TLLTF 10-Q
TILT Holdings Inc. (TLLTF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended OR |
For the transition period from to Commission file number: |
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification no.) | |
(Address of principal executive offices) | (Zip code) |
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(Registrant’s telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of April 30, 2025, there were
TILT HOLDINGS INC.
INDEX
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USE OF NAMES AND CURRENCY
In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” or “TILT” refer to TILT Holdings Inc. together with its wholly owned subsidiaries.
Unless otherwise indicated, all references to “$,” “US$,” “USD,” or “USD$” in this Quarterly Report on Form 10-Q refer to United States dollars, and all references to “C$,” “CAD,” or “CAD$” refer to Canadian dollars.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking information” and “forward-looking statements” within the meaning of applicable Canadian and United States (“U.S.”) securities laws (collectively, “forward-looking statements”). Such statements include, but are not limited to, statements with respect to expectations, projections, or other characterizations of future events or circumstances, and the Company’s objectives, goals, strategies, beliefs, intentions, plans, estimates, projections and outlook, including statements relating to the Company’s plans and objectives, or estimates or predictions of actions of customers, suppliers, competitors or regulatory authorities. These statements are subject to certain risks, assumptions and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. The words “believe,” “plan,” “intend,” “estimate,” “expect”, “likely,” “potential,” “proposed,” “scheduled,” “forecast,” or “anticipate,” and similar expressions, as well as future or conditional verbs such as “will,” “should,” “would,” “may,” “might,” and “could” identify forward-looking statements.
Management of the Company has based the forward-looking statements on its current views with respect to future events and financial performance and has made assumptions and applied certain factors regarding, among other things: future product pricing; costs of inputs; the Company’s ability to successfully market its products to its anticipated clients; the Company’s reliance on its key personnel; certain regulatory requirements; the application of federal and state environmental laws; the impact of increasing competition; the Company’s ability to successfully execute its operating plan for the next 12 months; the Company’s ability to obtain additional financing on favorable terms; the Company’s ability to defer principal and interest payments on certain notes; the Company’s ability to successfully negotiate a mutually agreeable waiver and forbearance agreement with certain noteholders; the receipt of applicable regulatory approvals; and the regulatory environments in which the Company operates. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company’s forward-looking statements are expressly qualified in their entirety by this cautionary statement. The purpose of forward-looking statements is to provide the reader with a description of management’s expectations, and such forward-looking statements may not be appropriate for any other purpose.
By its nature, forward-looking information is subject to risks and uncertainties, and there are a variety of risk factors, many of which are beyond the control of the Company, and that may cause actual outcomes to differ materially from those discussed in the forward-looking statements. Such factors include, among others, the status of cannabis as a controlled substance under the U.S. Federal Controlled Substances Act; risks related to the enforcement activities by the U.S. Department of Justice; risks related to the Company’s ability to continue as a going concern; reputational risk to third parties; risks associated with banking, financial transactions and anti-money laundering laws and regulations; risks related to federal and state forfeiture laws; the risk of heightened scrutiny by regulatory authorities; risks related to the potential negative impact of regulatory scrutiny on raising capital; risks related to regulatory or political change; risks due to industry immaturity or limited comparable, competitive or established industry best practices; risks related to the uncertainty surrounding existing protection from U.S. federal prosecution relating to cannabis laws; risks related to uncertainty with respect to geo-political disruptions; risks related to regulatory changes in relation to vaporization devices and subsequent impacts to interstate commerce, registrations and revenue reporting requirements, and potential excise tax applicability; risks relating to tax status; risks associated with the Company’s business model; risks related to the Company’s dependency on skilled labor, equipment, parts, components and key inputs; risks related to the reliance on third party suppliers; risks related to adverse economic conditions, labor shortages, supply chain disruptions, inflationary pressures and increasing interest rates; risks that the Company’s actual financial position and results of operations may differ materially from the expectations of the Company’s management; risks related to the costs and obligations relating to the Company’s investment in infrastructure, growth, regulatory compliance and operations; risks related to the
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Company’s dependency on regulatory approvals and licenses to conduct its business; risks related to the potential for changes in laws, regulations and guidelines which could adversely affect the Company’s future business; risks related to a failure on the part of the Company to comply with applicable regulations; risks related to the legal, regulatory and scientific status of cannabis; risks related to the Company’s ability to find suitable candidates and capital necessary to complete strategic alliances or partnerships; risks related to the Company’s ability to successfully identify and execute future acquisitions or dispositions; risks related to indebtedness and the Company’s ability to extend, refinance or repay such indebtedness; risks related to the Company’s ability to develop its products; risks related to the Company’s ability to achieve successful cultivation; risks related to adverse environmental conditions, accidents and labor disputes; risks related to the Company’s ability to turn a profit or generate immediate revenues; risks related to limitations on the permissible ownership of licenses; risks related to constraints on marketing the Company’s products under varying state laws; risks related to the potential results of future clinical research; risks related to the Company’s ability to effectively manage its growth and operations; risks related to the regulation of medical cannabis by the U.S. Food and Drug Administration; risks related to the differing local rules and regulations and the impact this may have on the Company’s ability to expand into new markets; risks related to the protection and enforcement of intellectual property rights and allegations that the Company is in violation of intellectual property rights of third parties; risks relating to access to banking; risks relating to disclosure of personal information to government or regulatory entities; risks related to the potential requirement to disclose personal identifying information to government or regulatory entities; risk that the Company may be forced to litigate or defend its intellectual property rights, or to defend against claims by third parties against the Company relating to intellectual property rights; risks related to data privacy laws, rules and regulations; risks relating to fraudulent activity by employees, contractors and consultants; risks regarding the enforceability of contracts; risk of litigation generally; risks relating to increasing competition in the industry; risks relating to the Company’s ability to secure adequate or reliable sources of funding; risks relating to product recalls; risks relating to reliance on technology systems that may be subject to cyber-attacks or security breaches; risks that the Company’s officers and directors may be engaged in a range of business activities resulting in conflicts of interest; risks that the Company’s officers, directors and other parties may exert significant influence on the Company; risks relating to the Company’s inability to successfully implement adequate internal controls over financial reporting; risks relating to restrictions on entry to the U.S. for the Company’s Canadian individuals; risks relating to the potential that bond requirements and insurance premiums may be economically prohibitive; risks relating to global economic and political instability and conflicts; the risk that the Company’s web presence’s visibility is not limited by geography; risks relating to volatility in the market price of the Company’s securities; risks related to price volatility of publicly traded securities; risks related to dilution of the Company’s securities; risks related to the Company’s securities being currently quoted on the OTCQB; and other factors beyond our control, as more particularly described under the heading “Risk Factors” in the Form 10-K for the fiscal year ended December 31, 2024 filed by the Company with the U.S. Securities and Exchange Commission (the “SEC”) on April 10 2025 (the “Form 10-K”) and on the System for Electronic Document Analysis and Retrieval Plus (“SEDAR+”) at www.sedarplus.com.
Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Although we have attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such forward-looking information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on forward-looking information and statements. The forward-looking information and statements contained herein are presented for the purposes of assisting readers in understanding our expected financial and operating performance and our plans and objectives and may not be appropriate for other purposes.
The forward-looking information and statements contained in this Quarterly Report on Form 10-Q represent our views and expectations as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update such forward-looking information and statements at a future time, we have no current intention of doing so except to the extent required by applicable law.
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
TILT HOLDINGS INC.
Condensed Consolidated Balance Sheets
(Amounts Expressed in Thousands of United States Dollars, Except for Share Amounts)
| March 31, 2025 |
| December 31, 2024 | |||
(unaudited) | (audited) | |||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Trade receivables, net | | | ||||
Inventories | | | ||||
Prepaid expenses and other current assets | | | ||||
Assets held for sale | | — | ||||
Total current assets | | | ||||
Non-current assets | ||||||
Property, plant and equipment, net | | | ||||
Right-of-use assets – finance, net | | | ||||
Right-of-use assets – operating, net | | | ||||
Intangible assets, net | | | ||||
Loans receivable | | | ||||
Goodwill | | | ||||
Other assets | | | ||||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | $ | | $ | | ||
Income taxes payable | | | ||||
Deferred revenue | | | ||||
Finance lease liability, current portion | | | ||||
Operating lease liability, current portion | | | ||||
Notes payable, current portion | | | ||||
Total current liabilities | | | ||||
Non-current liabilities | ||||||
Finance lease liability, net of current portion | | | ||||
Operating lease liability, net of current portion | | | ||||
Notes payable, net of discount, net of current portion | | | ||||
Massachusetts lease liability | | | ||||
Deferred tax liability | | | ||||
Other liabilities | | | ||||
TOTAL LIABILITIES | | | ||||
Shareholders’ equity | ||||||
Common shares, without par value, unlimited shares authorized, | | | ||||
Additional paid-in capital | | | ||||
Warrants | | | ||||
Accumulated other comprehensive income | | | ||||
Accumulated deficit | ( | ( | ||||
TOTAL SHAREHOLDERS’ EQUITY | ( | ( | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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TILT HOLDINGS INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(Amounts Expressed in Thousands of United States Dollars, Except Share and Per Share Amounts)
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Revenues, net | $ | | $ | | ||
Cost of goods sold | ( | ( | ||||
Gross profit | | | ||||
Operating expenses: | ||||||
Wages and benefits | | | ||||
General and administrative | | | ||||
Sales and marketing | | | ||||
Share-based compensation expense | | | ||||
Depreciation and amortization | | | ||||
Impairment loss | — | | ||||
Total operating expenses | | | ||||
Operating loss | ( | ( | ||||
Other income (expense): | ||||||
Interest income | — | | ||||
Other income | | | ||||
Unrealized loss on investment | — | ( | ||||
Gain (loss) on foreign currency exchange | | ( | ||||
Interest expense | ( | ( | ||||
Total other expense | ( | ( | ||||
Loss from operations before income tax | ( | ( | ||||
Income taxes: | ||||||
Income tax (expense) benefit | ( | | ||||
Net loss | $ | ( | $ | ( | ||
Other comprehensive loss: | ||||||
Net loss | $ | ( | $ | ( | ||
Foreign currency translation differences | — | ( | ||||
Comprehensive loss | $ | ( | $ | ( | ||
Weighted average number of shares outstanding: | ||||||
Basic and diluted | | | ||||
Net loss per common share | ||||||
Basic and diluted | $ | ( | $ | ( | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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TILT HOLDINGS INC.
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(Amounts Expressed in Thousands of United States Dollars, Except Share Amounts)
Accumulated Other | Shareholders' | |||||||||||||||||||
Common Shares | Additional | Comprehensive | Accumulated | Equity | ||||||||||||||||
Shares | Amount | Paid-in Capital | Warrants | Income (Loss) | Deficit | Total | ||||||||||||||
Balance - December 31, 2024 |
| |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
Share-based compensation | — | — | | — | — | — | | |||||||||||||
Issuance and vesting of restricted share units | | | — | — | — | — | | |||||||||||||
Comprehensive loss for the period | — | — | — | — | — | ( | ( | |||||||||||||
Balance - March 31, 2025 | | $ | | $ | | $ | | $ | | $ | ( | $ | ( | |||||||
Accumulated Other | Shareholders’ | |||||||||||||||||||
Common Shares | Additional | Comprehensive | Accumulated | Equity | ||||||||||||||||
| Shares |
| Amount |
| Paid-in Capital |
| Warrants |
| Income (Loss) |
| Deficit |
| Total | |||||||
Balance - December 31, 2023 | | $ | | $ | | $ | | $ | | $ | ( | $ | | |||||||
Share-based compensation | — | — | | — | — | — | | |||||||||||||
Issuance and vesting of restricted share units | | | — | — | — | — | | |||||||||||||
Comprehensive loss for the period | — | — | — | — | ( | ( | ( | |||||||||||||
Balance - March 31, 2024 | | $ | | $ | | $ | | $ | | $ | ( | $ | | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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TILT HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts Expressed in Thousands of United States Dollars)
Three Months Ended March 31, | ||||||
| 2025 |
| 2024 | |||
Cash flows from operating activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||
Unrealized loss on investments | — | | ||||
Gain on sale of assets and other | — | ( | ||||
Depreciation and amortization | | | ||||
Amortization of operating lease right of use assets | | | ||||
Payments on operating lease liability | ( | — | ||||
Change in allowance for doubtful accounts | ( | | ||||
Deferred tax | — | ( | ||||
Share-based compensation expense (benefit) | | | ||||
Accretion (adjustment) of debt discount | | ( | ||||
Impairment loss and loss on disposal of assets | — | | ||||
Inventory adjustments | | | ||||
Non-cash interest expense | | | ||||
Net change in working capital items: | ||||||
Trade receivables, net | ( | | ||||
Inventories | | ( | ||||
Prepaid expenses and other current assets | | | ||||
Accounts payable and accrued liabilities | | | ||||
Income tax payable | | | ||||
Deferred revenue | ( | ( | ||||
Net cash provided by (used in) operating activities | | ( | ||||
Cash flows from investing activities: | ||||||
Purchases of property, plant, and equipment | ( | ( | ||||
Repayment of loan receivable, net of advances | | | ||||
Net cash used in investing activities | ( | ( | ||||
Cash flows from financing activities: | ||||||
Payments on financing lease liability | ( | ( | ||||
Repayments on Revolving Facility | ( | ( | ||||
Repayments on Employee Retention Credit note | ( | — | ||||
Proceeds from Revolving Facility | | | ||||
Proceeds from 2024 Standard Farms Loan | | — | ||||
Net cash provided by financing activities | | | ||||
Effect of foreign exchange on cash and cash equivalents | — | ( | ||||
Net change in cash and cash equivalents and restricted cash | | | ||||
Cash and cash equivalents and restricted cash, beginning of year | | | ||||
Cash and cash equivalents and restricted cash, end of year | $ | | $ | | ||
Supplemental disclosures of non-cash investing and financing activities: | ||||||
Increases to right-of-use assets related to Ohio facility | $ | — | $ | | ||
Increases to operating lease liability related to Ohio facility | $ | — | $ | | ||
Increases to right-of-use assets related to SF PA Retail Facility | $ | | $ | — | ||
Increases to finance lease liability related to SF PA Retail Facility | $ | | $ | — | ||
Increase in notes payable, discount related to the 2024 Standard Farms Loan | $ | | $ | — | ||
2023 Refinanced Notes interest paid-in-kind | $ | | $ | — | ||
Supplemental disclosure of cash flow information: | ||||||
Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes | $ | | $ | | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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TILT HOLDINGS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
1. Nature and Continuance of Operations
TILT Holdings Inc. (“TILT” or the “Company”) is a business solutions provider to the global cannabis industry offering a diverse range of value-added products and services to industry participants. Through a portfolio of companies providing technology, hardware, cultivation and production, TILT services brands and cannabis retailers in regulated markets across
TILT was incorporated under the laws of Nevada pursuant to NRS Chapter 78 on June 22, 2018. The Company was continued under the Business Corporations Act (British Columbia) pursuant to a Certificate of Continuance dated November 14, 2018. The Company is a reporting issuer in Canada in the Provinces of British Columbia, Alberta, and Ontario and its common shares are listed for trading on the Cboe Canada (formerly known as the NEO Exchange) under the symbol “TILT.” In addition, the common shares are quoted on the OTCQB in the U.S. under the symbol “TLLTF.” The Company’s head office is in Phoenix, Arizona and its registered office is located at Suite 2400, 745 Thurlow Street, Vancouver, BC V6C 0C5 Canada.
Liquidity and Going Concern
The Company has experienced operating losses since its inception and may continue to incur losses in the development of its business. The Company incurred a comprehensive loss of $
On January 28, 2025, Commonwealth Alternative Care (“CAC”), a wholly-owned subsidiary of the Company, entered into an asset purchase agreement with In Good Health, Inc. for the sale of substantially all the assets and assumption of certain liabilities of its dispensaries located in Taunton and Brockton, Massachusetts. The purchase price for the assets is $
On May 2, 2024, Standard Farms, LLC (“Standard Farms PA”) entered into a Secured Promissory Note with a third-party experienced retailer and operator (the “Lender”) for borrowings up to $
All dollar amounts expressed in thousands, except per share amounts
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On October 3, 2024, the Company entered into a Second Amendment to its Revolving Facility (the “Revolving Facility Amendment”) through its subsidiary Jupiter. The Revolving Facility Amendment amended the required fixed charge coverage ratio financial covenant, the minimum monthly charge paid to the lender, and the inventory availability amount. The Revolving Facility Amendment also reduced the borrowing capacity from $
As of March 31, 2025, the Company continued to apply the default rate of
The Company’s operating plans for the next 12 months include (i) increasing revenue growth from the sale of existing products and the introduction of new products across all operating segments; (ii) reducing production and operational costs as a result of efficiencies in cannabis operations; (iii) reducing supply chain costs; (iv) reducing and delaying overhead and other certain expenditures; (v) obtaining other financings or completing other strategic transactions as necessary; and (vi) deferring principal and interest payments on the notes payable.
The Company believes that successfully implementing these operating plans will help to mitigate any substantial doubt raised by our historical operating results and satisfy our estimated liquidity needs for the 12 months following the issuance of these condensed consolidated financial statements.
However, the interest payments under these rates will constrain the Company’s liquidity while these rates remain in effect. While, as of the date of this filing, the Company is not in compliance with certain payment obligations and covenants under the 2023 Refinanced Notes and the 2023 New Notes (collectively, the “2023 Notes”) the Note Holders have not provided the requisite notice of an event of default. The Company is currently negotiating a waiver and forbearance agreement with the Note Holders to address such non-compliance. The Company can provide no assurance that the parties will reach a mutually agreeable resolution. See Note 10 — Notes Payable for additional information.
The Company cannot predict with certainty the outcome of its actions to generate liquidity as discussed above, including the availability of additional financing as necessary, or whether such actions would generate the expected liquidity as currently planned. Therefore, management has concluded there is substantial doubt about the Company’s ability to continue as a going concern within 12 months after the date of this filing. These financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated unaudited interim financial statements have been prepared in accordance with (i) United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information, (ii) the instructions to Form 10-Q, and (iii) Article 10 of Regulation S-X. In the opinion of our management, our condensed consolidated unaudited financial statements and accompanying notes (the “Financial Statements”) include all normal recurring adjustments that are necessary for the fair statement of the interim periods presented. Interim results of operations are not necessarily indicative of results for the full year, or any other period. The Financial Statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”), as filed with the SEC on April 10, 2025 and with the relevant Canadian securities regulatory authorities under our profile on SEDAR+. Except as noted below, there have been no material changes to the Company's significant accounting policies and estimates during the three months ended March 31, 2025. Certain information, footnotes and disclosures normally included in the annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted in accordance with SEC rules and regulations.
All dollar amounts expressed in thousands, except per share amounts
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The financial data included in the Financial Statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, statements of changes in shareholders’ equity, and cash flows of the Company for the three months ended March 31, 2025 and 2024. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the current year ending December 31, 2025.
Principles of Consolidation
The Financial Statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its subsidiaries, as well as the accounts of any entities over which the Company has a controlling financial interest in accordance with Accounting Standards Codification (“ASC”) 810 Consolidation. All transactions and balances between these entities have been eliminated upon consolidation.
Use of Estimates
The preparation of these Financial Statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. Actual results may differ from these estimates.
Restricted Cash
The Company had $
Revenue Recognition
Concentration Risk
Customers that account for 10% or more of the Company’s net sales consist of the following:
Three Months Ended March 31, | ||||
2025 | 2024 | |||
Customer One | ||||
Customer Two | ||||
Deferred Revenue
Contract assets represent the right to receive payment for goods and services that have been transferred to the customer, conditional upon something other than the passage of time. Deferred revenues include obligations to provide goods and services for which payment has been received. There are
Estimated Useful Lives and Depreciation of Property, Plant and Equipment
Depreciation of property, plant and equipment is dependent upon estimates of useful lives which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.
All dollar amounts expressed in thousands, except per share amounts
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Depreciation is provided on a straight-line basis over the following estimated useful lives:
Machinery and equipment | |
Furniture and fixtures | |
Autos and trucks | |
Buildings and land improvements | |
Leasehold improvements | Lesser of useful life of lease term |
Greenhouse - agricultural structure | |
Land | Not depreciated |
The assets’ residual values, useful lives and methods of depreciation are reviewed annually and adjusted prospectively, if appropriate. Leasehold improvements are amortized over the shorter of either the useful life or term of the lease. Gains or losses on disposal of an item are determined by comparing the proceeds from disposal with the carrying amount of the item and recognized in the consolidated statements of operations and comprehensive loss.
Recently Adopted and Issued Accounting Pronouncements
Recent accounting pronouncements, other than those below, issued by the Financial Accounting Standards Board (“FASB”), the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material effect on the Company’s present or future financial statements.
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU No. 2024-03 does not change or remove existing expense disclosure requirements but requires disaggregated disclosures about certain expense categories and captions, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. This guidance will be effective for public business entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2024-03 on its financial statements and related disclosures.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements. These improvements include enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, the CODM’s title and position, the measures the CODM uses to measure segment profit or loss, and how the CODM uses those measures. This guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning December 15, 2024 with early adoption permitted. The Company adopted this standard for the annual period ended December 31, 2024 and the segment disclosures in Note 18 — Reportable Segments and Revenue were updated, primarily by adding disclosures for significant expenses.
In December 2023, the FASB issued accounting standards update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public companies to annually disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, certain information about income taxes paid, and certain information disaggregated between federal, state, and/or domestic, and foreign. This guidance is effective for public business entities after December 15, 2024, with early adoption permitted. The Company adopted this standard on January 1, 2025, and there was no material impact to its current financial position or results of operations.
All dollar amounts expressed in thousands, except per share amounts
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3. Fair Value Measurements
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers all related factors of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
| ● | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices). |
| ● | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
Assets and liabilities measured at fair value on a recurring basis, including their levels in the fair value hierarchy are as follows:
As of March 31, 2025 | |||||||||
Fair value hierarchy | |||||||||
Fair value of assets |
| Level 1 |
| Level 2 |
| Level 3 | |||
Cash and cash equivalents | $ | | $ | — | $ | — | |||
Restricted cash | | — | — | ||||||
Total fair value of assets | $ | | $ | — | $ | — | |||
As of December 31, 2024 | |||||||||
Fair value hierarchy | |||||||||
Fair value of assets |
| Level 1 |
| Level 2 |
| Level 3 | |||
Cash and cash equivalents | $ | | $ | — | $ | — | |||
Restricted cash | | — | — | ||||||
Total | $ | | $ | — | $ | — | |||
Fair value of liabilities | |||||||||
Contingent interest feature derivative | — | — | ( | ||||||
Total fair value of liabilities | $ | — | $ | — | $ | ( | |||
Contingent Interest Feature Derivative
The fair value is based on Level 3 inputs, which include the projected escalating incremental interest expense from the 2024 Standard Farms Loan. The Retail Location opened on February 14, 2025, which resolved the contingent interest feature and resulted in the derecognition of the embedded derivative. The balance of the embedded derivative was
All dollar amounts expressed in thousands, except per share amounts
13
Investments
The Akerna Corp. (“Akerna”) marketable security balance included in investments has Level 1 inputs. During the three months ended March 31, 2024, the Company recorded a loss of $
Financial Instruments
The carrying amount of the Company’s notes payable, which are recorded at amortized cost, approximates their fair values based upon market interest rates available to the Company for debt of similar risk and maturities, a Level 3 input. See Note 10 — Notes Payable for additional information. Additionally, the carrying amount of the Company’s loans receivable, net of expected credit losses, approximates their fair values. See Note 8 — Loans Receivable for additional information. There were no transfers between the levels of fair value hierarchy during each of the three months ended March 31, 2025 and 2024.
4. Inventories
The Company’s inventories consisted of the following:
| March 31, 2025 |
| December 31, 2024 | |||
Raw Material - cannabis plants | $ | | $ | | ||
Raw Material - other materials | | | ||||
Work in progress | | | ||||
Finished goods | | | ||||
Supplies and accessories | | | ||||
Total Inventories | $ | | $ | | ||
During the three months ended March 31, 2025 and 2024, the Company recorded total inventory adjustments of $
5. Property, Plant and Equipment and Assets Held for Sale
The Company’s property, plant and equipment consisted of the following:
| March 31, 2025 |
| December 31, 2024 | |||
Land | $ | | $ | | ||
Machinery & equipment | | | ||||
Furniture & fixtures | | | ||||
Buildings | | | ||||
Greenhouse - agricultural structure | | | ||||
Leasehold improvements | | | ||||
Construction in progress | | | ||||
Autos & trucks | | | ||||
Total cost | | | ||||
Less: Accumulated depreciation | ( | ( | ||||
Total property, plant and equipment, net | $ | | $ | | ||
During the three months ended March 31, 2025 and 2024, the Company recognized depreciation expense of $
All dollar amounts expressed in thousands, except per share amounts
14
Assets Held for Sale
On January 28, 2025, CAC entered into an asset purchase agreement with In Good Health, Inc. for the sale of substantially all the assets and assumption of certain liabilities of its dispensaries located in Taunton and Brockton, Massachusetts. The purchase price for the assets is $
See below for the cost and related accumulated amortization by asset class transferred out of property, plant and equipment, net:
Accumulated | |||||||||
Asset class |
| Cost |
| Depreciation |
| Carrying Value | |||
Leasehold improvements | $ | | $ | ( | $ | | |||
Machinery & equipment | | ( | | ||||||
Furniture & fixtures | | ( | | ||||||
Total | $ | | $ | ( | $ | | |||
6. Investments
During the three months ended March 31, 2024, the Company recorded an unrealized loss of $
7. Intangible Assets
Intangible asset balances consisted of the following:
December 31, | Amortization | March 31, | |||||||||||||
Intangible assets, net |
| 2024 |
| Additions |
| Expense |
| Impairment |
| 2025 | |||||
Customer relationships | $ | | $ | — | $ | ( | $ | — | $ | | |||||
Trademarks | | — | ( | — | | ||||||||||
License rights(1) | | — | ( | — | | ||||||||||
Patents & technologies | | — | ( | — | | ||||||||||
Backlog and non-competition agreements | | — | — | — | | ||||||||||
Total intangible assets, net | $ | | $ | — | $ | ( | $ | — | $ | | |||||
December 31, | Amortization | March 31, | |||||||||||||
Intangible assets, net |
| 2023 |
| Additions |
| Expense |
| Impairment |
| 2024 | |||||
Customer relationships | $ | | $ | — | $ | ( | $ | — | $ | | |||||
Trademarks | | — | ( | — | | ||||||||||
License rights(1) | | — | ( | — | | ||||||||||
Patents & technologies | | — | ( | — | | ||||||||||
Backlog and non-competition agreements | | — | — | — | | ||||||||||
Total intangible assets, net | $ | | $ | — | $ | ( | $ | — | $ | | |||||
_____________
All dollar amounts expressed in thousands, except per share amounts
15
As of both March 31, 2025 and December 31, 2024, the total historical cost of intangible assets was $
The following table outlines the estimated future annual amortization expense for intangible assets as of March 31, 2025:
Estimated | |||
Years ended December 31, | amortization | ||
Remainder of 2025 | $ | | |
2026 | | ||
2027 | | ||
2028 | | ||
2029 | | ||
Thereafter | | ||
$ | | ||
8. Loans Receivable
A breakdown of the loans receivable terms and balances are as follows:
Loans receivable |
| March 31, 2025 |
| December 31, 2024 | ||
Teneo Fund SPVi LLC Note | $ | | $ | | ||
Less allowance for expected credit losses | ( | ( | ||||
Loans receivable | $ | | $ | | ||
Impairment
At each reporting date, the Company assesses whether loans receivable are credit impaired by applying the guidance in ASC 326. A financial asset is considered “credit impaired” when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Credit impairment is based on observable data such as significant financial difficulty of the debtor and a breach of contract such as a default or being past due. During the three months ended March 31, 2025, the Company did
Current expected credit loss (“CECL”) reserves are measured by the Company on a probability-weighted basis based on historical experience, current conditions, and reasonable and supportable forecasts. Our assessment includes a variety of factors, including underlying credit, relative maturity dates of the loans, economic considerations, as well as ongoing legal and other regulatory developments in the industry. The process includes consideration for the assumed recovery rate from underlying collateral, with adjustments for time value of money and estimated costs for obtaining and selling the collateral. Given the repayment profile and underlying terms of such loans, CECL reserves are generally estimated over the contractual term of the loan.
The following tables present an analysis of the credit quality of loans receivable, together with impairment losses recognized based on lifetime CECL reserves:
As of March 31, 2025 | |||||||||
Nature of collateral |
| Gross amounts |
| Loan losses |
| Net | |||
Security interest in assets of counterparty | $ | | $ | ( | $ | | |||
Net loans receivable | $ | | $ | ( | $ | | |||
All dollar amounts expressed in thousands, except per share amounts
16
As of December 31, 2024 | |||||||||
Nature of collateral |
| Gross amounts |
| Loan losses |
| Net | |||
Security interest in assets of counterparty | $ | | $ | ( | $ | | |||
Net loans receivable | $ | | $ | ( | $ | | |||
9. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following:
Accounts payable and accrued liabilities |
| March 31, 2025 |
| December 31, 2024 | ||
Accounts payable | $ | | $ | | ||
Accrued payroll | | | ||||
Other current payables/liabilities(1) | | | ||||
Total accounts payable and accrued liabilities | $ | | $ | | ||
_____________
Loyalty Liability
For some of its locations, the Company offers a loyalty reward program to its dispensary customers. The loyalty points are accrued when earned as a liability and reduction of revenues. The amount earned is deferred until the loyalty points are redeemed or expire. As of March 31, 2025 and December 31, 2024, the loyalty liability totaled $
Supplier Guaranty
On January 28, 2024, the Company and its subsidiaries JJ LP, Baker, CAC, Jimmy Jang Holdings, Inc. (“JJH”), JJ Blocker Co. (“JJB”), SFNY, Sea Hunter Therapeutics, LLC (“SEA”), Standard Farms Ohio, LLC (“Standard Farms OH”), Standard Farms PA, SH Finance Company, LLC (“SF Finance”), and Jupiter (collectively with the Company, JJ LP, Baker, CAC, JJH, JJB, SFNY, SEA, Standard Farms OH, Standard Farms PA, SF Finance, the “Guarantors”) and Shenzhen Smoore Technology Limited (“Smoore Technology”) and each of its affiliates that sells products to Jupiter and the Company (the “Buyers”) from time to time (collectively, the “Secured Party”) entered into: (i) a Debt and Security Agreement in favor of the Secured Party (the “Debt and Security Agreement”); (ii) a Guaranty in favor of the Secured Party (the “Guaranty”); (iii) a Side Letter (the “Side Letter”); (iv) a Trademark Security Agreement in favor of the Secured Party; and (v) an Equity Pledge Agreement in favor of the Secured Party (collectively, the “Smoore Agreements”).
The Guarantors entered into the Smoore Agreements with the Secured Party, its principal supplier of vaping product inventory (“Inventory”) to Jupiter, to provide for the payment of currently existing accounts payable by the Guarantors to the Secured Party (“Accounts”), reduction in the outstanding balance of Accounts from time to time in the future, and the continued shipping of Inventory to Jupiter by the Secured Party. The Guarantors pledged and granted to the Secured Party a first priority lien and security interest in all of the assets of the Guarantors, including a pledge of all equity interests in all direct and indirect subsidiaries of the Company.
On July 19, 2024, the Guarantors entered into an amended side letter (the “Amended Side Letter”) with the Secured Party. Under the Amended Side Letter, the Guarantors agree to reduce the outstanding balance of all Accounts to $
All dollar amounts expressed in thousands, except per share amounts
17
10. Notes Payable
Notes payable and debt issuance costs are as follows:
Notes Payable |
| March 31, 2025 |
| December 31, 2024 | ||
Revolving Facility – Interest rate of | $ | | $ | | ||
2023 Refinanced Notes – Interest rate of | | | ||||
2023 New Notes – Interest rate of | | | ||||
Employee Retention Credit note and other loans and borrowings | | | ||||
2024 Standard Farms Loan | | | ||||
2024 Standard Farms Loan, Derivative Features | — | | ||||
Total debt | | | ||||
Less: Debt discount and debt issuance costs | ( | ( | ||||
Less: Current portion of notes payable | ( | ( | ||||
Total debt, net of discount, net of current portion | $ | | $ | | ||
_____________
Revolving Facility
During the three months ended March 31, 2025, the Company drew proceeds of $
The Company paid $
2023 Refinanced Notes
The 2023 Refinanced Notes include the remaining $
As part of the 2023 Refinanced Notes, the Company recognized a debt discount of $
All dollar amounts expressed in thousands, except per share amounts
18
2023 New Notes
The 2023 New Notes issued included aggregate principal of $
Employee Retention Credit Note
During August 2023, the Company filed a claim with the Internal Revenue Service (“IRS”) for employee retention credits (“ERC”) totaling $
2024 Standard Farms Loan
On May 2, 2024, Standard Farms PA entered into a Secured Promissory Note with a third party experienced retailer and operator (the “Lender”) (the “2024 Standard Farms Loan”). Under the terms of the 2024 Standard Farms Loan, Standard Farms PA can borrow up to $
The 2024 Standard Farms Loan will mature on December 31, 2027, and will initially bear interest at
On May 2, 2024, the Company drew $
The Retail Location opened on February 14, 2025, which resolved the contingent interest feature and resulted in the derecognition of the embedded derivative. The balance of the embedded derivative was
The Company can request the remaining $
All dollar amounts expressed in thousands, except per share amounts
19
Because the capital is to fund the construction and operation of the new dispensaries, the 2024 Standard Farms Loan is secured by a first priority security interest in the retail assets of Standard Farms PA (the “Borrower Collateral”), and a second priority security interest in the equity interests of Standard Farms PA that are held by the Company’s subsidiary Baker (the “Baker Collateral”). Also on May 2, 2024, the Lender entered into a Consent, Collateral Release and Subordination Agreement (the “Subordination Agreement”) with the Company’s existing creditors to subordinate the Lender’s interest in the Baker Collateral and release the existing creditors’ interest in the Borrower Collateral. The Lender’s security interest is further described in in a Security Agreement, dated May 2, 2024, by and among Standard Farms PA, the Lender and Baker Technologies, Inc. (the “Security Agreement” and, collectively with the Note and the Subordination Agreement, the “Dispensary Agreements”).
The 2024 Standard Farms Loan and the Security Agreement include usual and customary loan provisions including: affirmative and negative covenants, events of default, representations and warranties. In the case of an event of default under the 2024 Standard Farms Loan, Standard Farms PA may become obligated to pay a multiplied balance of up to four times the then-outstanding obligations under the 2024 Standard Farms Loan, all obligations under the 2024 Standard Farms Loan may be accelerated and all remedies may be exercised by Lender. All obligations under the 2024 Standard Farms Loan are guaranteed by the Company, which guarantee shall terminate if and when a first priority security interest in the properly held retail assets of a wholly-owned subsidiary of Standard Farms PA is activated. In order to provide collateral free from prior liens, under the terms of the loan documents, Lender will have a first-priority security interest in the equity interests of any such wholly-owned subsidiary that may be held by Standard Farms PA.
Future principal payments due and interest accrued as of March 31, 2025 were as follows:
Year ended December 31, |
| Amount | |
Remainder of 2025 | $ | | |
2026 | | ||
2027 | | ||
Total principal payments | | ||
Add: Accrued interest | | ||
Total | $ | | |
11. Massachusetts Lease Liability
On May 16, 2022, the Company entered into a long-term lease with Innovative Industrial Properties (“IIP”) for the Taunton Facility with a term of
The transaction with IIP was accounted for as a failed sale and leaseback transaction, where the Company retained the Taunton Facility balances included in property, plant, and equipment, and recognized a note payable of $
On March 28, 2025, the Company received notices of default from IIP-PA 9 LLC and IIP-MA 8 LLC, the landlords for properties located at 411 Susquehanna Street, White Haven, PA, and 30 Mozzone Street, Taunton, MA, respectively, and each subsidiaries of Innovative Industrial Properties Inc (collectively, the “Landlord”). These notices were issued due to outstanding rental payments and other financial obligations under the respective leases.
The notice for the White Haven property indicated that Standard Farms LLC, a subsidiary of the Company, owed a total of $
Similarly, the notice for the Taunton property states that CAC, another subsidiary of the Company, owed a total of $
All dollar amounts expressed in thousands, except per share amounts
20
Landlord also indicated its intent to terminate the lease and seek damages if the defaults were not remedied by April 4, 2025.
Following receipt of the notices described above, the Company engaged in negotiations with the Landlord to cure the defaults. The Company has already made payments in satisfaction of the April rent obligations in exchange for forbearance from pursuing termination and eviction and the Landlord has accepted such payments. The Company is committed to negotiating in good faith to resolve the outstanding amounts and secure favorable terms for its operations. The Company is actively working to address these financial obligations and is exploring all available options to mitigate the impact of these defaults on its business operations.
As of March 31, 2025, the Massachusetts Lease Liability had a balance of $
Year ended December 31, |
| Amount | |
Remainder of 2025 | $ | | |
2026 | | ||
2027 | | ||
2028 | | ||
2029 | | ||
2030 and thereafter | | ||
Total future payments | | ||
Less: Interest | ( | ||
Total present value of minimum payments | | ||
Add: Estimated ending residual value | | ||
Total | $ | | |
12. Leases
The following table provides the components of lease cost recognized in the condensed consolidated statements of operations and comprehensive loss:
Three Months Ended March 31, | ||||||
| 2025 |
| 2024 | |||
Operating lease cost | $ | | $ | | ||
Finance lease cost: |
|
| ||||
Amortization of lease assets | | | ||||
Interest on lease liabilities | | | ||||
Finance lease costs | | | ||||
Total lease cost | $ | | $ | | ||
The following table provides the weighted average discount rates and weighted average remaining lease terms for the Company’s leases:
| March 31, 2025 |
| December 31, 2024 | |||
Operating leases | ||||||
Weighted average discount rate | ||||||
Weighted average remaining lease term | ||||||
Finance leases | ||||||
Weighted average discount rate | ||||||
Weighted average remaining lease term | ||||||
All dollar amounts expressed in thousands, except per share amounts
21
On January 28, 2025, Commonwealth Alternative Care (“CAC”), a wholly-owned subsidiary of the Company, entered into an asset purchase agreement with In Good Health, Inc. for the sale of substantially all the assets and assume certain liabilities of its dispensaries located in Taunton and Brockton, Massachusetts. As a result, the Company reclassified $
On February 15, 2023, the Company completed the sale and leaseback of its facility in White Haven, Pennsylvania (the “White Haven Facility”) to the buyer (the “Pennsylvania Transaction”) for $
The Company determined that control of the White Haven Facility transferred to the buyer, resulting in a sale of the White Haven Facility. The Company received cash proceeds of $
Future minimum lease payments under the Company’s non-cancellable leases as of March 31, 2025 are as follows:
Year ended December 31, |
| Finance |
| Operating | ||
Remainder of 2025 | $ | | $ | | ||
2026 | | | ||||
2027 | | | ||||
2028 | | | ||||
2029 | | | ||||
2029 and thereafter | | | ||||
Total undiscounted lease liabilities | | | ||||
Interest or discount on lease liabilities | ( | ( | ||||
Total present value of minimum lease payments | | | ||||
Lease liability - current portion | ( | ( | ||||
Lease liability | $ | | $ | | ||
13. Shareholders' Equity
LP Units of JJ LP
The limited partnership units (“LP Units”) of JJ LP, a subsidiary of the Company, are exchangeable for
Warrants
In connection with the NPA Amendment, the Company issued
All dollar amounts expressed in thousands, except per share amounts
22
The fair value of the Debt Modification Warrants upon issuance was determined using the Black-Scholes option pricing model with the following assumptions:
Exercise price |
| $ | |
Expected dividend yield | |||
Risk-free interest rate | |||
Expected life in years | |||
Expected volatility |
The following table summarizes the warrants that remain outstanding as of March 31, 2025:
Exercise | Number of | |||||||
Security issued |
| Price (CAD$) |
| Warrants |
| Expiration Date | ||
Debt modification warrants | | | February 15, 2030 | |||||
|
There was no warrant activity during the three months ended March 31, 2025.
Share-based Compensation
Under the Amended and Restated 2018 Stock and Incentive Plan (the “2018 Plan”), the Company has reserved
Restricted Stock Units (“RSUs”)
A summary of the status of the RSUs outstanding is as follows:
Number of | Weighted Average | ||||||
RSUs |
| RSUs |
| Grant Date Fair Value | |||
Unvested as of December 31, 2024 | | $ | | ||||
Vested | ( | | |||||
Forfeited | ( | | |||||
Unvested as of March 31, 2025 | | $ | | ||||
During the three months ended March 31, 2025 and 2024, the Company recorded $
On June 12, 2023, the Company approved the grant of
During August 2023, the Board granted
As of March 31, 2025, there was $
All dollar amounts expressed in thousands, except per share amounts
23
Share Options
A summary of the status of the share options outstanding is as follows:
Share Options | Weighted | Weighted Average | ||||||
Common | Average | Remaining Contractual | ||||||
Share options |
| Shares |
| Exercise Price |
| Life (yrs) | ||
Balance as of December 31, 2024 | | $ | | |||||
Forfeited | ( | | — | |||||
Balance as of March 31, 2025 | | $ | | |||||
For the three months ended March 31, 2025 and 2024, the Company recorded share-based compensation expense of $
On September 29, 2024, the Company entered into an independent director compensation agreement that approved the issuance of
As of March 31, 2025, there was $
The following table summarizes the share options that remain outstanding as of March 31, 2025:
Number of | Exercise | Options | ||||||
Security issuable |
| Share Options |
| Price |
| Expiration Date |
| Exercisable |
Legacy employees | | $ | June 28, 2028 | | ||||
2020 employee grant | | $ | June 25, 2030 - December 1, 2030 | | ||||
Other employee grants | | $ | February 14, 2029 - September 29, 2034 | | ||||
Total | | |
Performance Stock Units (“PSUs”)
There was no PSU activity during the three months ended March 31, 2025, and there were
As there was no PSU activity during the three months ended March 31, 2025,
On September 26, 2023, the Company entered into an employment agreement with Tim Conder, the Company’s Chief Executive Officer (“CEO”) (the “CEO Agreement”) pursuant to which Mr. Conder serves as the CEO of the Company. Under the terms of the CEO Agreement, Mr. Conder received an equity grant of
All dollar amounts expressed in thousands, except per share amounts
24
April 19, 2024, the Company also entered into a side letter with Mr. Conder pursuant to which Mr. Conder agreed that the
As of March 31, 2025, Mark Scatterday, the Company’s former CEO and director, and major stockholder and lender, had an aggregate of
As of March 31, 2025, all PSU awards granted containing market conditions have expired and there is
14. Loss Per Share
The following is a calculation of basic and diluted loss per share for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||
Loss per share | 2025 | 2024 | ||||
Net loss attributable to TILT | $ | ( | $ | ( | ||
Weighted-average number of shares and units outstanding - basic and diluted |
|
| |
| | |
Loss per share - basic and diluted | $ | ( | $ | ( | ||
Diluted loss per share for each of the three months ended March 31, 2025 and 2024 is the same as basic loss per share as the issuance of shares on exercise of warrants and share options is anti-dilutive.
15. Income Taxes
The following table summarizes the Company’s income tax expense and effective tax rates for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Loss before income taxes | $ | ( | $ | ( | ||
Income tax (expense) benefit |
| ( |
| | ||
Effective tax rate | ( | |||||
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, under which deferred tax assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets and liabilities and the respective tax bases.
Deferred taxes are provided using an asset and liability method whereby deferred tax assets and liabilities are recognized based on the rates enacted for the period they are expected to reverse. Temporary differences are the differences between financial statements carrying values of assets and liabilities and the respective tax bases. The effect on deferred tax assets and liabilities of a change in tax law or tax rates is recognized in income in the period that enactment occurs.
The Company’s U.S. income tax attributes are potentially subject to annual limitations resulting from equity shifts that constitute an ownership change as defined by Internal Revenue Code (“IRC”) Section 382. Any potential annual limitations resulting from an equity shift that constitutes an ownership change under IRC Section 382 could result in additional limitation of the realization of U.S. federal, state and local income tax attributes. The Company is not utilizing any net operating loss carryforwards that would be subject to IRC Section 382, and the Company will perform an analysis as necessary.
The Company has recorded uncertain tax liabilities related to the positions taken and expected to be taken on the company’s federal income tax returns for the periods ending December 31, 2024 and 2023. The Company has received legal opinions and analysis related to these positions. The balance of the uncertain tax liabilities as of March 31, 2025 and December 31, 2024 is $
All dollar amounts expressed in thousands, except per share amounts
25
reflected uncertain tax positions tax expense of approximately $
16. Related Party Transactions
On February 15, 2023, the Company refinanced a payable due to Mark Scatterday, a former director of the Company, through an affiliated entity, Mak One LLP (“Mak One”) as part of its 2023 Refinanced Notes. As of March 31, 2025, the balance of the payable was $
See Note 10 — Notes Payable for additional information regarding the 2023 Refinanced Notes and 2023 New Notes, including calculation of the interest rates for each note as of March 31, 2025.
In connection with the 2023 Refinanced Notes, the Company issued
17. Commitments and Contingencies
Litigation
The Company has been named as a defendant in several legal actions and is subject to various risks and contingencies arising in the normal course of business. Management is of the opinion that the outcome of these uncertainties will not have a material adverse effect on the Company’s financial position.
On December 16, 2024, S.K, D.C. and D.G. (the “Named Plaintiffs”) filed a complaint in the United States District Court for the Northern District of California against Jupiter, 3Win Corporation, CB Solutions Inc. and Greenlane Holdings, Inc. (collectively, the Defendants”). Jupiter is a wholly owned subsidiary of the Company. In the complaint, the Named Plaintiffs allege, on behalf of a class of similarly-situated plaintiffs, that the Defendants violated federal and state antitrust statutes through the sale and distribution of closed cannabis oil vaporizing systems produced by Shenzhen Smoore Technology Company, Limited and Smoore International Holdings Limited, identified as unnamed co-conspirators in the complaint.
On February 11, 2025, Earth’s Healing Inc. (the “Named Plaintiff”) filed a complaint in the United States District Court for the Northern District of California against Shenzhen Smoore Technology Co. Ltd, Jupiter Research, LLC (“Jupiter”), 3Win Corporation, CB Solutions Inc. and Greenlane Holdings, Inc. (collectively, the “Defendants”). Jupiter is a wholly owned subsidiary of the Company. In the complaint, the Named Plaintiff alleges, on behalf of a class of similarly-situated plaintiffs, that the Defendants violated federal antitrust statutes through the sale and distribution of closed cannabis oil vaporizing systems.
18. Reportable Segments and Revenue
The Company operates in
All dollar amounts expressed in thousands, except per share amounts
26
distribution of electronic, non-nicotine (i.e., cannabis) devices and systems. The accessories segment includes distribution of vapor cartridges and accessory products.
Information related to each segment is set out below. Other segment (income) expenses is primarily made up of income tax expense, insurance expense, and selling expense, as well as various other general and administrative expenses. Segment net loss is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries. The Company has elected not to disclose segment-level asset information, as the Company’s CEO, who is also its CODM, does not review such information to assess the performance of the segment and allocation resources.
The following tables present the operating results of the Company’s segments:
Three Months Ended March 31, 2025 | ||||||||||||
| Cannabis |
| Accessories |
| Corporate |
| Total | |||||
Revenue | $ | | $ | | $ | — | $ | | ||||
Inter-segment revenue | — | ( | — | ( | ||||||||
Net revenue | $ | | $ | | $ | — | $ | | ||||
Cost of goods sold | | | — | | ||||||||
Wages and benefits | | | | | ||||||||
Professional fees | | | | | ||||||||
Depreciation and amortization | | | — | | ||||||||
Interest expense | | | | | ||||||||
Other segment (income) expenses | | | ( | | ||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Three Months Ended March 31, 2024 | ||||||||||||
| Cannabis |
| Accessories |
| Corporate |
| Total | |||||
Revenue | $ | | $ | | $ | — | $ | | ||||
Inter-segment revenue | — | ( | — | ( | ||||||||
Net revenue | $ | | $ | | $ | — | $ | | ||||
Cost of goods sold | | | — | | ||||||||
Wages and benefits | | | | | ||||||||
Professional fees | | | | | ||||||||
Depreciation and amortization | | | — | | ||||||||
Impairment loss | | — | — | | ||||||||
Interest expense | | | | | ||||||||
Other segment (income) expenses | ( | | ( | | ||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Geographic Areas
The following table presents financial information relating to geographic areas in which the Company operated for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, 2025 | ||||||||||||
US | Canada | Other | Total | |||||||||
Revenue | $ | | $ | | $ | | $ | | ||||
Gross profit | | | | | ||||||||
Three Months Ended March 31, 2024 | ||||||||||||
US | Canada | Other | Total | |||||||||
Revenue | $ | | $ | | $ | | $ | | ||||
Gross profit | | | - | | ||||||||
All dollar amounts expressed in thousands, except per share amounts
27
19. Subsequent Events
During April 2025, the Company received an additional $
On April 10, 2025, Redbud Roots Inc. (the “Named Plaintiff”) filed a complaint in the United States District Court for the Northern District of California against Shenzhen Smoore Technology Co. Ltd, Jupiter Research, LLC (“Jupiter”), 3Win Corporation, CB Solutions Inc. and Greenlane Holdings, Inc. (collectively, the “Defendants”). Jupiter is a wholly owned subsidiary of the Company. In the complaint, the Named Plaintiff alleges, on behalf of a class of similarly-situated plaintiffs, that the Defendants violated federal antitrust statutes through the sale and distribution of closed cannabis oil vaporizing systems.
All dollar amounts expressed in thousands, except per share amounts
28
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following management’s discussion and analysis of financial condition and results of operations (“MD&A”) in conjunction with our unaudited consolidated condensed financial statements for the three months ended March 31, 2025, included elsewhere in this Quarterly Report on Form 10-Q. This MD&A contains statements that are forward-looking. Please refer to the discussion of forward-looking statements and information set out under the heading “Cautionary Note Regarding Forward-Looking Statements” identified in this Quarterly Report on Form 10-Q. These statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors. Actual results could differ materially because of the factors discussed below or elsewhere in this Quarterly Report on Form 10-Q. See Item 1A. "Risk Factors" of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”). Unless otherwise indicated or the context otherwise requires, references herein to “we,” “us,” “our,” and the “Company” refers to TILT Holdings Inc., and its subsidiaries.
All dollar amounts presented in this MD&A are presented in thousands of U.S. dollars (“USD$”, “$”, or “US$”), except per share amounts, unless otherwise indicated.
Overview
The Company was incorporated under the laws of Nevada pursuant to NRS Chapter 78 on June 22, 2018. The Company was continued under the Business Corporations Act (British Columbia) pursuant to a Certificate of Continuance dated November 14, 2018. The Company’s head office is located in Phoenix, Arizona and its registered office is located in Vancouver, British Columbia.
The Company operates through two business divisions: Inhalation Technology and Cannabis. The Inhalation Technology division encompasses the Jupiter Research LLC (“Jupiter”) business, through which the Company sells vape and accessory products and services to regulated markets across 40 states in the United States (“U.S.”), as well as Canada, Israel, Mexico, South America and the European Union. The Cannabis division includes operations in Massachusetts at Commonwealth Alternative Care (“CAC”), in Pennsylvania at Standard Farms LLC (“Standard Farms PA”) and in Ohio at Standard Farms Ohio, LLC (“Standard Farms OH”).
Through CAC, the Company operates a vertically integrated marijuana facility in Taunton, Massachusetts, dually licensed for both medical and adult-use cultivation, manufacturing and retail sales. Through this operating facility, the Company produces, packages, and sells a variety of cannabis flower, vape cartridge, concentrate, edible and topical products via wholesale and retail to Massachusetts customers.
Through Standard Farms PA, the Company operates a fully licensed integrated cultivation and manufacturing facility specializing in high-quality medical cannabis products such as vape cartridges, flower, capsules, oil syringes and tinctures, all of which are sold via wholesale to Pennsylvania customers throughout the Commonwealth. The Company additionally holds a permit for a medical marijuana dispensary.
Through Standard Farms OH’s facility outside Cleveland, Ohio, the Company produces high-quality medical cannabis products from cannabis biomass including tinctures, vape cartridges, syringes, topicals, concentrates and edibles, which are then sold and distributed throughout Ohio via wholesale to other licensed cannabis businesses.
Significant Developments in the Quarter
On January 28, 2025, Commonwealth Alternative Care (“CAC”), a wholly-owned subsidiary of the Company, entered into an asset purchase agreement with In Good Health, Inc. for the sale of substantially all the assets and assumption of certain liabilities of its dispensaries located in Taunton and Brockton, Massachusetts. The purchase price for the assets is $2,000 plus the assumption of certain liabilities, and the sale is expected to be completed within the next 12 months. As a result, the Company reclassified $1,541 of its assets to assets held for sale on the condensed consolidated balance sheet as of March 31, 2025. This amount includes $1,300 of property, plant and equipment, net, $211 of right-of-use assets related to a finance lease, and $30 of prepaid expenses. See Note 5 — Property, Plant and Equipment and Assets Held for Sale for additional information.
All dollar amounts expressed in thousands, except per share amounts
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On March 28, 2025, the Company received notices of default from IIP-PA 9 LLC and IIP-MA 8 LLC, the landlords for properties located at 411 Susquehanna Street, White Haven, PA, and 30 Mozzone Street, Taunton, MA, respectively, and each subsidiaries of Innovative Industrial Properties Inc (collectively, the “Landlord”). These notices were issued due to outstanding rental payments and other financial obligations under the respective leases.
The notice for the White Haven property indicated that Standard Farms LLC, a subsidiary of the Company, owed a total of $1,131, which includes base rent, additional rent, and replenishment of the security deposit. The Landlord expressed its intent to terminate the lease and pursue legal proceedings if the defaults were not cured by April 4, 2025.
Similarly, the notice for the Taunton property states that CAC, another subsidiary of the Company, owed a total of $2,997 which includes base rent, additional rent, late charges, interest, and replenishment of the security deposit. The Landlord also indicated its intent to terminate the lease and seek damages if the defaults were not remedied by April 4, 2025.
Following receipt of the notices described above, the Company engaged in negotiations with the Landlord to cure the defaults. The Company has already made payments in satisfaction of the April rent obligations in exchange for forbearance from pursuing termination and eviction and the Landlord has accepted such payments. The Company is committed to negotiating in good faith to resolve the outstanding amounts and secure favorable terms for its operations. The Company is actively working to address these financial obligations and is exploring all available options to mitigate the impact of these defaults on its business operations.
Certain Trends and Uncertainties
The Company’s business, financial condition, and results of operations may be impacted by certain trends and uncertainties. See Liquidity and Capital Resources below and Liquidity and Capital Resources under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 1A. “Risk Factors” of the Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and on the System for Electronic Document Analysis and Retrieval Plus (“SEDAR+”) for discussions of trends and uncertainties and risks that may affect the Company.
Results of Operations
The Company reports the results of operations of its affiliates and subsidiaries from the date that control commences, either through the purchase of the business or control through a management agreement. The following selected financial information includes only the results of operations after the Company established control of affiliates and subsidiaries. Accordingly, the information included below may not be representative of the results of operations of such affiliates or subsidiaries had their results of operations been included for the entire reporting period.
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
Three Months Ended March 31, | |||||
2025 |
| 2024 | |||
Revenues, net | $ | 22,725 | $ | 37,504 | |
Cost of goods sold | (19,333) | (30,787) | |||
Gross profit | 3,392 | 6,717 | |||
Operating loss | (6,569) | (5,389) | |||
Total other expense | (6,527) | (5,842) | |||
Loss from operations before income tax | (13,096) | (11,231) | |||
Net loss | (13,240) | (9,651) | |||
All dollar amounts expressed in thousands, except per share amounts
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Revenue
Revenue represents the amount the Company expects to receive for goods in its contracts with customers, net of discounts and sales taxes. The Company’s revenue is derived from the following:
Sale of Goods — Vaporization and Inhalation Devices:
Revenue from the wholesale sales of accessories is recognized when the Company transfers control and satisfies its performance obligations on wholesale sales of accessories. Revenue is recognized from product sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery, depending on the terms of sale with the customer.
Sale of Goods — Cannabis:
Revenue from the direct sale of goods is recognized when the Company transfers control of the goods to the customer. For dispensary sales, this occurs at the point of sale at the dispensary, whereas for wholesale sales this occurs when goods are delivered to the customer.
Revenue for the three months ended March 31, 2025 was $22,725, down from $37,504 for the three months ended March 31, 2024, reflecting a year-over-year decrease of $14,779 or 39%. The decrease was mainly attributable to Jupiter which saw revenue decrease $12,985 or 48% year-over-year, mainly driven by lower sales volume related to the temporary transition of certain customers to a commission structure. Additionally, the cannabis division decreased revenue by $1,794 or 17% year-over-year, primarily driven by a decrease in sales volume in the Massachusetts and Pennsylvania markets.
Cost of Goods Sold, Gross Profit and Gross Margin Percentage
Cost of goods sold represents costs directly related to manufacturing and distribution of the Company’s products. Primary costs include raw materials, packaging, direct labor, overhead, shipping and handling, the depreciation of certain property, plant and equipment, and tariffs. Manufacturing overhead and related expenses include salaries, wages, employee benefits, utilities, maintenance, and property taxes. Cost of goods sold also includes inventory valuation adjustments. The Company recognizes the cost of goods sold as the associated revenues are recognized.
Cost of goods sold for the three months ended March 31, 2025 was $19,333, down from $30,787 for the three months ended March 31, 2024 reflecting a year-over-year decrease of $11,454 or 37%, mainly attributable to the sales volume decline described above. This was partially offset by an increase in expenses related to inventory adjustments for excess and obsolete products as well as the absence of a one-time credit for community impact fees as was received in the prior year period.
Gross profit reflects revenue less production costs primarily consisting of labor, materials, rent and facilities, supplies, overhead, and amortization on production equipment, shipping, packaging and other expenses required to grow and manufacture cannabis products. Gross margin represents gross profit as a percentage of revenue.
The Company’s gross profit for the three months ended March 31, 2025 was $3,392, down from $6,717 for the three months ended March 31, 2024, which reflects a year-over-year decrease of $3,325 or 50%. Gross margin was 15% and 18% for the three months ended March 31, 2025 and 2024, respectively. The decrease in gross profit was mainly driven by the decreased sales volume whereas the decrease in gross margin was primarily driven by the increase in expenses related to inventory adjustments for excess and obsolete products. Additionally, the gross margin in the prior year period benefited from a one-time credit for community impact fees whereas there was no such credit in the current period.
All dollar amounts expressed in thousands, except per share amounts
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Total Operating Expenses
Total operating expenses primarily consists of costs incurred at the Company’s corporate offices, share-based compensation, personnel costs including wages and employee benefits, professional service costs including accounting and legal expenses, rental costs associated with certain of the Company’s offices and facilities, insurance expenses, costs associated with advertising and marketing the Company’s products and other general and administrative expenses which support the Company’s business.
The following is a summary of the Company’s operating expenses derived from the condensed consolidated financial statements of the Company for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | |||||
2025 | 2024 | ||||
Wages and benefits | $ | 3,872 | $ | 4,496 | |
General and administrative | 3,346 | 3,483 | |||
Sales and marketing | 58 | 142 | |||
Share-based compensation expense | 65 | 107 | |||
Depreciation and amortization | 2,620 | 3,866 | |||
Impairment loss | — | 12 | |||
Total operating expenses | $ | 9,961 | $ | 12,106 | |
Total operating expenses for the three months ended March 31, 2025 were $9,961, a decrease of $2,145 or 18% year-over-year from $12,106. The decrease was primarily due to wages and benefits driven mainly by a decrease in headcount as a result of the Company’s cost reduction strategies. Additionally, depreciation and amortization expense decreased mainly due to the impairment of intangible assets at December 31, 2024, leading to lower amortization expense during the current period.
Impairment Losses
Impairment losses for the three months ended March 31, 2024 were $12. There were no impairment losses recognized during the three months ended March 31, 2025.
Total Other Expense
The following is a summary of the Company’s total other expense derived from the consolidated financial statements of the Company for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | |||||
2025 |
| 2024 | |||
Interest income | $ | — | $ | 2 | |
Other income | 1,034 | 204 | |||
Unrealized loss on investment | — | (1) | |||
Gain (loss) on foreign currency exchange | 2 | (4) | |||
Interest expense | (7,563) | (6,043) | |||
Total other expense | $ | (6,527) | $ | (5,842) | |
Other expense for the three months ended March 31, 2025 was $6,527, an increase of $685 from other expense of $5,842 for the three months ended March 31, 2024, primarily due to the increase in interest expense which was driven mainly by compounding interest on certain debt and interest related to the 2024 Standard Farms Loan. Partially offsetting the foregoing, other income increased, mainly due to the receipt of refunds from the IRS related to previously filed claims for ERC. See Note 10 – Notes Payable for further details.
All dollar amounts expressed in thousands, except per share amounts
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Income Tax (Expense Benefit
As the Company operates in the cannabis industry, it is subject to the limits of Section 280E of the Internal Revenue Code under which the Company is only allowed to deduct expenses directly related to the cost of production. As such, the effective tax rate can be highly variable and may not correlate to pre-tax income or loss.
Income tax expense for the three months ended March 31, 2025 was $144, an increase of $1,724 from income tax benefit of $1,580 for the three months ended March 31, 2024. See Note 15 — Income Taxes for further details.
Net Loss Attributable to TILT
The Company recorded net loss of $13,240 for the three months ended March 31, 2025 compared to net loss of $9,651 for the three months ended March 31, 2024, for an increase in net loss of $3,589 primarily driven by the $3,325 decrease in gross profit, the $685 increase in other expense, and the $1,724 increase in income tax expense, partially offset by the $2,145 decrease in operating expense.
Liquidity and Capital Resources
The Company closely monitors and manages its capital resources to assess the liquidity required to fund fixed asset capital expenditures and operations.
Liquidity and Going Concern
The Company’s balance of cash and cash equivalents was $3,036 as of March 31, 2025 compared to $3,003 as of December 31, 2024. The Company requires cash to: (i) fund operating expenses, working capital requirements, including accounts payable and accrued liabilities, and outlays for strategic acquisitions and investments, (ii) service debt, including principal and interest; (iii) conduct research and development; and (iv) incur capital expenditures.
The Company has experienced operating losses since its inception and may continue to incur losses in the development of its business. The Company incurred a comprehensive loss of $13,240 during the three months ended March 31, 2025 and has an accumulated deficit of $1,138,997 as of March 31, 2025. Additionally, as of March 31, 2025, the Company had negative working capital of $85,950 compared to negative working capital of $46,608 as of December 31, 2024. The decrease in working capital was primarily driven by an increase in notes payable due in the next 12 months and a decrease in inventories.
On January 28, 2025, CAC, a wholly-owned subsidiary of the Company, entered into an asset purchase agreement with In Good Health, Inc. for the sale of substantially all the assets and assumption of certain liabilities of its dispensaries located in Taunton and Brockton, Massachusetts. The purchase price for the assets is $2,000 plus the assumption of certain liabilities, and the sale is expected to be completed within the next 12 months. As a result, the Company reclassified $1,541 of its assets to assets held for sale on the condensed consolidated balance sheet as of March 31, 2025. This amount includes $1,300 of property, plant and equipment, net, $211 of right-of-use assets related to a finance lease, and $30 of prepaid expenses. See Note 5 — Property, Plant and Equipment and Assets Held for Sale for additional information.
On May 2, 2024, Standard Farms, LLC (“Standard Farms PA”) entered into a Secured Promissory Note with a third-party experienced retailer and operator (the “Lender”) for borrowings up to $10,500 (the “2024 Standard Farms Loan”). Proceeds from the 2024 Standard Farms Loan will be used to construct dispensaries obtained via a permit issued from the Department of Health, Bureau of Medical Marijuana, of the Commonwealth of Pennsylvania (the “Commonwealth”). The Standard Farms PA permit will allow the construction and operation of up to three medical marijuana dispensaries in the Commonwealth (collectively, the “Retail Locations”). Proceeds from the 2024 Standard Farms Loan will also be utilized for the initial setup and operation of the Retail Locations. The 2024 Standard Farms Loan will mature on December 31, 2027, and will initially bear interest at 20%. The interest rate will automatically increase to 30% upon Standard Farm PA’s opening a Retail Location and completing a first commercial sale in the Commonwealth (“Location Opening Date”). On May 2, 2024, the Company drew $3,000 in proceeds on the 2024 Standard Farms Loan, $1,700 of which is allocated to a
All dollar amounts expressed in thousands, except per share amounts
33
contingent interest derivative, and recognized a debt discount of $784. The Retail Location opened on February 14, 2025, which resolved the contingent interest feature and resulted in the derecognition of the embedded derivative. The balance of the embedded derivative was zero as of March 31, 2025. See Note 10 — Notes Payable for additional information.
On October 3, 2024, the Company entered into a Second Amendment to its Revolving Facility (the “Revolving Facility Amendment”) through its subsidiary Jupiter. The Revolving Facility Amendment amended the required fixed charge coverage ratio financial covenant, the minimum monthly charge paid to the lender, and the inventory availability amount. The Revolving Facility Amendment also reduced the borrowing capacity from $12,500 to $6,000.
As of March 31, 2025, the Company continued to apply the default rate of 25.0% to accrue interest on the refinancing of $38,000 of secured promissory notes issued originally under the 2019 Junior Notes NPA (the “2023 Refinanced Notes”) due to continued noncompliance with financial covenants. The 25.0% interest rate represents the prime rate of 7.5% plus 8.5%, the 8.0% default interest rate, and the 1% annual increase pursuant to the first amendment (the “NPA Amendment”) to its existing junior secured note purchase agreement (the “2019 Junior Notes NPA”), as the principal balance was more than $30,000 as of February 15, 2024, which was the first anniversary of the date the Company entered into the NPA Amendment (the “Effective Date”). The private placement secured promissory notes issued pursuant to the NPA Amendment (the “2023 New Notes”) remain at the default interest rate of 24.0%.
The Company’s operating plans for the next 12 months include (i) increasing revenue growth from the sale of existing products and the introduction of new products across all operating segments; (ii) reducing production and operational costs as a result of efficiencies in cannabis operations; (iii) reducing supply chain costs; (iv) reducing and delaying overhead and other certain expenditures; (v) obtaining other financings or completing other strategic transactions as necessary; and (vi) deferring principal and interest payments on the notes payable.
The Company believes that successfully implementing these operating plans will help to mitigate any substantial doubt raised by our historical operating results and satisfy our estimated liquidity needs for the 12 months following the issuance of these condensed consolidated financial statements.
However, the interest payments under these rates will constrain the Company’s liquidity while these rates remain in effect. While, as of the date of this filing, the Company is not in compliance with certain payment obligations and covenants under the 2023 Refinanced Notes and the 2023 New Notes (collectively, the “2023 Notes”) the Note Holders have not provided the requisite notice of an event of default. The Company is currently negotiating a waiver and forbearance agreement with the Note Holders to address such non-compliance. The Company can provide no assurance that the parties will reach a mutually agreeable resolution. See Note 10 — Notes Payable for additional information.
The Company cannot predict with certainty the outcome of its actions to generate liquidity as discussed above, including the availability of additional financing as necessary, or whether such actions would generate the expected liquidity as currently planned. Therefore, management has concluded there is substantial doubt about the Company’s ability to continue as a going concern within 12 months after the date of this filing. These financial statements do not include any adjustments that might become necessary should the Company be unable to continue as a going concern.
All dollar amounts expressed in thousands, except per share amounts
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Cash Flows
The following table presents the Company’s net cash inflows and outflows from the condensed consolidated financial statements for the three months ended March 31, 2025 and 2024:
Three Months Ended March 31, | ||||||
2025 | 2024 | |||||
Net cash provided by (used in) operating activities | $ | 1,903 | $ | (2,439) | ||
Net cash used in investing activities | (2,089) | (185) | ||||
Net cash provided by financing activities | 219 | 2,819 | ||||
Effect of foreign exchange on cash and cash equivalents | — | (8) | ||||
Net changes in cash and cash equivalents | $ | 33 | $ | 187 | ||
For the three months ended March 31, 2025, cash was provided by (used in):
| ● | Operating activities: $1,903. The cash flow from operating activities for the three months ended March 31, 2025 increased $4,342 as compared to cash used in operating activities of $2,439 for the three months ended March 31, 2024, mainly driven by lower inventory purchases compared to the prior year period related to the Company’s shift to an asset-light model with a focus on just-in-time inventory. |
| ● | Investing activities: ($2,089). The cash flow from investing activities for the three months ended March 31, 2025 decreased $1,904 from cash used in investing activities of $185 for the three months ended March 31, 2024. The decrease was mainly related to the buildout of the Standard Farms PA Retail Location during the three months ended March 31, 2025. See Note 10 – Notes Payable. |
| ● | Financing activities: $219. The cash flow from financing activities for the three months ended March 31, 2025 decreased $2,600 as compared to cash provided by financing activities of $2,819 for the three months ended March 31, 2024. The decrease was mainly driven by decreased draw on the Revolving Facility and repayments made on the Employee Retention Credit Note. For further details see Note 10 — Notes Payable. |
Critical Accounting Estimates
There were no significant changes in the Company’s significant accounting judgements and estimates during the three months ended March 31, 2025 from those previously disclosed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Item 8. Note 2 to our audited consolidated financial statements in the Form 10-K and the “Recently Adopted and Issued Accounting Pronouncements” section of Note 2 — Basis of Presentation and Summary of Significant Accounting Policies in the notes to the Financial Statements.
Legal and Regulatory Matters
In accordance with the Canadian Securities Administrators Staff Notice 51-352 Issuers with U.S. Marijuana-Related Activities, readers are referred to the subsection titled “Legal and Regulatory Matters” in the Form 10-K, which includes information regarding the current federal and state-level United States regulatory regimes in those jurisdictions where the Company is currently directly and indirectly involved in the cannabis industry, through its subsidiaries and investments. Other than as described below, there have been no material updates to this disclosure as of the date hereof.
All dollar amounts expressed in thousands, except per share amounts
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Regulation of Cannabis in the U.S. Federally
On August 29, 2023, and in response to President Biden’s directive to review cannabis’s scheduling, the Department of Health and Human Services (“HHS”) formally presented its recommendation to the Drug Enforcement Administration (“DEA”) that cannabis be rescheduled to Schedule III from Schedule I. Section 280E does not apply to those trafficking in Schedule III controlled substances. On May 16, 2024, the DEA, which has final jurisdiction over scheduling decisions, issued a proposed rule to move cannabis from Schedule I to Schedule III. However, the rescheduling process was indefinitely delayed on January 15, 2025, after allegations of bias and improper communication by the DEA prompted an administrative ruling that halted proceedings pending further action by the agency.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and, as such, is not required to provide the information under this item.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer (“CEO”) and Interim Chief Financial Officer (“ Interim CFO”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as the Company’s controls and procedures are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.
In connection with the preparation of this Quarterly Report on Form 10-Q, as of March 31, 2025, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and Interim CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, management concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025.
Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of the Company’s internal control performed during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
All dollar amounts expressed in thousands, except per share amounts
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Except as set forth below, there have been no material changes in the status of the legal proceedings to those previously disclosed in Item 3. “Legal Proceedings” of the Form 10-K, Item 1. Refer to Note 17 — Commitments and Contingencies for additional information on the Company’s legal proceedings.
The Company has been named as a defendant in several legal actions and is subject to various risks and contingencies arising in the normal course of business. Management is of the opinion that the outcome of these uncertainties will not have a material adverse effect on the Company’s financial position.
On December 16, 2024, S.K, D.C. and D.G. (the “Named Plaintiffs”) filed a complaint in the United States District Court for the Northern District of California against Jupiter, 3Win Corporation, CB Solutions Inc. and Greenlane Holdings, Inc. (collectively, the Defendants”). Jupiter is a wholly owned subsidiary of the Company. In the complaint, the Named Plaintiffs allege, on behalf of a class of similarly-situated plaintiffs, that the Defendants violated federal and state antitrust statutes through the sale and distribution of closed cannabis oil vaporizing systems produced by Shenzhen Smoore Technology Company, Limited and Smoore International Holdings Limited. On March 7, 2025, the Named Plaintiffs filed a First Amended Complaint adding Shenzhen Smoore Technology Company, Limited and Smoore International Holdings Limited as defendants.
On February 11, 2025, Earth’s Healing Inc. (the “Named Plaintiff”) filed a complaint in the United States District Court for the Northern District of California against Shenzhen Smoore Technology Co. Ltd, Jupiter Research, LLC (“Jupiter”), 3Win Corporation, CB Solutions Inc. and Greenlane Holdings, Inc. (collectively, the “Defendants”). Jupiter is a wholly owned subsidiary of the Company. In the complaint, the Named Plaintiff alleges, on behalf of a class of similarly-situated plaintiffs, that the Defendants violated federal antitrust statutes through the sale and distribution of closed cannabis oil vaporizing systems.
On April 10, 2025, Redbud Roots Inc. (the “Named Plaintiff”) filed a complaint in the United States District Court for the Northern District of California against Shenzhen Smoore Technology Co. Ltd, Jupiter Research, LLC (“Jupiter”), 3Win Corporation, CB Solutions Inc. and Greenlane Holdings, Inc. (collectively, the “Defendants”). Jupiter is a wholly owned subsidiary of the Company. In the complaint, the Named Plaintiff alleges, on behalf of a class of similarly-situated plaintiffs, that the Defendants violated federal antitrust statutes through the sale and distribution of closed cannabis oil vaporizing systems.
Item 1A. Risk Factors
You should carefully consider the risks described in Item 1A. “Risk Factors” of the Form 10-K for the year ended December 31, 2024, and all information contained in this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition, results of operations, and cash flows filed with the SEC and on SEDAR+ at www.sedarplus.com. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or currently considered immaterial may also materially adversely affect our business, financial condition, results of operations, and cash flows. Except for the risk factors set forth below, there have been no material changes in the risk factors contained in our Annual Report on Form 10-K
We may be adversely affected by boycotts, civil unrest, trade disputes, and other geo-political disruptions.
We may be adversely affected by boycotts, civil unrest and other geo-political disruptions. These events may damage our properties, deny us access to an adequate workforce, increase the cost of energy and other raw materials, temporarily or permanently close our facilities, disrupt the production, supply and distribution of our products and potentially disrupt information systems.
All dollar amounts expressed in thousands, except per share amounts
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The U.S. has imposed and may impose additional quotas, duties, tariffs, retaliatory or trade protection measures or other restrictions or regulations and may adversely adjust prevailing quota, duty or tariff levels, which can affect both the materials that we use to package our products and the sale of finished products. For example, the tariffs imposed by the U.S. on materials from China are impacting our vaporizer and vaporizer accessory products. Measures to reduce the impact of tariff increases or trade restrictions, including geographical diversification of our sources of supply, adjustments in packaging design and fabrication or increased prices, could increase our costs, delay our time to market and/or decrease sales. Other governmental action related to tariffs or international trade agreements has the potential to adversely impact demand for our products and our costs, customers, suppliers and global economic conditions and cause higher volatility in financial markets. While we actively review existing and proposed measures to seek to assess the impact of them on our business, changes in tariff rates, import duties and other new or augmented trade restrictions could have a number of negative impacts on our business, including higher consumer prices and reduced demand for our products and higher input costs.
International conflict has materially adversely affected and is likely to continue to materially adversely affect global trade, currency exchange rates, regional economies and the global economy. In particular, while it is difficult to anticipate the impact of any of the foregoing on us, the conflict and actions taken in response to the conflict could increase our costs, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company made no unregistered sales of equity securities during the quarter covered by this report.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended March 31, 2025, no director or officer of the Company
All dollar amounts expressed in thousands, except per share amounts
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Item 6. Exhibits
Exhibit No. |
| Description of Exhibit |
|---|---|---|
10.1# | ||
31.1 | ||
31.2 | ||
32.1 | ||
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Calculation Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded with Inline XBRL document) |
______________________
# Certain schedules and exhibits have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the Securities and Exchange Commission upon request.
All dollar amounts expressed in thousands, except per share amounts
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 15, 2025 | TILT HOLDINGS INC. | |
By: | /s/ Tim Conder | |
Tim Conder | ||
Chief Executive Officer and Director (Principal Executive Officer) | ||
By: | /s/ Brad Hoch | |
Brad Hoch | ||
Interim Chief Financial Officer (Principal Financial Officer) | ||
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