RE:RE:Key Takeaways from the Financials and MD&ASo I'll start by saying that I'm no accountant and I'm not a business professional. Here's what I know:
1) We made more (10 x Inventories)
2) We made more (20x revenue q over q / aka way more hat sales)
3) We spent more (building/marketing/share based payments)
4) We own more
5) We 'owe' more ($36m up from $30m)
6) We lost more (TCL of $5,511,639 for the 9 months ended)
Now that I have those statements out of the way, I need someone to clarify something for me if you want to take a stab at it.
We have been getting guidance since early this year that they have sold upwards of 200K worth of product but have not be able to 'recognize' the revenue due to dispensary payments not being forthcoming (IE: NET 90). This all stems from the labelling issues, pulling product off shelves due to compliance and then filling back orders.
In our most recent quarterly results we show the following at a high level:
1) Sales $21,664 (Page 4)
2) Accounts Receivable ($14,425)(Page 6)
3) Inventories ($385,528) (Page 6)
Note 5 (Accounts Receivable) says we have Trade Receivables of $6,242
https://www.accountingtools.com/articles/what-are-trade-receivables.html Note 6 (Inventories) shows:
Raw materials ($258,174) aka THC and other ingredients used to make our drinks
Work in process ($23,129) assuming on the bottling line, in storage or in transit
Finished Goods ($151,780) assuming what has been completed but not shipped
Here's my question:
If I am a dispensary and I submit a purchase order and TNY subsequently invoices me with a NET 30/60/90/120 then proceeds to deliver the product, TNY can't necessarily show it a sales or revenue until it is paid for, which they have eluded to a couple of times including their most recent MD&A but why would that not show up as an account receivable? Am I missing something in their Account Standards?
Ned in their MD&A they indicate:
Also, during the period, considerable inventories were shipped to over 50 retail locations throughout California. These inventories, despite being at stores, would not be reflected in the Company’s revenue because the Company only recognizes revenue when it is paid, not when products ship to either distributors or retailers. These products on shelves, including product that the stores may have sold to customers, therefore show as finished goods in this quarter’s inventories until such time as the Company receives payment – even if the Company has received reports of these products having been sold by the retailers. While I don't agree with this outlook as even if they didn't collect the payment, inventory (thinking in our storage) is typically something that has not been sold whereas accounts receivable or trade receivables have been sold but the 'cash' portion is pending transfer from the buyer to the seller.
Based on their guidance above they have $21k in sales, $6K in trade receivables and $151K in finished goods (Inventories) for approximately $178K. That still puts us $22 short of what we were being told. Anybody coming up with a different outcome? If so, care to share.
It is a little concerning because at least for a portion of the last quarter we were in multiple dispensaries (between 30-50 with increasing counts) and these numbers aren't impressive considering all of it appears to have just been from filling the back orders with no net new revenue.
One thing that comes to mind is most of these potential sales in our eyes were actually promos and freebies as part of our marketing activities to build the brand.
It will be interesting to see how they do in the next two quarters and how they will report the BevMo sales.
Cautiously Optimistic as I understand that building a beverage company is no easy task but a little troubled by the cryptic nature of a fair amount their news releases, which to their credit have improved as of late.
MJ1