iAnthus Capital Holdings (CSE: IAN) unbelievably filed its fourth quarter financials last night, reporting revenues of $27.2 million, with a loss of $258.4 million. The significant loss was a result of impairments to the tune of $234.2 million in goodwill reductions.
Full earnings for the fiscal year amounted to revenues of $78.3 million, and a net loss of $301.2 million. Gross profit before adjustments amounted to $37.02 million for the full fiscal year. Total operating expenses for the year amounted to $355.5 million, including impairments of $234.2 million, followed by salaries of $34.7 million and depreciation and amortization of $23.6 million. Expenses were partially offset by other items, which recognized a gain of $11.1 million, largely through a gain from the change in fair value of financial instruments.
The significant impairment was a result of the the firms total net assets exceeding the Company’s market capitalization as of December 31, 2019, with goodwill impairments being allocated to each of its cash generating units. The hardest hit unit was that of the firms Arizona operations, which saw a $110.2 million impairment, followed by Nevada with a $50.5 million impairment. Based on the rational for the asset impairment, specifically as it pertains to market capitalization, it would be unsurprising to see further impairments made to the companies goodwill and intangibles in subsequent quarters, should the company actually file them.
Looking to the balance sheet, the company psoted a cash position of $34.8 million at year end, as compared to $27.9 million at the end of the September quarterly. Notably, however, iAnthus raised $36.2 million on December 20, 2019 via the issuance of additional secured notes – signifying that the company was running on less than fumes by the time this cash infusion arrived, and largely pointing to the reason that it ultimately underwent a strategic review.
Receivables declined over the course of the quarter, from $9.9 million to $7.6 million, as did inventory, which fell from $30.7 million to $25.2 million. Current assets overall grw from $85.4 million to $87.1 million.
Payables were relatively unchanged during the quarter, declining from $26.7 million to $25.4 million. Current lease liabilities grew from nil to $5.3 million over the quarter, resulting in current liabilities climbing to $44.2 million from $41.6 million.
Despite the cash problems exhibited by the company – iAnthus is nearly burning $10 million a month to keep its operations afloat – it appears that it remains focused on protecting its own members of management first and foremost. For instance, the Stavola note was repaid in full, and on time – all $10.8 million, along with $24,000 in interest. Secondly, former CEO Hadley Ford evidently had access to a total loan facility of up to C$500,000, of which $391,000 was outstanding, which bears interest at a rate of 2.5% – a rate far better than what iAnthus was able to borrow money at.
Further, this loan remains outstanding despite Ford no longer having a role with the company, due to undisclosed related party loans in which he obtained from Gotham Green Partners’ managing member. While originally set to have a maturity date of June 30, 2020, that date has now been extended to June 30, 2021, and when repaid, “the balance of the loan due is to be partially offset by compensation owed to Ford,” – meaning the full figure is unlikely to be returned.
iAnthus is also heavily tied up in legal battles, some of which were not previously disclosed. For instance, the company has had a claim filed against it by the prior shareholders of GrowHealthy in relation to shares owed in connection with the acquisition of the firm. Subsequent to the fiscal year end, that claim was amended to also include monetary compensation. Further, a class action was also filed this month against the company, as well as the firms former CEO and CFO, claiming statutory and common law misrepresentation while seeking an undefined amount of damages together with interests and costs.
The company also acknowledged that it has received demand letters from two former employees, with combined damages claimed totaling $1.2 million. iAnthus has also seen its purchase of Sierra Well, announced in September, fall through due to “adverse market conditions.”
Despite the filing of the firms annual financial statements, trading in iAnthus remains halted as a result of failing to file its first quarter 2020 financial statements by the deadline of July 14, 2020.
Information for this briefing was found via Sedar and iAnthus Capital Holdings Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
