☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(§Large accelerated filer ☐ Accelerated filer ☐ ☒ Smaller reporting company ☒ Emerging growth company ☒
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PART I. FINANCIAL INFORMATION | ||||||||||
Item 1. | 1 | |||||||||
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Item 2. | ||||||||||
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Item 3. | ||||||||||
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Item 2. | ||||||||||
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Item 3. | ||||||||||
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Item 4. | ||||||||||
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Item 5. | ||||||||||
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Item 6. | ||||||||||
statement.
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
(Revised) | ||||||||
Assets | ||||||||
Cash | $ | 13,692 | $ | 11,015 | ||||
Restricted cash | 8,435 | 495 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $401 (December 31, 2020 - $401) | 4,360 | 3,351 | ||||||
Prepaid expenses | 4,639 | 3,611 | ||||||
Inventories | 26,174 | 25,451 | ||||||
Other assets | 3,200 | 1,700 | ||||||
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Current Assets | $ | 60,500 | $ | 45,623 | ||||
Investments | 532 | 512 | ||||||
Property, plant and equipment | 109,075 | 106,997 | ||||||
Right-of-use assets | 32,204 | 33,083 | ||||||
Other long-term assets | 7,752 | 8,137 | ||||||
Intangible assets | 154,818 | 158,781 | ||||||
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Total Assets | $ | 364,881 | $ | 353,133 | ||||
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Liabilities | ||||||||
Accounts payable | $ | 13,897 | $ | 12,089 | ||||
Accrued and other current liabilities | 67,450 | 55,053 | ||||||
Current portion of long-term debt | 161,443 | 157,042 | ||||||
Derivative liabilities | 282 | 245 | ||||||
Current portion of lease liabilities | 7,630 | 7,450 | ||||||
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Current Liabilities | $ | 250,702 | $ | 231,879 | ||||
Long-term debt, net of issuance costs | 25,590 | 14,133 | ||||||
Deferred income tax | 32,130 | 32,122 | ||||||
Long-term portion of lease liabilities | 26,948 | 27,670 | ||||||
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Total Liabilities | $ | 335,370 | $ | 305,804 | ||||
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Commitments and Contingencies | ||||||||
Shareholders’ Equity | ||||||||
Common shares — no par value. Authorized — unlimited number. 171,718 — issued and outstanding (December 31, 2020 — 171,718 — issued and outstanding) | $ | — | $ | — | ||||
Shares to be issued | 1,531 | 1,531 | ||||||
Additional paid-in capital | 771,574 | 769,940 | ||||||
Accumulated deficit | (743,594 | ) | (724,142 | ) | ||||
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Total Shareholders’ Equity | $ | 29,511 | $ | 47,329 | ||||
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Total Liabilities and Shareholders’ Equity | $ | 364,881 | $ | 353,133 | ||||
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September 30, | December 31, | |||||||
2021 | 2020 | |||||||
(Revised) | ||||||||
Assets | ||||||||
Cash | $ | 19,502 | $ | 11,015 | ||||
Restricted cash | 4,138 | 495 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $194 (December 31, 2020 - $401) | 3,427 | 3,351 | ||||||
Prepaid expenses | 3,150 | 3,611 | ||||||
Inventories | 29,984 | 25,451 | ||||||
Other assets | 2,627 | 1,700 | ||||||
Current Assets | 62,828 | 45,623 | ||||||
Investments | 592 | 512 | ||||||
Property, plant and equipment | 113,308 | 106,997 | ||||||
Right-of-use | 31,268 | 33,083 | ||||||
Other long-term assets | 8,442 | 8,137 | ||||||
Intangible assets | 147,566 | 158,781 | ||||||
Total Assets | $ | 364,004 | $ | 353,133 | ||||
Liabilities | ||||||||
Accounts payable | $ | 13,033 | $ | 12,089 | ||||
Accrued and other current liabilities | 89,358 | 55,053 | ||||||
Current portion of long-term debt, net of issuance costs | 164,793 | 157,042 | ||||||
Derivative liabilities | 315 | 245 | ||||||
Current portion of lease liabilities | 7,579 | 7,450 | ||||||
Current Liabilities | 275,078 | 231,879 | ||||||
Long-term debt, net of issuance costs | 27,074 | 14,133 | ||||||
Deferred income tax | 32,130 | 32,122 | ||||||
Long-term portion of lease liabilities | 28,027 | 27,670 | ||||||
Total Liabilities | 362,309 | 305,804 | ||||||
Commitments and Contingencies | 0 | 0 | ||||||
Shareholders’ Equity | ||||||||
Common shares — 0 par value. Authorized — unlimited number. 171,718 — issued and outstanding (December 31, 2020 — 171,718 — issued and outstanding) | 0— | 0— | ||||||
Shares to be issued | 1,531 | 1,531 | ||||||
Additional paid-in capital | 774,849 | 769,940 | ||||||
Accumulated deficit | (774,685 | ) | (724,142 | ) | ||||
Total Shareholders’ Equity | $ | 1,695 | $ | 47,329 | ||||
Total Liabilities and Shareholders’ Equity | $ | 364,004 | $ | 353,133 | ||||
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenues, net of discounts | $ | 51,805 | $ | 30,426 | ||||
Costs and expenses applicable to revenues | (22,084 | ) | (14,974 | ) | ||||
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Gross profit | 29,721 | 15,452 | ||||||
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Operating expenses | ||||||||
Selling, general and administrative expenses | 23,686 | 27,741 | ||||||
Depreciation and amortization expenses | 7,374 | 6,414 | ||||||
Write-downs and other charges | 259 | 679 | ||||||
Impairment loss | — | 199,364 | ||||||
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Loss from operations | (1,598 | ) | (218,746 | ) | ||||
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Interest income | 124 | 12 | ||||||
Other income | 274 | 81 | ||||||
Interest expense | (5,678 | ) | (4,467 | ) | ||||
Accretion expense | (4,852 | ) | (4,004 | ) | ||||
Provision for debt obligation fee | (414 | ) | (12,503 | ) | ||||
Losses (gains) from change in fair value of financial instruments | (17 | ) | 4,692 | |||||
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Loss from operations before income taxes | (12,161 | ) | (234,935 | ) | ||||
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Income tax expense | 7,291 | 1,406 | ||||||
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Net loss | $ | (19,452 | ) | $ | (236,341 | ) | ||
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Net loss per share - basic and diluted | $ | (0.11 | ) | $ | (1.38 | ) | ||
Weighted average number of common shares outstanding - basic and diluted | 171,718 | 171,667 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(Revised) | (Revised) | |||||||||||||||
Revenues, net of discounts | $ | 49,263 | $ | 40,616 | $ | 155,296 | $ | 105,688 | ||||||||
Costs and expenses applicable to revenues | (23,206 | ) | (15,513 | ) | (68,207 | ) | (46,243 | ) | ||||||||
Gross profit | 26,057 | 25,103 | 87,089 | 59,445 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling, general and administrative expenses | 22,581 | 24,173 | 67,263 | 74,521 | ||||||||||||
Depreciation and amortization | 8,133 | 7,237 | 23,266 | 20,416 | ||||||||||||
Write-downs, recoveries and other charges, net | 0 | 3 | 186 | 690 | ||||||||||||
Impairment loss | 127 | 4,100 | 1,823 | 203,464 | ||||||||||||
Loss from operations | (4,784 | ) | (10,410 | ) | (5,449 | ) | (239,646 | ) | ||||||||
Interest income | 138 | 96 | 371 | 276 | ||||||||||||
Other income | 350 | 461 | 844 | 756 | ||||||||||||
Interest expense | (5,959 | ) | (5,476 | ) | (17,516 | ) | (15,108 | ) | ||||||||
Accretion expense | (767 | ) | (4,354 | ) | (8,283 | ) | (12,471 | ) | ||||||||
Provision for debt obligation fee | (423 | ) | (423 | ) | (1,255 | ) | (13,342 | ) | ||||||||
( Loss) gains from change in fair value of financial instruments | (300 | ) | 244 | 10 | 5,170 | |||||||||||
Loss before income taxes | (11,745 | ) | (19,862 | ) | (31,278 | ) | (274,365 | ) | ||||||||
Income tax expense | 4,090 | 5,609 | 19,265 | 12,272 | ||||||||||||
Net loss | $ | (15,835 | ) | $ | (25,471 | ) | $ | (50,543 | ) | $ | (286,637 | ) | ||||
Net loss per share - basic and diluted | $ | (0.09 | ) | $ | (0.15 | ) | $ | (0.29 | ) | $ | (1.67 | ) | ||||
Weighted average number of common shares outstanding - basic and diluted | 171,718 | 171,643 | 171,718 | 171,651 |
Three Months Ended March 31, 2021 | ||||||||||||||||||||
Number of Shares (Common) | Shares to be Issued | Additional Paid- in-Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
Balance – January 1, 2021 - Revised | 171,718,192 | $ | 1,531 | $ | 769,940 | $ | (724,142 | ) | $ | 47,329 | ||||||||||
Share-based compensation | — | — | 1,634 | — | 1,634 | |||||||||||||||
Net loss | — | — | — | (19,452 | ) | (19,452 | ) | |||||||||||||
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Balance – March 31, 2021 | 171,718,192 | $ | 1,531 | $ | 771,574 | $ | (743,594 | ) | $ | 29,511 | ||||||||||
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Three Months Ended March 31, 2020 | ||||||||||||||||||||
Number of Shares (Common) | Shares to be Issued | Additional Paid- in-Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
Balance – January 1, 2020 | 171,643,192 | $ | 1,531 | $ | 761,722 | $ | (410,780 | ) | $ | 352,473 | ||||||||||
Share issuance – Settlement of outstanding obligations | 75,000 | — | 193 | — | 193 | |||||||||||||||
Share-based compensation | — | — | 5,175 | — | 5,175 | |||||||||||||||
Other - Warrant issuance | — | — | (3,325 | ) | — | (3,325 | ) | |||||||||||||
Net loss | — | — | — | (236,341 | ) | (236,341 | ) | |||||||||||||
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Balance – March 31, 2020 | 171,718,192 | $ | 1,531 | $ | 763,765 | $ | (647,121 | ) | $ | 118,175 | ||||||||||
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or shares)
Three Months Ended September 30, 2021 | ||||||||||||||||||||
Number of Common Shares (‘000) | Shares to be Issued | Additional Paid-in-Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
Balance – June 30, 2021 | 171,718 | $ | 1,531 | $ | 773,235 | $ | (758,850 | ) | $ | 15,916 | ||||||||||
Share-based compensation | — | — | 1,614 | — | 1,614 | |||||||||||||||
Net loss | — | — | — | (15,835 | ) | (15,835 | ) | |||||||||||||
Balance – September 30, 2021 | 171,718 | $ | 1,531 | $ | 774,849 | $ | (774,685 | ) | $ | 1,695 | ||||||||||
Nine Months Ended September 30, 2021 | ||||||||||||||||||||
Number of Common Shares (‘000) | Shares to be Issued | Additional Paid-in-Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
Balance – January 1, 2021 - Revised | 171,718 | $ | 1,531 | $ | 769,940 | $ | (724,142 | ) | $ | 47,329 | ||||||||||
Share-based compensation | — | — | 4,909 | — | 4,909 | |||||||||||||||
Net loss | — | — | — | (50,543 | ) | (50,543 | ) | |||||||||||||
Balance – September 30, 2021 | 171,718 | $ | 1,531 | $ | 774,849 | $ | (774,685 | ) | $ | 1,695 | ||||||||||
Three Months Ended September 30, 2020 | ||||||||||||||||||||
Number of Common Shares (‘000) | Shares to be Issued | Additional Paid-in-Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
Balance – June 30, 2020 | 171,718 | $ | 1,531 | $ | 766,257 | $ | (671,946 | ) | $ | 95,842 | ||||||||||
Share-based compensation | — | — | 1,745 | — | 1,745 | |||||||||||||||
Net loss (Revised) | — | — | — | (25,471 | ) | (25,471 | ) | |||||||||||||
Balance (Revised) – September 30, 2020 | 171,718 | $ | 1,531 | $ | 768,002 | $ | (697,417 | ) | $ | 72,116 | ||||||||||
Nine Months Ended September 30, 2020 | ||||||||||||||||||||
Number of Common Shares (‘000) | Shares to be Issued | Additional Paid-in-Capital | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||
Balance – January 1, 2020 | 171,643 | $ | 1,531 | $ | 761,722 | $ | (410,780 | ) | $ | 352,473 | ||||||||||
Share issuance – Settlement of outstanding obligations | 75 | — | 193 | — | 193 | |||||||||||||||
Share-based compensation | — | — | 9,412 | — | 9,412 | |||||||||||||||
Other - Warrant issuance | — | — | (3,325 | ) | — | (3,325 | ) | |||||||||||||
Net loss (Revised) | — | — | — | (286,637 | ) | (286,637 | ) | |||||||||||||
Balance (Revised) – September 30, 2020 | 171,718 | $ | 1,531 | $ | 768,002 | $ | (697,417 | ) | $ | 72,116 | ||||||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (19,452 | ) | $ | (236,341 | ) | ||
Adjustments to reconcile net loss to cashflow from (used in) operations: | ||||||||
Interest income | (124 | ) | (12 | ) | ||||
Interest expense | 5,678 | 4,467 | ||||||
Accretion expense | 4,852 | 4,004 | ||||||
Debt obligation fees | 414 | 12,503 | ||||||
Impairment loss | — | 199,364 | ||||||
Depreciation and amortization | 7,374 | 6,414 | ||||||
Write-downs and other charges | 259 | 679 | ||||||
Share-based compensation | 1,634 | 5,368 | ||||||
Gain from change in fair value of financial instruments | 17 | (4,692 | ) | |||||
Income from equity-accounted investments | — | 41 | ||||||
Deferred income taxes | 8 | (2,206 | ) | |||||
Change in non-cash working capital items (Note 12) | 4,792 | 3,473 | ||||||
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NET CASH FLOW FROM (USED IN) OPERATING ACTIVITIES | $ | 5,452 | $ | (6,938 | ) | |||
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CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
Purchase of property, plant and equipment | (4,752 | ) | (10,030 | ) | ||||
Acquisition of other intangible assets | — | (292 | ) | |||||
Proceeds from redemption and sale of investment | — | 110 | ||||||
Issuance of related party promissory note | (375 | ) | — | |||||
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NET CASH USED IN INVESTING ACTIVITIES | $ | (5,127 | ) | $ | (10,212 | ) | ||
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CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of debt | 11,000 | — | ||||||
Debt issuance costs | (694 | ) | — | |||||
Repayment of debt | (14 | ) | (11,212 | ) | ||||
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NET CASH PROVIDED (USED IN) BY FINANCING ACTIVITIES | $ | 10,292 | $ | (11,212 | ) | |||
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CASH, CASH EQUIVALENTS AND RESTRICTED CASH: | ||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH DURING THE PERIOD | 10,617 | (28,362 | ) | |||||
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CASH AND RESTRICTED CASH, BEGINNING OF PERIOD | 11,510 | 34,821 | ||||||
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CASH AND RESTRICTED CASH, END OF PERIOD | $ | 22,127 | $ | 6,459 | ||||
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Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
(Revised) | ||||||||
CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (50,543 | ) | $ | (286,637 | ) | ||
Adjustments to reconcile net loss to cashflow from (used in) operations: | ||||||||
Interest income | (371 | ) | (276 | ) | ||||
Interest expense | 17,516 | 15,108 | ||||||
Accretion expense | 8,283 | 12,471 | ||||||
Debt obligation fees | 1,255 | 13,342 | ||||||
Impairment loss | 1,823 | 203,464 | ||||||
Depreciation and amortization | 23,266 | 20,416 | ||||||
Write-downs, recoveries and other charges, net | 186 | 690 | ||||||
Share-based compensation | 4,909 | 9,605 | ||||||
Gain from change in fair value of financial instruments | (10 | ) | (5,170 | ) | ||||
Income from equity-accounted investments | — | (140 | ) | |||||
Deferred income taxes | 0 | (3,845 | ) | |||||
Change in non-cash working capital items (Note 12) | 13,531 | 13,227 | ||||||
NET CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | 19,845 | $ | (7,745 | ) | |||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
Purchase of property, plant and equipment | (16,528 | ) | (12,297 | ) | ||||
Acquisition of other intangible assets | (463 | ) | (459 | ) | ||||
Proceeds from redemption and sale of investment | — | 1,685 | ||||||
Issuance of related party promissory note | (977 | ) | (3,016 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | $ | (17,968 | ) | $ | (14,087 | ) | ||
CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of debt | 11,000 | 14,737 | ||||||
Debt issuance costs | (694 | ) | (2,230 | ) | ||||
Repayment of debt | (53 | ) | (10,838 | ) | ||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | $ | 10,253 | $ | 1,669 | ||||
CASH AND RESTRICTED CASH: | ||||||||
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH DURING THE PERIOD | 12,130 | (20,163 | ) | |||||
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD | 11,510 | 34,821 | ||||||
CASH AND RESTRICTED CASH, END OF PERIOD | $ | 23,640 | $ | 14,658 | ||||
(a) |
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(b) |
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These
(c) |
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iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
.
Pursuant to the terms of the Restructuring Support Agreement, if the Recapitalization Transaction is completed through CCAA proceedings, then the existing holders of the Company’s common shares (the “Existing Shareholders”) will not receive any recovery.
The Company may be required to obtain other necessary approvals with respect to the Plan of Arrangement, including approvals by state-level regulators and the Canadian Securities Exchange (collectively, the “Requisite Approvals”). Specifically, certain of the transactions contemplated by the Recapitalization Transaction have triggered the requirement for an approval by state-level regulators in certain U.S. states with jurisdiction over the licensed cannabis operations of entities owned, in whole or in part, or controlled, directly or indirectly, by the Company in such states. On February 23, 2021, the Nevada Cannabis Compliance Board approved the proposed change of ownership and control of the Company’s wholly-owned subsidiary, GreenMart of Nevada NLV, LLC (“GMNV”), contemplated by the Recapitalization Transaction. On June 17, 2021, the Massachusetts Cannabis Control Commission (the “CCC”) also approved the proposed change of ownership and control of the current licenses held by the Company’s wholly-owned subsidiaries, Mayflower Medicinals, Inc. (“Mayflower”) and Cannatech Medicinals, Inc. (“Cannatech”), contemplated by the Recapitalization Transaction (the “June 17 Approval”). On June 15, 2021, the Company and the Lenders agreed to amend the date by which the Recapitalization Transaction pursuant to the Plan of Arrangement is required to be implemented by from June 30, 2021 to August 31, 2021.
iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
(d) |
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(f) |
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(g) |
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unknown period of time.
iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
Operating Leases | ||||
2021 | $ | 7,630 | ||
2022 | 6,983 | |||
2023 | 7,041 | |||
2024 | 7,198 | |||
2025 | 7,271 | |||
Thereafter | 57,004 | |||
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Total lease payments | $ | 93,127 | ||
Less: interest expense | (58,549 | ) | ||
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Present value of lease liabilities | $ | 34,578 | ||
Weighted-average remaining lease term (years) | 11.9 | |||
Weighted-average discount rate | 20 | % |
Operating Leases | ||||
2022 | $ | 7,579 | ||
2023 | 7,328 | |||
2024 | 7,463 | |||
2025 | 7,629 | |||
2026 | 7,538 | |||
Thereafter | 59,301 | |||
Total lease payments | $ | 96,838 | ||
Less: interest expense | (61,232 | ) | ||
Present value of lease liabilities | $ | 35,606 | ||
Weighted-average remaining lease term (years) | 11.5 | |||
Weighted-average discount rate | 19 | % | ||
lines on the unaudited interim condensed consolidated statements of operations.
Balance Sheet Information | Classification | March 31, 2021 | December 31, 2020 | |||||||||
Right-of-use assets | Operating leases | $ | 32,204 | $ | 33,083 | |||||||
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Lease Liabilities | ||||||||||||
Current portion of lease liabilities | Operating leases | $ | 7,630 | $ | 7,450 | |||||||
Long-term lease liabilities | Operating leases | 26,948 | 27,670 | |||||||||
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Total | $ | 34,578 | $ | 35,120 | ||||||||
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Balance Sheet Information | Classification | September 30, 2021 | December 31, 2020 | |||||||||
Right-of-use | Operating leases | $ | 31,268 | $ | 33,083 | |||||||
Lease Liabilities | ||||||||||||
Current portion of lease liabilities | Operating leases | $ | 7,579 | $ | 7,450 | |||||||
Long-term lease liabilities | Operating leases | 28,027 | 27,670 | |||||||||
Total | $ | 35,606 | $ | 35,120 | ||||||||
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
(Revised) | ||||||||
Supplies | $ | 4,816 | $ | 5,010 | ||||
Raw materials | 7,150 | 7,047 | ||||||
Work in process | 6,925 | 5,710 | ||||||
Finished goods | 7,283 | 7,684 | ||||||
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Total | $ | 26,174 | $ | 25,451 | ||||
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iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
September 30, 2021 | December 31, 2020 | |||||||
(Revised) | ||||||||
Supplies | $ | 6,383 | $ | 5,010 | ||||
Raw materials | 3,536 | 7,047 | ||||||
Work in process | 10,532 | 5,710 | ||||||
Finished goods | 9,533 | 7,684 | ||||||
Total | $ | 29,984 | $ | 25,451 | ||||
Secured Notes | May 2019 Debentures | March 2019 Debentures | Other | Total | ||||||||||||||||
As of January 1, 2021 | $ | 115,350 | $ | 23,240 | $ | 31,665 | $ | 920 | $ | 171,175 | ||||||||||
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Fair value of financial liabilities issued | 10,860 | — | — | 160 | 11,020 | |||||||||||||||
Accretion of balance | 4,007 | 193 | 357 | 295 | 4,852 | |||||||||||||||
Repayment | — | — | — | (14 | ) | (14 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
As of March 31, 2021 | $ | 130,217 | $ | 23,433 | $ | 32,022 | $ | 1,361 | $ | 187,033 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Secured Notes (1) | May 2019 Debentures | March 2019 Debentures | Other | Total | ||||||||||||||||
As of January 1, 2021 | $ | 115,350 | $ | 23,240 | $ | 31,665 | $ | 920 | $ | 171,175 | ||||||||||
Fair value of financial liabilities issued | 12,302 | — | — | 160 | 12,462 | |||||||||||||||
Accretion of balance | 6,302 | 591 | 1,095 | 295 | 8,283 | |||||||||||||||
Repayment | — | — | — | (53 | ) | (53 | ) | |||||||||||||
As of September 30, 2021 | $ | 133,954 | $ | 23,831 | $ | 32,760 | $ | 1,322 | $ | 191,867 | ||||||||||
(1) | This amount |
(a) |
|
operations. The principal amount of such notes will remain outstanding until the closing of the Recapitalization Transaction. Interest on the Tranche Two Secured Notes will continue to accrue at the default rate of 16.0% per annum until such time. operations.secured notesSecured Notes (the “Tranche One Secured Notes”). with an original maturity date of May 14, 2021. The principal amount of such notes will remain outstanding until the closing of the Recapitalization Transaction. Interest on the Tranche One Secured Notes will continue to accrue at the default rate of 16.0% per annum until such time. Because the conversion price of $3.08 was less than the Company’s closing stock price on the date of issuance, this gave rise to a beneficial conversion feature valued at $7.9 million. The Company recognized this beneficial conversion feature as a debt discount and additional paid in capital on the closing date. The discount to the Tranche One Secured Notes is being amortized to interest expense until maturity or its earlier repayment or conversion. For the three and nine months ended March 31,September 30, 2021, the amount of amortization recorded in accretion expense was $NaN and $1.0 million, respectively (September 30, 2020 – $0.7 million (March 31, 2020 - $0.7 million)and $2.0 million, respectively). The terms also contain a financial covenant requiring the Company’s asset value to be 1.75 times the total net debt at each quarter end and maintain a minimum cash balance of $1.0 million while the Tranche One Secured Notes remain outstanding (the “market value test”).March 31,September 30, 2021, interest expense and accretion expense of $1.7 million and $2.3$5.0 million, respectively, (September 30, 2020 – $1.7 million and $4.7 million, respectively), and accretion expense of $NaN and $2.4 million, respectively (September 30, 2020 – $1.5 million and $4.4 million, respectively), were recorded inon the unaudited interim condensed consolidated statements of operations (March 31, 2020 - $1.4 million and $2.0 million, respectively).March 31,September 30, 2021, consisted of $97.5 million and $60.0 million of principal amount and $19.0$26.9 million and $6.0$8.4 million in accrued interest with respect to the Secured Notes and Unsecured Debentures, respectively. As a result of the default, the Company is classifying the Tranche One Secured Notes, Tranche Two Secured Notes, and Tranche Three Secured Notes as current liabilities on the unaudited interim condensed consolidated balance sheets. As of March 31,September 30, 2021, the Company is still in default on the Tranche One Secured Notes, Tranche Two Secured Notes, and Tranche Three Secured Notes. Further details on the default are disclosed in Note 13.March 31,September 30, 2021, interest expense of $0.4 million (March 31,and $1.3 million, respectively (September 30, 2020 - $2.2 million)– $0.4 million and $1.2 million, respectively), was recorded in relation to the Exit Fee on the unaudited interim condensed consolidated statements of operations. As of March 31,September 30, 2021, the Company accrued $14.2$15.0 million (as of March 31, 2020 - $12.5(September 30, 2020—$13.3 million) related to the Exit Fee, comprised of an aggregate principal amount of $10.3 million and $3.9$4.7 million in accrued interest (as of March 31,(September 30, 2020 – an aggregate principal amount of $10.3 million and $2.2$3.0 million respectively)in accrued interest). Furthermore, as a result of this default, the Company is classifying the Exit Fee as a current liability on the unaudited interim condensed consolidated balance sheets as of March 31,September 30, 2021.iANTHUS CAPITAL HOLDINGS, INC.NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(In thousands except per share amounts)secured notesSecured Notes (the “Tranche Two Secured Notes”). The Tranche Two Secured Notes accrue interest at 13.0% per annum and maturehad an original maturity date of May 14, 2021.March 31,September 30, 2021, interest expense and accretion expense of $0.8 million and $2.4 million, respectively (September 30, 2020 – $0.8 million and $2.3 million, respectively), and accretion expense of $NaN and $0.7 million, respectively (September 30, 2020 – $0.5 million respectively,and $1.4 million, respectively), were recorded inon the unaudited interim condensed consolidated statements of operations (March 31, 2020 - $0.7 million and $0.4 million, respectively).
The principal amount of such notes will remain outstanding until the closing of the Recapitalization Transaction. Interest on the Tranche Three Secured Notes will continue to accrue at default rate of 16.0% per annum until such time.
operations.
(b) |
|
operations.
(c) |
|
operations.
(d) |
|
(a) |
|
75,000
(b) |
|
March 31, 2021 | ||||||||
Units | Weighted Average Exercise Price (C$) | |||||||
Warrants outstanding as of December 31, 2020 | 49,236 | $ | 4.06 | |||||
Granted | — | — | ||||||
Exercised | — | — | ||||||
Expired | (9,411 | ) | 2.52 | |||||
|
|
|
| |||||
Warrants outstanding as of March 31, 2021 | 39,825 | $ | 4.24 | |||||
|
|
|
|
warrants:
September 30, 2021 | ||||||||
Units | Weighted Average Exercise Price (C$) | |||||||
Warrants outstanding as of December 31, 2020 | 49,236 | $ | 4.06 | |||||
Granted | 0 | 0— | ||||||
Exercised | 0 | 0— | ||||||
Expired | (26,577 | ) | 4.21 | |||||
Warrants outstanding as of September 30, 2021 | 22,659 | $ | 3.57 | |||||
March 31, 2021 | December 31, 2020 | |||||||
Risk-free interest rate | 0.2 | % | 0.2 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Expected volatility | 139.0 - 209.6 | % | 148.0 - 251.1 | % |
September 30, 2021 | December 31, 2020 | |||||||
Risk-free interest rate | 0.5 | % | 0.2 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Expected volatility | 67.4 - 186.1 | % | 148.0 - 251.1 | % |
March 31, 2021 | December 31, 2020 | |||||||||||||||
Year of expiration | Number Outstanding | Weighted Average Exercise Price (C$) | Number Outstanding | Weighted Average Exercise Price (C$) | ||||||||||||
2021 | 17,185 | $ | 5.16 | 26,596 | $ | 4.37 | ||||||||||
2022 | 20,855 | 3.44 | 20,855 | 3.62 | ||||||||||||
2023 | 1,785 | 4.57 | 1,785 | 4.57 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Warrants outstanding | 39,825 | $ | 4.24 | 49,236 | $ | 4.06 | ||||||||||
|
|
|
|
|
|
|
|
September 30, 2021 | December 31, 2020 | |||||||||||||||
Year of expiration | Number Outstanding | Weighted Average Exercise Price (C$) | Number Outstanding | Weighted Average Exercise Price (C$) | ||||||||||||
2021 | 19 | $ | 6.87 | 26,596 | $ | 4.37 | ||||||||||
2022 | 20,855 | 3.49 | 20,855 | 3.62 | ||||||||||||
2023 | 1,785 | 4.57 | 1,785 | 4.57 | ||||||||||||
Warrants outstanding | 22,659 | $ | 3.57 | 49,236 | $ | 4.06 | ||||||||||
(c) |
|
March 31, 2021 | December 31, 2020 | |||||||
Common Share Options | 10,825 | 11,510 | ||||||
Warrants | 39,825 | 49,236 | ||||||
Secured Notes | 46,458 | 46,458 | ||||||
Debentures | 10,135 | 10,135 | ||||||
MPX dilutive instruments(1) | 408 | 408 | ||||||
|
|
|
| |||||
Total* | 107,651 | 117,747 | ||||||
|
|
|
|
|
September 30, 2021 | December 31, 2020 | |||||||
Common share options | 10,543 | 11,510 | ||||||
Warrants | 22,659 | 49,236 | ||||||
Secured notes | 46,458 | 46,458 | ||||||
Debentures | 10,135 | 10,135 | ||||||
MPX dilutive instruments (1) | 408 | 408 | ||||||
Total | 90,203 | 117,747 | ||||||
(1) | Prior to the MPX Acquisition, MPX had instruments outstanding that were potentially dilutive and as a result of the MPX Acquisition, the Company assumed certain of these instruments. |
(d) |
|
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||
Units | Weighted Average Exercise Price (C$) | Weighted Average Contractual Life | Units | Weighted Average Exercise Price (C$) | Weighted Average Contractual Life | |||||||||||||||||||
Options outstanding, beginning | 11,510 | $ | 4.86 | — | 19,578 | $ | 4.80 | — | ||||||||||||||||
Granted | — | — | — | 135 | 0.82 | — | ||||||||||||||||||
Exercised | — | — | — | — | — | — | ||||||||||||||||||
Forfeited/Expired | (685 | ) | 4.09 | — | (8,203 | ) | 4.99 | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Options outstanding, ending | 10,825 | $ | 4.91 | 6.72 | 11,510 | $ | 4.86 | 7.34 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
Units | Weighted Average Exercise Price (C$) | Weighted Average Contractual Life | Units | Weighted Average Exercise Price (C$) | Weighted Average Contractual Life | |||||||||||||||||||
Options outstanding, beginning | 11,510 | $ | 4.86 | — | 19,578 | $ | 4.80 | — | ||||||||||||||||
Granted | 0 | 0— | — | 135 | 0.82 | — | ||||||||||||||||||
Exercised | 0 | 0— | — | 0 | 0— | — | ||||||||||||||||||
Forfeited/Expired | (967 | ) | 3.99 | — | (8,203 | ) | 4.99 | — | ||||||||||||||||
Options outstanding, ending | 10,543 | $ | 4.94 | 6.22 | 11,510 | $ | 4.86 | 7.34 | ||||||||||||||||
2021 | 2020 | |||||||
Loss from operations before income taxes | $ | (12,161 | ) | $ | (234,935 | ) | ||
Income tax expense | 7,291 | 1,406 | ||||||
|
|
|
| |||||
Effective tax rate | (60.0 | )% | (0.6 | )% | ||||
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 (Revised) | 2021 | 2020 (Revised) | |||||||||||||
Loss before income taxes | $ | (11,745 | ) | $ | (19,862 | ) | $ | (31,278 | ) | $ | (274,365 | ) | ||||
Income tax expense | 4,090 | 5,609 | 19,265 | 12,272 | ||||||||||||
Effective tax rate | (34.8 | )% | (28.2 | )% | (61.6 | )% | (4.5 | )% | ||||||||
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenues | ||||||||
Eastern Region | $ | 33,056 | $ | 18,049 | ||||
Western Region | 18,302 | 11,725 | ||||||
Other(1) | 447 | 652 | ||||||
|
|
|
| |||||
Total | $ | 51,805 | $ | 30,426 | ||||
|
|
|
| |||||
Gross profit | ||||||||
Eastern Region | 21,162 | $ | 10,761 | |||||
Western Region | 8,580 | 4,761 | ||||||
Other | (21 | ) | (70 | ) | ||||
|
|
|
| |||||
Total | $ | 29,721 | $ | 15,452 | ||||
|
|
|
| |||||
Depreciation and amortization | ||||||||
Eastern Region | $ | 6,178 | $ | 5,519 | ||||
Western Region | 838 | 590 | ||||||
Other | 358 | 305 | ||||||
|
|
|
| |||||
Total | $ | 7,374 | $ | 6,414 | ||||
|
|
|
| |||||
Asset impairments and write-downs | ||||||||
Eastern Region | $ | 259 | $ | 196,844 | ||||
Western Region | — | 252 | ||||||
Other | — | 2,947 | ||||||
|
|
|
| |||||
Total | $ | 259 | $ | 200,043 | ||||
|
|
|
| |||||
Purchase of property, plant and equipment | ||||||||
Eastern Region | $ | 4,745 | $ | 9,621 | ||||
Western Region | 3 | 388 | ||||||
Other | 4 | 21 | ||||||
|
|
|
| |||||
Total | $ | 4,752 | $ | 10,030 | ||||
|
|
|
| |||||
Purchase of intangibles | ||||||||
Eastern Region | $ | — | $ | 218 | ||||
Western Region | — | 74 | ||||||
Other | — | — | ||||||
|
|
|
| |||||
Total | $ | — | $ | 292 | ||||
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 (Revised) | 2021 | 2020 (Revised) | |||||||||||||
Revenues | ||||||||||||||||
Eastern Region | $ | 31,518 | $ | 23,759 | $ | 99,298 | $ | 61,397 | ||||||||
Western Region | 17,361 | 16,216 | 54,767 | 41,945 | ||||||||||||
Other (1) | 384 | 641 | 1,231 | 2,346 | ||||||||||||
Total | $ | 49,263 | $ | 40,616 | $ | 155,296 | $ | 105,688 | ||||||||
Gross profit | ||||||||||||||||
Eastern Region | $ | 19,460 | $ | 16,716 | $ | 65,025 | $ | 39,676 | ||||||||
Western Region | 6,231 | 7,944 | 21,814 | 18,996 | ||||||||||||
Other | 366 | 443 | 250 | 773 | ||||||||||||
Total | $ | 26,057 | $ | 25,103 | $ | 87,089 | $ | 59,445 | ||||||||
Depreciation and amortization | ||||||||||||||||
Eastern Region | $ | 5,056 | $ | 3,506 | $ | 13,379 | $ | 10,755 | ||||||||
Western Region | 2,702 | 3,280 | 8,755 | 8,551 | ||||||||||||
Other | 375 | 451 | 1,132 | 1,110 | ||||||||||||
Total | $ | 8,133 | $ | 7,237 | $ | 23,266 | $ | 20,416 | ||||||||
Asset impairments and write-downs | ||||||||||||||||
Eastern Region | $ | 127 | $ | 0 | $ | 386 | $ | 45,385 | ||||||||
Western Region | — | 4,100 | — | 155,875 | ||||||||||||
Other | — | 3 | 1,624 | 2,894 | ||||||||||||
Total | $ | 127 | $ | 4,103 | $ | 2,010 | $ | 204,154 | ||||||||
Net loss | ||||||||||||||||
Eastern Region | $ | 581 | $ | (5,291 | ) | $ | 8,911 | $ | (52,302 | ) | ||||||
Western Region | (637 | ) | (13,864 | ) | (1,679 | ) | (165,340 | ) | ||||||||
Other | (15,779 | ) | (6,316 | ) | (57,775 | ) | (68,995 | ) | ||||||||
Total | $ | (15,835 | ) | $ | (25,471 | ) | $ | (50,543 | ) | $ | (286,637 | ) | ||||
Purchase of property, plant and equipment | ||||||||||||||||
Eastern Region | $ | 5,255 | $ | 1,237 | $ | 14,778 | $ | 11,663 | ||||||||
Western Region | 1,635 | 80 | 1,703 | 408 | ||||||||||||
Other | 26 | 128 | 47 | 226 | ||||||||||||
Total | $ | 6,916 | $ | 1,445 | $ | 16,528 | $ | 12,297 | ||||||||
Purchase of intangibles | ||||||||||||||||
Eastern Region | $ | — | $ | 86 | $ | 31 | $ | 385 | ||||||||
Western Region | — | — | — | 0 | ||||||||||||
Other | 432 | — | 432 | 74 | ||||||||||||
Total | $ | 432 | $ | 86 | $ | 463 | $ | 459 | ||||||||
(1) | Revenues from segments below the quantitative thresholds are attributable to an operating segment of the Company that includes revenue from the sale of CBD products throughout the United States. This segment has never met any of the quantitative thresholds for determining reportable segments |
March 31, 2021 | December 31, 2020 | |||||||
(Revised) | ||||||||
Assets | ||||||||
Eastern Region | $ | 230,195 | $ | 227,237 | ||||
Western Region | 109,356 | 109,039 | ||||||
Other | 25,330 | 16,857 | ||||||
|
|
|
| |||||
Total | $ | 364,881 | $ | 353,133 | ||||
|
|
|
|
September 30, 2021 | December 31, 2020 | |||||||
(Revised) | ||||||||
Assets | ||||||||
Eastern Region | $ | 226,362 | $ | 227,237 | ||||
Western Region | 109,580 | 109,039 | ||||||
Other | 28,062 | 16,857 | ||||||
Total | $ | 364,004 | $ | 353,133 | ||||
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenue | ||||||||
iAnthus branded products | $ | 31,182 | $ | 15,179 | ||||
Third party branded products | 15,207 | 10,458 | ||||||
Wholesale/bulk/other products | 5,416 | 4,789 | ||||||
|
|
|
| |||||
Total | $ | 51,805 | $ | 30,426 | ||||
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | ||||||||||||||||
iAnthus branded products | $ | 25,925 | $ | 20,911 | $ | 89,404 | $ | 52,369 | ||||||||
Third party branded products | 15,692 | 13,248 | 47,294 | 36,615 | ||||||||||||
Wholesale/bulk/other products | 7,646 | 6,457 | 18,598 | 16,704 | ||||||||||||
Total | $ | 49,263 | $ | 40,616 | $ | 155,296 | $ | 105,688 | ||||||||
March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Financial Assets | ||||||||||||||||||||||||||||||||
Long term investments - other1 | $ | 532 | $ | — | $ | — | $ | 532 | $ | 512 | $ | — | $ | — | $ | 512 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Financial Liabilities | ||||||||||||||||||||||||||||||||
Derivative liabilities | $ | — | $ | — | $ | 282 | $ | 282 | $ | — | $ | — | $ | 245 | $ | 245 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Financial Assets | ||||||||||||||||||||||||||||||||
Long term investments - other 1 | $ | 592 | $ | — | $ | — | $ | 592 | $ | 512 | $ | — | $ | — | $ | 512 | ||||||||||||||||
Financial Liabilities | ||||||||||||||||||||||||||||||||
Derivative liabilities | $ | — | $ | — | $ | 315 | $ | 315 | $ | — | $ | — | $ | 245 | $ | 245 | ||||||||||||||||
(1) |
|
iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
Financial Assets | ||||
Balance as of December 31, 2020 | $ | 512 | ||
Revaluations on Level 1 instruments | 20 | |||
|
| |||
Balance as of March 31, 2021 | $ | 532 | ||
|
|
Financial Assets | ||||
Balance as of December 31, 2020 | $ | 512 | ||
Revaluations on Level 1 instruments | 80 | |||
Balance as of September 30, 2021 | $ | 592 | ||
Derivative Liabilities | ||||
Balance as of December 31, 2020 | $ | 245 | ||
Revaluations on Level 3 instruments | 37 | |||
|
| |||
Balance as of March 31, 2021 | $ | 282 | ||
|
|
Derivative Liabilities | ||||
Balance as of December 31, 2020 | $ | 245 | ||
Revaluations on Level 3 instruments | 70 | |||
Balance as of September 30, 2021 | $ | 315 | ||
March 31, 2021 | December 31, 2020 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Unsecured Debentures | $ | 55,455 | $ | 56,305 | $ | 54,905 | $ | 53,830 | ||||||||
Secured Notes | 130,217 | 141,230 | 115,350 | 134,609 | ||||||||||||
Other | 1,361 | 1,086 | 920 | 924 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 187,033 | $ | 198,621 | $ | 171,175 | $ | 189,363 | ||||||||
|
|
|
|
|
|
|
|
September 30, 2021 | December 31, 2020 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
Unsecured Debentures | $ | 56,591 | $ | 61,694 | $ | 54,905 | $ | 53,830 | ||||||||
Secured Notes | 133,954 | 169,259 | 115,350 | 134,609 | ||||||||||||
Other | 1,322 | 1,018 | 920 | 924 | ||||||||||||
Total | $ | 191,867 | $ | 231,971 | $ | 171,175 | $ | 189,363 | ||||||||
For the twelve months ended March 31, | ||||||||||||||||||||
2022 | 2023 | 2024 | 2025 | 2026 | ||||||||||||||||
Operating leases | $ | 7,630 | $ | 6,983 | $ | 7,041 | $ | 7,198 | $ | 7,271 | ||||||||||
Service contracts | 2,701 | — | — | — | — | |||||||||||||||
Construction contracts | 12 | — | — | — | — | |||||||||||||||
Long-term debt, principal(1) | 167,901 | 11,605 | 58 | 65 | 15,681 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 178,244 | $ | 18,588 | $ | 7,099 | $ | 7,263 | $ | 22,952 | ||||||||||
|
|
|
|
|
|
|
|
|
|
For the 12 months ended September 30, | 2022 | 2023 | 2024 | 2025 | 2026 | |||||||||||||||
Operating leases | $ | 7,579 | $ | 7,328 | $ | 7,463 | $ | 7,629 | $ | 7,538 | ||||||||||
Service contracts | 2,704 | 4 | 0— | 0— | 0— | |||||||||||||||
Long-term debt, principal (1) | 168,210 | 12,108 | 65 | 16,320 | 78 | |||||||||||||||
Total | $ | 178,493 | $ | 19,440 | $ | 7,528 | $ | 23,949 | $ | 7,616 | ||||||||||
(1) | The payment schedule above shows amounts payable if the conversion options are not exercised by the lender |
establishedentered into a line of credit agreement (the “LOC Agreement”) with Zia Integrated, LLC (“Zia”), a cannabis management and consulting firm based in Maryland, permitting Zia drawdowns of up to an aggregate of $15.0 million. For each drawdown made by Zia, a convertible promissory note will be issued to Zia by the Company.Company (the “Convertible Note”). As of the date of filing of the unaudited interim condensed consolidated financial statements, no0 drawdowns have been made on the line of creditLOC Agreement and the principal amount on the convertible promissory noteConvertible Note is $Nil$NaN (December 31, 2020—$Nil)2020 - $NaN). On August 5, 2021, the Company exercised its right to terminate the LOC Agreement and Convertible Note.StandardsStthreenine months ended March 31,September 30, 2021, the former consultant updated the claim to set forth the total damages claimed, which are $5.4 million, and provided supplemental disclosures which specify total damages sought, which are $167.0 million; $1.3threenine months ended March 31,September 30, 2021, the claim was proposed to be amended to include additional damages of $10.0 million; and
On January 8, 2021, the Lead Plaintiff filed an opposition to the Motion to Dismiss the Amended Complaint. The Company and its Chief Financial Officer’s reply to the opposition was filed on February 22, 2021. In a memorandum of opinion dated August 30, 2021, the SDNY granted the Company’s and its Chief Financial Officer’s Motion to Dismiss the Amended Complaint. The SDNY indicated that the Lead Plaintiff may move for leave to file a proposed second amended complaint by September 30, 2021. On October 1, 2021, the Lead Plaintiff filed a motion for leave to amend the Amended Complaint. On October 28, 2021, the parties filed a Stipulation and Proposed Scheduling Order Regarding Lead Plaintiff’s Motion for Leave to File a Second Amended Complaint. Pursuant to this stipulation, the defendants take no position as to whether the SDNY should grant the Lead Plaintiff’s Motion for Leave to File a Second Amended Complaint, which motion remains pending before the SDNY. If the SNDY does grant this motion, the Company will have the right to file a Motion to Dismiss Lead Plaintiff’s second amended complaint no later than 45 days after the filing of Lead Plaintiff’s second amended complaint.
On June 15, 2021, the Company and the Lenders agreed to amend the date by which the Recapitalization Transaction pursuant to the Plan of Arrangement is required to be implemented by from June 30, 2021 to August 31, 2021. On August 20, 2021, the Applicants filed the Application with the OSCJ, which sought, among other things, a declaration that the “Outside Date”, as that term is defined in the Restructuring Support Agreement, be extended to the date on which any regulatory approval or consent condition to implementation of the Plan of
is scheduled to be heard on March 29, 2022.
iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
vacated (the “Final Judgement”). On May 1, 2021, the period to file an appeal of the final judgment expired. MPX NJ, ICM and INJ did not file an appeal of the final judgment and accordingly, the Final Judgement remains in effect and the matter is deemed terminated as of May 1, 2021.
March 31, 2021 | December 31, 2020 | |||||||
Financial Statement Line Item | ||||||||
Accounts receivable | $ | — | $ | 140 | ||||
Other long-term assets | 3,732 | 3,358 | ||||||
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| |||||
Total | $ | 3,732 | $ | 3,498 | ||||
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September 30, 2021 | December 31, 2020 | |||||||
Financial Statement Line Item | ||||||||
Accounts receivable | $ | 0 | $ | 140 | ||||
Other long-term assets | 4,335 | 3,358 | ||||||
Total | $ | 4,335 | $ | 3,498 | ||||
iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Income taxes | $ | 657 | $ | — | ||||
Interest | 24 | 52 |
For the Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Income taxes | $ | 1,560 | $ | 292 | ||||
Interest | 71 | 123 |
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Decrease (increase) in: | ||||||||
Accounts receivables | $ | (1,009 | ) | $ | (344 | ) | ||
Prepaid expenses | (1,028 | ) | (790 | ) | ||||
Inventories | (723 | ) | (2,823 | ) | ||||
Other assets | (719 | ) | (54 | ) | ||||
Increase (decrease) in: | ||||||||
Accounts payable | 1,930 | (3,974 | ) | |||||
Accrued and other liabilities | 6,341 | 11,458 | ||||||
|
|
|
| |||||
$ | 4,792 | $ | 3,473 | |||||
|
|
|
|
For the Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Decrease (increase) in: | ||||||||
Accounts receivables | $ | (4 | ) | $ | 1,791 | |||
Prepaid expenses | 461 | 928 | ||||||
Inventories | (4,534 | ) | (5,209 | ) | ||||
Other assets | 59 | (1,602 | ) | |||||
Increase (decrease) in: | ||||||||
Accounts payable | (486 | ) | (9,686 | ) | ||||
Accrued and other current liabilities | 18,035 | 27,005 | ||||||
$ | 13,531 | $ | 13,227 | |||||
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Property, plant and equipment | $ | 2,977 | $ | 2,146 | ||||
Operating lease right-of-use assets | 542 | 413 | ||||||
Other intangible assets | 3,855 | 3,855 | ||||||
|
|
|
| |||||
$ | 7,374 | $ | 6,414 | |||||
|
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|
|
For the Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Property, plant and equipment | $ | 10,135 | $ | 7,590 | ||||
Operating lease right-of-use | 1,567 | 1,264 | ||||||
Intangible assets | 11,564 | 11,562 | ||||||
$ | 23,266 | $ | 20,416 | |||||
For the Three Months Ended March 31, 2021 | ||||||||
2020 |
| |||||||
Write-downs: | ||||||||
Accounts receivable provisions | $ | — | $ | 329 | ||||
Fixed asset | 259 | 350 | ||||||
|
|
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| |||||
$ | 259 | $ | 679 | |||||
|
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|
|
iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
For the Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Write-downs : | ||||||||
Account receivable (recoveries) provisions, net | $ | (72 | ) | $ | 311 | |||
Fixed asset | 258 | 379 | ||||||
$ | 186 | $ | 690 | |||||
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Supplemental Cash Flow Information: | ||||||||
Share issuance – settlement of outstanding obligations | $ | — | $ | 193 | ||||
Cashless exercise of MPX warrants recorded as derivatives | — | 3,325 |
For the Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Supplemental Cash Flow Information: | ||||||||
Share issuance - settlement of outstanding obligations | $ | 0 | $ | 193 | ||||
Cashless exercise of MPX warrants recorded as derivatives | 0 | 3,325 | ||||||
Non-cash consideration transferred from the Tranche Four Secured Notes | 947 | 259 | ||||||
Non-cash consideration transferred from the Senior Secured Bridge Notes | 1,049 | 0 |
March 31, 2021 | December 31, 2020 | |||||||
Cash | $ | 13,692 | $ | 11,015 | ||||
Restricted cash | 8,435 | 495 | ||||||
|
|
|
| |||||
Total cash and restricted cash presented in statements of cash flows | $ | 22,127 | $ | 11,510 | ||||
|
|
|
|
September 30, 2021 | December 31, 2020 | |||||||
Cash | $ | 19,502 | $ | 11,015 | ||||
Restricted cash | 4,138 | 495 | ||||||
Total cash and restricted cash presented in the statements of cash flows | $ | 23,640 | $ | 11,510 | ||||
(in ’000s of U.S. dollars) | Restructured Senior Debt1 | Interim Financing2 | 8% Senior Unsecured Debentures3 | Pro Forma Common Equity4 | ||||||||||||
Secured Lenders | $ | 85,000 | $ | 14,737 | $ | 5,000 | 48.625 | % | ||||||||
Unsecured Debentureholders | — | — | 15,000 | 48.625 | % | |||||||||||
Existing Shareholders | — | — | — | 2.75 | % | |||||||||||
|
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|
|
|
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| |||||||||
Total | $ | 85,000 | $ | 14,737 | $ | 20,000 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
(in ’000s of U.S. dollars) | Restructured Senior Debt 1 | Interim Financing 2 | 8% Senior Unsecured Debentures 3 | Pro Forma Common Equity 4 | ||||||||||||
Secured Lenders | $ | 85,000 | $ | 14,737 | $ | 5,000 | 48.625 | % | ||||||||
Unsecured Debentureholders | — | — | 15,000 | 48.625 | % | |||||||||||
Existing Shareholders | — | — | — | 2.75 | % | |||||||||||
Total | $ | 85,000 | $ | 14,737 | $ | 20,000 | 100 | % |
(1) | The principal balance of the Secured Notes will be reduced to $85.0 million, which will be increased by the amount of the Interim Financing, non-convertible andnon-callable for three years and includes payment in kind at an interest rate of 8% per year and a maturity date which will be five years after the consummation of the Recapitalization Transaction (the “Restructured Senior Debt”). |
(2) | The Secured Lenders provided $14.7 million of interim financing (“Interim Financing”) to ICM on substantially the same terms as the Restructured Senior Debt, net of a 5% original issue discount. The amounts of the Interim Financing along with any accrued interest thereon is expected to be converted into, and the original principal balance will be added to, the Restructured Senior Debt upon consummation of the Recapitalization Transaction. |
iANTHUS CAPITAL HOLDINGS, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts)
(3) | The 8% Senior Unsecured Debentures include payment in kind at an interest rate of 8% per non-callable for three years and are subordinate to the Restructured Senior Debt but senior to the Company’s common shares. |
(4) | Following consummation of the Recapitalization Transaction, a to-be-determined |
December 31, 2020 | ||||||||||||
As previously reported | Adjustment | As adjusted | ||||||||||
Inventories | $ | 30,292 | $ | (4,841 | ) | $ | 25,451 | |||||
Current Assets | 50,464 | (4,841 | ) | 45,623 | ||||||||
Total Assets | 357,974 | (4,841 | ) | 353,133 | ||||||||
Accrued and other current liabilities | 56,381 | (1,328 | ) | 55,053 | ||||||||
Current liabilities | 233,207 | (1,328 | ) | 231,879 | ||||||||
Total Liabilities | 307,132 | (1,328 | ) | 305,804 | ||||||||
Accumulated Deficit | (720,629 | ) | (3,513 | ) | (724,142 | ) | ||||||
Total Shareholders’ Equity | 50,842 | (3,513 | ) | 47,329 | ||||||||
Total Liabilities and Shareholders’ Equity | 357,974 | (4,841 | ) | 353,133 |
The effect of
December 31, 2020 | ||||||||||||
As previously reported | Adjustment | As adjusted | ||||||||||
Inventories | $ | 30,292 | $ | (4,841 | ) | $ | 25,451 | |||||
Current assets | 50,464 | (4,841 | ) | 45,623 | ||||||||
Total assets | 357,974 | (4,841 | ) | 353,133 | ||||||||
Accrued and other current liabilities | 56,381 | (1,328 | ) | 55,053 | ||||||||
Current liabilities | 233,207 | (1,328 | ) | 231,879 | ||||||||
Total liabilities | 307,132 | (1,328 | ) | 305,804 | ||||||||
Accumulated deficit | (720,629 | ) | (3,513 | ) | (724,142 | ) | ||||||
Total shareholders’ equity | 50,842 | (3,513 | ) | 47,329 | ||||||||
Total liabilities and shareholders’ equity | 357,974 | (4,841 | ) | 353,133 |
March 31, 2021 | ||||||||||||
As previously reported | Adjustment | As adjusted | ||||||||||
Deficit accumulated – Balance January 1, 2021 | $ | (720,629 | ) | $ | (3,513 | ) | $ | (724,142 | ) | |||
Shareholders’ equity total – Balance January 1, 2021 | 50,842 | (3,513 | ) | 47,329 |
For the Nine Months Ended September 30, 2020 | ||||||||||||
As previously reported | Adjustment | As adjusted | ||||||||||
Costs and expenses applicable to revenues | $ | (40,789 | ) | $ | (5,454 | ) | $ | (46,243 | ) | |||
Gross margin | 64,899 | (5,454 | ) | 59,445 | ||||||||
Loss from operations | (234,192 | ) | (5,454 | ) | (239,646 | ) | ||||||
Loss from operations before income tax 1 | (269,051 | ) | (5,314 | ) | (274,365 | ) | ||||||
Income tax expense | 13,680 | (1,408 | ) | 12,272 | ||||||||
Net loss | (282,591 | ) | (4,046 | ) | (286,637 | ) |
(1) | The revised balance includes income of $0.1 million, resulting from a reclassification from the income on equity-accounted investment line to the other income line, on the unaudited interim condensed consolidated statements of operations for the nine months ended September 30, 2020. |
(in ’000s of U.S. dollars) | Restructured Senior Debt (1) | Interim Financing (2) | 8% Senior Unsecured Debentures (3) | Pro Forma Common Equity (4) | ||||||||||||
Secured Lenders | $ | 85,000 | $ | 14,737 | $ | 5,000 | 48.625 | % | ||||||||
Unsecured Lenders | — | — | 15,000 | 48.625 | % | |||||||||||
Existing Shareholders | — | — | — | 2.75 | % | |||||||||||
Total | $ | 85,000 | $ | 14,737 | $ | 20,000 | 100 | % | ||||||||
(1) | The principal balance of the Secured Notes will be reduced to $85.0 million, which will be increased by the amount of the Interim Financing, which has a first lien, senior secured position over all of the Company’s assets, is non-convertible andnon-callable for three years and includes payment in kind at an interest rate of 8% per year and a maturity date which will be five years after the consummation of the Recapitalization Transaction (the “Restructured Senior Debt”). |
(2) | The Secured Lenders provided $14.7 million of interim financing (“Interim Financing”) to ICM on substantially the same terms as the Restructured Senior Debt, net of a 5% original issue discount. The amounts of the Interim Financing along with any accrued interest thereon is expected to be converted into, and the original principal balance will be added to, the Restructured Senior Debt upon consummation of the Recapitalization Transaction. |
(3) | The 8% Senior Unsecured Debentures include payment in kind at an interest rate of 8% per annum, a maturity date which will be five years after the consummation of the Recapitalization Transaction, are non-callable for three years and are subordinate to the Restructured Senior Debt but senior to the Company’s common shares. |
(4) | Following consummation of the Recapitalization Transaction, a to-be-determined |
Three Months Ended March 31, | ||||||||
(in ‘000s of U.S. dollars) | 2021 | 2020 | ||||||
Revenues | ||||||||
Eastern Region | $ | 33,056 | $ | 18,049 | ||||
Western Region | 18,302 | 11,725 | ||||||
Other | 447 | 652 | ||||||
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| |||||
Total revenues | $ | 51,805 | $ | 30,426 | ||||
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| |||||
Cost of sales applicable to revenues | ||||||||
Eastern Region | $ | (11,893 | ) | $ | (7,288 | ) | ||
Western Region | (9,723 | ) | (6,963 | ) | ||||
Other | (468 | ) | (723 | ) | ||||
|
|
|
| |||||
Total cost of sales applicable to revenues | $ | (22,084 | ) | $ | (14,974 | ) | ||
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| |||||
Gross profit | ||||||||
Eastern Region | $ | 21,162 | $ | 10,761 | ||||
Western Region | 8,580 | 4,761 | ||||||
Other | (21 | ) | (70 | ) | ||||
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| |||||
Total gross profit | $ | 29,721 | $ | 15,452 | ||||
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|
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in ’000s of U.S. dollars) | 2021 | 2020 (Revised) | 2021 | 2020 (Revised) | ||||||||||||
Revenues | ||||||||||||||||
Eastern Region | $ | 31,518 | $ | 23,759 | $ | 99,298 | $ | 61,397 | ||||||||
Western Region | 17,361 | 16,216 | 54,767 | 41,945 | ||||||||||||
Other | 384 | 641 | 1,231 | 2,346 | ||||||||||||
Total revenues | $ | 49,263 | $ | 40,616 | $ | 155,296 | $ | 105,688 | ||||||||
Cost of sales applicable to revenues | ||||||||||||||||
Eastern Region | $ | (12,058 | ) | $ | (7,042 | ) | $ | (34,273 | ) | $ | (21,721 | ) | ||||
Western Region | (11,130 | ) | (8,272 | ) | (32,953 | ) | (22,949 | ) | ||||||||
Other | (18 | ) | (199 | ) | (981 | ) | (1,573 | ) | ||||||||
Total cost of sales applicable to revenues | $ | (23,206 | ) | $ | (15,513 | ) | $ | (68,207 | ) | $ | (46,243 | ) | ||||
Gross profit | ||||||||||||||||
Eastern Region | $ | 19,460 | $ | 16,716 | $ | 65,025 | $ | 39,676 | ||||||||
Western Region | 6,231 | 7,944 | 21,814 | 18,996 | ||||||||||||
Other | 366 | 443 | 250 | 773 | ||||||||||||
Total gross profit | $ | 26,057 | $ | 25,103 | $ | 87,089 | $ | 59,445 | ||||||||
Eastern Region
As
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Total operating expenses | $ | 30,841 | $ | 35,513 | $ | 92,538 | $ | 299,091 | ||||||||
Total other expense | 6,961 | 9,452 | 25,829 | 34,719 | ||||||||||||
Income tax expense | 4,090 | 5,609 | 19,265 | 12,272 |
Our sales revenues in the eastern region increased by 83.1% from $18.0 million in the prior year quarter to $33.1 million for the three months ended March 31, 2021. Across the eastern region, we continued to experience steady organic growth within each of our revenue channels: retail, wholesale, and delivery. The increase in sales revenues was also attributable to two new dispensaries in Florida and Massachusetts, which opened in January 2021 and December 2020, respectively.
During the three months ended March 31, 2021, approximately 11,700 pounds of plant material was harvested from three cultivation facilities operating in the eastern region as compared to approximately 3,800 pounds harvested from the same facilities for the three months ended March 31, 2020.
In the eastern region, for the three months ended March 31, 2021, gross profit was $21.2 million, or 64.0% of sales revenues, as compared to $10.8 million, or 59.6% of sales revenues for the three months ended March 31, 2020. The increase in gross profit as a percentage of sales revenue is primarily due to a more favorable sales mix and from improving efficiency of our operations across the Easton Region in the current year quarter.
Western Region
As of March 31, 2021, we held licenses to operate up to eight dispensaries and fourteen cultivation and processing facilities in the western region, subject to regulatory approval. As of March 31, 2021, we had five dispensaries and five cultivation and processing facilities open and operational in this region. As of March 31, 2020, we held licenses to operate up to eight dispensaries and five cultivation and processing facilities in the western region. As of March 31, 2020, we had five dispensaries and five cultivation and processing facilities open and operational. The decrease in the number of dispensary and cultivation facilities was a result of the redemption of our equity interest in Reynold Greenleaf & Associates, LLC (“RGA”) which occurred in the fourth quarter of 2020.
Our sales revenues in the western region increased by 56.1% from $11.7 million in the prior year quarter to $18.3 million for the three months ended March 31, 2021. The increase in sales revenues was mainly attributable to strong same-store sales growth in each of our four Arizona dispensaries. Furthermore, wholesale revenues in both Arizona and Nevada markets improved quarter over quarter, and revenues generated from delivery and toll processing channels increased nearly threefold in the current quarter as compared to the prior year quarter.
During the three months ended March 31, 2021, approximately 1,700 pounds of plant material was harvested from five cultivation facilities operating in the western region as compared to approximately 1,800 pounds harvested from the same facilities in the prior year quarter.
In the western region, for the three months ended March 31, 2021, gross profit was $8.6 million, or 46.9% of sales revenues, as compared to $4.8 million, or 40.6% of sales revenues for the prior year quarter. The increase in gross margin in the western region is due to our manufacturing and selling, of more higher margin in-house products in the current quarter as compared to the prior year quarter.
Other revenues
Other revenues include revenues from the sale of CBD products and income from property leasing arrangements from our assets in Colorado which do not meet the consolidation criteria under U.S. GAAP. For the three months ended March 31, 2021, other revenues were $0.4 million as compared to $0.7 million for the prior year quarter. This decrease was attributable to lower retail sales of CBD products as a result of restrictions imposed on retailers across the U.S. due to COVID-19.
Selling, general, and administrative expenses
Three Months Ended March 31, | ||||||||
(in ‘000s of U.S. dollars) | 2021 | 2020 | ||||||
Salaries and employee benefits | $ | 10,006 | $ | 11,135 | ||||
Share-based compensation | 1,634 | 5,175 | ||||||
Legal and other professional fees | 5,238 | 3,330 | ||||||
Facility, insurance, and technology costs | 4,100 | 3,887 | ||||||
Marketing expenses | 1,153 | 1,540 | ||||||
Travel and pursuit costs | 151 | 596 | ||||||
Other general corporate expenditures | 1,404 | 2,078 | ||||||
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| |||||
Total | $ | 23,686 | $ | 27,741 | ||||
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|
|
Salaries which are necessary to conduct our ordinary business operations as well as support marketing, technology, and employee benefits
For the three months ended March 31, 2021, salariesother growth initiatives such as opening new dispensaries and employee benefits decreased to $10.0 million
As of March 31, 2021,2020, we have taken measures necessary to control our discretionary spending to employ capital as efficiently as possible. However, we expect total employee headcount was approximately 930 employeesoperating expenses to continue to increase as comparedwe continue to 750 employees as of March 31, 2020.
Share-based compensation
Share-based compensation decreased to $1.6 million forinvest in our operations and capital projects, attract and retain top talent, and implement robust technology systems in our corporate, retail and cultivation and manufacturing facilities.
Legal and other professional fees
Legal and other professional fees for the three months ended March 31, 2021 increased to $5.2 million as compared to $3.3 million for the prior year quarter. We continue to use the expertiseretail, wholesale, or delivery of various professionals such as bankers, lawyers, accountants, auditors, valuators andcannabis products.
Facility, insurance and technology costs
Facility, insurance and technology costs for the three months ended March 31, 2021 increased to $4.1 million as compared to $3.9 million for the prior year quarter. Costs such as facility rent, utilities, property taxes, insurance, repairs and maintenance have remained relatively consistent quarter over quarter. The increase is attributable to new facility build-outs since the prior year quarter, offset by the decrease as a result of savings from the renewal of our insurance policies in February 2021.
Marketing expenses
Marketing expenses for the three months ended decreased to $1.2 million from $1.5 million for the prior year quarter due to fewer marketing initiatives in the current quarter as compared to the prior year quarter.
Travel and pursuit costs
Travel and pursuit costs for the three months ended March 31, 2021 decreased to $0.2 million from $0.6 million for the three months ended March 31, 2020 primarily due to fewer travel expenses incurred in the current quarter as compared to the prior year quarter due to travel restrictions as a result of COVID-19.
Other general corporate expenditures
Other general corporate expenditures for the three months ended March 31, 2021 were $1.4 million as compared to $2.1 million for the prior year quarter. Other general corporate expenditures include research and development costs related to new products, bank fees, general office expenses, regulatory and compliance related expenses, loss contingencies, foreign exchange gains and losses and miscellaneous items, other than interest. The decrease was mainly due to savings in office expenses as most of our employees have been working from home since the onset of COVID-19 in March 2020.
Depreciation and amortization expenses
Depreciation and amortization expenses for the three months ended March 31, 2021 were $7.4 million as compared to $6.4 million in the prior year quarter. The increase was primarily due to the increased depreciable asset base resulting from the opening of new dispensaries in the Eastern region and the continued buildout of our cultivation and processing facilities in Florida, Arizona and New Jersey. Amortization of intangible assets of $3.9 million remained consistent quarter over quarter.
Impairment loss
For the three months ended March 31, 2021, no impairment loss was recognized as compared to $199.4 million in the prior year quarter. expense
Interest income
For the three months ended March 31, 2021 and 2020, interest income of $0.1 million and less than $0.1 million, respectively, was recognized as a result of our loan facilities and bank balances.
Interest expense, accretion expense andno other debt related expenses
Three Months Ended March 31, | ||||||||
(in ’000s of U.S. dollars) | 2021 | 2020 | ||||||
Interest expense | $ | 5,678 | $ | 4,467 | ||||
Accretion expense | 4,852 | 4,004 | ||||||
Provision for debt obligation fee | 414 | 12,503 | ||||||
|
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| |||||
Total | $ | 10,944 | $ | 20,974 | ||||
|
|
|
|
For the three months ended March 31, 2021, interest expense increased to $5.7 million as compared to $4.5 million for the prior year quarter. The increase was mainly due to the following financings and certain amendments to terms of existing debt instruments during the three months ended March 31, 2021:
In March 2020, we defaulted on our 13% senior secured convertible debentures (“Secured Notes”) which triggered an escalation of the annual interest rate from 13% to 16%;
In July 2020, the holders of the Secured Notes (“Secured Lenders”) provided $14.7 million of secured debentures (“Interim Financing”) which have an annual interest rate of 8%; and
In February 2021, iAnthus New Jersey, LLC issued $11.0 million of senior secured bridge notes (“Senior Secured Bridge Notes”) which have an annual interest rate of 14%.
For the three months ended March 31, 2021, we recorded accretion expense of $4.9 million as compared to $4.0 million for the prior year quarter. The increase was mainly due to accretion expense recognized on the additional financings noted above. Refer to Note 4 in the accompanying unaudited interim condensed consolidated financial statements for more details on the long-term debt instruments that have an impact on periodic interest and accretion expense.
For the three months ended March 31, 2021, accrued interest of $0.4 million was recognized as part of the $10.0 million obligation required to be paid as part of the Secured Notes which accrue interest at a rate of 13% (the “Exit Fee”). The Exit Fee is classified under the provision for debt obligation fee on the unaudited interim condensed consolidated statements of operations. Refer to Note 4 in the accompanying unaudited interim condensed consolidated financial statements for more details on the Exit Fee.
Our policy is to expense any debt issuance costs allocated to a derivative liability for our compound financial instruments at the time of issuance. For the three months ended March 31, 2021 and 2020, debt issuance costs were $0.7 million and $Nil, respectively. Debt issuance costs allocated to the host debt contracts are deferred and amortized over the time to maturity of the debt instrument and are included in accretion expense. Any debt issuance costs allocated to financial instruments classified in equity are recorded in paid-in-capital on the unaudited interim condensed consolidated balance sheets.
Change in fair value of financial instruments
For the three months ended March 31, 2021, we recorded a loss of less than $0.1 million due to the change in fair value of financial instruments classified as derivative liabilities requiring fair value recognition each reporting period as compared to a gain of $4.7 million in the prior year quarter. We use the Black-Scholes valuation model to determine the fair value of derivative financial instruments each reporting period. Key inputs to the model are current share price, volatility and a risk-free rate. The loss from the change in fair value recorded in 2021 was a result of the movement in our share price quarter over quarter.
Income Taxes
ordinary business expenses. Our effective tax rate differs from the statutory tax rate and varies from year to year primarily as a result of numerous permanent differences, the provision for income taxes at different rates in foreign and domestic jurisdictions, including changes in enacted statutory tax rate increases or reductions in the year, changes in our valuation allowance based on our recoverability assessments of deferred tax assets and favorable or unfavorable resolution of various tax examinations.
Financing requirements have fluctuated from period
Our major financing activities during the three months ended March 31, 2021 were as follows:
thereon. In February 2021, we issued $11.0 million of senior secured bridge notes which mature on the earlier of (i) February 2, 2023, (ii) the date on whichnotes. While we close a Qualified Financing and (iii) such earlier date that the principal amount may become due and payable pursuant to the terms of such notes. The senior secured bridge notes accrue interest at 14% annually (increasing to 25% annually in the event of default and decreasing to 8% annually upon the completion of our proposed recapitalization transaction). “Qualified Financing” means a transaction or series of related transactions resulting in net proceeds to us of not less than $10 million from the subscription of our securities, including, but not limited to, a private placement or rights offering.
Our major financing activities during the year ended December 31, 2020 were as follows:
In July 2020, we issued $14.7 million of secured debentures which mature on July 13, 2025 and accrue interest at 8% annually.
Although there has been an increase in the amount of capital available over the last several years, there is neither a broad nor deep pool of institutional capital that is available to cannabis license holders and/or applicants in the United States. There can be no assurance that additional capital will be available to us when needed or on terms that are acceptable. Our potential inability to raise capital to fund capital expenditures and/or acquisitions may cast substantial doubt on our ability to continue as a going concern and may have a material adverse effect on future profitability.
The terms of our outstanding Secured Notes impose certain restrictions on our operating and financing activities, including certain restrictions on our ability to incur certain additional indebtedness, grant liens, make certain dividends and other payment restrictions affecting our subsidiaries, issue shares or convertible securities and sell certain assets. Such notes are secured by all of our current and future assets and the rights of the remaining lenders are subordinate to the secured notes. Our remaining outstanding unsecured debt instruments also impose certain restrictions on our operating and financing activities, including certain restrictions on our ability to incur certain additional indebtedness at the subsidiary level.
We believe that the financing transactions discussed above should provide us with thewe have funding necessary for us to continue as a going concern. However, in the eventconcern, we may need to raise additional capital and there can be no assurance that such capital will be available to us on favorable terms, if at all. As such, these material circumstances cast substantial doubt on our ability to continue as a going concern for a period of no less than 12 months from the date of this report. Ourreport, and our unaudited interim condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Working Capital
As of March 31, 2021, We have based this estimate on assumptions that may prove to be wrong, and we held unrestricted cash of $13.7 million (December 31, 2020 —$11.0 million). The increase in cash wascould utilize our available capital resources sooner than we currently plan due to the net cash inflows from operating activities and the Senior Secured Bridge Notes financing, partially offset by capital expenditures during the three months ended March 31, 2021. As of March 31, 2021, we had a working capital deficit of $190.2 million, comparedincorrect assumptions or due to a working capital deficitdecision to expand our activities beyond those currently planned.
Cash Flow For the ThreeNine Months Ended March 31,September 30, 2021 as Compared to March 31,the Nine Months Ended September 30, 2020
Cash from
Cash flows
impairment loss on intangible assets.
period.
current period.
Cash from the future.
nine months ended September 30, 2020.
Cash from
Corporation (“MPX”).
Estimate
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
ITEM 4. | CONTROLS AND PROCEDURES. |
|
over Financial Reporting
Walmer
PlanSDNY. If the SNDY does grant this motion, the Company will have the right to file a Motion to Dismiss Hi-Med’s second amended complaint no later than 45 days after the filing of Arrangement
Hi-Med’s second amended complaint.
MPX NJ Matter
On December 16, 2020, MPX New Jersey, LLC (“MPX NJ”“Plaintiff”) filed a complaint, as amended on July 8, 2019 and November 20, 2019, in the SuperiorDistrict Court of New Jersey Chancery Division – MonmouthClark County, Nevada against the Company and two of its wholly-owned subsidiaries, CGX Life Sciences, Inc. (“CGX”) and MPX Bioceutical ULC (“MPX” and together with CGX, collectively, the “iAnthus Defendants”, with respect to alleged consulting fees owed to the Plaintiff pursuant to a Consultancy Services Agreement dated as of July 8, 2015. The iAnthus Capital Management, LLCDefendants responded to the Plaintiff’s first and second amended complaints on July 22, 2019 and December 11, 2019, respectively. On February 4, 2021, the Plaintiff served a supplemental disclosure on the iAnthus Defendants which included a computation of damages totaling $167,000,000 for the alleged finder’s fee owed to the Plaintiff by MPX and $5,416,200 for damages pursuant to the Consultancy Services Agreement. On August 23, 2021, the Plaintiff filed a notice to abandon certain claims initially filed in his complaint. Specifically, the Plaintiff abandoned his claims for: (i) breach of contract; (ii) breach of oral contract; (iii) constructive trust; (iv) intentional interference with a prospective business advantage and contractual relations; (v) conversion; and (vi) specific performance. The Plaintiff is now only pursuing claims for Quasi Contract/Unjust Enrichment and Quantum Merit. On August 26, 2021, the iAnthus Defendants filed a Motion for Summary Judgment, which was denied
Telephone Consumer Protection Act (“TCPA”) Class Action Matter
On January 13, 2021, a class action complaint was filed against iAnthus Empire Holdings, LLC (“IEH”) in the United States District Court for the Southern District of New York, alleging violations of the TCPA relating to IEH’s alleged text message marketing. On February 1, 2021, the plaintiff filed a Notice of Dismissal Without Prejudice, dismissing all claims of the named, individual plaintiff and the unnamed members of the alleged class.
ITEM 6. | EXHIBITS. |
Exhibit No. | Description | |
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File - the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 is formatted in Inline XBRL |
* | Filed herewith. |
IANTHUS CAPITAL HOLDINGS, INC. | ||||||
Date: November 8, 2021 | By: | /s/ Randy Maslow | ||||
Randy Maslow Interim Chief Executive Officer, President and Director (Principal Executive Officer) | ||||||
Date: November 8, 2021 | By: | /s/ Julius Kalcevich | ||||
Julius Kalcevich | ||||||
Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
40