| Basis of presentation and summary of significant accounting policies | Note 2. Basis of presentation and summary of significant accounting policies The accompanying unaudited consolidated financial statements (the “financial statements”) reflect the accounts of the Company. The financial statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. The information included in this Form 10-Q should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended May 31, 2021 (the “Annual Financial Statements”). These financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The Company’s balance sheet in these interim financial statements was derived from the audited Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements. These consolidated financial statements have been prepared on the going concern basis which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations as they come due, under the historical cost convention except for certain financial instruments that are measured at fair value, as detailed in the Company’s accounting policies. As a result of the April 30, 2021 business combination with Aphria, the reported results do not include the results of operations of Tilray and its subsidiaries on and prior to April 30, 2021, in accordance with the accounting treatment applicable to the Arrangement. Accordingly, comparisons between the Company's results for the three and nine months ended February 28, 2022 and prior periods may not be meaningful. Information about the accounting treatment of the Arrangement including details of the transaction, determination of the total fair value consideration, and allocation of the purchase price, are included in the Company's Annual Report for the year ended May 31, 2021 The purchase price allocation for the Arrangement is open for adjustments and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date. In the event that more information is obtained, the purchase price allocation may change. Any future adjustments to the purchase price allocation, including changes within identifiable intangible assets or estimation uncertainty impacted by market conditions, may impact future net earnings. The purchase price allocation adjustments can be made through the end of the measurement period, which is not to exceed one year from the acquisition date. Basis of consolidation Subsidiaries are entities controlled by the Company. Control exists when the Company either has a controlling voting interest or is the primary beneficiary of a variable interest entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. A complete list of our subsidiaries that existed prior to our most recent year end is included in the Annual Report. O n August 13, 2021, the Company and other unrelated persons in the principal amount of $ 165.8 million (the “MM Notes”) originally issued by MedMen Enterprises Inc. (“ MedMen ”) together with certain associated warrants (the “MM Warrants”) to acquire Class B subordinate voting shares of Medmen (the “ MedMen Shares”) from certain funds affiliated with Gotham Green Partners (the “MM Transaction”). The MM Notes mature on August 17, 2028 . On August 17, 2021, SH Acquisition completed the MM Transaction and issued 9,817,061 shares of its common stock as partial consideration for the MM Transaction. The balance of the consideration for the MM Transaction was paid in cash by the other unrelated investors of SH Acquisition. In connection with its issuance of 9,817,061 shares of its common stock, the Company’s received an interest in SH Acquisition equal to approximately 68% of the interests in SH Acquisition and, therefore, indirectly acquired a right to 68% of the MM Notes and related MM Warrants, which were convertible into approximately 21% of the MedMen Shares outstanding (if such MM Notes and MM Warrants were converted and exercised upon closing the MM Transaction). In addition, interest on the principal amount of the MM Notes shall accrue at an interest rate of LIBOR plus 6%, with a LIBOR floor of 2.5% and, any accrued interest shall be payment-in-kind at a price equal to the trailing 30-day volume weighted average price of the MedMen Shares, as and when such payment-in-kind interest becomes due and payable. 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 upon conversion of convertible securities that may be issued by MedMen. Tilray’s ability to convert the Notes and exercise the Warrants is dependent upon U.S. federal legalization of cannabis (a “Triggering Event”) or Tilray’s waiver of such requirement as well as any additional regulatory approvals. Under the SH Acquisition partnership agreement, certain material events described therein require the approval of the Company, and the Company has the ability to appoint two of the three board of directors of the general partner of SH Acquisition. As a result, we consolidated SH Acquisition as a subsidiary of Tilray beginning on August 17, 2021. Long-term investments. On December 1, 2021, the Company acquired all the membership interests in Cheese Grits, LLC, a Georgia limited liability company that owns the SweetWater Brewing Company brewery and taproom in Atlanta, Georgia (the “SW Acquisition”), which facility was previously leased to the Company. Cheese Grits, LLC, was owned by certain former equity holders of SweetWater and current employees. As consideration for the SW Acquisition, the Company paid a purchase price at closing equal to $30,665, which purchase price was satisfied through the assumption of outstanding debt as well as the issuance of 843,687 shares of Tilray Class 2 common stock with a fair value of $8,606. On December 17, 2021, the Company issued an additional 82,224 Class 2 common shares with a fair value at issuance of $776 to satisfy its contractual obligations under the SW Acquisition. As a result of the SW Acquisition, Cheese Grits, LLC has been consolidated as a subsidiary of Tilray beginning on December 1, 2021. The SW Acquisition did not meet the definition of a business under US GAAP and has been treated as an asset acquisition. On December 7, 2021 the Company acquired all the membership interests in Double Diamond Distillery LLC (d/b/a Breckenridge Distillery), a Colorado limited liability company and a leading distilled spirits brand located in Breckenridge, Colorado, known for its award-winning bourbon whiskey collection and innovative craft spirits portfolio (the “Breckenridge Acquisition”). As consideration for the Breckenridge Acquisition, the Company paid a purchase price in an aggregate amount equal to $114,068, which purchase price was satisfied through the issuance of 12,540,479 shares of Tilray’s Class 2 common shares. As a result, we consolidated Double Diamond Distillery LLC as a subsidiary of Tilray beginning December 7, 2021. Additional information about the Breckenridge Acquisition is included in Note 6 Goodwill Long-term investments Debt securities are classified as available-for-sale and are recorded at fair value and are subject to impairment testing. Other than impairment losses, unrealized gains and losses during the period, net of the related tax effect, are excluded from income and reflected in other comprehensive income (loss), and the cumulative effect is reported as a separate component of stockholders’ equity until realized. Upon sale, realized gain and losses are reported in net income. Debt securities are impaired when a decline in fair value is determined to be other-than-temporary. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, credit quality of debt instrument issuers, and the duration and extent to which the fair value is less than cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in the statements of net loss and a new cost basis for the investment is established. The Company also evaluates whether there is a plan to sell the security or it is more likely than not that the Company will be required to sell the security before recovery. If neither of the conditions exist, then only the portion of the impairment loss attributable to credit loss is recorded in the statements of net loss and the remaining amount is recorded in other comprehensive income (loss). Investments in equity securities of entities over which the Company does not have a controlling financial interest or significant influence are accounted for at fair value. Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”). In applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the equity investments are less than carrying values. Changes in value are recorded in the statement of net loss and comprehensive loss, within the line, “ Non-operating income (expense)”. Investments in entities over which the Company does not have a controlling financial interest but has significant influence, are accounted for using the equity method, with the Company’s share of earnings or losses reported in earnings or losses from equity method investments on the statements of net loss and comprehensive loss. Equity method investments are recorded at cost, plus the Company’s share of undistributed earnings or losses, and impairment, if any, within “Interest in equity investees” on the balance sheets. The Company assesses investments in equity method investments when events or circumstances indicate that the carrying amount of the investment may be impaired. If it is determined that the current fair value of an equity method investment is less than the carrying value of the investment, the Company will assess if the shortfall is other than temporary (OTTI). Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the equity investee to sustain an earnings capacity that would justify the carrying amount of the investment. Once a determination is made that an OTTI exists, the investment is written down to its fair value in accordance with ASC 820 at the reporting date, which establishes a new cost basis. Earnings (loss) per share Basic earnings (loss) per share is computed by dividing reported net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing reported net income (loss) 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. 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 and nine-months ended February 28, 2022, the dilutive potential common share equivalents outstanding consist of the following:1,870,386 and 2,256,567 common shares from RSUs, nil and 901,781 common shares from share options, 1,007,654 and 3,119,734 common shares from warrants and nil and 1,468,878 common shares from convertible debentures, respectively. 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 In May 2021, the FASB issued ASU 2021-04, Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) In October 2021, the FASB issued ASU 2021-08, Business Combinations (Subtopic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance, New accounting pronouncements recently adopted In December – In January 2020, the FASB issued ASU 2020-01, Investments – Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) |
