iAnthus Capital Holdings Inc. (CSE: IAN) (OTCPK: ITHUF) reported a first-quarter decline in both revenue and gross profit, along with a substantial net loss, according to financial results released Monday for the period ending March 31.
The company’s first quarter revenue dipped to $36.8 million, marking a sequential decrease of 2.2% and a more significant 14.1% year-on-year decline. Gross profit experienced a similar downtrend, settling at $15.5 million. This represents a 3.6% drop from Q4 2022 and a 31% decline from the same quarter in the prior year.
iAnthus also disclosed a net loss of $18.6 million, equivalent to a net loss per share of zero cents. This is an improvement from a net loss of $43.7 million or $0.01 per share in Q4 2022 but a more significant loss than Q1 2022, which saw a net loss of $10.1 million, or $0.06 per share.
However, the company’s adjusted EBITDA showed a positive shift, from a loss of $1 million in Q4 2022 to a positive $900,000 in the first quarter this year. Despite this quarter-on-quarter growth, the figure is a step down from the $3.4 million reported in Q1 2022.
Meanwhile, iAnthus is grappling with several legal battles that pose risks to its operational future and financial health.
- The “Roberts Matter” involves a dispute around the acquisition of GrowHealthy Holdings’ assets in early 2018. The case has seen various motions, amended complaints, and appeals, and is currently in the discovery phase.
- The “U.S. Hi-Med Matter” represents a complaint filed by Hi-Med LLC, an equity holder and unsecured lender, against iAnthus and certain current and former directors and officers, in which iAnthus is accused of breaching provisions of the unsecured debentures, violating federal securities laws, and committing common law fraud.
- Shareholders in the U.S. and Canada also filed class-action lawsuits alleging false and misleading statements regarding certain proceeds from the issuance of long-term debt.
- A former consultant lodged a claim seeking unpaid consulting fees. This action is currently stayed pending the resolution of a declaratory judgment complaint filed by iAnthus in the Arizona Superior Court.
The latest legal woe involves a claim filed on April 5 by Canaccord Genuity Corp., a former financial advisor, that alleges it is owed a cash fee related to the closing of a recapitalization transaction, which the company utilized to avoid bankruptcy and impacts the stock ownership or the debt structure of a business.
Canaccord said that it is owed a cash fee equal to $2.23 million. iAnthus noted in regulatory filings that it intends to dispute the claim, citing the expiration of the engagement period.
Despite being a defendant in several legal actions and subject to various risks and contingencies, the company’s management, in consultation with legal counsel, believes that these uncertainties will not materially affect iAnthus’ financial position.
However, the company does warn that if developments in any of these matters lead to an unfavorable outcome requiring a significant provision, or if any of these matters result in an adverse judgment or are settled for substantial amounts, they could have a material adverse effect on iAnthus’ results of operations, cash flows, and financial position in the relevant period or periods.
Among the ongoing legal actions, two claims stand out related to events before the company’s closing of the MPX Bioceutical Corp. acquisition in February 2019.
One claim involves two former noteholders against the company and MPX Bioceutical ULC regarding alleged payments of $1.3 million made by the noteholders to MPX. They claim the right to receive $115 million.
The second claim is against the company, MPX ULC, and MPX regarding a prior acquisition made by MPX that iAnthus did not acquire as part of the acquisition. The claimants are seeking $3 million in connection with alleged contractual obligations of MPX.
The company maintains that it is closely monitoring the developments of these cases and is strategizing accordingly.