities categorized within Level 3 of the fair value hierarchy measured at fair value on a recurring basis are reconciled to the closing balances as follows:
|
|
Debt securities
classified as
available-for-
sale
|
|
|
Warrant liability
|
|
Opening balance as at December 31, 2020
|
|
$
|
2,500
|
|
|
$
|
(120,647
|
)
|
Additions and settlements
|
|
|
|
|
|
|
|
|
Additions
|
|
|
—
|
|
|
|
—
|
|
Exercise
|
|
|
—
|
|
|
|
—
|
|
Settlements
|
|
|
(2,500
|
)
|
|
|
81,223
|
|
Interest expenses, net
|
|
|
—
|
|
|
|
—
|
|
Change in fair value
|
|
|
—
|
|
|
|
(83,380
|
)
|
Closing balance as at March 31, 2021
|
|
$
|
—
|
|
|
$
|
(122,804
|
)
|
|
|
Quantitative information about Level 3 fair value measurements
|
|
|
Fair value at March
31, 2021
|
|
|
Valuation technique
|
|
Unobservable input
|
|
Range (weighted
average)
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability
|
|
$
|
(122,804
|
)
|
|
Monte Carlo
|
|
Volatility
|
|
100%
|
|
|
|
|
|
|
|
|
Expected life
|
|
0.2 years to 4.5 years (2.1 years)
|
Items measured at fair value on a non-recurring basis
The Company's prepayments 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.
The estimated fair value of cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and other current liabilities and Senior Facility at March 31, 2021 (December 31, 2020 – the fair value of all aforementioned) approximate their carrying value.
17
23.
|
Business Segment Information
|
The Company has two operating segments based on major product categories: cannabis and hemp. These operating segments are also the Company’s reportable segments.
The cannabis segment cultivates, processes and distributes medical and adult-use cannabis products in a variety of formats, as well as related accessories, on a global basis. The hemp segment processes and distributes a diverse portfolio of hemp-based natural and organic food and wellness products on a global basis.
The results of each segment are regularly reviewed by the Company’s Chief Executive Officer, who is the Company’s chief operating decision maker, to assess the performance of the segment and make decisions regarding the allocation of resources. The Company’s chief operating decision maker uses revenue and gross profit as the measure of segment profit or loss. The accounting policies of each segment are the same as those set out under the summary of significant accounting policies in Note 1. There are no intersegment sales or transfers.
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
Revenue
|
|
|
Gross profit
|
|
|
Revenue
|
|
|
Gross profit
|
|
Cannabis
|
|
$
|
31,386
|
|
|
$
|
9,343
|
|
|
$
|
30,776
|
|
|
$
|
2,926
|
|
Hemp
|
|
$
|
16,635
|
|
|
$
|
4,160
|
|
|
$
|
21,326
|
|
|
$
|
7,944
|
|
Total
|
|
$
|
48,021
|
|
|
$
|
13,503
|
|
|
$
|
52,102
|
|
|
$
|
10,870
|
|
No asset information is provided for the segments because the Company’s chief operating decision maker does not review this information by segment on a regular basis.
Total revenue and gross profit for the reportable segments is equal to the Company’s consolidated revenue and gross profit.
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Gross profit for the segments
|
|
$
|
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
|
|
|
|
—
|
|
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 expense (income), net
|
|
|
(1,516
|
)
|
|
|
4,651
|
|
Loss before income taxes
|
|
$
|
(341,212
|
)
|
|
$
|
(185,094
|
)
|
18
Sources of revenue were as follows:
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Dried cannabis
|
|
$
|
21,086
|
|
|
$
|
19,696
|
|
Cannabis extracts
|
|
|
10,270
|
|
|
|
10,545
|
|
Hemp products
|
|
|
16,635
|
|
|
|
21,326
|
|
Accessories and other
|
|
|
30
|
|
|
|
535
|
|
Total
|
|
$
|
48,021
|
|
|
$
|
52,102
|
|
Channels of revenue were as follows:
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cannabis
|
|
|
|
|
|
|
|
|
Adult-use
|
|
$
|
19,440
|
|
|
$
|
20,919
|
|
Canada - medical
|
|
|
3,217
|
|
|
|
4,051
|
|
International - medical
|
|
|
8,600
|
|
|
|
5,806
|
|
Bulk
|
|
|
129
|
|
|
|
—
|
|
Total Cannabis revenue
|
|
$
|
31,386
|
|
|
$
|
30,776
|
|
Hemp
|
|
|
16,635
|
|
|
|
21,326
|
|
Total
|
|
$
|
48,021
|
|
|
$
|
52,102
|
|
Revenue attributed to geographic region based on the location of the customer was as follows:
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Canada
|
|
$
|
27,195
|
|
|
$
|
29,488
|
|
United States
|
|
|
11,043
|
|
|
|
16,530
|
|
Other countries
|
|
|
9,783
|
|
|
|
6,084
|
|
Total
|
|
$
|
48,021
|
|
|
$
|
52,102
|
|
Revenue includes excise duties of $4,646 for the three months ended March 31, 2021 (2020: $4,972).
Long-lived assets consisting of property and equipment, net of accumulated depreciation, attributed to geographic regions based on their physical location were as follows:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Canada
|
|
$
|
122,182
|
|
|
$
|
122,328
|
|
Portugal
|
|
|
69,704
|
|
|
|
71,988
|
|
United States
|
|
|
5,830
|
|
|
|
5,182
|
|
Other countries
|
|
|
55
|
|
|
|
61
|
|
Total
|
|
$
|
197,771
|
|
|
$
|
199,559
|
|
Major customers
One customer, in the Cannabis segment, accounted for 20% of revenue for the three months ended March 31, 2021. One customer, in the Hemp segment, accounted for 11% of revenue for the three months ended March 31, 2021. Two customers, in the Cannabis segment, accounted for 16% and 13% of revenue, respectively, for the three months ended March 31, 2020. One customer, in the Hemp segment, accounted for 26% of revenue for the three months ended March 31, 2020.
Two customers accounted for 18% and 11%, respectively, of the Company’s accounts receivable balance as of March 31, 2021. Three customers accounted for 17%, 16% and 11%, respectively, of the Company’s accounts receivable balance as of December 31, 2020.
A cannabinoid supplier (“supplier”) to Tilray, and Tilray had been engaged in binding arbitration, which commenced in March 2020 and related to a supply agreement dispute between the parties. On April 29, 2021, the parties mutually agreed to settle this matter. Pursuant to a settlement agreement and release, Tilray (i) paid $20,000 in cash and $5,000 in Class 2 Common Stock to the supplier on April 29, 2021, and (ii) agreed to pay either $15,000 in Class 2 Common Stock or $20,000 in cash, depending on certain circumstances, to the supplier within nine months of the settlement date, in each case subject to certain upward adjustments based on the trading price and resale registration status of the Class 2 Common Stock. The parties also agreed to, among other things, withdraw
19
from the arbitration proceeding and to release the other party from any and all claims arising out of or relating to the arbitration or the supply agreement. As of March 31, 2021, the Company recorded the litigation settlement expense in its statement of net loss and comprehensive loss to reflect the outcome of this settlement. The litigation liability is payable in a combination of cash and shares of the Company’s class 2 common stock. The initial payments made on April 29, 2021 are reflected in accounts payable and the remaining future payment is reflected in accrued expenses. The Company also removed $59,700 of purchase commitments (refer to Note 16) from its commitments and contingencies as of March 31, 2021.
On April 25, 2021, the Company notified its senior secure credit facility lender that it intends to (i) terminate the commitments under the Senior Facility, and (ii) repay all outstanding loans and other obligations under the Senior Facility. On May 4, 2021, the Company repaid in full all outstanding indebtedness under its Senior Facility agreement. The Senior Facility and related security interests were terminated in conjunction with the repayment in full of $52,069 (C$64,000) of principal, as well as accrued and unpaid interest and fees of $494 (C$610), plus a prior notice prepayment fee of $1,070 (C$1,320).
As disclosed previously, on April 30, 2021 the Arrangement with Aphria was completed (refer to Note 1 for additional information regarding the Arrangement) and we paid the financial advisor transaction fee of $9,200.
20