iAnthus struggle to be profitable despite revenue increasing by 14% from the prior quarter.
iAnthus Capital Holdings, Inc. (CSE: IAN), which owns, operates, and partners with regulated cannabis operations across the United States, reports its financial results for the second quarter ended June 30, 2020. Amounts are in U.S. Dollars unless stated otherwise.
Second Quarter 2020 Financial Updates
- Net loss of $20.9 million, or a loss of $0.12 per share
- Reported revenues of $34.6 million, up 14% from the prior quarter
- Gross margin for the quarter was 54.8%, up from 49.2% in the prior quarter
- 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 ("Unsecured Debentures") due on March 31, 2020 or June 30, 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, consisting of principal amounts at face value of $97.5 million and $60.0 million and accrued interest amounts at June 30, 2020 of $7.1 million and $2.4 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 $12.9 million in excess of the aforementioned amounts that are further detailed in the Company's Financial Statements.
|Table 1: Q2 2020 Financial Results|
|in thousands of US$, except share and per|
share amounts (unaudited)
|Q2 2020||Q1 2020||Q2 2019|
|Gross profit, excluding fair value items||18,994||14,979||9,197|
|Gross margin, excluding fair value items||54.8%||49.2%||47.9%|
|Net loss per share||(0.12)||(1.50)||(0.06)|
On October 5, 2020, the Company received final approval from the Supreme Court of British Columbia (the "Court") for the Company's plan of arrangement approved by securityholders on September 14, 2020 (the "Plan of Arrangement") to implement the Company's previously announced recapitalization transaction (the "Recapitalization Transaction").
Further to the Company's news release dated October 6, 2020 (a copy of which is available under the Company's SEDAR profile at www.sedar.com), iAnthus amended and restated the Plan of Arrangement (the "Revised Plan") to remove a proposed injunction provision and to provide for a narrower scope of release of claims. The Court issued its Reasons for Judgment on October 5, 2020 and approved the Revised Plan. A copy of the Court's decision is available online at: https://www.bccourts.ca/jdb-txt/sc/20/14/2020BCSC1484.htm.
Securityholder approval and Court approval were the two primary conditions precedent for closing the Recapitalization Transaction, both of which conditions have been satisfied. The closing of the Recapitalization Transaction remains subject to certain other customary closing conditions set out in the previously disclosed Restructuring Support Agreement and the Arrangement Agreement, copies of which are available under the Company's SEDAR profile at www.sedar.com (and filed on July 20, 2020 and August 17, 2020, respectively). A copy of the Revised Plan has also been filed under the Company's SEDAR profile as of October 7, 2020.
Certain of the transactions contemplated by the Recapitalization Transaction may trigger a review and approval requirement 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 iAnthus. Where required, iAnthus has either commenced or intends to promptly commence the review and approval process.
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