Quarterly report [Sections 13 or 15(d)]

Nature and Continuance of Operations

v3.25.2
Nature and Continuance of Operations
6 Months Ended
Jun. 30, 2025
Nature and Continuance of Operations  
Nature and Continuance of Operations

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 40 states in the United States (“U.S.”), as well as Canada, South America, and the European Union.

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 Scottsdale, 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 $25,300 during the six months ended June 30, 2025 and has an accumulated deficit of $1,151,059 as of June 30, 2025. Additionally, as of June 30, 2025, the Company had negative working capital of $93,881 compared to negative working capital of $46,627 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, a decrease in trade receivables mainly due to lower revenue, and a decrease in inventories.

In 2024, the Company announced a strategic review whereby it planned to divest of its plant-touching assets. 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 “Retail Disposal Group”). 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. During the three months ended June 30, 2025, the Company determined that the wholesale-related operations of CAC and Standard Farms Ohio, LLC (“Standard Farms OH”) (collectively, the “Wholesale Disposal Group”) met the criteria to be classified as held for sale and that the strategic shift would have a major effect on its operations and financial results. The results of the Retail Disposal Group and the Wholesale Disposal Group (collectively, the “Disposal Groups”) are presented as discontinued operations in the condensed consolidated statements of operations and comprehensive loss for all periods presented. The assets and liabilities of the discontinued operations have been reflected as assets and liabilities held for sale in the condensed consolidated balance sheets for all periods presented. See Note 4 — Assets Held for Sale and Discontinued Operations 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 were to be used for the construction of 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 allows the construction and operation of up to three medical marijuana dispensaries in the Commonwealth (collectively, the “Retail Locations”). The 2024 Standard Farms Loan will mature on December 31, 2027, and initially bore interest at 20%. On May 2, 2024, the Company drew $3,000 in proceeds on the 2024 Standard Farms Loan, $1,700 of which was allocated to a contingent interest derivative, and recognized a debt discount of $784. Subsequent to May 2, 2024, the Company drew an additional $3,144 in proceeds on this loan. Proceeds from the 2024 Standard Farms Loan were utilized for the initial setup and operation of the Retail Locations. On February 14, 2025 (the “Location Opening Date”), Standard Farms PA opened a Retail Location and completed its first commercial sale in the Commonwealth, triggering an automatic increase in the interest rate to 30%, derecognition of the $1,700

contingent interest derivative, and recognition of a debt discount for the same amount. See Note 11 — 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 Research, LLC (“Jupiter”). The Revolving Facility Amendment updated 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 June 30, 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 1.0% 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; (ii) reducing production and operational costs as a result of efficiencies or divestitures 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 the current interest rates will constrain the Company’s liquidity while they 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 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 11 — 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.