Draft regulations 'kicking them in the kneecaps.'
Draft regulations 'kicking them in the kneecaps.'
Despite the ongoing battle with the booted shareholders, iAnthus Capital Holdings, Inc. (CSE: IAN) (OTCPK: ITHUF) continues to operate and deliver earnings. The company had first-quarter revenue of $42.8 million, a sequential decrease of 10% from the fourth quarter and a decrease of 17% from the same period in the prior year. iAnthus reported a net loss of $10.1 million, or a loss of $0.06 per share, compared to a loss of $26.9 million or a loss of $0.16 per share in Q4 2021, and compared to a loss of $19.5 million, or a loss of $0.11 per share, in the same period in the prior year.
iAnthus said in a statement, “Due to liquidity constraints experienced by the Company, the Company did not make applicable interest payments due on its 13% senior secured convertible debentures (“Secured Notes”) and its 8% convertible unsecured debentures due during 2020. As previously disclosed by the Company, the non-payment of interest in March 2020 triggered an event of default with respect to these components of the Company’s long-term debt, which, as of March 31, 2022, consisted of principal amounts of $97.5 million and $60.0 million, and accrued interest of $34.8 million and $10.8 million, on the Secured Notes and Unsecured Debentures, respectively. In addition, as a result of the default, as of March 31, 2022, the Company has accrued additional fees and interest of $15.8 million (“Exit Fees”) in excess of the aforementioned amounts that are further detailed in the Company’s financial statements.”
As of March 31, 2022, iAnthus had unrestricted cash of $14.1 million (December 31, 2021—$13.2 million), an accumulated deficit of $811.7 million (December 31, 2021—$801.6 million), and a working capital deficit of $255.7 million (December 31, 2021—$231.7 million).
Last week, iAnthus announced the resignation of its Co-Founder and Interim Chief Executive Officer, Randy Maslow from his executive positions with the company, including all positions with the company’s subsidiaries and its affiliates, and from the company’s Board of Directors and committees, effective as of May 6, 2022. Maslow will continue to serve the company in a consulting role for a period of six months following the Resignation Date. Maslow will receive total cash compensation in the amount of $12.2 million, of which $5.1 million was paid out on May 6, 2022.
On May 6, 2022, the company announced the appointment of Robert Galvin as Interim Chief Executive Officer and member of the Board, effective May 6, 2022. Galvin served as the company’s Interim Chief Operating Officer and has held a number of executive positions with iAnthus and previously served as a member of the Board following the completion of the company’s transaction in February 2019 with MPX Bioceutical Corporation, where Mr. Galvin also served as a board member.
While some shareholders continue to file complaints about losing their shares to the lenders, the courts have continued to side with the lenders. It seems that some of the disgruntled common stock shareholders when they get cases dismissed, retool and come back. The shareholders continue to insist that the debt payments could have been made when the company instead chose to default and thus handing the company over to the lenders. The latest move was in March when the company and the lender Gotham Green both as a New York judge to toss the shareholder’s latest claims. they say the case should be in Canada, not New York. The investors say they bought their shares in New York and so the case should be there.
iAnthus Capital Holdings, Inc. (CSE: IAN) (OTC: ITHUF) closed its acquisition of MPX New Jersey, LLC, a medical cannabis permit holder in New Jersey. The acquisition was originally announced in 2018 with a value of $835 million, but became a tangled mess with competing lawsuits.
On January 7, 2022, the New Jersey Cannabis Regulatory Commission approved iAnthus NJ’s acquisition of MPX NJ. As previously announced in the company’s February 2, 2021 news release, iAnthus NJ issued $11 million aggregate principal amount of senior secured bridge notes, the net proceeds of which are being used primarily for the construction and improvements of facilities leased by iAnthus NJ.
Since that time, iAnthus NJ has continued to make significant construction progress at its cultivation and manufacturing facility in Pleasantville, New Jersey and plans to start operations in the near term. Additionally, upon receipt of the necessary approvals from the CRC, MPX NJ expects to open its dispensary facility in Atlantic City, New Jersey in the next few months, and then two prospective satellite dispensaries in New Jersey upon approval of MPX NJ’s pending satellite applications filed with the New Jersey Department of Health in December, 2020.
In 2020, MPX NJ sued iAnthus Capital Management and its New Jersey subsidiary. MPX accused iAnthus of improperly going after the operation of the Pleasantville Alternative Treatment Center by trying to negotiate with regulators. A the time the judge ruled against iAnthus according to a story on NJ.com.
The story said that in a remote hearing, Judge Joseph Quinn issued an initial order that said iAnthus could not represent itself as MPX NJ without disclosing the pending agreement before the health department or enter into contracts that bind MPX. “iAnthus must also inform former shareholder Beth Stavola of all contracts and construction at the Pleasantville cultivation site, and avoid additional unauthorized construction in parts of the facility where marijuana is being grown.” Stavola sold her original cannabis assets to MPX Bioceuticals and then proceeded to build that company to become an attractive property, which iAnthus acquired. She was the founder and CEO of Stavola Medical Marijuana Holdings, Health for Life Inc, GreenMart of Nevada, and CBD For Life.
iAnthus has been mired in shareholder lawsuits since the company claimed it couldn’t make its debt payments and the lender Gotham Green essentially took the company. Shareholders have filed lawsuits claiming that iAnthus had the funds to make the debt payments and feel the company was stolen from them.
In December, Law360 reported that iAnthus Capital Holdings Inc. and Gotham Green Partners asked a New York federal court to toss a pair of shareholders’ securities fraud suits over purportedly misleading disclosures and allegedly self-interested financing deals. “The proposed class action asserts that iAnthus made false and misleading statements about its expanding business operations without disclosing to stockholders that it did not use escrowed funds to make necessary interest payments. On April 6, 2020, iAnthus announced it had defaulted on $4.4 million in interest payments to Gotham Green because of the coronavirus pandemic, as well as a decline in cannabis markets overall.”
After the markets closed on Monday, iAnthus Capital Holdings, Inc. (OTC: ITHUF) reported its financial results for the quarter ending September 30, 2021. Revenue for the third quarter was $49.3 million, up 21% from the same quarter in the prior year, but it dropped 9% sequentially. The net loss was $15.8 million, or a loss of $0.09 per share, compared to a net loss of $25.5 million, or a loss of $0.15 per share, in the same quarter in the prior year.
Debt Payments Not Made
iAnthus said it did not make the applicable interest payments due on its 13% senior secured convertible debentures and its 8% convertible unsecured debentures due during 2020. As previously disclosed, the non-payment of interest in March 2020 triggered an event of default with respect to these components of the company’s long-term debt, which, as of September 30, 2021, consisted of principal amounts at face value of $97.5 million and $60.0 million, and accrued interest of $26.9 million and $8.4 million, on the Secured Notes and Unsecured Debentures, respectively. In addition, as a result of the default, as of September 30, 2021, the company has accrued additional fees and interest of $15.0 million in excess of the aforementioned amounts that are further detailed in the company’s financial statements.
Update on Class Action Suit
Shareholders weren’t very happy with the restructuring agreement that occurred in July 2020 that effectively took their shares and gave them to the creditors. On September 1, 2021, iAnthus announced the dismissal of the previously disclosed consolidated actions (which included the shareholder class action claim and a complaint filed by Hi-Med) in the United States District Court for the Southern District of New York. The plaintiffs though were granted the right to file a proposed second amended complaint by September 30, 2021. Each plaintiff moved for leave to file second amended complaints, and the Court granted the plaintiffs’ motions for leave to file second amended complaints. iAnthus said it will continue to vigorously defend its interests in court.
Still Waiting On States
In addition, the regulatory approvals by state-level regulators in Massachusetts, New York and Maryland necessary to close the Recapitalization Transaction remain outstanding. In New Jersey, a change of control approval is not required at the present time because the company is awaiting approval by the Cannabis Regulatory Commission (“CRC”) for the Company to close its acquisition of 100% of the equity interests in New Jersey license holder MPX New Jersey, LLC, pursuant to certain contractual agreements. The company said it has a reasonable expectation that approval of the Amended Permit Application will be listed for consideration by the CRC on its monthly agenda in the next sixty (60) days or sooner and, upon any such approval thereof and the closing of the acquisition within no later than five (5) business days thereafter, as set forth in the Agreements, prior regulatory approval for the change of beneficial ownership of MPXNJ that would result from the Recapitalization Transaction will be required as a condition to closing under the Restructuring Support Agreement.
The saga of the once-promising cannabis company iAnthus (OTC: ITHUF) continues as the company has now turned against its lender (and one-time savior) Gotham Green Partners. The latest move comes just as a New York court dismissed a shareholder lawsuit led by Hi-Med LLC that claimed iAnthus had the money to make its debt payments to Gotham Green but instead defaulted and created a situation that would allow Gotham Green to take the company from shareholders. Green Market Report was able to view the case filed by iAnthus against Gotham Green for this story.
The new case is filed by current iAnthus CEO Randy Maslow in the Ontario Supreme Court against Gotham Green after the lender asked the court to give it an indefinite amount of time to restructure. When iAnthus didn’t make its debt payments to Gotham Green, the lender moved to take over the company. The problem that the reorganization is facing is that Gotham Green has investments in many of the cannabis companies competing against iAnthus. Several states have restrictions against cross-ownership and so Gotham Green is having trouble getting approvals in many states. States often don’t want one company owning too many licenses in any given area so that there is healthy competition and opportunities for less-funded applicants.
The case stated, “Despite the passage of a further two months, approval is still outstanding from four of the five U.S. state regulators, specifically those in Florida, Maryland, Massachusetts and New York. These states represent over 80% of iAnthus’ storefronts and over 70% of iAnthus’ operational facility space. Their importance is only expected to increase in the coming years.” The original restructuring agreement occurred in July 2020 and gave the company a year to get the approvals. iAnthus also accuses Gotham of causing the delays leaving the company in limbo. The only state that has given its approval is Nevada.
MedMen is specifically mentioned as an issue of cross-ownership problems. The case says that Gotham owns approximately 60% of the MedMen voting shares due to the financing Gotham provided the company. Confusing this situation, even more, is that Tilray (NASDAQ: TLRY) just announced it was buying the majority of the outstanding senior secured convertible notes of MedMen that were originally held by Gotham Green. However, Tilray can’t remain on the Toronto Stock Exchange if it owns a U.S. cannabis company, so it can’t convert the shares until cannabis is federally legal. So, MedMen and GGP amended the restrictive covenants and extended the debt maturity to 2028, and said claimed it was meant to give MedMen more time execute its strategy, but it also buys Tilray more time. Still, Gotham Green will continue to 0wn 9% of MedMen even after the sale and continue to have a board member.
Gotham has claimed that the pandemic among other things was the reason for the delays. In Florida, Gotham cited the Surfside condominium collapse as a reason as well as vacations.
Back in 2020, iAnthus was in a cash crunch and convinced shareholders that the only way out was to let its lender take over. Now it seems other lenders are happy to step in and help. The case stated, ” the Company has received at least three unsolicited written offers (and multiple unsolicited telephonic expressions of interest) to recapitalize the Company, all of which would
provide for a full and immediate payment of all principal, interest and fees owing to the Lenders and meaningfully better terms for Existing Shareholders than the 2.75% equity interest
contemplated by the Recapitalization Transaction. The debt repayments contemplated by these offers would result in the Secured Lenders receiving a return on investment of over 15% and the Unsecured Debenture Holders receiving a return on investment of approximately 8%. In addition to the Lenders’ return on their debt instruments, the Secured Lenders and Unsecured Debenture Holders hold approximately 15.9 million warrants and 3.7 million warrants, respectively. ”
Hi-Med was one of iAnthus’ largest shareholders. It alleged in its case that an escrow account set up by iAnthus to cover interest payments was never tapped. Hi-Med also alleged that there was a conspiracy between iAnthus’ former CEO Hadley Ford and Gotham Green to trigger a default. On April 6, 2020, iAnthus announced it had defaulted on $4.4 million in interest payments to the private equity firm Gotham Green Partners because of the coronavirus pandemic, as well as a decline in cannabis markets overall. The investors said there was an escrow of more than $5.7 million to pay one year’s interest on the 2018 debentures in the event of an iAnthus default. That agreement was amended in September to provide an additional $20 million to iAnthus, according to court documents.
The loss though hinged on the definition of the shares being traded. The investor’s case said that the iAnthus’ shares they bought are listed on the Canadian Stock Exchange and also trade in the U.S. on the OTCQX market. However, the Judge overseeing the case said that the OTC didn’t qualify as an exchange transaction. Still, Hi-Med was given until September 30 to file amended complaints.
iAnthus Gets Stronger
Since the cash crunch of 2019, iAnthus has continued to operate and get stronger by the quarter. iAnthus has reported $227 million in revenue (representing 110% growth) and positive adjusted EBITDA in the five publicly reported quarters since it defaulted in April 2020. Last month the company reported its financial results for the quarter ending June with revenue increasing 57% to $54.2 million. The company trimmed its net losses to $15.3 million, or a loss of $0.09 per share, versus a loss of $24.8 million, or a loss of $0.14 per share, in the same quarter in the prior year.
iAnthus Capital Holdings, Inc . (CSE: IAN) (OTCPK: ITHUF) reported its financial results for the three ending June 30, 2021 as revenue increased 57% to $54.2 million. The company trimmed its net losses to $15.3 million, or a loss of $0.09 per share, versus a loss of $24.8 million, or a loss of $0.14 per share, in the same quarter in the prior year.
Despite a gross profit of $31 million, iAnthus did not make interest payments due on its 13% senior secured convertible debentures and its 8% convertible unsecured debentures due during 2020. As previously disclosed, the non-payment of interest in March 2020 triggered an event of default with respect to these components of the company’s long-term debt, which, as of June 30, 2021, consisted of principal amounts at face value of $97.5 million and $60.0 million, and accrued interest of $22.9 million and $7.2 million, on the Secured Notes and Unsecured Debentures, respectively. In addition, as a result of the default, as of June 30, 2021, the Company has accrued additional fees and interest of $14.6 million (“Exit Fees”) in excess of the aforementioned amounts that are further detailed in the company’s financial statements.
In 2020, iAnthus entered into a restructuring support agreement that was amended on June 15, 2021 with the holders of its Secured Notes and a majority of the holders of its Unsecured Debentures to effectuate a proposed recapitalization transaction to be implemented by way of a court-approved plan of arrangement under the Business Corporations Act ( British Columbia ). The company is required to issue an aggregate of 6,072,579,699 common shares upon the extinguishment of (i) $22.5 million of Secured Notes (including the Exit Fees) plus interest accrued thereon, (ii) $40.0 million of Unsecured Debentures plus interest accrued thereon, and (iii) interest accrued above the principal amount of $14.7 million of the interim financing provided by the Secured Lenders.
iAnthus said in its statement that 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, contemplated by the Recapitalization Transaction. On June 17, 2021, the Massachusetts Cannabis Control Commission approved the proposed change of ownership and control of the current licenses held by the Company’s wholly-owned subsidiaries, Mayflower Medicinals, Inc., and Cannatech Medicinals, Inc. contemplated by the Recapitalization Transaction. Similar state-level regulatory approvals are being sought in Florida, Maryland, New York, New Jersey, and Vermont.
After the market closed on Monday, iAnthus Capital Holdings, Inc . (CSE: IAN) (OTC: ITHUF) reported its financial results for the three months ended March 31, 2021. iAnthus said that revenue rose 70% to $51.8 million. The net loss was $19.5 million, or a loss of $0.11 per share versus a loss of $236.3 million, or a loss of $1.38 per share, in the same quarter in the prior year.
The company noted that due to liquidity constraints it did not make applicable interest payments due on its 13% senior secured convertible debentures and its 8% convertible unsecured debentures due during 2020. The non-payment of interest in March 2020 triggered an event of default, which, as of March 31, 2021, consisted of principal amounts at face value of $97.5 million and $60.0 million, and accrued interest of $19.0 million and $6.0 million, on the Secured Notes and Unsecured Debentures, respectively.
As a result of the default, iAnthus has accrued additional fees and interest of $14.2 million. Most shareholders are aware that in July 2020 iAnthus entered into a restructuring agreement with its debtholders to begin a proposed recapitalization transaction in Canada. However, some of the transactions that the company wants to undertake have triggered the requirement for approval by state-level regulators in certain U.S. states with jurisdiction over the licensed cannabis operations owned, in whole or in part by iAnthus in such states. In February, 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, contemplated by the Recapitalization Transaction. Similar state-level regulatory approvals are being sought in Florida, Massachusetts, Maryland, New York, New Jersey, and Vermont.
If the Recap plan is consummated, iAnthus said it intends to issue up to an aggregate of 6,072,579,699 common shares upon the extinguishment of (i) $22.5 million of Secured Notes (including the Exit Fees), (ii) $40.0 million of Unsecured Debentures, including interest accrued thereon, and (iii) interest accrued on the interim financing in the amount of $14.7 million provided by the Secured Lenders.
iAnthus Capital Holdings, Inc . (OTCPK: ITHUF) reported its financial results for the fourth quarter and year ending December 31, 2020. The company delivered revenue of $46.0 million for the quarter with a net loss of $27.3 million, or a loss of $0.16 per share.
For the full year, iAnthus delivered revenue of $151.7 million, up 93.5% from the prior year with a net loss of $309.8 million, or a loss of $1.81 per share. The company became a U.S. reporting company effective February 5, 2021, and all the financial statements are reported in accordance with U.S. Generally Accepted Accounting Principles (GAAP). All currency is expressed in U.S. dollars.
Recapitalization Plan Still Ongoing
The company also noted that it did not make applicable interest payments due on its 13% senior secured convertible debentures and its 8% convertible unsecured debentures due during 2020. The non-payment of interest in March 2020 triggered an event of default with respect to these components of the company’s long-term debt, which, as of December 31, 2020, consisted of principal amounts at face value of $97.5 million and $60.0 million and accrued interest of $15.1 million and $4.8 million on the Secured Notes and Unsecured Debentures, respectively. In addition, as a result of the default, the company has accrued additional fees and interest of $13.8 million in excess of the aforementioned amounts that are further detailed in the company’s financial statements.
iAnthus entered into a restructuring support agreement with its debtholders to effectuate a recapitalization transaction to be implemented by way of a court-approved plan of arrangement under the Business Corporations Act ( British Columbia ). On September 14, 2020, the company’s security holders voted in support of the Recapitalization Transaction, and on October 5, 2020, the Plan of Arrangement was approved by the Supreme Court of British Columbia.
If consummated, iAnthus said it intends to issue up to an aggregate of 6,072,579,699 common shares upon the restructuring of (i) $22.5 million of Secured Notes (including the Exit Fee), $40.0 million of Unsecured Debentures, including interest accrued thereon and (ii) interest accrued on the interim financing in the amount of $14.7 million provided by the Secured Lenders. “The Recapitalization Transaction remains subject to the receipt of all necessary regulatory approvals and approval by the CSE. Specifically, certain of the transactions contemplated by the Recapitalization Transaction have triggered approval by U.S. state-level regulators in the states in which the Company operates. Where required, iAnthus has commenced the review and approval process.”
iAnthus (OTC: ITHUF) stock popped over 57% to lately sell at 29 cents after the company was able to close on an $11 million bridge financing funded by certain lenders affiliated with the counterparties to the previously announced restructuring support agreement dated July 10, 2020. They are the holders of all of the 13% senior secured convertible debentures issued by iAnthus Capital Management, LLC and the holders of 91% of the principal amount of 8% convertible unsecured debentures issued by iAnthus.
Randy Maslow, Interim Chief Executive Officer and President of the Company said in a statement, “We are very pleased to have closed this bridge note financing. The net proceeds from the financing will be used exclusively for our operations in New Jersey for the continued construction and completion of improvements at our New Jersey cultivation, manufacturing, and dispensary facilities. We expect to sublease these facilities to MPX NJ once construction is complete and the facilities are ready to commence licensed operations.”
MPX NJ Battle
The battle between MPX New Jersey and iAnthus NJ continues even as iAnthus secured the financing. which will be used primarily for the construction and improvements of certain New Jersey facilities leased and/or owned by iAnthus NJ. These facilities are expected to be subleased to MPX New Jersey, with which the company has entered into several contractual agreements as described below. These facilities include the cultivation and manufacturing facility currently under construction in Pleasantville and the current dispensary located in Atlantic City, as well as two prospective satellite dispensaries expected to be leased and/or purchased and improved by iAnthus NJ pursuant to satellite approval applications filed with the New Jersey Department of Health on December 31, 2020.
However, the Monmouth County Superior Court is allowing iAnthus to continue construction at the Pleasantville facility. Maslow said, “We are pleased with the Court’s ruling today in iAnthus’ favor, giving the Company the green light to continue its ongoing build-out of the Pleasantville cultivation and processing facility, which is important to New Jersey’s goal of providing additional supply as quickly as possible to the state’s medical cannabis patient population. The Court recognized iAnthus’ substantial interest in completing the construction of the cultivation facility, especially given the Company’s contractual rights to acquire full ownership of MPX NJ, subject to regulatory approval. The Court’s ruling today, together with our closing yesterday on an $11 million financing earmarked solely for our NJ operations, gives us tremendous confidence in our ability to complete the cultivation, processing and associated dispensary facilities in a timely fashion for the benefit of New Jersey’s patients.”
Last week, the company announced that in a unanimous decision, the British Columbia Court of Appeal dismissed the appeal of Walmer Capital Limited, Island Investments Holdings Limited, and Alastair Crawford of the order of the Supreme Court of British Columbia made October 5, 2020, approving a plan of arrangement to implement the Company’s previously announced recapitalization transaction. Thus, effectively ending the shareholder fight.
It’s a bombshell recording between former iAnthus Capital Holdings Inc. (OTC: ITHUF) Hadley Ford and an unidentified investor that has been leaked to the internet. A transcript was published online in which Ford candidly discusses the company’s dealings with its lenders Gotham Green Partners and Oasis Management. Green Market Report reached out to both companies for comment but has yet to receive a response. The most explosive exchange alleges that the lenders conspired to wipe out the unsuspecting shareholders. The stock was plunging another 30% to lately sell at 29 cents as it has also found itself mired in a lawsuit with MPX NJ, a class-action lawsuit, and a fight over the company’s recapitalization or bankruptcy plan.
Well, How Did We Get Here?
At the beginning of 2020, iAnthus was looking like it would become one of the top MSO’s (multi-state operators) in the business, and then the company unraveled in spectacular fashion. In 2019, iAnthus was delivering solid earnings, making acquisitions, and getting capital from Gotham Green Partners (GGP). It closed on its huge $835 million acquisition of MPX Bioceuticals, whose COO was Beth Stavola. The company also acquired Stavol’s CBD For Life brand and made her a board member. In January of 2020, the company completed its commitment to Stavola of $11 million. This raised eyebrows at the time as many believed the company should have restructured the payment or that Stavola as a board member and Chief Strategy Officer should have made it easier for the company to repay her. In hindsight, she was smart to get her money quickly before the company fell apart. Ford’s opinion of these actions are discussed on the call.
In April 2020, Ford abruptly resigned from the company after an investigation by the board’s special committee. The company’s President and Co-founder Randy Maslow was appointed as the interim CEO. The company formed a special committee to look into allegations made in an online media report that Hadley had misused company funds for his own benefit and that there was a conflict of interest. The committee determined that two of the allegations were substantiated and recommended further action.
According to a company statement, the Special Committee determined that Ford entered into two undisclosed loans (one loan for $100,000 with a related-party and the other for $60,000 with a non-arm’s length party) and those loans created a potential or apparent conflict and should have been disclosed to the board in a timely way. On The alleged call, Ford says he believed Stavola leaked the loan information because she wanted to become CEO of the company.
Stavola at the time said, “I look forward to working closely with Randy as interim CEO and the Special Committee as the Company explores strategic alternatives.” iAnthus initiated a Strategic Alternatives Review Process and has hired Canaccord Genuity Corp. as its financial advisor.
Recapitalization To Avoid Bankruptcy
In August 2020, iAnthus reported a staggering net loss of $237.3 million, which included a $199.4 million impairment loss. While the revenue rose 12% sequentially to $30.4 million, the net losses and defaulting on debt payments have overshadowed any good news. iAnthus said in its earnings statement that it did not make interest payments due on its Secured Notes and Unsecured Debentures due on March 31, 2020. “This non-payment of interest triggered an event of default with respect to these components of the Company’s long-term debt, consisting of principal amounts at face value of $97.5 million and $60.0 million and accrued interest amounts at March 31, 2020, of $3.2 million and $1.2 million on the Secured Notes and Unsecured Debentures, respectively.”
The company had an accumulated deficit of $622 million according to the filing. On July 10, the company entered into a Restructuring Support Agreement with some of its lenders. “If the Recapitalization Transaction is completed through CCAA Proceedings, then the Existing Shareholders (defined as the existing holders of Common Shares) will not receive a recovery.” In other words, the shareholders lose everything.
In addition to the Recapitalization plan, Stavola left the company. Since that time, Stavola has filed a lawsuit against iAnthus regarding MPX NJ. In late 2020, MPX NJ sued iAnthus Capital Management and its New Jersey subsidiary. MPX is saying that iAnthus is improperly going after the operation of the Pleasantville Alternative Treatment Center by trying to negotiate with regulators. The judge ruled against iAnthus according to a story on NJ.com. The two companies have a shared lease for the dispensary, but MPX NJ is insisting that it is the company that was awarded the permit in 2018 and that the master services agreement that iAnthus cites as its authority, has not been approved by the New Jersey State of Health. iAnthus disputes the allegations of the Complaint and disputes that it ever engaged in the conduct that was the subject of the temporary restraints in the first place.
Oasis Management Debt
In addition to the money invested by GGP, Oasis Management stepped in with $25 million. In March 2020, Oasis began to complain publicly that iAnthus was in breach of the terms. This topic is discussed in detail on the call transcript with regards to Alex Shoghi, the contact at Oasis. Ford is quoted in the published transcript, which hasn’t been verified as saying:
So then we get to June of 2019 and I get this phone call from, uh, Alex Shoghi at Oasis saying, Oh, you’re in violation of your maintenance covenants. I’m like, what are you talking about? Well, the stock price is so low. Um, you know, you violated the maintenance component, so there are no maintenance covenants of the deal. Uh, there’s only a current test. And he said, nah, that’s not the way I read it. I don’t care how you read it. You and I negotiated the deal. We both know there’s no maintenance covenant. Like it’s not in any of my notes. It’s not in any of the language and any of the usual things. So yeah, he tried to stick us up for some better economics, but he had his lawyers involved and there wasn’t a maintenance covenant. So he went away.
Ford according to the call contact Adler at GGP to tell him what Shoghi was up to and Adler allegedly said he wouldn’t negotiate with terrorists and they should play hardball with Oasis. They felt that Oasis wanted better terms for his deal and that by threatening to take it public he could tank the stock price. Ford was very concerned according to the call that Shoghi was going to publish what he deemed were lies about the company. As it turned out, Shoghi did go public and the stock price dropped as expected.
The Phone Call
Initially, according to the phone call. GGP wasn’t too happy with Oasis and was on the side of iAnthus. iAnthus was trying to get more investment money from GGP and at first it seemed Adler was on board. GGP was going to invest $20 million, but then delays began to happen and the paperwork looked to be changing in GGP’s favor. Ford started to get concerned and began to look elsewhere to raise money as the $20 million dropped down to $15 million and investors were getting nervous about the Shoghi situation. As all of this is happening, the stock price continues to fall. Then it seems, Adler and GGP began to side with Oasis. Ford says on the alleged call:
guys, you know, we got an interest payment in a week. You guys have said that you were going to forbear that, or, you know, push that off for us. I haven’t seen any paperwork. I need to get the paperwork. And Alex says, and Jason let’s Alex talk, And Alex says, oh, we’re happy to continue to have a conversation on forbearances but there’s nothing that I ask this to give us that would make them forbear. And then Jason says, I had a thought. More of a Gotahm led action. We’re going to take the company private. I’m like, well, that’s interesting. I said, you know, stocks low enough. Um, and I’ve got some ideas on that. You could, uh, offer a warrant and all these other things, and you could actually make it a very shareholder friendly, uh, going private transaction. You could have guys showing more than 1% roll into it and keep the cash need down. And the stock guys with less than that could get a long day warranted. Um, you know, give some upside when the company comes back public again, and there’s enough juice for everyone to make a lot of money.
And Jason says, well, actually had different concepts are going private. Um, uh, we’re going to take out, we’re going to wipe out the public shareholders and the junior guys, and then we’re going to recharge the management team.
At this point, Ford starts to think about the shareholders.
I’ve got a responsibility to the public shareholders. I agree to likehose the public shareholders and junior guys and enrich myself and Jason’s well, think about it. Don’t send any texts, don’t send any emails. Um, and, um, you know, we’ll talk about it. Um, and I went and spoke with our outside counsel, spoke with my board and they’re like, well, Gotham’s not your friend. And we said, okay, let’s go to the mattresses. You know, we got a lot of people already in the data room booking to, uh, finance this, we’ll hire an outside advisor, which ended up being canaccord to do kind of a strategic review. We will start to hoard cash. We’ll start to lay people off. we’ll stop all our spending. We won’t pay any interest. Um, and we’ll fight these bastrdds and there’s enough assets value here that will emerge successful.
By this time, iAnthus had approached Canaccord Genuity to help with raising money. According to the call, Ford supposedly gave names of wealthy individuals who could invest in the company, but he felt that Canaccord never pursued those options. The other unidentified person on the supposed call complained that Canaccord did receive bids for iAnthus, but never pass those offers along to the company. Had that been pursued, iAnthus shareholder value may have been saved.
More Shareholder Disrespect
The transcript of the supposed call is quite lengthy. While Ford mostly fights for the shareholders, it seems others in the company have no concern for those investors. Ford says at one point:
They’re saying, what’s my liability going forward or saying the board is not going to get rich on a shareholder friendly outcome.
So the optimization was never about getting the best deal for the shareholders, although they will claim that, but I know the optimization was around getting something that looked prudent and thoughtful.
Again, Green Market Report hasn’t verified the call, although New Cannabis Ventures wrote, ” We were able to confirm with the investor, who was aware that it had been leaked, that the recording is legitimate, though he claimed to have no involvement in sharing the information and had no intention for it to become public.”
With regards to the Recapitalization Plan, there is an appeal with respect to the Supreme Court of British Columbia’s final approval for the plan of arrangement to implement the Recapitalization Transaction, iAnthus confirmed that the appeal is scheduled to be heard on January 26, 2021. The submissions will be held virtually before a three-member panel of the British Columbia Court of Appeal. iAnthus considers the appeal to be without merit and intends to vigorously defend its interest in court.
In March of 2019, the stock traded at roughly $5.67. It is now trading at approximately 31 cents.
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