In its management's discussion and analysis filing, Aphria said it is "unable to determine whether there will be any potential regulatory and/or enforcement action resulting from [the short-sellers report] or, if any such action is taken, whether it will have a material adverse effect on the company's business, financial position, profitability or liquidity".
"This is the first quarter to partially include adult-use sales, helping to drive 63% quarter-over-quarter net revenue growth, as did continued strength in sales to the medical-use market". The company also announced that co-founder Cole Cacciavillani and CEO Vic Neufeld will both leave the company in the coming months.
The shift from medical to recreational demand hurt Aphria's margins a bit, as recreational products cost less; a gram of recreational product had an average selling price of C$6.32 ($4.77), inclusive of excise tax, while a gram for medical use went for C$7.51 ($5.67), on average.
Aphria shares were down 2.43% to $6.40 a share early Friday.
Aphria ended the fiscal second quarter with a strong balance sheet and liquidity, including C$152.1 million of cash and C$32.7 million of liquid marketable securities, to fund announced Canadian and global growth and facilities expansion. The cost per gram jumped from $1.30 in Q1 to $1.76.
The moves come as the company released quarterly results that failed to meet analyst expectations.
Cacciavillani is Aphria's second-largest shareholder with about a 2.9 percent stake while Neufeld has about a 0.8 percent holding, according to data compiled by Bloomberg.
The company did not address the issues it has had over the past few months with Hindenburg Research, the short seller who criticized company management.
"Succession is the plan".
Neufeld says he and Cacciavillani will begin the transition process immediately, and at the appropriate time, they will both step down from executive positions at Aphria. "The Part IV and V expansions of Aphria One are now complete and awaiting Health Canada approval, while an application for a cultivation license at Aphria Diamond has been submitted and is awaiting pre-cultivation inspection".
"Annualized harvest expected to increase to 255,000 kilograms by the end of calendar 2019", said the company in a statement.
"During this transition period, we're going to work hard to benefit from their mentorship", he added. We're excited to have just closed the previously announced acquisition of CC Pharma, based in Germany, which distributes pharmaceuticals and medical cannabis to over 13,000 pharmacies.
One of the largest cannabis companies in Canada, Aphria's stock was hammered a few months ago by allegations from short sellers that the company bought numerous assets in the Caribbean and Latin America at grossly inflated prices, created to enrich insiders.