TILT Holdings Inc 10-Q for FY2023 Q2

TILT Holdings Inc. (TLLTF)

10-Q 2023-08-14 For: 2023-06-30

Added on April 06, 2026

About this 10-Q

TILT Holdings Inc filed this 10-Q on August 14, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $41.6M; down 11.6% from $47.06M a year earlier
Net loss: $26.9M; compared with a net loss of $7.05M a year earlier
Diluted EPS: -$0.07; compared with -$0.02 a year earlier

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British Columbia		83-2097293
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

2801 E. Camelback Road #180
Phoenix, Arizona		85016
(Address of principal executive offices)		(Zip code)


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

PART I — FINANCIAL INFORMATION	5

Item 1. Financial Statements (Unaudited)	5

Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	5

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022 (Unaudited)	6

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (Unaudited)	7

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)	8

Notes to the Condensed Consolidated Financial Statements (Unaudited)	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3. Quantitative and Qualitative Disclosures About Market Risk	42

Item 4. Controls and Procedures	42

PART II — OTHER INFORMATION	43

Item 1. Legal Proceedings	43

Item 1A. Risk Factors	43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 3. Defaults Upon Senior Securities	48

Item 4. Mine Safety Disclosures	48

Item 5. Other Information	48

Item 6. Exhibits	49

Signatures	51


	June 30, 2023		December 31, 2022
	(unaudited)		(audited)
ASSETS
Current assets
Cash and cash equivalents	$	2,815	$	2,202
Restricted cash		1,298		1,298
Trade receivables, net		26,086		26,698
Inventories		36,826		52,909
Loans receivable, current portion		—		516
Prepaid expenses and other current assets		1,698		1,979
Assets held for sale		—		325
Total current assets		68,723		85,927

Non-current assets
Property, plant and equipment, net		54,319		67,937
Right-of-use assets – finance, net		2,631		4,351
Right-of-use assets – operating, net		12,518		740
Investments		2		6,402
Intangible assets, net		95,457		102,714
Loans receivable, net of current portion		1,355		3,703
Deferred tax asset		1,008		—
Goodwill		20,751		20,751
Other assets		1,454		1,453
TOTAL ASSETS	$	258,218	$	293,978

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	43,147	$	58,170
Income taxes payable		1,826		979
Deferred revenue		5,404		5,760
Finance lease liability, current portion		1,136		1,075
Operating lease liability, current portion		81		135
Notes payable, current portion		11,532		59,378
Total current liabilities		63,126		125,497

Non-current liabilities
Finance lease liability, net of current portion		3,663		4,245
Operating lease liability, net of current portion		12,776		701
Notes payable, net of discount, net of current portion		45,504		350
Massachusetts lease liability		40,386		40,022
Deferred tax liability		—		1,373
Other liabilities		1,413		273
TOTAL LIABILITIES		166,868		172,461

Shareholders’ equity
Common shares, without par value, unlimited shares authorized, 378,528,861 and 377,515,391 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		856,044		858,143
Additional paid-in capital		225,228		225,127
Warrants		5,835		796
Accumulated other comprehensive income		983		988
Accumulated deficit		(995,473)		(963,703)
TOTAL SHAREHOLDERS’ EQUITY		92,617		121,351

Non-controlling interest		(1,267)		166
TOTAL EQUITY		91,350		121,517
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	258,218	$	293,978


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues, net	$	41,599	$	47,055	$	83,863	$	89,407
Cost of goods sold		(37,559)		(36,110)		(71,027)		(69,109)
Gross profit		4,040		10,945		12,836		20,298

Operating expenses:
Wages and benefits		5,871		6,335		11,655		11,503
General and administrative		4,529		5,585		10,149		10,364
Sales and marketing		290		586		694		993
Share-based compensation expense (benefit)		(2,358)		786		(2,065)		2,012
Depreciation and amortization		4,712		4,560		8,841		9,118
Impairment loss and loss on disposal of assets		4,947		6,669		5,135		7,366
Total operating expenses		17,991		24,521		34,409		41,356
Operating loss		(13,951)		(13,576)		(21,573)		(21,058)

Other income (expense):
Interest income		(64)		56		—		74
Other income		3		4		100		7
Change in fair value of warrant liability		—		3,913		—		1,750
Gain on sale of assets		—		—		8,401		1
Unrealized loss on investment		(6,400)		(49)		(6,400)		(94)
Loan receivable losses		(5,200)		(504)		(5,588)		(1,021)
Loss on foreign currency exchange		(1)		—		(1)		—
Interest expense		(5,466)		(3,796)		(9,558)		(6,577)
Total other expense		(17,128)		(376)		(13,046)		(5,860)
Loss from operations before income tax and non-controlling interest		(31,079)		(13,952)		(34,619)		(26,918)

Income taxes
Income tax benefit		2,742		6,898		1,416		8,230
Net loss before non-controlling interest		(28,337)		(7,054)		(33,203)		(18,688)
Less: Net income attributable to non-controlling interest		1,442		3		1,433		8
Net loss attributable to TILT Holdings Inc.	$	(26,895)	$	(7,051)	$	(31,770)	$	(18,680)

Other comprehensive loss
Net loss before non-controlling interest	$	(28,337)	$	(7,054)	$	(33,203)	$	(18,688)
Foreign currency translation differences		(3)		(3)		(5)		(2)
Comprehensive loss before non-controlling interest		(28,340)		(7,057)		(33,208)		(18,690)
Less: Net income attributable to non-controlling interest		1,442		3		1,433		8
Comprehensive loss attributable to TILT Holdings Inc.	$	(26,898)	$	(7,054)	$	(31,775)	$	(18,682)


Weighted average number of shares outstanding:
Basic and diluted		378,296,093		375,538,599		377,998,289		375,075,478
Net loss per common share attributable to TILT Holdings Inc.
Basic and diluted	$	(0.07)	$	(0.02)	$	(0.08)	$	(0.05)


									Accumulated Other						Shareholders'
	Common Shares				Additional				Comprehensive		Accumulated		Non-Controlling		Equity
	Shares		Amount		Paid in Capital		Warrants		Income (Loss)		Deficit		Interest		Total
Balance - December 31, 2022	377,515,391	$	858,143	$	225,127	$	796	$	988	$	(963,703)	$	166	$	121,517
Share-based compensation	—		—		31		—		—		—		—		31
Warrants expired	—		—		67		(67)		—		—		—		—
Issuance and vesting of restricted share units	370,744		209		—		—		—		—		—		209
Shares reserved for contingent consideration	—		53		—		—		—		—		—		53
Warrants issued as part of debt modification	—		—		—		5,106		—		—		—		5,106
Comprehensive (loss) income for the period	—		—		—		—		(2)		(4,875)		9		(4,868)
Balance - March 31, 2023	377,886,135	$	858,405	$	225,225	$	5,835	$	986	$	(968,578)	$	175	$	122,048
Share-based compensation	—		—		3		—		—		—		—		3
Issuance and vesting (forfeiture) of restricted share units	642,726		(1,074)		—		—		—		—		—		(1,074)
Shares reserved for contingent consideration	—		(1,287)		—		—		—		—		—		(1,287)
Comprehensive loss for the period	—		—		—		—		(3)		(26,895)		(1,442)		(28,340)
Balance - June 30, 2023	378,528,861	$	856,044	$	225,228	$	5,835	$	983	$	(995,473)	$	(1,267)	$	91,350


								Accumulated Other						Shareholders’
	Common Shares			Additional				Comprehensive		Accumulated		Non-Controlling		Equity
	Shares	Amount		Paid in Capital		Warrants		Income (Loss)		Deficit		Interest		Total
Balance - December 31, 2021	374,082,759	$	854,952	$	224,835	$	952	$	999	$	(856,248)	$	175	$	225,665
Share-based compensation	—		—		81		—		—		—		—		81
Issuance and vesting of restricted share units	1,220,468		888		—		—		—		—		—		888
Shares reserved for contingent consideration	—		257		—		—		—		—		—		257
Comprehensive income (loss) for the period	—		—		—		—		1		(11,629)		(5)		(11,633)
Balance - March 31, 2022	375,303,227	$	856,097	$	224,916	$	952	$	1,000	$	(867,877)	$	170	$	215,258
Share-based compensation	—		—		18		—		—		—		—		18
Issuance and vesting of restricted share units	473,048		508		—		—		—		—		—		508
Shares reserved for contingent consideration	—		261		—		—		—		—		—		261
Comprehensive loss for the period	—		—		—		—		(3)		(7,051)		(3)		(7,057)
Balance - June 30, 2022	375,776,275	$	856,866	$	224,934	$	952	$	997	$	(874,928)	$	167	$	208,988


Machinery and equipment	2 – 7 years
Furniture and fixtures	3 – 10 years
Autos and trucks	5 years
Buildings and land improvements	5 – 39 years
Leasehold improvements	Lesser of useful life of lease term
Greenhouse - agricultural structure	5 – 15 years
Land	Not depreciated


	As of June 30, 2023
	Fair value hierarchy
Fair value of assets	Level 1		Level 2		Level 3
Cash and cash equivalents	$	2,815	$	—	$	—
Restricted cash		1,298		—		—
Investments		2		—		—
Total	$	4,115	$	—	$	—


	As of December 31, 2022
	Fair value hierarchy
Fair value of assets	Level 1		Level 2		Level 3
Cash and cash equivalents	$	2,202	$	—	$	—
Restricted cash		1,298		—		—
Investments		2		—		—
Total	$	3,502	$	—	$	—


Balance, January 1, 2022	$	70,545
Jupiter impairment		(6,668)
Balance, June 30, 2022	$	63,877


	June 30,		December 31,
	2023		2022
Raw Material - cannabis plants	$	3,283	$	3,383
Raw Material - other materials		619		763
Work in progress		11,460		11,268
Finished goods		18,662		34,779
Supplies and accessories		2,802		2,716
Total Inventories	$	36,826	$	52,909


Investment	June 30, 2023		December 31, 2022
HERBL, Inc.	$	—	$	6,400
Akerna		2		2
Total Investments	$	2	$	6,402


Intangible assets	June 30, 2023		December 31, 2022
Customer relationships	$	85,300	$	85,300
Trademarks		29,000		29,000
License rights⁽¹⁾		6,540		6,540
Management agreements		926		926
Patents & technologies		32,900		32,900
Backlog and non-competition agreements		10,406		10,406
Total intangible assets, at cost		165,072		165,072
Less: Accumulated amortization		(69,615)		(62,358)
Total intangible assets, net	$	95,457	$	102,714


	Estimated
Years ended December 31,	amortization
Remainder of 2023	$	6,477
2024		12,953
2025		12,953
2026		12,796
2027		12,796
Thereafter		31,103
	$	89,078


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(33,203)	$	(18,688)
Adjustments to reconcile net loss to net cash provided by operating activities:
Unrealized loss on investments		6,400		94
(Gain) loss on sale of assets and other		(8,379)		9
Depreciation and amortization		11,490		11,813
Amortization of operating lease right of use assets		1,185		483
Change in allowance for doubtful accounts		369		(119)
Non-cash interest income		—		(15)
Deferred tax		(2,381)		(9,487)
Share-based compensation expense (benefit)		(2,065)		2,012
Accretion of debt discount		404		1,580
Change in fair value of warrant liability		—		(1,750)
Loan receivable losses		5,588		1,021
Impairment loss and loss on disposal of assets		5,135		7,366
Inventory adjustments		5,103		516
Non-cash interest expense		6,289		2,195
Net change in working capital items:
Trade receivables, net		243		2,505
Inventories		10,980		4,837
Prepaid expenses and other current assets		280		(693)
Accounts payable and accrued liabilities		(7,489)		452
Income tax payable		847		1,052
Deferred revenue		(356)		(1,420)
Net cash provided by operating activities		440		3,763

Cash flows from investing activities:
Purchases of property, plant, and equipment		(326)		(13,979)
Proceeds from sale of property, plant and equipment		15,000		3
Repayment of loan receivable, net of advances		(2,792)		(826)
Net cash provided by (used in) investing activities		11,882		(14,802)

Cash flows from financing activities:
Payments on lease liability		(3,862)		(1,190)
Repayments on notes payable and Massachusetts Lease Liability		(10,324)		(319)
Repayments on Revolving Facility		(59,572)		(67,304)
Debt issuance costs		(1,213)		—


	June 30, 2023		December 31, 2022
Land	$	6,266	$	6,434
Land improvements		—		461
Machinery & equipment		13,491		13,692
Furniture & fixtures		784		790
Buildings		45,107		51,987
Greenhouse - agricultural structure		6,769		8,196
Leasehold improvements		10,344		9,955
Construction in progress		212		610
Autos & trucks		235		256
Total cost		83,208		92,381
Less: accumulated depreciation		(28,889)		(24,444)
Total property, plant and equipment	$	54,319	$	67,937


	Jupiter
Terminal value growth rate		3.0%
Discount rate		22.5%
Projected revenue growth rate*		9.9%
Fair value	$	166,957


Loans receivable	June 30, 2023		December 31, 2022
Teneo Fund SPVi LLC Note	$	5,911	$	5,911
Pharma EU, LLC Note		1,410		1,410
A&R Note		710		710
SSZ and Elev8 Note		1,002		1,002
Pure Hana Synergy Note		224		224
Little Beach Harvest Note		5,121		2,199
Total loans receivable	$	14,378	$	11,456
Less allowance for expected credit losses		(13,023)		(7,237)
Loans receivable, net of expected credit losses		1,355		4,219
Less current portion of loan receivable		—		(516)
Loans receivable, long-term	$	1,355	$	3,703


			Standard		Standard
	Jupiter		Farms PA		Farms OH		Total
Balance, December 31, 2021	$	63,346	$	5,819	$	1,380	$	70,545
Impairment		(6,668)		—		—		(6,668)
Balance, June 30, 2022	$	56,678	$	5,819	$	1,380	$	63,877

Balance, December 31, 2022	$	17,721	$	3,030	$	—	$	20,751
Impairment		—		—		—		—
Balance, June 30, 2023	$	17,721	$	3,030	$	—	$	20,751


	As of June 30, 2023
Nature of collateral	Gross amounts		Loan losses		Net
Security interest in assets of counterparty	$	12,744	$	(11,389)	$	1,355
Third party guarantee		1,410		(1,410)		—
No collateral		224		(224)		—
Net loans receivable	$	14,378	$	(13,023)	$	1,355


Accounts payable and accrued liabilities	June 30, 2023		December 31, 2022
Accounts payable	$	40,144	$	49,261
Accrued interest expense		—		2,983
Accrued payroll		1,634		1,626
Due to Jupiter Sellers		—		2,800
Other current payables/liabilities⁽¹⁾		1,369		1,500
Total accounts payable and accrued liabilities	$	43,147	$	58,170


Notes Payable	June 30, 2023			December 31, 2022
Revolving Facility – Interest rate of 11.25% as of June 30, 2023, due on July 21, 2024 ⁽¹⁾	$	10,575		$	10,722
2019 Senior Notes – Interest rate of 16.0% per annum, due on February 28, 2023		—			2,159
2019 Junior Notes – Interest rate of 8.0% per annum, due on April 1, 2023		—			46,497
2023 Refinanced Notes – Interest rate of 24.75% per annum as of June 30, 2023, due on February 15, 2026 ⁽³⁾		40,420			—
2023 New Notes – Interest rate of 24.75% per annum as of June 30, 2023, due on February 15, 2027 ⁽³⁾		8,963			—
2023 Bridge Note – Interest rate of 16.75% per annum as of June 30, 2023, due on December 1, 2023		4,563			—
Other loans and borrowings		350			350
Total debt		64,871			59,728
Less: Debt discount and debt issuance costs		(7,835)	⁽²⁾		—
Less: Current portion of notes payable		(11,532)			(59,378)
Total debt, net of discount, net of current portion	$	45,504		$	350


Year ended December 31,	Amount
Remainder of 2023	$	6,983
2024		15,575
2025		5,000
2026		28,000
2027		8,963
2028 and thereafter		350
Total	$	64,871



	June 30, 2023		December 31, 2022
Operating leases
Weighted average discount rate		19.1%		8.0%
Weighted average remaining lease term		13.65 years		5.49 years
Finance leases
Weighted average discount rate		8.0%		8.0%
Weighted average remaining lease term		3.82 years		4.66 years


Year ended December 31,	Finance		Operating
Remainder of 2023	$	732	$	1,222
2024		1,489		2,433
2025		1,212		2,468
2026		926		2,530
2027		916		2,594
2028 and thereafter		380		28,264
Total undiscounted lease liabilities		5,655		39,511
Interest or discount on lease liabilities		(856)		(26,654)
Total present value of minimum lease payments		4,799		12,857
Lease liability - current portion		(1,136)		(81)
Lease liability	$	3,663	$	12,776


Exercise price	$	0.07084
Expected dividend yield		0%
Risk free interest rate		3.94%
Expected life in years		7.0 years
Expected volatility		84.00%


	Exercise	Number of
Security issued	Price (CAD$)	Warrants	Expiration Date
Founders separation warrants	1.05	9,045,691	September 30, 2024
Debt modification warrants	0.09	91,999,901	February 15, 2030
		101,045,592


		Weighted
	Number of	Average
Warrants	Warrants	Exercise Price
Balance as of December 31, 2022	9,545,691	CAD$ 1.01
Issued	91,999,901	0.09
Expired	(500,000)	0.33
Balance as of June 30, 2023	101,045,592	CAD$ 0.18


	Number of	Weighted Average
RSUs	RSUs	Grant Date Fair Value
Unvested as of December 31, 2022	2,742,765	$	0.25
Issued	9,873,204		0.03
Vested	(1,013,470)		0.22
Forfeited	(1,172,341)		0.24
Unvested as of June 30, 2023	10,430,158	$	0.05


	Share Options	Weighted		Weighted Average
	Common	Average		Remaining Contractual
Share options	Shares	Exercise Price		Life (yrs)
Balance as of January 1, 2023	9,753,600	$	0.60	6.11
Forfeited	(373,129)	$	0.45	—
Balance as of June 30, 2023	9,380,471	$	0.61	5.58


	Number of	Exercise		Options
Security issuable	Share Options	Price	Expiration Date	Exercisable
Legacy employees	190,000	$ 1.58-1.58	June 28, 2028	190,000
2020 employee grant	5,507,873	$ 0.30-0.48	June 25, 2030 - December 1, 2030	4,230,804
Other employee grants	3,682,598	$ 0.41-3.96	June 17, 2024 - November 21, 2029	3,682,598
Total	9,380,471			8,103,402


	Number of	Weighted Average
Performance Stock Units	PSUs	Grant Date Fair Value
Unvested as of January 1, 2023	10,632,378	$	0.30
Forfeited	(9,039,699)		0.30
Unvested as of June 30, 2023	1,592,679	$	0.31


	Closing Price on
PSU Grant Dates	Grant Date		Expiration Date	Outstanding (#)
September 30, 2021	$	0.39	December 31, 2024	526,147
December 19, 2021	$	0.23	December 31, 2024	366,532
Total				892,679


Loss per share	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022
Net loss attributable to TILT	$	(26,895)	$	(7,051)	$	(31,770)	$	(18,680)
Weighted-average number of shares and units outstanding - basic and diluted		378,296,093		375,538,599		377,998,289		375,075,478
Loss per share - basic and diluted	$	(0.07)	$	(0.02)	$	(0.08)	$	(0.05)


	For the three months ended June 30, 2023
	Cannabis		Accessories		Corporate		Other		Total
Revenue		12,925	$	28,833	$	—	$	—	$	41,758
Inter-segment revenue		—		(159)		—		—		(159)
Net revenue	$	12,925	$	28,674	$	—	$	—	$	41,599
Share-based compensation		—		—		(1,072)		(1,286)		(2,358)
Depreciation and amortization		821		3,246		628		17		4,712
Wages and benefits		1,899		1,335		2,637		—		5,871
Impairment loss		3,208		16		986		737		4,947
Interest expense		1,377		621		3,400		68		5,466
Loan receivable losses		—		—		277		4,923		5,200
Net loss	$	(16,387)	$	(2,840)	$	(4,587)	$	(4,523)	$	(28,337)


	For the six months ended June 30, 2023
	Cannabis		Accessories		Corporate		Other		Total
Revenue	$	25,886	$	58,246	$	—	$	—	$	84,132
Inter-segment revenue		—		(269)		—		—		(269)
Net revenue	$	25,886	$	57,977	$	—	$	—	$	83,863
Share-based compensation		—		—		(831)		(1,234)		(2,065)
Depreciation and amortization		1,615		6,484		642		100		8,841
Wages and benefits		4,120		2,608		4,927		—		11,655
Impairment loss		3,256		16		1,126		737		5,135
Interest expense		2,733		1,263		5,494		68		9,558
Loan losses		—		—		665		4,923		5,588
Net income (loss)	$	(23,035)	$	(5,490)	$	(8,200)	$	3,522	$	(33,203)


	For the six months ended June 30, 2022
	Cannabis		Accessories		Corporate		Other		Total
Revenue	$	23,482	$	66,708	$	—	$	—	$	90,190
Inter-segment revenue		—		(783)		—		—		(783)
Net revenue	$	23,482	$	65,925	$	—	$	—	$	89,407
Share-based compensation		—		—		1,494		518		2,012
Depreciation and amortization		1,295		7,409		27		387		9,118
Wages and benefits		3,251		2,420		5,832		—		11,503
Impairment loss		697		6,669		—		—		7,366
Interest expense		688		840		5,049		—		6,577
Loan losses		—		—		1,021		—		1,021
Net income (loss)	$	(3,161)	$	(15,749)	$	723	$	(501)	$	(18,688)


	For the three months ended June 30, 2023
	US		Canada		Other		Total
Revenue	$	36,232	$	5,361	$	6	$	41,599
Gross profit		2,607		1,433		-		4,040