TLLTF 10-Q

TILT Holdings Inc. (TLLTF)

10-Q 2023-11-13 For: 2023-09-30

View Original

Added on April 06, 2026


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 September 30, 2023 (Unaudited) and December 31, 2022	5

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

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

Condensed Consolidated Statements of Cash Flows for the nine months ended September 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	37

Item 3. Quantitative and Qualitative Disclosures About Market Risk	48

Item 4. Controls and Procedures	48

PART II — OTHER INFORMATION	50

Item 1. Legal Proceedings	50

Item 1A. Risk Factors	50

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3. Defaults Upon Senior Securities	54

Item 4. Mine Safety Disclosures	54

Item 5. Other Information	54

Item 6. Exhibits	55

Signatures	56


	September 30, 2023		December 31, 2022
	(unaudited)		(audited)
ASSETS
Current assets
Cash and cash equivalents	$	1,486	$	2,202
Restricted cash		1,297		1,298
Trade receivables, net		20,976		26,698
Inventories		38,435		52,909
Loans receivable, current portion		—		516
Prepaid expenses and other current assets		2,663		1,979
Assets held for sale		—		325
Total current assets		64,857		85,927

Non-current assets
Property, plant and equipment, net		52,675		67,937
Right-of-use assets – finance, net		2,437		4,351
Right-of-use assets – operating, net		12,406		740
Investments		1		6,402
Intangible assets, net		92,219		102,714
Loans receivable, net of current portion		1,355		3,703
Deferred tax asset		2,574		—
Goodwill		20,751		20,751
Other assets		1,954		1,453
TOTAL ASSETS	$	251,229	$	293,978

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	48,984	$	58,170
Income taxes payable		1,414		979
Deferred revenue		4,040		5,760
Finance lease liability, current portion		1,169		1,075
Operating lease liability, current portion		79		135
Notes payable, current portion		19,197		59,378
Total current liabilities		74,883		125,497

Non-current liabilities
Finance lease liability, net of current portion		3,355		4,245
Operating lease liability, net of current portion		12,757		701
Notes payable, net of discount, net of current portion		34,287		350
Massachusetts lease liability		40,577		40,022
Deferred tax liability		—		1,373
Other liabilities		1,233		273
TOTAL LIABILITIES		167,092		172,461

Shareholders’ equity
Common shares, without par value, unlimited shares authorized, 381,463,838 and 377,515,391 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		856,208		858,143
Additional paid-in capital		225,254		225,127
Warrants		5,835		796
Accumulated other comprehensive income		976		988
Accumulated deficit		(1,004,136)		(963,703)
TOTAL SHAREHOLDERS’ EQUITY		84,137		121,351

Non-controlling interest		—		166
TOTAL EQUITY		84,137		121,517
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	251,229	$	293,978


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues, net	$	44,555	$	40,487	$	128,418	$	129,894
Cost of goods sold		(36,595)		(30,950)		(107,622)		(100,059)
Gross profit		7,960		9,537		20,796		29,835

Operating expenses:
Wages and benefits		4,707		4,881		16,362		16,384
General and administrative		3,721		4,643		13,870		15,007
Sales and marketing		175		808		869		1,801
Share-based compensation expense (benefit)		190		533		(1,875)		2,545
Depreciation and amortization		3,891		4,594		12,732		13,712
Impairment loss and loss on disposal of assets		—		175		5,135		7,541
Total operating expenses		12,684		15,634		47,093		56,990
Operating loss		(4,724)		(6,097)		(26,297)		(27,155)

Other income (expense):
Interest income		—		94		—		168
Other income		2		2		102		9
Change in fair value of warrant liability		—		610		—		2,360
Gain (loss) on sale of assets and membership interests		483		(1)		8,884		—
Unrealized loss on investment		(1)		(198)		(6,401)		(292)
Loan receivable losses		(14)		(133)		(5,602)		(1,154)
Loss on foreign currency exchange		(17)		—		(18)		—
Interest expense		(6,369)		(4,150)		(15,927)		(10,727)
Total other expense		(5,916)		(3,776)		(18,962)		(9,636)
Loss from operations before income tax and non-controlling interest		(10,640)		(9,873)		(45,259)		(36,791)

Income taxes
Income tax benefit (expense)		1,977		(5,818)		3,393		2,412
Net loss before non-controlling interest		(8,663)		(15,691)		(41,866)		(34,379)
Less: Net income attributable to non-controlling interest		—		—		1,433		8
Net loss attributable to TILT Holdings Inc.	$	(8,663)	$	(15,691)	$	(40,433)	$	(34,371)

Other comprehensive loss
Net loss before non-controlling interest	$	(8,663)	$	(15,691)	$	(41,866)	$	(34,379)
Foreign currency translation differences		(7)		(8)		(12)		(10)
Comprehensive loss before non-controlling interest		(8,670)		(15,699)		(41,878)		(34,389)
Less: Net income attributable to non-controlling interest		—		—		1,433		8
Comprehensive loss attributable to TILT Holdings Inc.	$	(8,670)	$	(15,699)	$	(40,445)	$	(34,381)


Weighted average number of shares outstanding:
Basic and diluted		379,610,460		375,776,275		378,541,584		375,311,644
Net loss per common share attributable to TILT Holdings Inc.
Basic and diluted	$	(0.02)	$	(0.04)	$	(0.11)	$	(0.09)


									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
Share-based compensation	—		—		26		—		—		—		—		26
Issuance and vesting of restricted share units	2,934,977		164		—		—		—		—		—		164
CGSF/SFNY Divestiture	—		—		—		—		—		—		1,267		1,267
Comprehensive loss for the period	—		—		—		—		(7)		(8,663)		—		(8,670)
Balance - September 30, 2023	381,463,838	$	856,208	$	225,254	$	5,835	$	976	$	(1,004,136)	$	—	$	84,137


								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
Share-based compensation	—		—		(13)		—		—		—		—		(13)
Issuance and vesting of restricted share units	—		430		—		—		—		—		—		430
Shares reserved for contingent consideration	—		117		—		—		—		—		—		117
Comprehensive loss for the period	—		—		—		—		(8)		(15,691)		—		(15,699)
Balance - September 30, 2022	375,776,275	$	857,413	$	224,921	$	952	$	989	$	(890,619)	$	167	$	193,823


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 September 30, 2023
	Fair value hierarchy
Fair value of assets	Level 1		Level 2		Level 3
Cash and cash equivalents	$	1,486	$	—	$	—
Restricted cash		1,297		—		—
Investments		1		—		—
Total	$	2,784	$	—	$	—


	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, September 30, 2022	$	63,877


	September 30, 2023		December 31, 2022
Raw Material - cannabis plants	$	2,910	$	3,383
Raw Material - other materials		534		763
Work in progress		13,880		11,268
Finished goods		18,851		34,779
Supplies and accessories		2,260		2,716
Total Inventories	$	38,435	$	52,909


Investment	September 30, 2023		December 31, 2022
HERBL, Inc.	$	—	$	6,400
Akerna		1		2
Total Investments	$	1	$	6,402


Intangible assets	September 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
Patents & technologies		32,900		32,900
Backlog and non-competition agreements		10,406		10,406
Total intangible assets, at cost		164,146		165,072
Less: Accumulated amortization		(71,927)		(62,358)
Total intangible assets, net	$	92,219	$	102,714


	Estimated
Years ended December 31,	amortization
Remainder of 2023	$	3,239
2024		12,953
2025		12,953
2026		12,796
2027		12,796
Thereafter		31,103
	$	85,840


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(41,866)	$	(34,379)
Adjustments to reconcile net loss to net cash provided by operating activities:
Unrealized loss on investments		6,401		292
(Gain) loss on sale of assets and other		(8,133)		10
Depreciation and amortization		16,527		17,826
Amortization of operating lease right of use assets		1,887		531
Change in allowance for doubtful accounts		328		(213)
Non-cash interest income		-		(45)
Deferred tax		(3,947)		(3,450)
Share-based compensation expense (benefit)		(1,875)		2,545
Accretion of debt discount		1,466		2,210
Change in fair value of warrant liability		-		(2,360)
Loan receivable losses		5,602		1,154
Impairment loss and loss on disposal of assets		5,135		7,541
Inventory adjustments		5,831		546
Non-cash interest expense		4,255		3,430
Net change in working capital items:
Trade receivables, net		5,394		8,666
Inventories		8,644		5,804
Prepaid expenses and other current assets		(1,185)		(452)
Accounts payable and accrued liabilities		(1,788)		(1,036)
Income tax payable		435		621
Deferred revenue		(1,720)		(949)
Net cash provided by operating activities		1,391		8,292

Cash flows from investing activities:
Purchases of property, plant, and equipment		(351)		(14,856)
Proceeds from sale of property, plant and equipment		15,000		9
Repayment of loan receivable, net of advances		(2,806)		(1,115)
Proceeds from CGSF/SFNY Divestiture		1,400		—
Net cash provided by (used in) investing activities		13,243		(15,962)

Cash flows from financing activities:
Payments on lease liability		(2,348)		(1,595)
Repayments on notes payable and Massachusetts Lease Liability		(14,825)		(319)
Repayments on Revolving Facility		(94,870)		(120,256)


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


Loans receivable	September 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		—		2,199
Total loans receivable	$	9,257	$	11,456
Less allowance for expected credit losses		(7,902)		(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


	As of September 30, 2023
Nature of collateral	Gross amounts		Loan losses		Net
Security interest in assets of counterparty	$	7,623		(6,268)	$	1,355
Third party guarantee		1,410		(1,410)		—
No collateral		224		(224)		—
Net loans receivable	$	9,257	$	(7,902)	$	1,355


			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, September 30, 2022	$	56,678	$	5,819	$	1,380	$	63,877

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


Accounts payable and accrued liabilities	September 30, 2023		December 31, 2022
Accounts payable	$	45,587	$	49,261
Accrued interest expense		—		2,983
Accrued payroll		2,183		1,626
Due to Jupiter Sellers		—		2,800
Other current payables/liabilities⁽¹⁾		1,214		1,500
Total accounts payable and accrued liabilities	$	48,984	$	58,170


Notes Payable	September 30, 2023			December 31, 2022
Revolving Facility – Interest rate of 11.5% as of September 30, 2023, due on July 21, 2024 ⁽¹⁾	$	7,586		$	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 17.0% per annum as of September 30, 2023, due on February 15, 2026		39,944			—
2023 New Notes – Interest rate of 25.0% per annum as of September 30, 2023, due on February 15, 2027 ⁽³⁾		9,546			—
2023 Bridge Notes – Paid in August 2023		—			—
Employee Retention Credit note and other loans and borrowings		3,594			350
Total debt		60,670			59,728
Less: Debt discount and debt issuance costs		(7,186)	⁽²⁾		—
Less: Current portion of notes payable		(19,197)			(59,378)
Total debt, net of discount, net of current portion	$	34,287		$	350


Year ended December 31,	Amount
Remainder of 2023	$	1,944
2024		16,180
2025		5,000
2026		28,000
2027		9,546
2028 and thereafter		—
Total	$	60,670



	September 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	$	366	$	611
2024		1,489		2,433
2025		1,212		2,468
2026		926		2,530
2027		916		2,594
2028 and thereafter		379		28,264
Total undiscounted lease liabilities		5,288		38,900
Interest or discount on lease liabilities		(764)		(26,064)
Total present value of minimum lease payments		4,524		12,836
Lease liability - current portion		(1,169)		(79)
Lease liability	$	3,355	$	12,757


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 September 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	13,608,307		0.03
Vested	(4,163,720)		0.08
Forfeited	(1,452,804)		0.23
Unvested as of September 30, 2023	10,734,548	$	0.04


	Share Options	Weighted		Weighted Average
	Common	Average		Remaining Contractual
Share options	Shares	Exercise Price		Life (yrs)
Balance as of December 31, 2022	9,753,600	$	0.60	6.11
Forfeited	(1,014,915)	$	0.47	—
Balance as of September 30, 2023	8,738,685	$	0.62	5.23


	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	4,866,087	$ 0.30-0.48	June 25, 2030 - December 1, 2030	3,698,944
Other employee grants	3,682,598	$ 0.41-3.96	June 17, 2024 - November 21, 2029	3,682,598
Total	8,738,685			7,571,542


	Number of	Weighted Average
Performance Stock Units	PSUs	Grant Date Fair Value
Unvested as of January 1, 2023	10,632,378	$	0.30
Issued	2,000,000		0.06
Vested	(42,000)		0.21
Forfeited	(9,154,925)		0.30
Unvested as of September 30, 2023	3,435,453	$	0.17


	Closing Price on
PSU Grant Dates	Grant Date		Expiration Date	Outstanding (#)
September 30, 2021	$	0.39	December 31, 2024	373,758
December 19, 2021	$	0.23	December 31, 2024	361,695
Total				735,453


Loss per share	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2023		2022		2023		2022
Net loss attributable to TILT	$	(8,663)	$	(15,691)	$	(40,433)	$	(34,371)
Weighted-average number of shares and units outstanding - basic and diluted		379,610,460		375,776,275		378,541,584		375,311,644
Loss per share - basic and diluted	$	(0.02)	$	(0.04)	$	(0.11)	$	(0.09)


	Three Months Ended September 30, 2023
	Cannabis		Accessories		Corporate		Other		Total
Revenue	$	11,738	$	33,010	$	—	$	—	$	44,748
Inter-segment revenue		—		(193)		—		—		(193)
Net revenue	$	11,738	$	32,817	$	—	$	—	$	44,555
Share-based compensation		—		—		190		—		190
Depreciation and amortization		655		3,236		—		—		3,891
Wages and benefits		1,884		1,518		1,305		—		4,707
Impairment loss		—		—		—		—		—
Interest expense		1,817		680		3,872		—		6,369
Loan receivable losses		—		—		1		13		14
Net loss	$	(4,365)	$	(1,311)	$	(3,456)	$	469	$	(8,663)


	Three Months Ended September 30, 2022
	Cannabis		Accessories		Corporate		Other		Total
Revenue	$	12,175	$	28,799	$	—	$	—	$	40,974
Inter-segment revenue		—		(487)		—		—		(487)
Net revenue	$	12,175	$	28,312	$	—	$	—	$	40,487
Share-based compensation		—		—		418		115		533
Depreciation and amortization		672		3,712		13		197		4,594
Wages and benefits		1,912		1,159		1,810		—		4,881
Impairment loss		—		—		175		—		175
Interest expense		1,350		402		2,398		—		4,150
Loan losses		—		—		133		—		133
Net loss	$	(4,513)	$	(1,739)	$	(9,297)	$	(142)	$	(15,691)


	Nine Months Ended September 30, 2023
	Cannabis		Accessories		Corporate		Other		Total
Revenue	$	37,624	$	91,256	$	—	$	—	$	128,880
Inter-segment revenue		—		(462)		—		—		(462)
Net revenue	$	37,624	$	90,794	$	—	$	—	$	128,418
Share-based compensation		—		—		(641)		(1,234)		(1,875)
Depreciation and amortization		2,270		9,720		642		100		12,732
Wages and benefits		6,004		4,126		6,232		—		16,362
Impairment loss		3,256		16		1,126		737		5,135
Interest expense		4,550		1,943		9,366		68		15,927
Loan losses		—		—		666		4,936		5,602
Net income (loss)	$	(27,400)	$	(6,801)	$	(11,656)	$	3,991	$	(41,866)


	Nine Months Ended September 30, 2022
	Cannabis		Accessories		Corporate		Other		Total
Revenue	$	35,657	$	95,507	$	—	$	—	$	131,164
Inter-segment revenue		—		(1,270)		—		—		(1,270)
Net revenue	$	35,657	$	94,237	$	—	$	—	$	129,894
Share-based compensation		—		—		1,912		633		2,545
Depreciation and amortization		1,967		11,121		40		584		13,712
Wages and benefits		5,163		3,579		7,642		—		16,384
Impairment loss		697		6,669		175		—		7,541
Interest expense		2,038		1,242		7,447		—		10,727
Loan losses		—		—		1,154		—		1,154
Net loss	$	(7,674)	$	(17,488)	$	(8,574)	$	(643)	$	(34,379)


	Three Months Ended September 30, 2023
	US		Canada		Other		Total
Revenue	$	38,803	$	5,752	$	-	$	44,555
Gross profit		6,292		1,668		-		7,960