Business Context and Reporting Period
This Form 8-K, dated May 21, 2021, reports on Tilray, Inc. (now Tilray Brands, Inc.), a Delaware corporation. The filing addresses the aftermath of the April 30, 2021, consummation of a plan of arrangement with Aphria Inc., which was treated as a reverse acquisition for accounting purposes. Consequently, Aphria became the accounting acquirer, and its historical financial statements now represent those of Tilray.
Key Financial Metrics
This filing is a current report regarding corporate governance and accounting changes; it does not contain revenue, profit, cash flow, margin, debt, or liquidity metrics for the reporting period.
Material Changes
- Accountant Dismissal: On May 21, 2021, the Board dismissed Deloitte LLP as the independent registered public accounting firm.
- Accountant Appointment: On May 21, 2021, the Board appointed PricewaterhouseCoopers LLP (PwC) as the new independent registered public accounting firm, effective immediately.
- Historical Audit Opinions: Deloitte issued adverse opinions on Tilray's internal control over financial reporting for fiscal years ended December 31, 2020, and 2019, citing material weaknesses in reconciliation procedures, inventory valuation, and organizational structure.
Guidance, Outlook, and Risks
The filing does not provide financial guidance or outlook. However, it highlights significant risks related to internal controls:
- Fiscal 2020 Weaknesses: Ineffective controls over balance sheet reconciliations, manual journal entries, inventory measurement spreadsheets, and segregation of duties in Portugal and Manitoba Harvest units.
- Fiscal 2019 Weaknesses: Issues regarding organizational structure, reporting lines, retention of competent personnel, and the deployment of control activities.
- Transition Risk: The shift from Deloitte to PwC coincides with the reverse acquisition of Aphria, requiring the integration of accounting standards and audit processes.
Investor Verification Checklist
- Verify the specific timeline for PwC's initial audit of the combined entity's fiscal year ending May 31, 2021.
- Review the remediation plans for the material weaknesses in internal controls identified by Deloitte for 2019 and 2020.
- Confirm the status of the reverse acquisition accounting treatment and its impact on future financial reporting comparability.
- Examine the letter from Deloitte (Exhibit 16.1) for any additional context regarding the dismissal.