Tilt blamed the drop on lower sales volume for vape brand Jupiter, as well as a reduction in number of orders occurring, but not fulfilled, at the end of the quarter. Lower average prices in certain product lines also contributed to the revenue decline, however, this was partially offset by growth in the plant-touching business.
Tilt also reported a net loss of $26.9 million for the quarter versus last year’s Q2 net loss of $7.1 million. Tilt attributed the bulk of the increase to $15.7 million of non-cash writedown expenses related to inventory, investment, and loans receivable in the second quarter of 2023.
“I am encouraged by the progress we have made since I rejoined the company in April,” said interim CEO Tim Conder. “We have instilled a stronger focus on cash management in order to achieve profitability and cash flow generation.”
Conder highlighter “various cost-saving measures and efficiency improvements through vendor rationalization, improved inventory management and decreased waste, and operational rightsizing” that were implemented during the period and which are expected to result in annualized cost savings of approximately $8 million beginning in the third quarter of 2023.
Despite the slowdown in Jupiter sales, Conder seemed to suggest that the company’s focus would be on Jupiter moving forward.
“Looking ahead, we are intently focused on cash flow generation and prioritizing the strength of our balance sheet as we work to pay down debt and grow our cash reserves,” he said. “We will continue to execute on our strategic refinement plan while optimizing our brand portfolio to better align with our core competencies in inhalation. As we progress through the year, we are excited to better unify Jupiter and our plant-touching businesses while building the foundation for profitable growth in 2024 and beyond.”
The company also stated in its filing that the lawsuit from VPR Brands against Jupiter was settled in May.
Tilt has undergone a rapid change after it sent former CEO Gary Santo packing and brought back Mark Scatterday, the founder of Jupiter, as an advisor. In addition, Tilt appointed former CFO Brad Hoch, who currently serves as chief accounting officer, as interim CFO and Arthur “Art” Smuck to the company’s board of directors.
Tilt is reporting earnings now as a going concern these days. It incurred a comprehensive loss of $31 million during the six months ended June 30 and has an accumulated deficit of $995 million as of that same date.
Additionally, the company reported positive working capital of $5.5 million (compared to negative working capital of $39 million as of Dec. 31, 2022).
Tilt also stated in its filing that during the second quarter of 2023, a primary supplier significantly changed the payment terms of the company’s trade payable. The company said this was an unexpected event impacting short-term liquidity, causing the company to get a bridge loan.
“However, the issuance of the 2023 bridge notes caused the company to have to obtain a waiver of financial covenant defaults expected to occur for the 2023 Refinanced Notes,” the company reported. “As a result of the waiver, the company had to pay default interest rates on its 2023 Refinanced Notes and 2023 New Notes, which resulted in an increase from 16.5% as of March 31, 2023, to 24.75% as of June 30, 2023.”
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