Tilt Holdings Writes Off Half the Value of its Market Cap, Posts $5mm in Revenue for 2018

When it comes to absolute bombshell financial results in the cannabis sector, few come to mind quickly. That will now change however, after Tilt Holdings (CSE: TILT) posted its year end audited financial statements for 2018 with a mind boggling net loss of US$552.1 million with revenues for the year of $5.65 million.

Largely, this loss was the result of an impairment to goodwill in the amount of $496.44mm, out of a total initial goodwill amount of $503.79mm. This is significant, in that this was the first public reporting period for the issuer following its reverse takeover transaction that brought the firm public in December 2018.

This inflated goodwill figure was the result of the transactions that transpired to bring the entity public. Immediately following the valuing of these entities as nine figures, the public vehicle essentially elected to write off a large portion of this value. The reason given for this is outright hilarious:

Yes, that does in fact blame this massive write down of goodwill on “the Company’s outlook on the medical cannabis industry in Canada as a result of the legalized recreational market.” Perhaps the best part of this argument, is that these valuations were used in a transaction that occurred after the recreational legalization of cannabis in Canada.

Not to mention that Baker Technologies and Briteside Holdings are both US based entities of the company and thus should feel no impact from the status of cannabis within Canada. Here’s the summary from Tilt’s basis of consolidation that describes what each business unit does:

The business combination was set into motion on November 13, 2018, culminating in the reverse takeover transaction and public listing on December 6, 2018.

Outside of this intriguing loss, the company reported revenues of $5.65mm, resulting in a gross profit of $2.45mm. Total operating expenses were $56.59mm. Tilt Holdings reported a cash position of $97.25mm as of December 31, 2018.

In addition to releasing financial statements, Tilt Holdings released news that it had secured a new credit facility on April 29. The total loan, in the amount of US$20mm, has an excellent effective interest rate of 18.75%.

The first $8mm of this loan was drawn down immediately, with the remaining $12mm to be issued by May 10. Should the second drawn down not occur, the loan comes due June 28, 2019. Upon the drawing down of the second facility the loan becomes due in 180 days. The loan, provided by two related parties, is secured via liens on the borrowers property. The borrower being that of Standard Farms, and White Haven RE, two subsidiaries of Tilt Holdings. Should the second advance occur, a lien will be placed on the assets of the Sea Hunter Therapeutics subsidiary as well.

Proceeds from the credit facility will be used towards future M&A as well as general corporate purposes.

Tilt Holdings closed CAD$2.66 yesterday, down $0.13, or 4.66%.

Information for this briefing was found via Sedar and Tilt Holdings. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.