TILT Releases Letter from CEO Responding to Investor Concerns

CAMBRIDGE, Mass.–(BUSINESS WIRE)–TILT Holdings Inc. (“TILT” or the “Company”) (CSE: TILT) (OTCQB: SVVTF),
a leading provider of products and services to businesses operating in
the cannabis industry, today released a letter from the Company’s
Interim Chief Executive Officer, Mark Scatterday.

Dear TILT Shareholders:
In stepping into TILT’s CEO role
last month, I shared that one of my operational priorities was
committing our organization to regular shareholder communication and
updates. Our investors have been and remain our key partners in building
TILT into what it is today—a Top 5 US-focused cannabis company by
revenue with 500+ employees, and products and solutions in 40 US States
across cultivation, production, consumer devices, packaged goods,
software, services and distribution.

While I won’t make it a regular practice to comment on daily stock price
movements, I have observed there remains a great deal of confusion out
in the market around TILT. After a strong first quarter earnings last
week where TILT reported $40mm of pro forma revenue, representing 3x
year-over-year revenue growth and a 330 basis point improvement in
Adjusted pro forma EBITDA Margin compared to the same period a year ago,
I do think it is valuable to briefly check-in.

I have heard six primary questions from shareholders and investors since
Q1 earnings. Below are my thoughts in regard to each:




Did management decide to give itself a special first quarter comp
payout of stock options?

Answer: No. The approximately $60 million of non-cash stock
option expense in the first quarter came from options that were
issued 6 months ago as part of TILT’s foundational four-way merger
and going public process, well before I stepped into the role of
Interim CEO. These options have an exercise price of $5.25 CAD, and
were on a vesting schedule that automatically creates non-cash stock
option expense each quarter due to standard accounting rules around
option valuation. Q1’s option expense was based on a vesting
schedule set at the time of the merger. The options’ $5.25 exercise
price means that at today’s current stock price these options are
deeply out of the money. There should be no confusion on this
point—these options will only have value as TILT keeps growing and
focuses on taking the stock price up past $5.25 CAD. Therefore,
management, option recipients and other shareholders are entirely
aligned in their incentives to keep TILT growing and reaching
profitability for full year 2019.


Does TILT have sufficient sources of cash?

Answer: As I said on the earnings call, we secured a $20
million credit facility last month, and have been in the process of
securing additional capital. Fortunately, our Jupiter vaporization
business and many of our other assets are at a sufficient scale to
support incremental debt, and we have received significant interest
from potential capital providers in supporting TILT’s focus on
maintaining strong organic growth of our existing assets, as well as
achieving both profitability and a self-sustaining free cash flow
operating model in 2019. To that end, we have been engaging
established investors that specialize in the cannabis space to help
us build on our momentum and investor interest, and to optimize the
amount raised in this next funding round.


What does TILT intend to do with these funds? Said differently,
what are its priorities for 2019?

Answer: Much like our May 2019 credit facility, this next
round of capital is a bridge to profitability. Again, as I conveyed
on the earnings call, we are focused on operational excellence,
integrating our previous acquisitions, and driving growth and
profitability based on our existing assets.


Is Mark Scatterday as Interim CEO committed to TILT?

Answer: Regarding this question on my involvement in TILT,
let me say unequivocally, Yes, I am clearly committed to TILT. I am
one of the largest securityholders of TILT through TILT’s previous
acquisition of my firm Jupiter Research, and my incentives are
therefore clearly aligned with other securityholders.


Is TILT management and its founders committed to the company?

Answer: Yes, strongly so. As you also saw this morning, we
had a key announcement in this regard with key founders and
executives having entered into voluntary lock-up agreements around
their shares. The voluntary lock-up agreements with TILT are tied to
80,340,640 common shares in the capital of the Company (“Common
”) or securities convertible into Common Shares (the “Locked-up
”), representing 18.6% of the voting shares of the
Company, assuming the conversion or exercise of all issued and
outstanding compressed shares, options to purchase Common Shares and
other securities convertible into or exchangeable for Common Shares.
Under the Lock-up Agreement, the Locked-up Shareholders agree to an
additional lock-up of their Locked-up Securities, forfeiting rights
to offer to sell, contract to sell or otherwise dispose of their
Locked-up Securities, or enter into any transaction to such effect,
directly or indirectly, in addition to other restrictions, including
restrictions contained in certain pre-existing lock-up agreements,
on or before the dates set forth in the Lock-up Agreement. In
accordance with the Lock-up Agreement, 10%, or 8,034,064 of the
Locked-up Securities, will be released from escrow on June 6, 2019,
40%, or 32,136,256 of the Locked-up Securities, will be released on
December 6, 2019 and the remaining 50%, or 40,170,320 Locked-up
Securities, will be released on June 6, 2020. This schedule reflects
an extension from the pre-existing lock-up terms applying to certain
TILT shareholders which are to be released from lock-up 50% on June
6, 2019 and the remaining 50% on December 6, 2019.


Does TILT remain optimistic about the US cannabis industry?

Answer: Yes, as much as ever. We are continuing to scale
rapidly, as confirmed by our 3x year over year revenue growth in the
first quarter, and are improving our profitability and cash flow
profile. Moreover, we continue to see positive developments and
large market expansion opportunities for our existing assets to
support, such as Illinois legalizing adult-use cannabis and
establishing a regulated sales structure through its legislature.
The recent legislative evolution in Illinois is just the latest
example of our addressable market continuing to grow, and we look
forward to capitalizing on the opportunities. Additionally, in
Massachusetts, we recently began expansion of Blackbird’s software
solutions to clients to facilitate the efficient movement of
cannabis products at each touch point within the supply chain. With
21 adult-use dispensaries industry-wide having recently received the
final license and another 31 with provisional licenses, we continue
to anticipate significant rates of growth in the adult-use market in

I look forward to maintaining a direct dialogue with our shareholders
and prospective investors on TILT and our opportunity ahead as one of
the largest and most innovative US-focused cannabis companies in the

Sincerely Yours,

Mark Scatterday
Interim Chief Executive Officer

About TILT

TILT is a leading provider of products and services to businesses
operating in the cannabis industry. The Company offers the contract
manufacturing of marijuana in a variety of form factors, vaporizer and
inhalation devices, business and consumer delivery services and a broad
suite of software products for over 1,500 retailers and brands
throughout the United States (“U.S.”), Canada and Europe. The majority
of TILT’s products are customized to client specifications and branding,
all enabling them to operate their businesses more efficiently and
connect with their customers more effectively. The Company is organized
in two main business units, Software & Services and Consumer Devices &
Packaged Goods, designed to augment competencies across the organization
in research, manufacturing, packaging and technology to deliver
end-to-end services and customer solutions. All of TILT’s products are
supported by an extensive research process led by scientists and
engineers, using data analytics and discovery to produce new products
helping shape the industry. Headquartered in Cambridge, MA, with offices
throughout the U.S., Toronto and London, TILT has over 500 employees and
has sales in 40 U.S. states, Canada and Europe. For more information,
please visit www.tiltholdings.com.

Forward-Looking Information

This news release contains forward-looking information based on
current expectations. Forward-looking information is provided for the
purpose of presenting information about management’s current
expectations and plans relating to the future and readers are cautioned
that such statements may not be appropriate for other purposes. Forward
looking information may include, without limitation, the receipt of the
Certificate of Operation by Standard Farms, the operational date of the
Facility, the expected growth of the Massachusetts and Illinois cannabis
market, the opinions or beliefs of management, prospects, opportunities,
priorities, targets, goals, ongoing objectives, milestones, strategies
and outlook of TILT, and includes statements about, among other things,
future developments, the future operations, strengths and strategy of

Generally, forward looking information can be identified by the use
of forward looking terminology such as “plans”, “expects” or “does not
expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”,
“intends”, “anticipates” or “does not anticipate”, or “believes”, or
variations of such words and phrases or state that certain actions,
events or results “may”, “could”, “would”, “might” or “will be taken”,
“occur” or “be achieved”. These statements should not be read as
guarantees of future performance or results. These statements are based
upon certain material factors, assumptions and analyses that were
applied in drawing a conclusion or making a forecast or projection,
including TILT’s experience and perceptions of historical trends,
current conditions and expected future developments, as well as other
factors that are believed to be reasonable in the circumstances.

Although such statements are based on management’s reasonable
assumptions at the date such statements are made, there can be no
assurance that they it be completed on the terms described above and
that such forward-looking information will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such forward-looking information. Accordingly, readers
should not place undue reliance on the forward-looking information. TILT
assumes no responsibility to update or revise forward-looking
information to reflect new events or circumstances unless required by
applicable law.

By its nature, forward-looking information is subject to risks and
uncertainties, and there are a variety of material factors, many of
which are beyond the control of TILT, and that may cause actual outcomes
to differ materially from those discussed in the forward-looking

The CSE has neither approved nor disapproved the contents of this
news release.

Pro Forma Presentation

The pro forma information (“Pro Forma Information”) presented herein
is not necessarily indicative of the operating results or financial
condition that would have been achieved if the proposed acquisitions to
which the Pro Forma Information relates had been completed on the dates
or for the periods presented, nor do they purport to project the results
of operations or financial position of the combined entities for any
future period or as of any future date. Actual amounts recorded upon
consummation of the acquisitions to which the Pro Forma Information
relates would likely differ from those recorded in the Pro Forma
Information. The Pro Forma Information does not reflect any special
items such as integration costs or operating synergies that may be
realized as a result of the acquisitions to which the Pro Forma
Information relates.


Contact Information:
Joel Milton
SVP of Business
Phone: (303) 872-7255

Investor Contact:
Scott Van Winkle

Media Contact:
Cory Ziskind
Phone: 646-277-1232

Author: dmnnewswire