Aleafia Health (OTC:ALEAF) posted the first profitable quarter in its short history, but that wasn't enough to prevent a sell-off in its stock.

Tuesday morning, the marijuana stock posted its Q3 of fiscal 2019 results. For the quarter, the company booked 5.29 million Canadian dollars ($3.99 million) in revenue, which was up by 34% from Q2's result. On the bottom line, Aleafia netted a profit of just under CA$1.86 million ($1.41 million), a sharp swing from the CA$11.48 million ($8.68 million) it lost in the preceding quarter.

Marijuana leaf with sun shining behind it.

Image source: Getty Images.

Although the profitability of the quarter will be taken as good news by investors, Aleafia had predicted it would land in the black. It did not, at that point, provide any estimate for profitability.

Aleafia considers Q3 to have been a quarter of transition, as it completed or came close to completing a set of asset construction projects.

In the press release detailing the period's results, the company said that "[o]ver the last year, we have overseen major cannabis facility build-outs, all of which are now substantially complete. During this industry transition period, our prudent allocation of capital and focus on sustainable growth sets us apart."

The company had been building three new assets: an outdoor cultivation facility in the Ontario town of Port Perry, its Niagara Greenhouse, and an expansion of its growth, extraction, and logistics facility in another Ontario municipality, Paris.

Aleafia added in the press release that it "believes that its current cash position is more than adequate to fund all operating and capital activities." That said, the company's cash and other liquid assets dipped by 10% quarter over quarter to land at just over CA$57 million ($43 million).

In terms of operations, 79% of the company's revenue derived from cannabis sales. Drilling down further, recreational cannabis sales improved by 53% on a quarter-over-quarter basis, while medical cannabis saw an increase of 43%. The average net selling price per gram for the former in Q3 was CA$6.40 ($4.84) and for the latter CA$15.11 ($11.42).

In spite of the financial and operational improvements, the market was not impressed by Aleafia's results. The stock closed down by nearly 11% on the day.

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