GB Group Ord Shs GBGPF

RE:Derivatives instrument

[StilesBC2]

As I understand, prior to going public they would have issued bond type instruments at 12% interest, also giving the holder the option to convert their bond value into common equity by a certain date (end of Q1) and a certain price.  This is attractive for investors and more common in times of limited funding - reward for the risk they take by being unsecured. 

When the company went public, it would have been at a price higher than what the conversion price was, so the holders of course elected to convert. 

Basically, this is an accounting identity issue, not some grave managerial or strategic error.  At the time, the issue of the debentures may have been a wise move.  If anything, perhaps the company could have waited until this was off the books before going public, but hard to blame them for taking advantage of a bull market. 

Sans the derivative loss, they were only negative $900,000 on the quarter and with even modest growth in sales, they'll show profitability next quarter. 

More interesting to me was the nearly doubling of revenue y/y and the $10.81 price per gram.  They seem to be doing a good job keeping margins up, relative to the industry (eg. Canopy just over $7/gram)