Tilray Brands, Inc. [TLRY] Filings

10-Q 1 tlry20240731_10q.htm FORM 10-Q tlry20240731_10q.htm

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 August 31, 2024

☐	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 BRANDS, 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.)
265 Talbot Street West, Leamington, ON	N8H 5L4
(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

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 ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of October 8, 2024, the registrant had 903,286,257 shares of Common Stock, $0.0001 par value per share issued and outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Statements of Financial Position (Unaudited)	1
	Consolidated Statements of Loss and Comprehensive Loss (Unaudited)	2
	Consolidated Statements of Stockholders' Equity (Unaudited)	3
	Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Interim Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
Signatures		51

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended August 31, 2024 (the “Form 10-Q”) contains forward-looking statements under Canadian securities laws and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be subject to the "safe harbor" created by those sections and other applicable laws. Such statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements under the Canadian securities laws and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are intended to be subject to the “safe harbor” created by those sections and other applicable laws. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “seek,” or “should,” or the negative or plural of these words or similar expressions or variations are intended to identify such forward-looking statements. Forward-looking statements include, among other things, our beliefs or expectations relating to our future performance, results of operations and financial condition; our intentions or expectations regarding our cost savings initiatives; our strategic initiatives, business strategy, supply chain, brand portfolio, product performance and expansion efforts; our intentions regarding the use of net proceeds from our ATM Program; our intentions regarding our capital structure and TLRY 27 Notes; current or future macroeconomic trends; our expectations and potential impacts of regulatory or industry developments; our statements regarding the consolidation of the Canadian cannabis industry; our expectations regarding any future tax developments; future corporate acquisitions and strategic transactions; and our synergies, cash savings and efficiencies anticipated from the integration of our completed acquisitions and strategic transactions.

Risks and uncertainties that may cause actual results to differ materially from forward-looking statements include, but are not limited to, those identified in this Form 10-Q and other risks and matters described in our most recent Annual Report on Form 10-K for the fiscal year ended May 31, 2024 as well as our other filings made from time to time with the U.S. Securities and Exchange Commission and in our Canadian securities filings.

Forward looking statements are based on information available to us as of the date of this Form 10-Q and, while we believe that information provides a reasonable basis for these statements, these statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. You should not rely upon forward-looking statements or forward-looking information as predictions of future events.

We undertake no obligation to update forward-looking statements to reflect actual results or changes in assumptions or circumstances, except as required by applicable law.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

TILRAY BRANDS, INC.

Consolidated Statements of Financial Position

(in thousands of United States dollars, unaudited)

	*August 31,*			*May 31,*
	*2024*			*2024*
Assets
Current assets
Cash and cash equivalents	$	205,186		$	228,340
Marketable securities		74,869			32,182
Accounts receivable, net		104,037			101,695
Inventory		264,295			252,087
Prepaids and other current assets		44,960			31,332
Assets held for sale		32,536			32,074
Total current assets		725,883			677,710
Capital assets		555,136			558,247
Operating lease, right-of-use assets		17,176			16,101
Intangible assets		908,768			915,469
Goodwill		2,009,714			2,008,884
Long-term investments		7,853			7,859
Convertible notes receivable		32,000			32,000
Other assets		5,337			5,395
Total assets	$	4,261,867		$	4,221,665
Liabilities
Current liabilities
Bank indebtedness	$	18,134		$	18,033
Accounts payable and accrued liabilities		236,146			241,957
Contingent consideration		15,000			15,000
Warrant liability		2,557			3,253
Current portion of lease liabilities		5,640			5,091
Current portion of long-term debt		16,072			15,506
Current portion of convertible debentures payable		—			330
Total current liabilities		293,549			299,170
Long - term liabilities
Lease liabilities		60,657			60,422
Long-term debt		155,268			158,352
Convertible debentures payable		132,650			129,583
Deferred tax liabilities, net		136,230			130,870
Other liabilities		99			90
Total liabilities		778,453			778,487
Commitments and contingencies (refer to Note 19)
Stockholders' equity
Common stock ($0.0001 par value; 1,198,000,000 common shares authorized; 875,444,828 and 831,925,373 common shares issued and outstanding, respectively)		88			83
Preferred shares ($0.0001 par value; 10,000,000 preferred shares authorized; nil and nil preferred shares issued and outstanding, respectively)		—			—
Additional paid-in capital		6,217,533			6,146,810
Accumulated other comprehensive loss		(39,877	)		(43,499	)
Accumulated deficit		(2,699,653	)		(2,660,488	)
Total Tilray Brands, Inc. stockholders' equity		3,478,091			3,442,906
Non-controlling interests		5,323			272
Total stockholders' equity		3,483,414			3,443,178
Total liabilities and stockholders' equity	$	4,261,867		$	4,221,665

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

TILRAY BRANDS, INC.

Consolidated Statements of Loss and Comprehensive Loss

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

	*Three months ended*
	*August 31,*
	*2024*			*2023*
Net revenue	$	200,044		$	176,949
Cost of goods sold		140,338			132,753
Gross profit		59,706			44,196
Operating expenses:
General and administrative		44,113			40,516
Selling		11,690			6,859
Amortization		21,804			22,225
Marketing and promotion		11,566			8,535
Research and development		105			79
Change in fair value of contingent consideration		—			(11,107	)
Litigation costs, net of recoveries		1,595			2,034
Restructuring costs		4,247			915
Transaction costs (income), net		1,156			8,502
Total operating expenses		96,276			78,558
Operating loss		(36,570	)		(34,362	)
Interest expense, net		(9,842	)		(9,835	)
Non-operating income (expense), net		12,646			(4,402	)
Loss before income taxes		(33,766	)		(48,599	)
Income tax expense, net		886			7,264
Net loss	$	(34,652	)	$	(55,863	)
Total net income (loss) attributable to:
Stockholders of Tilray Brands, Inc.		(39,165	)		(71,525	)
Non-controlling interests		4,513			15,662
Other comprehensive gain (loss), net of tax
Foreign currency translation gain (loss)		4,160			3,209
Total other comprehensive gain (loss), net of tax		4,160			3,209
Comprehensive loss	$	(30,492	)	$	(52,654	)
Total comprehensive income (loss) attributable to:
Stockholders of Tilray Brands, Inc.		(35,543	)		(68,476	)
Non-controlling interests		5,051			15,822
Weighted average number of common shares - basic		875,444,828			691,189,382
Weighted average number of common shares - diluted		875,444,828			691,189,382
Net loss per share - basic	$	(0.04	)	$	(0.10	)
Net loss per share - diluted	$	(0.04	)	$	(0.10	)

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

TILRAY BRANDS, INC.

Consolidated Statements of Stockholders’ Equity

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

								*Accumulated*
	*Number of*				*Additional*			*other*						*Non-*
	*common*		*Common*		*paid-in*			*comprehensive*			*Accumulated*			*controlling*
	*shares*		*stock*		*capital*			*loss*			*Deficit*			*interests*			*Total*
Balance at May 31, 2023		656,655,455	$	66	$	5,777,743		$	(46,610	)	$	(2,415,507	)	$	14,251		$	3,329,943
Share issuance - HEXO acquisition		39,705,962		4		65,158			—			—			—			65,162
Share issuance - settlement of contractual change of control severance incurred from HEXO acquisition		865,426		—		1,500			—			—			—			1,500
Share issuance - Double Diamond Holdings dividend settlement		5,004,735		—		8,146			—			—			—			8,146
Share issuance - HTI convertible note		17,148,541		2		49,998			—			—			—			50,000
Share issuance - RSUs exercised		3,912,481		—		—			—			—			—			—
Shares effectively repurchased for employee withholding tax		—		—		(4,860	)		—			—			—			(4,860	)
Equity component related to issuance of convertible debt, net of issuance costs		—		—		3,953			—			—			—			3,953
Stock-based compensation		—		—		8,257			—			—			—			8,257
Dividends declared to non-controlling interests				—		—			—			—			(7,891	)		(7,891	)
Comprehensive income (loss) for the period		—		—		—			3,049			(71,525	)		15,822			(52,654	)
Balance at August 31, 2023		723,292,600		72		5,909,895			(43,561	)		(2,487,032	)		22,182			3,401,556

Balance at May 31, 2024		831,925,373		83		6,146,810			(43,499	)		(2,660,488	)		272			3,443,178
Share issuance - At-the-Market (“ATM”) program		36,693,307		4		66,468			—			—			—			66,472
Share issuance - RSUs exercised		6,823,140		1		(1	)		—			—			—			—
Share issuance - options exercised		3,008		—		—			—			—			—			—
Shares effectively repurchased for employee withholding tax		—		—		(2,661	)		—			—			—			(2,661	)
Stock-based compensation		—		—		6,917			—			—			—			6,917
Comprehensive income (loss) for the period		—		—		—			3,622			(39,165	)		5,051			(30,492	)
Balance at August 31, 2024		875,444,828	$	88	$	6,217,533		$	(39,877	)	$	(2,699,653	)	$	5,323		$	3,483,414

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

TILRAY BRANDS, INC.

Consolidated Statements of Cash Flows

(in thousands of United States dollars, unaudited)

	*For the three months ended*
	*August 31,*			*August 31,*
	*2024*			*2023*
Cash provided by (used in) operating activities:
Net loss	$	(34,652	)	$	(55,863	)
Adjustments for:
Deferred income tax expense, net		382			59
Unrealized foreign exchange (gain) loss		(5,602	)		(3,127	)
Amortization		31,814			30,789
Accretion of convertible debt discount		3,067			5,544
Other non-cash items		729			(6,357	)
Stock-based compensation		6,917			8,257
(Gain) loss on long-term investments & equity investments		(499	)		47
Loss on derivative instruments		(696	)		10,345
Change in fair value of contingent consideration		—			(11,107	)
Change in non-cash working capital:
Accounts receivable		(2,342	)		13,044
Prepaids and other current assets		(13,570	)		(4,654	)
Inventory		(12,383	)		3,650
Accounts payable and accrued liabilities		(8,472	)		(6,469	)
Net cash used in operating activities		(35,307	)		(15,842	)
Cash provided by (used in) investing activities:
Investment in capital and intangible assets		(6,736	)		(4,152	)
Proceeds from disposal of capital and intangible assets		28			342
Disposal (purchase) of marketable securities, net		(42,687	)		(45,436	)
Business acquisitions, net of cash acquired		—			22,956
Net cash provided by (used in) investing activities		(49,395	)		(26,290	)
Cash provided by (used in) financing activities:
Share capital issued, net of cash issuance costs		66,472			—
Proceeds from long-term debt		—			7,621
Repayment of long-term debt		(4,791	)		(6,369	)
Proceeds from convertible debt		—			21,553
Repayment of convertible debt		(330	)		—
Repayment of lease liabilities		(862	)		—
Net increase (decrease) in bank indebtedness		101			(8,787	)
Net cash provided by (used in) financing activities		60,590			14,018
Effect of foreign exchange on cash and cash equivalents		958			614
Net decrease in cash and cash equivalents		(23,154	)		(27,500	)
Cash and cash equivalents, beginning of period		228,340			206,632
Cash and cash equivalents, end of period	$	205,186		$	179,132

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

TILRAY BRANDS, INC.

Notes to Consolidated Financial Statements

Note 1. Basis of presentation and summary of significant accounting policies

The accompanying unaudited condensed interim consolidated financial statements (the “Financial Statements”) reflect the accounts of the Company for the quarterly period ended August 31, 2024. The financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP and should be read in conjunction with the audited consolidated financial statements (the “Annual Financial Statements”) included in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2024 (the “Annual Report”). 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 fiscal 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, under the historical cost convention except for certain financial instruments that are measured at fair value, as detailed in the Company’s accounting policies.

All amounts in the Financial Statements, notes and tables have been rounded to the nearest thousand, except par values and per share amounts, and unless otherwise indicated.

Certain items of the comparative figures have been changed to conform to the presentation adopted in the current period.

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 all subsidiaries are included in the Financial Statements from the date that control commences until the date that control ceases. All intercompany balances and transactions have been eliminated on consolidation. A complete list of our subsidiaries that existed as of our most recent fiscal year end is included in the Annual Report.

Convertible notes receivable

Convertible notes receivable includes various investments in which the Company has the right, or potential right to convert the indenture into common stock of the investee and are classified as available-for-sale and are recorded at fair value. Unrealized gains and losses during the year, 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. We use judgement to assess convertible notes receivables for impairment at each measurement date. Convertible notes receivables are impaired when a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the consolidated statements of loss and comprehensive loss and a new cost basis for the investment is established. We also evaluate whether there is a plan to sell the security, or it is more likely than not that we 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 loss and the remaining amount is recorded in other comprehensive income (loss).

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing reported net income (loss) attributable to stockholders of Tilray Brands, Inc. by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share is computed by dividing reported net income (loss) attributable to stockholders of Tilray Brands, Inc. by the sum of the weighted average number of common shares and the number of dilutive potential 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, warrants, and RSUs and the incremental shares issuable upon conversion of the convertible debentures and similar instruments. Shares of common stock outstanding under the share lending arrangement entered into in conjunction with the TLRY 27 Notes, see Note 13 (Convertible debentures payable) are excluded from the calculation of basic and diluted earnings per share because the borrower of the shares is required under the share lending arrangement to refund any dividends paid on the shares lent.

In computing diluted earnings (loss) 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. For the three months ended August 31, 2024 and August 31, 2023, the dilutive potential common share equivalents outstanding consisted of the following: 23,411,577 and 21,202,933 common shares from RSUs, 3,359,144 and 6,325,348 common shares from share options, 6,210,000 and 7,847,219 common shares for warrants and 64,971,746 and 77,819,141 common shares for convertible debentures, respectively.

New accounting pronouncements not yet adopted

In August 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-05, Business Combination - Joint Venture Formations (Subtopic 805-60) Recognition and Initial Measurement (“ASU 2023-05”), which is intended to address the accounting for contributions made to a joint venture. ASU 2023-05 is effective for the Company beginning June 1, 2026. This update will be applied prospectively on or after the effective date of the amendments. The Company is currently evaluating the effect of adopting this ASU.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. The Company is currently evaluating the effect of adopting this ASU.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which requires public entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold on an annual basis. ASU 2023-09 is effective for the Company beginning with the fiscal year ended June 1, 2025. The Company is currently evaluating the effect of adopting this ASU.

New accounting pronouncements recently adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. ASU 2023-07 is effective for the Company beginning with the fiscal year ended May 31, 2025 and will be disclosed retrospectively in the Annual Report on Form 10-K.

On March 21, 2024, the FASB issued ASU 2024-01, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which adds illustrative examples that demonstrate how the scoping guidance in ASC 718-10-15-3 applies to profits interest or similar awards. The Company adopted ASU 2024-01 beginning with the fiscal year ended June 1, 2024 with no material impacts.

Note 2. Inventory

Inventory consisted of the following:

	*August 31,*		*May 31,*
	*2024*		*2024*
Beverage alcohol inventory		58,784	$	52,831
Plants		16,333		13,828
Dried cannabis		107,290		108,721
Cannabis derivatives		7,306		4,504
Cannabis vapes		4,858		4,132
Packaging and other inventory items		20,270		22,115
Distribution inventory		38,202		35,645
Wellness inventory		11,252		10,311
Total	$	264,295	$	252,087

Note 3. Capital assets

Capital assets consisted of the following:

	*August 31,*			*May 31,*
	*2024*			*2024*
Land	$	45,165		$	45,577
Production facilities		375,345			369,630
Equipment		262,876			258,532
Leasehold improvements		19,463			19,377
Finance lease, right-of-use assets		43,429			43,993
Construction in progress		12,516			10,713
	$	758,794		$	747,822
Less: accumulated amortization		(203,658	)		(189,575	)
Total	$	555,136		$	558,247

Assets held for sale consisted of the following:

	*August 31,*		*May 31,*
	*2024*		*2024*
Land	$	970	$	954
Production facility		25,010		24,682
Equipment		6,556		6,438
	$	32,536	$	32,074

During the fiscal year ended May 31, 2024, the Company classified the following assets from its Cannabis reporting segment as held for sale, including its Quebec cultivation facility, the Fort Collins, CO partially vacant warehouse facility, and the Broken Coast former cultivation facility located in Duncan, B.C.. Following an assessment of facility capacity utilization, it was determined that these facilities would be exited and held for sale. It is expected that the sale of these assets will be completed within twelve months from the period in which they were classified as held for sale. Assets held for sale are measured at the lower of carrying amount and their fair value less costs to sell, and are no longer depreciated. Disposition of assets held for sale are recorded in the consolidated statement of net loss and comprehensive loss, within the line, “Non-operating income (expense), net”.

Note 4. Leases

The table below presents the lease-related assets and liabilities recorded on the balance sheet.

		*August 31,*		*May 31,*
	*Classification on Balance Sheet*	*2024*		*2024*
Assets
Finance lease, right-of-use assets	Capital assets	$	43,429	$	43,993
Operating lease, right-of-use assets	Operating lease, right-of-use assets		17,176		16,101
Total right-of-use asset		$	60,605	$	60,094
Liabilities
Current:
Current portion of finance lease liabilities	Current portion of lease liabilities	$	1,116	$	1,092
Current portion of operating lease liabilities	Current portion of lease liabilities		4,524		3,999
Non-current:
Finance lease liabilities	Lease liabilities		43,737		43,948
Operating lease liabilities	Lease liabilities		16,920		16,474
Total lease liabilities		$	66,297	$	65,513

The following table presents the future undiscounted payments associated with lease liabilities as of August 31, 2024:

	*Operating*			*Finance*
	*leases*			*leases*
2025	$	4,775		$	3,299
2026		6,089			4,398
2027		5,439			4,398
2028		4,540			4,398
Thereafter		6,139			78,781
Total minimum lease payments	$	26,982		$	95,274
Imputed interest		(5,538	)		(50,421	)
Obligations recognized	$	21,444		$	44,853

Note 5. Intangible Assets

Intangible assets consisted of the following items:

	*August 31,*			*May 31,*
	*2024*			*2024*
Customer relationships & distribution channel	$	609,728		$	603,939
Licenses, permits & applications		371,507			368,057
Non-compete agreements		12,441			12,403
Intellectual property, trademarks, knowhow & brands		616,721			608,672
		1,610,397		$	1,593,071
Less: accumulated amortization		(285,785	)		(261,758	)
Less: impairments		(415,844	)		(415,844	)
Total	$	908,768		$	915,469

Included in Licenses, permits & applications was $185,636 of indefinite-lived intangible assets as of August 31, 2024, compared to $182,851 as of May 31, 2024.

Expected future amortization expense for intangible assets as of August 31, 2024 is as follows:

	*Amortization*
2025 (remaining nine months)	$	55,822
2026		74,430
2027		74,430
2028		74,430
2029		74,430
Thereafter		369,590
Total	$	723,132

Note 6. Goodwill

The following table shows the carrying amount of goodwill by reporting units:

	*August 31,*			*May 31,*
Reporting Unit	*2024*			*2024*
Cannabis	$	2,640,669		$	2,640,669
Distribution		4,458			4,458
Beverage alcohol		120,802			120,802
Wellness		77,470			77,470
Effect of foreign exchange		8,746			7,916
Impairments		(842,431	)		(842,431	)
Total	$	2,009,714		$	2,008,884

Note 7. Business acquisitions

Acquisition of Craft Beverage Business Portfolio

On September 29, 2023, Tilray acquired a portfolio of craft brands, assets and businesses comprising eight beer and beverage brands from Anheuser-Busch Companies, LLC, ("AB") including breweries and brewpubs associated with them (the “Craft Acquisition”). The acquired businesses/brands include Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company, and HiBall Energy. The Company paid a total purchase price equivalent of $83,658 in cash, net of a working capital adjustment at closing of $1,342.

The Company is in the process of assessing the fair value of the net assets acquired and, as a result, the fair value may be subject to adjustments pending completion of final valuations and post-closing adjustments. The table below summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed for the Craft Acquisition at the effective acquisition date as follows:

	*Amount*
Consideration
Cash consideration	$	83,658
Net assets acquired
Current assets
Cash and cash equivalents		77
Inventory		21,493
Prepaids and other current assets		573
Long-term assets
Capital assets		76,114
Finance lease, right-of-use assets		45,496
Operating lease, right-of-use assets		7,677
Other assets		108
Total assets		151,538
Current liabilities
Accounts payable and accrued liabilities		14,706
Current portion of finance lease liabilities		1,031
Current portion of operating lease liabilities		1,408
Long - term liabilities
Finance lease liabilities		44,465
Operating lease liabilities		6,270
Total liabilities		67,880
Total net assets acquired		83,658

In the event that the Craft Acquisition had occurred on June 1, 2022, the Company would have had, on an unaudited proforma basis, additional net revenue of approximately $nil and $41,000 for the three months ended August 31, 2024 and 2023, respectively, and its consolidated net loss and comprehensive net income would have increased by approximately $nil and $3,000 for the three months ended August 31, 2024 and 2023, respectively. This unaudited pro forma financial information does not reflect the realization of any expected ongoing synergies relating to the integration of the Craft Acquisition.

Note 8. Convertible notes receivable

Convertible notes receivable is comprised of the following:

	*August 31,*		*May 31,*
	*2024*		*2024*
MedMen Convertible Note		32,000		32,000
Deduct - current portion		—		—
Total convertible notes receivable, non current portion	$	32,000	$	32,000

MedMen Convertible Note

On August 31, 2021, the Company issued 9,817,061 shares valued at $117,804 to acquire 68% interest in Superhero Acquisition L.P. (“SH Acquisition”), which purchased a senior secured convertible note issued by MedMen (the "MedMen Convertible Note"), together with certain associated warrants to acquire Class B subordinate voting shares of MedMen, in the principal amount of $165,799. The MedMen Convertible Note bears interest at the Secured Overnight Financing Rate ("SOFR") plus 6%, with a SOFR floor of 2.5% with any accrued interest being added to the outstanding principal amount. The outstanding principal amount, together with accrued interest is to be paid on August 17, 2028, the maturity date of the MedMen Convertible Note. SH Acquisition was also granted “top-up” rights enabling it (and its limited partners) to maintain its percentage ownership (on an “as-converted” basis) in the event that MedMen issues equity securities. SH Acquisition’s ability to convert the MedMen Convertible Note and exercise the Warrants is dependent upon U.S. federal legalization of cannabis or Tilray’s waiver of such requirement as well as any additional regulatory approvals.

During the year ended May 31, 2024, the Company recognized an other-than-temporary change in fair value, which resulted in a non-cash expense of $42,681. The MedMen Convertible Note was valued based upon the fair value of the collateral assets net of disposal costs and has been reduced to reflect recent events, including the appointment of a chief restructuring officer on January 23, 2024 to facilitate MedMen’s anticipated recapitalization and restructuring of operations, filing for insolvency protection in Canada and in California and pending asset sales. There are no additional changes in fair value for the three months ended August 31, 2024.

The Company did not derive any revenue or cash from MedMen's operations, and fully complies with all limitations imposed by applicable U.S. law and regulations in connection with its ownership of the MedMen Convertible Note. In addition, since the fiscal year ended May 31, 2024, the Company has not recognized any interest income on the MedMen Convertible Note, nor did the Company recognize any interest income for the three months ended August 31, 2024, which would have increased its value.

Note 9. Long term investments

Long term investments consisted of the following:

	*August 31,*		*May 31,*
	*2024*		*2024*
Equity investments measured at fair value	$	2,353	$	2,359
Equity investments under measurement alternative		5,500		5,500
Total	$	7,853	$	7,859

Note 10. Bank indebtedness

Aphria Inc., a subsidiary of the Company, has 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, 2024, the Company has not drawn on the line of credit. The operating line of credit is secured by a security interest on certain real property located at 265 Talbot St. West, Leamington, Ontario.

CC Pharma GmbH, a subsidiary of the Company, has two operating lines of credit in the amounts of €7,000 and €500. These lines bear interest at Euro Short-Term Rate ("ESTR") plus 2.50% and Euro Interbank Offered Rate ("EURIBOR") plus 4.00%, respectively. As of August 31, 2024, a total of €7,395 ($8,134) was drawn down from the total available credit of €7,500. The operating line of credit for €7,000 is secured by an interest in the inventory of CC Pharma GmbH as well as the Densborn facility and underlying real property. The operating line of credit for €500 is unsecured.

American Beverage Crafts Group Inc. ("ABC Group"), a subsidiary of the Company, has a revolving credit facility of $30,000, which bears interest at SOFR plus an applicable margin. As of August 31, 2024, the Company has drawn down $10,000 on the revolving line of credit. The revolving credit facility is secured by ABC Group's assets and includes a corporate guarantee by a subsidiary of the Company.

Note 11. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are comprised of:

	*August 31,*		*May 31,*
	*2024*		*2024*
Trade payables	$	101,868	$	105,392
Accrued liabilities		90,899		92,424
Litigation accrual		24,413		24,378
Accrued payroll and employment related taxes		10,279		6,154
Income taxes payable		973		4,092
Accrued interest		3,359		4,217
Sales taxes payable		4,355		5,300
Total	$	236,146	$	241,957

Note 12. Long-term debt

The following table sets forth the net carrying amount of long-term debt instruments:

	*August 31,*			*May 31,*
	*2024*			*2024*
Credit facility - C$66,000 - Canadian prime interest rate plus an applicable margin, 3-year term, with a 10-year amortization, repayable in blended monthly payments, due in November 2025	$	38,480		$	39,420
Term loan - C$25,000 - Canadian prime plus 1.00%, compounded monthly, 5-year term, with a 15-year amortization, repayable in equal monthly installments of C$181 including interest, due in July 2033		10,154			10,212
Term loan - C$25,000 - Canadian prime plus 1.00%, compounded monthly, 5-year term, with a 15-year amortization, repayable in equal monthly installments of C$196 including interest, due in July 2033		12,406			12,422
Term loan - C$1,250 - Canadian prime plus 1.50%, 5-year term, with a 10-year amortization, repayable in equal monthly installments of C$12 including interest, due in August 2026		245			263
Mortgage payable - C$3,750 - Canadian prime plus 1.50%, 5-year term, with a 20-year amortization, repayable in equal monthly installments of C$23 including interest, due in August 2026		2,111			2,089
Term loan ‐ €1,500 ‐ at 2.00%, 5‐year term, repayable in quarterly installments of €94 plus interest, due in April 2025		320			417
Term loan ‐ €3,500 ‐ at 4.59%, 5‐year term, repayable in monthly installments of €52 plus interest, due in August 2028		3,030			3,151
Mortgage payable - $22,635 - EURIBOR rate plus 1.5%, 10-year term, repayable in monthly installments of $57 including interest, due in October 2030		19,969			20,066
Term loan - $90,000 - SOFR plus an applicable margin, 5-year term, repayable in quarterly installments of $875 to $1,750 due in June 2028		85,500			86,626
Carrying amount of long-term debt		172,215			174,666
Unamortized financing fees		(875	)		(808	)
Net carrying amount		171,340			173,858
Less principal portion included in current liabilities		(16,072	)		(15,506	)
Total noncurrent portion of long-term debt	$	155,268		$	158,352

Note 13. Convertible debentures payable

The following table sets forth the net carrying amount of the convertible debentures payable:

	*August 31,*		*May 31,*
	*2024*		*2024*
5.20% Convertible Notes ("TLRY 27")	$	132,650	$	129,583
5.25% Convertible Notes ("APHA 24")		—		330
Total		132,650		129,913
Deduct - current portion		—		330
Total convertible debentures payable, non current portion	$	132,650	$	129,583

TLRY 27 Notes

	*August 31,*			*May 31,*
	*2024*			*2024*
5.20% Contractual debenture	$	172,500		$	172,500
Unamortized discount		(39,850	)		(42,917	)
Net carrying amount	$	132,650		$	129,583

The TLRY 27 convertible debentures were issued on May 30, 2023 and on June 9, 2023 by way of overallotment, in the principal amount of $172,500 (the “TLRY 27 Notes”). The TLRY 27 Notes bear interest at a rate of 5.20% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, and mature on June 15, 2027, unless earlier converted. The TLRY 27 Notes are Tilray’s general unsecured obligations and rank senior in right of payment to all of Tilray’s indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment with any of Tilray’s unsecured indebtedness that is not so subordinated, including TLRY 23 and APHA 24, effectively junior in right of payment to any of Tilray’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables but excluding intercompany obligations) of Tilray’s current or future subsidiaries. Noteholders will have the right to convert their TLRY 27 Notes into shares of Tilray’s common stock at their option, at any time, until the close of business on the second scheduled trading day immediately before June 15, 2027. The initial conversion rate is 376.6478 shares per $1,000 principal amount of TLRY 27 Notes, which represents a conversion price of approximately $2.66 per share. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

The TLRY 27 Notes will be redeemable, in whole and not in part, at Tilray’s option at any time on or after June 20, 2025 at a cash redemption price equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, but only if the last reported sale price of Tilray’s common stock exceeds 130% of the conversion price for a specified period of time. If certain corporate events that constitute a fundamental change occur, then, subject to a limited exception, noteholders may require Tilray to repurchase their TLRY 27 Notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. In connection with the Company’s offering of the TLRY 27 Notes, the Company entered into a share lending agreement with an affiliate of Jefferies LLC (the “Share Borrower”), pursuant to which it lent to the Share Borrower 38,500,000 shares of the Company’s common stock (the "Borrowed Shares"). The Borrowed Shares were newly-issued shares, will be held as treasury shares until the expiration or early termination of the share lending agreement and may be used by purchasers of the TLRY 27 Notes to sell up to 38,500,000 shares of the Company’s common stock. The fair value of the share lending agreement has been recorded as part of the unamortized discount on the debenture. The Company expects that the selling stockholders will use their position created by such sales to establish their initial hedge with respect to their investments in the TLRY 27 Notes. The Company did not receive any proceeds from the sale of the Borrowed Shares. See Note 27 (Subsequent Events), which discloses the repurchase of $7,500 of TLRY 27 Notes in an exchange transaction.

During the three months ended August 31, 2024, the Company recognized interest expense and accretion of amortized discount of $2,243 and $3,067 respectively. During the three months ended August 31, 2023, the Company recognized interest expense and accretion of amortized discount of $2,243 and $2,795 respectively.

APHA 24 Notes

	*August 31,*		*May 31,*
	*2024*		*2024*
5.25% Contractual debenture	$	—	$	350,000
Debt settlement		—		(349,670	)
Fair value adjustment		—		—
Net carrying amount	$	—	$	330

The APHA 24 convertible debentures, were entered into in April 2019, in the principal amount of $350,000, bore interest at a rate of 5.25% per annum, and were payable semi-annually in arrears on June 1 and December 1 of each year, and matured on June 1, 2024 (the "APHA 24 Notes"). On June 1, 2024, the Company repaid the remaining principal of the APHA 24 Notes in cash upon maturity.

Note 14. Warrant liability

As of August 31, 2024 and May 31, 2024, there were 6,209,000 warrants outstanding, with an original exercise price of $5.95 per warrant, expiring September 17, 2025. Each warrant is exercisable for one common share of the Company.

The warrants contain anti-dilution price protection features, which adjust the exercise price of the warrants if the Company subsequently issues common stock at a price lower than the exercise price of the warrants. In the event additional warrants or convertible debt are issued with a lower and/or variable exercise price, the exercise price of the warrants will be adjusted accordingly. During the nine months ended August 31, 2024, the Company issued shares which triggered the anti-dilution price protection feature lowering the exercise price to $1.61. These warrants are classified as liabilities as they are to be settled in registered shares, and the registration statement is required to be active, unless such shares may be subject to an applicable exemption from registration requirements. The holders, at their sole discretion, may elect to affect a cashless exercise, and be issued exempt securities in accordance with Section 3(a)(9) of the 1933 Act. In the event the Company does not maintain an effective registration statement, the Company may be required to pay a daily cash penalty equal to 1% of the number of shares of common stock due to be issued multiplied by any trading price of the common stock between the exercise date and the share delivery date, as selected by the holder. Alternatively, the Company may deliver registered common stock purchased by the Company in the open market. The Company may also be required to pay cash if it does not have sufficient authorized shares to deliver to the holders upon exercise.

The Company estimated the fair value of warrants outstanding as of August 31, 2024 at $0.412 per warrant using the Black Scholes pricing model (Level 3) with the following assumptions: Risk-free interest rate of 3.23%, expected volatility of 50%, expected term of 1.05 years, strike price of $1.61 and fair value of common stock of $1.71.

Expected volatility is based on both historical and implied volatility of the Company’s common stock.

Note 15. Stockholders' equity

Issued and outstanding

As of August 31, 2024, the Company had 1,198,000,000 common shares and 10,000,000 preferred shares authorized to be issued, with 875,444,828 common shares and nil preferred shares issued and outstanding. Historically, the Company has issued shares of its common stock as consideration for business acquisitions, settlement of convertible notes, settlement of litigation claims, in connection with public offerings and as payment of dividends to non-controlling interests for profit distributions.

During the three months ended August 31, 2024, the Company issued the following common shares:

36,693,307 shares under its At-the-Market (“ATM”) program generating gross proceeds of $68,279. The Company paid $1,807 in commissions and other fees associated with these issuances, with net proceeds of $66,472.

6,826,148 shares in connection with the exercise of previously awarded stock-based compensation awards.

During the three months ended August 31, 2024 the Company granted 13,054,906 time-based RSUs, and $nil performance-based RSUs. During the three months ended August 31, 2023 the Company granted 11,559,549 time-based RSUs and 7,566,146 performance based RSUs. The 7,566,146 performance based RSUs issued contain certain performance conditions that will not be set until a future date and, therefore, the grant date has not been met for accounting purposes. The Company's total stock-based compensation expense recognized for the three months ended August 31, 2024 and August 31, 2023 are as follows:

	*For the three months ended*
	*August 31,*		*August 31,*
	*2024*		*2023*
RSUs		6,917		8,257
Total	$	6,917	$	8,257

Note 16. Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss includes the following components:


	*Foreign*
	*currency*
	*translation*
	*gain (loss)*			*Total*
Balance May 31, 2023	$	(46,610	)	$	(46,610	)
Other comprehensive loss		3,049			3,049
Balance August 31, 2023	$	(43,561	)	$	(43,561	)

Balance May 31, 2024	$	(43,499	)	$	(43,499	)
Other comprehensive loss		3,622			3,622
Balance August 31, 2024	$	(39,877	)	$	(39,877	)

Note 17. Non-controlling interests

The following tables summarize the information relating to the following subsidiaries of the Company in which there is non-controlling interest; SH Acquisition (68%), CC Pharma Nordic ApS (75%), Aphria Diamond (51%), and ColCanna S.A.S. (90%) before intercompany eliminations.

Summary of balance sheet information of the entities in which there is a non-controlling interest as of August 31, 2024:

	SH		*CC Pharma*			*Aphria*			*ColCanna*			*August 31,*
	*Acquisition*		*Nordic ApS*			*Diamond*			*S.A.S.*			*2024*
Current assets	$	—	$	14		$	108,030		$	11		$	108,055
Non-current assets		32,000		—			123,694			3,355			159,049
Current liabilities		—		(17	)		(133,014	)		(6,993	)		(140,024	)
Non-current liabilities		—		—			(23,359	)		(1,451	)		(24,810	)
Net assets	$	32,000	$	(3	)	$	75,351		$	(5,078	)	$	102,270

Summary of balance sheet information of the entities in which there is a non-controlling interest as of May 31, 2024:

	SH		*CC Pharma*			*Aphria*			*ColCanna*			*May 31,*
	*Acquisition*		*Nordic ApS*			*Diamond*			*S.A.S.*			*2024*
Current assets	$	—	$	12		$	95,720		$	3		$	95,735
Non-current assets		32,000		—			124,675			3,637			160,312
Current liabilities		—		(9	)		(130,945	)		(6,913	)		(137,867	)
Non-current liabilities		—		—			(24,482	)		(1,452	)		(25,934	)
Net assets	$	32,000	$	3		$	64,968		$	(4,725	)	$	92,246

Summary of income statement information of the entities in which there is a non-controlling interest for the three months ended August 31, 2024:

	SH		*CC Pharma*			*Aphria*		*ColCanna*			*August 31,*
	*Acquisition*		*Nordic ApS*			*Diamond*		*S.A.S.*			*2024*
Revenue	$	—	$	—		$	18,558	$	—		$	18,558
Total expenses		—		5			9,216		630			9,851
Net (loss) income		—		(5	)		9,342		(630	)		8,707
Other comprehensive (loss) income		—		(1	)		1,041		277			1,317
Net comprehensive (loss) income	$

Tilray Brands, Inc. [TLRY] Filings
10-Q	[2024-10-10]
10-Q	[2024-10-10]
10-K	[2024-07-30]
10-Q	[2024-04-09]
10-Q	[2024-01-09]
10-Q	[2023-10-04]
10-K	[2023-07-26]
10-Q	[2023-04-10]
10-Q	[2023-01-09]
10-Q	[2022-10-07]
10-K	[2022-07-28]
10-Q	[2022-04-06]
10-Q	[2022-01-10]
10-Q	[2021-10-07]
10-K	[2021-07-28]
10-Q	[2021-05-10]
10-K	[2021-02-19]
10-Q	[2020-11-09]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-03-02]
10-Q	[2019-11-13]
10-Q	[2019-08-13]
10-Q	[2019-05-15]
10-K	[2019-03-25]
10-Q	[2018-11-14]
10-Q	[2018-08-29]
S-1	[2018-06-20]