Note 6 - Business Acquisitions

3 Months Ended

Aug. 31, 2023

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note 6. Business acquisitions

Acquisition of Montauk Brewing Company, Inc.

On   November 7, 2022, Tilray acquired Montauk Brewing Company, Inc. (“Montauk”), a leading craft brewer company based in Montauk, New York, which expanded our distribution network with a strong brand in the tri-state region of the U.S. In consideration for the acquisition of Montauk, and after giving effect to post-closing adjustments, the Company paid an aggregate purchase price equal to $35,123, which was comprised of $28,701 in cash and the remainder through the issuance of 1,708,521 shares of Tilray's common stock (having a value of $6,422 at closing). In the event that Montauk achieves certain volume and/or EBITDA targets on or before  December 31, 2025, the stockholders of Montauk shall be eligible to receive additional contingent cash consideration of up to $18,000. The Company determined that the closing date fair value of this contingent consideration was $10,245 based on the inputs disclosed in Note 23 (Fair value measurements). 

The table below summarizes fair value of the assets acquired and the liabilities assumed at the effective acquisition date. 

	Amount
Consideration
Cash	$	28,701
Shares		6,422
Contingent consideration		10,245
Net assets acquired
Current assets
Cash and cash equivalents		1,983
Accounts receivable		1,116
Prepaids and other current assets		467
Inventory		1,570
Long-term assets
Capital assets		420
Customer relationships (15 years)		18,540
Intellectual property, trademarks & brands (15 years)		13,650
Goodwill		17,803
Total assets		55,549
Current liabilities
Accounts payable and accrued liabilities		1,580
Long-term liabilities
Deferred tax liability		4,851
Other liabilities		3,750
Total liabilities		10,181
Total net assets acquired	$	45,368

In the event that the Montauk acquisition had occurred on June 1, 2022, the Company would have had additional revenue of approximately $3,000 for the three months ended  August 31, 2022 and net loss and comprehensive net loss would have increased by approximately $600 for the three months ended  August 31, 2022, primarily as a result of amortization of the intangible assets acquired. This unaudited pro forma financial information does not reflect the realization of any expected ongoing synergies relating to the integration of Montauk.

Acquisition of HEXO Corp.

On June 22, 2023, Tilray acquired HEXO, a cannabis company in Canada (the “HEXO Acquisition”) for the purpose of expanding the Company’s revenue base, production capabilities around certain form factors and growth opportunities with the Redecan brand. In consideration for the HEXO Acquisition, the Company paid a total purchase price equivalent of $93,882, which consisted of stock consideration of $63,927, settlement of convertible notes receivable of $28,720, the fair value of HEXO stock-based compensation of $1,188 and the assumption of warrants of $47. In connection with the HEXO Acquisition, each outstanding HEXO common share was exchanged for 0.4352 of a share of Tilray common stock and each outstanding HEXO preferred share was exchanged for 0.7805 of a share of Tilray common stock. In the aggregate, the Company issued 39,705,962 shares of Tilray common stock, at a share price of $1.61 per share, in connection with the HEXO Acquisition. The Company intends to sell HEXO's Kirkland lake property and has recorded the value of the associated capital assets as an asset held for sale. 

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 HEXO Acquisition at the effective acquisition date as follows: 

	Amount
Consideration
Shares	$	63,927
Settlement of convertible notes receivable		28,720
Warrants assumed		47
Estimated fair value of HEXO stock-based compensation		1,188
Net assets acquired
Current assets
Cash and cash equivalents		14,634
Restricted cash		1,657
Accounts receivable		7,855
Asset held for sale		755
Prepaids and other current assets		2,530
Inventory		27,495
Long-term assets
Prepaid expenses		8,384
Capital assets		70,782
Intellectual property, trademarks & brands (15 years)		2,000
Interest in equity investee		3,145
Total assets		139,237
Current liabilities
Accounts payable and accrued liabilities		45,355
Total liabilities		45,355
Total net assets acquired	$	93,882

Included in accounts payable and accrued liabilities was $12,856 of litigation settlement accruals as of June 22, 2023. 

In the event the HEXO Acquisition had occurred on June 1, 2022, the Company would have had, on an unaudited proforma basis, additional revenue of approximately $7,000 and $20,000 for the three month period ended  August 31, 2023 and 2022, respectively, and its net loss and comprehensive net loss would have increased by approximately $1,800 and $30,000 for the three month period ended August 31, 2023, and 2022, respectively. This unaudited pro forma financial information does not reflect the realization of any expected ongoing synergies relating to the integration of HEXO.

Acquisition of Truss Beverage Co.

On August 3, 2023, Tilray acquired the remaining 57.5% equity interest in Truss Beverage Co. ("Truss"), a cannabis beverage company, for $74 (CAD$100) in cash and $4,181 of contingent consideration from Molson Coors Canada ("Molson"). This represents the portion of Truss that had not been previously acquired as part of the HEXO Acquisition. The Company currently intends to divest Truss's assets and has recorded the value of the associated capital assets and lease obligations as an asset held for sale. The Company has agreed to pay Molson as contingent consideration an amount equal to 57.5% of any proceeds from any divesture, net of any costs and expenses associated with the disposition. 

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

	Amount
Consideration
Cash consideration	$	74
Investment in equity investees		3,145
Contingent consideration		4,181
Net assets acquired
Current assets
Cash and cash equivalents		6,739
Accounts receivable		1,038
Prepaids and other current assets		78
Inventory		2,573
Asset held for sale		2,960
Long-term assets
Intangible assets		296
Total assets		13,684
Current liabilities
Accounts payable and accrued liabilities		5,408
Other liabilities		876
Total liabilities		6,284
Total net assets acquired		7,400

In the event that the Truss acquisition had occurred on June 1, 2022 the Company would have had, on an unaudited proforma basis, additional revenue of approximately $3,000 and $5,000 for the three month period ended  August 31, 2023 and 2022, respectively, and net loss and comprehensive net loss would have increased by approximately $700 and $1,000 for the three month period ended August 31, 2023, and 2022, respectively. This unaudited pro forma financial information does not reflect the realization of any expected ongoing synergies relating to the integration of Truss.