You’re reading a copy of this week’s edition of New Cannabis Ventures’ weekly newsletter, which we’ve been publishing since October 2015. The newsletter includes unique information to help our readers stay ahead of the game as well as links to the most important events of the week. news.

Friends,

We were surprised to see Tilray rise initially after its report this week. The company missed analysts’ estimates for revenue and profitability, but rallied nonetheless. We thought the positive reaction may have been due to relief that the numbers weren’t even worse, but we think the market may have been tied to something beyond revenue and adjusted EBITDA. Instead, traders likely took note of reported net profit and earnings per share (EPS), which were well ahead of expectations.

Tilray’s press release trumpeted its earnings but did little to explain them. The first of five detailed points of his net income of $52.5 million, but it was never discussed in the body of the press release:

The income statement included in the release, of course, made it easy to see what was going on, at least for those watching. Historically, the company had always released its documents before the earnings call and before the market opened, but that was not the case. After issuing a press release before the market opened, the 10-Q was not filed until after the close. With this information, it became much easier to understand how Tilray generated its so-called profit. Quite simply, most are due to its share price falling during the quarter.

Much of the accounting profit was due to $72.7 million of non-operating revenue. In other words, without this element, which was detailed in the file, the company would have declared a loss. The 10-Q broke down non-operating earnings into primarily $56.1 million of change in the value of its convertible debentures and $21.1 million of change in the value of warrant liabilities. Falling stock prices drove down the value of these liabilities, which generated $77.2 million in revenue. This was helped by an unspecified $1.4 million gain and somewhat offset by small losses in currencies and long-term investments.

Another item that helped boost earnings was an operating charge of -$29.1 million, a change in the fair value of the contingent consideration for the recently acquired Sweetwater company. This means that the cash award due from December 2023 is now less likely. In other words, because its acquisition does not meet previous expectations, Tilray is unlikely to realize the payment it had previously expected.

Tilray reported pretax profit of $50.6 million. Had it not had the non-operating and operating adjustments detailed above, it would have reported a pre-tax loss of $51.2 million.

While Tilray wants investors to believe things are going well, we suggest ignoring its boasts of profitability, as falling stock prices and deals that fall short of expectations are not the foundations of success. The company also bragged about revenue growth, but compared not only the results of the combined company, but also those of the recently acquired Breckinridge Distillery this quarter to those of Aphria a year ago. . The cannabis segment on an apple-to-apple basis declined, but the company highlighted its 32% growth. Similarly, the 64% growth recorded for alcoholic beverages is mainly due to acquisition.

One thing that rose sharply was the number of shares. While the company spent a lot of verbiage on revenue growth and other metrics, the weighted average share count growth was even higher at 84%, the highest growth number we’ve seen in this press release. To make matters worse, Tilray did exactly what we expected and discussed in this letter recently, hitting its At-The-Money (ATM) shelf hard. After the quarter ended, the company sold 16.9 million shares between March 3 and April 6, raising $90 million (at an average of around $5.31) and leaving it with 310 available. millions of dollars. As a result of these share sales, the company incurred an additional potential cost of $6.45 million, as it was forced to reduce the exercise price of its warrants from $5.95 to 4 $.91.

Tilray’s press release gave the impression that things were going well, but a close look at the financials paints a different picture. The company suffered from negative growth on an organic basis and its share count exploded. Operating cash flow was -$46.3 million and net debt continues to increase. It’s no wonder the company is selling its shares so aggressively, especially since so much of its debt is about to become current. The company is talking about aggressive M&A plans, but it doesn’t have the financial capacity to do anything other than stock-based deals from our perspective. We continue to believe that investors should prepare for more stock sales by Tilray in the months ahead.

Understand complex financials, deal terms, legislative updates and important catalysts using the oldest cannabis stock due diligence platform trusted by investors for over 8 years.

The main objective of 420 Investor is to provide professional, objective and real-time information on the main cannabis companies in the market in order to help investors capitalize on Cannabis™.

New Cannabis Ventures publishes selected articles as well as exclusive news. Here are some of the most interesting business content from this week:

For real-time updates, download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and learn about industry news with like-minded people on the largest group of cannabis investors and entrepreneurs on LinkedIn.

Get ahead of the crowd! If you’re a cannabis investor and find value in our Sunday newsletters, subscribe to 420 Investor, Alan’s comprehensive stock due diligence platform since 2013. Get immediate access to in-depth, real-time news and market insights from the publicly traded cannabis industry, including daily videos, weekly chats, model portfolios, a community forum and more.

Use the professionally managed suite of NCV cannabis stock indices to monitor the performance of publicly traded cannabis companies within the day or over longer periods. In addition to the comprehensive Global Cannabis Stock Index, we offer a family of indices to track Canadian licensed producers as well as the American Cannabis Operator Index and Ancillary Cannabis Index.

Check out the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue-generating cannabis stocks.

Stay up to date on some of the most important communications from public companies by watching upcoming cannabis investor earnings conference calls.

Check out new listings coming soon with Cannabis Stock IPOs and new issues tracker.

Sincerely,

Alan and Joe

Based in Houston, Alan draws on his experience as the founder of the online community 420 Investor, the cannabis industry’s first and still largest public equity-focused due diligence platform. With his vast network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Prior to focusing on the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as a freelance research analyst after more than two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 on Seeking Alpha, where he has 70,000 subscribers, Alan is a frequent speaker at industry conferences and a frequent source for the media, including the NY Times, Wall Street Journal, Fox Business, and BloombergTV. Contact Alan: Twitter | Facebook | LinkedIn | E-mail