10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to ___________

Commission File

Number:000-56228

IANTHUS CAPITAL HOLDINGS, INC.

(Exact Name of Registrant as

Specified in its Charter)


British Columbia, Canada		98-1360810
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

420 Lexington Aven ue, Suite 414 New York, NY		10170
(Address of principal executive offices)		(Zip Code)

(646)518-9411

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T(§

232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2of

the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in

Rule12b-2of

the Exchange Act). Yes ☐ No ☒

Number of common shares outstanding as of August 1

, 2022 was

6,244,297,897.

Table of Contents


		Page No.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements		4

	Condensed Consolidated Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021		4

	Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2022 and 2021 (Unaudited)		5

	Condensed Consolidated Statements of Changes in Shareholders’ (Deficit) Equity for the Three and Six Months ended June 30, 2022 and 2021 (Unaudited)		6

	Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2022 and 2021 (Unaudited)		7

	Notes to the Condensed Consolidated Financial Statements (Unaudited)		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		43

Item 4.	Controls and Procedures		43

PART II. OTHER INFORMATION			44

Item 1.	Legal Proceedings		44

Item 1A.	Risk Factors		45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		61

Item 3.	Defaults Upon Senior Securities		61

Item 4.	Mine Safety Disclosure		61

Item 5.	Other Information		61

Item 6.	Exhibits		61

	Signatures		62

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form

10-Q

contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements in this Quarterly Report on Form

10-Q

about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common shares and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statements.

Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout our most recent Annual Report on Form

10-K

and any updates described in our Quarterly Reports on Form

10-Q

and Current Reports on Form

8-K

as may be amended, supplemented or superseded from time to time by other reports we file with the U.S. Securities and Exchange Commission (the “SEC”). You should read this Quarterly Report on Form

10-Q

and the documents that we referenced herein and have filed as exhibits to the reports we file with the SEC, completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this Quarterly Report on Form

10-Q

is accurate as of the date hereof. Because the risk factors in our SEC reports could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this Quarterly Report on Form

10-Q,

and particularly our forward-looking statements, by these cautionary statements.

Table of Contents

iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

Note 1 – Organization and Description of Business

(a)

Description of Business

iAnthus Capital Holdings, Inc. (“ICH”, or “iAnthus”), together with its consolidated subsidiaries (the “Company”) was incorporated under the laws of British Columbia, Canada, on November 15, 2013. The Company is a vertically-integrated multi-state owner and operator of licensed cannabis cultivation, processing and dispensary facilities, and developer, producer and distributor of innovative branded cannabis and cannabidiol (“CBD”) products in the United States. Through the Company’s subsidiaries, licenses, interests and contractual arrangements, the Company has the capacity to operate dispensaries and cultivation/processing facilities, and manufacture and distribute cannabis across the states in which the Company operates in the U.S.

The Company’s business activities, and the business activities of its subsidiaries, which operate in jurisdictions where the use of marijuana has been legalized under state and local laws, currently are illegal under U.S. federal law. The U.S. Controlled Substances Act classifies marijuana as a Schedule I controlled substance. Any proceeding that may be brought against the Company could have a material adverse effect on the Company’s business plans, financial condition and results of operations.

(b)

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (the “financial statements”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and, therefore, certain information, footnotes and disclosures normally included in the annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted in accordance with SEC rules and regulations.

The financial data presented herein should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2021, included in the Company’s Annual Report on the Form

10-K

filed with the SEC on March 18, 2022. In the opinion of management, the financial data presented includes all adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These unaudited interim condensed consolidated financial statements include estimates and assumptions of management that affect the amounts reported on the unaudited condensed consolidated financial statements. Actual results could differ from these estimates.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2022, or any other period.

Except as otherwise stated, these unaudited interim condensed consolidated financial statements are presented in U.S. dollars.

(c)

Consummation of Recapitalization Transaction

On June 24, 2022 (the “Closing Date”), the Company completed its previously announced recapitalization transaction (the “Recapitalization Transaction”) pursuant to the terms of that certain Restructuring Support Agreement (the “Restructuring Support Agreement”) dated July 10, 2020, as amended on June 15, 2021, by and among the Company, all of the holders (the “Secured Lenders”) of the 13.0% senior secured convertible debentures (the “Secured Notes”) issued by iAnthus Capital Management, LLC (“ICM”), a wholly-owned subsidiary of the Company, and a majority of the holders (the “Consenting Unsecured Lenders”) of the Company’s 8.0% unsecured convertible debentures (the “Unsecured Debentures”). The Recapitalization Transaction closed pursuant to the terms of the amended and restated plan of arrangement (the “Plan of Arrangement”) under the Business Corporations Act (British Columbia) approved by the Supreme Court of British Columbia

(the

“

Court”)

Pursuant to the terms of the Restructuring Support Agreement, Gotham Green Admin 1, LLC as collateral agent (the “Collateral Agent”), the Secured Lenders and the Consenting Unsecured Lenders agreed to forbear from further exercising any rights or remedies in connection with any events of default that existed or may have existed in the future arising under any of the purchase agreements with respect to the Secured Notes and all other agreements delivered in connection therewith, the purchase agreements with respect to the Unsecured Debentures and all other agreements delivered in connection therewith and any other agreement to which the Collateral Agent, Secured Lenders, or Consenting Unsecured Lenders are a party to (collectively, the “Defaults”). As of the Closing Date, the Collateral Agent, Secured Lenders and Consenting Unsecured Lenders irrevocably waived all Defaults.

In connection with the closing of the Recapitalization Transaction, the Company issued an aggregate of 6,072,580 common shares to the Secured Lenders and all of the holders (the “Unsecured Lenders

” and together with the Secured Lenders, the “Lenders

”)

of the Unsecured Debentures. Specifically, the Company issued 3,036,290 common shares (the “Secured Lender Shares”), or 48.625% of the outstanding common shares of the Company, to the Secured Lenders and 3,036,290 common shares (the “Unsecured Lender Shares” and together with Secured Lender Shares, the “Shares”), or 48.625% of the outstanding common shares of the Company, to the Unsecured Lenders. As of the Closing Date, there were 6,244,298 common shares of the Company issued and outstanding. As of the Closing Date, the then existing holders of the Company’s common shares collectively held 171,718 common shares, or 2.75% of the outstanding common shares of the Company.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

As of the Closing Date, the outstanding principal amount of the Secured Notes (including the interim financing secured notes in the aggregate principal amount of approximately $14.7 million origin

ally due

July 13, 2025)

together with interest accrued and fees thereon were forgiven in part and exchanged for (A) the Secured Lender Shares, (B) the June Secured Debentures (as defined below) in the aggregate principal amount of $99.7 million and (C) the June Unsecured Debentures (as defined below) in the aggregate principal amount of $5.0 million. Also as of the Closing Date, the outstanding principal amount of the Unsecured Debentures together with interest accrued and fees thereon were forgiven in part and exchanged for (A) the Unsecured Lender Shares and (B) the June Unsecured Debentures in the aggregate principal amount of $15.0 million. Furthermore, all existing options and warrants to purchase common shares of the Company, including certain debenture warrants and exchange warrants previously issued to the Secured Lenders, the warrants previously issued in connection with the Unsecured Debentures and all other Affected Equity (as defined in the Plan of Arrangement), were cancelled and extinguished for no consideration.

Secured Debenture Purchase Agreement

In connection with the closing of the Recapitalization Transaction, the Company entered into a Third Amended and Restated Secured Debenture Purchase Agreement (the “Secured DPA”), dated as of June 24, 2022, with ICM, the other Credit Parties (as defined in the Secured DPA), the Collateral Agent, and the lenders party thereto (the “New Secured Lenders”) pursuant to which ICM issued the New Secured Lenders 8.0% secured debentures (the “June Secured Debentures”) in the aggregate principal amount of $99.7 million pursuant to the Plan of Arrangement.

The June Secured Debentures accrue interest at a rate of 8.0% per annum (increasing to 11.0% upon the occurrence of an Event of Default (as defined in the Secured DPA)), are due on June 24, 2027 and may be prepaid on a pro rata basis from and after the third anniversary of the Closing Date upon prior written notice to the New Secured Lenders without premium or penalty. Upon receipt of a Change of Control Notice (as defined in the Secured DPA), each New Secured Lender may provide notice to ICM to either (i) purchase the June Secured Debenture at a price equal to 103.0% of the then outstanding principal amount together with interest accrued thereon (the “Offer Price”) or (ii) if the Change of Control Transaction (as defined in Secured DPA) results in a new issuer, or if the New Secured Lender desires that the June Secured Debenture remain unpaid and continue in effect after the closing of the Change of Control Transaction, convert or exchange the June Secured Debenture into a replacement debenture of the new issuer or ICM, as applicable, in the aggregate principal amount of the Offer Price on substantially equivalent terms to those terms contained in the June Secured Debenture. Notwithstanding the foregoing, if 90.0% or more of the principal amount of all June Secured Debentures outstanding have been tendered for redemption on the date of the Change of Control Notice, ICM may, at its sole discretion, redeem all of the outstanding June Secured Debentures at the Offer Price. As security for the Obligations (as defined in the Secured DPA), ICM and the Company granted to the Collateral Agent, for the benefit of the New Secured Lenders, a security interest over all of their present and after acquired personal property.

Pursuant to the Secured DPA, so long as Gotham Green Partners, LLC or any of its Affiliates (as defined in the Secured DPA) hold at least 50.0% of the outstanding principal amount of June Secured Debentures, the Collateral Agent will have the right to appoint two

non-voting

observers to the Company’s board of directors, each of which shall receive up to a maximum amount of

$25

thousand

dollars in any

-month

period for reasonable

out-of-pocket

expenses.

In addition, pursuant to the Secured DPA, the New Secured Lenders purchased an additional $25.0 million of

June

Secured Debentures (the “Additional Secured Debentures”).

Unsecured Debenture Purchase Agreement

In connection with the closing of the Recapitalization Transaction, the Company, as guarantor of the Guaranteed Obligations (as defined in the Unsecured DPA (as defined herein)), entered into an Unsecured Debenture Purchase Agreement (the “Unsecured DPA”) dated as of June 24, 2022 with ICM, the Secured Lenders and the Consenting Unsecured Lenders pursuant to which ICM issued 8.0% unsecured debentures (the “June Unsecured Debentures”) in the aggregate principal amount of $20.0 million pursuant to the Plan of Arrangement, including $5.0 million to the Secured Lenders and $15.0 million to the Unsecured Lenders.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

The June Unsecured Debentures accrue interest at a rate of 8.0% per annum (increasing to 11.0% upon the occurrence of an Event of Default (as defined in the Unsecured DPA)), are due on June 24, 2027 and may be prepaid on a pro rata basis from and after the third anniversary of the Closing Date upon prior written notice to the Unsecured Lender without premium or penalty. Upon receipt of a Change of Control Notice (as defined in the Unsecured DPA), each Unsecured Lender may provide notice to ICM to either (i) purchase the June Unsecured Debenture at a price equal to 103.0% of the then outstanding principal amount together with interest accrued thereon (the “Unsecured Offer Price”) or (ii) if the Change of Control Transaction (as defined in Unsecured DPA) results in a new issuer, or if the Unsecured Lender desires that the June Unsecured Debenture remain unpaid and continue in effect after the closing of the Change of Control Transaction, convert or exchange the June Unsecured Debenture into a replacement debenture of the new issuer or ICM, as applicable, in the aggregate principal amount of the Unsecured Offer Price on substantially equivalent terms to those terms contained in the June Unsecured Debenture. Notwithstanding the foregoing, if 90.0% or more of the principal amount of all June Unsecured Debentures outstanding have been tendered for redemption on the date of the Change of Control Notice, ICM may, at its sole discretion, redeem all of the outstanding June Unsecured Debentures at the Unsecured Offer Price. Pursuant to the Unsecured DPA, the Obligations (as defined in the Unsecured DPA) are subordinated in right of payment to the Senior Indebtedness (as defined in the Unsecured DPA).

Refer

Note 5 for further discussion regarding the Recapitalization Transaction.

(d)

Going Concern

These unaudited interim condensed consolidated financial statements have been prepared under the assumption that the Company will be able to continue its operations and will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future. For the three and six months ended June 30, 2022, the Company reported net losses of $373.6 million and $383.7 million, respectively, for the six months ended June 30, 2022, an operating cash outflow of $5.7 million and an accumulated deficit of

1,185.3 million as of June 30, 2022.

The Company believes that the consummation of the Recapitalization Transaction will provide the necessary funding for the Company to continue funding its operations in the future. Further, the consummation of the Recapitalization Transaction resulted in lower interest rates on the June Secured Debentures, June Unsecured Debentures and the Senior Secured Bridge Notes, allows interest to be paid-in-kind and enables the Company to seek additional debt or equity financings in the future. As such, the Company believes it may generate positive cash flows in the future and continue as a going concern for a period of no less than 12 months from the date of these unaudited interim condensed consolidated financial statements. These unaudited interim condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

(e)

Basis of Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of the Company together with its consolidated subsidiaries, except for subsidiaries which the Company has identified as variable interest entities where the Company is not the primary beneficiary.

(f)

Use of Estimates

The preparation of the unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgements that affect the application of accounting policies and the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations regarding future events that are believed to be reasonable under the circumstances. Actual results may differ significantly from these estimates.

Significant estimates made by management include, but are not limited to: economic lives of leased assets; inputs used in the valuation of inventory; allowances for potential uncollectability of accounts receivable; provisions for inventory obsolescence; impairment assessment of long-lived assets; depreciable lives of property, plant and equipment; useful lives of intangible assets; accruals for contingencies including tax contingencies; valuation allowances for deferred income tax assets; estimates of fair value of identifiable assets and liabilities acquired in business combinations; estimates of fair value of derivative instruments; and estimates of the fair value of stock-based payment awards.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

(g)

Change in Estimates

In January 2021, the Company completed an assessment of the yield per gram that is used as an input to value the Company’s inventory. The timing of this review was based on a combination of factors accumulating over time that provided the Company with updated information to make a better estimate on the yield of its products. These factors included enhanced data gathering of crop production and yields into inventory. The assessment resulted in a revision of the Company’s production yield estimates that are used to value ending inventory. The effect of this change was an increase in costs and expenses applicable to revenues of approximately $2.9 million in the first quarter of 2021.

(h)

Coronavirus Pandemic

In March 2020, the World Health Organization declared the global emergence of the novel coronavirus, known as

COVID-19

(“COVID-19”)

a pandemic. The Company continues to monitor guidance and orders issued by federal, state, and local authorities with respect to

COVID-19.

As a result, the Company may take actions that alter its business operations as may be required by such guidance and orders or take other steps that the Company determines are in the best interest of its employees, customers, partners, suppliers, shareholders, and stakeholders.

Any such alterations or modifications could cause substantial interruption to the Company’s business and could have a material adverse effect on the Company’s business, operating results, financial condition, and the trading price of the Company’s common shares, and could include temporary closures of one or more of the Company’s facilities; temporary or long-term labor shortages; temporary or long-term adverse impacts on the Company’s supply chain and distribution channels; and the potential of increased network vulnerability and risk of data loss resulting from increased use of remote access and removal of data from the Company’s facilities. In addition,

COVID-19

could negatively impact capital expenditures and overall economic activity in the impacted regions, which could impact the demand for the Company’s products and services.

It is unknown whether and how the Company may be impacted if the

COVID-19

pandemic continues to persist or if there are increases in its breadth or in its severity, including as a result of the waiver of regulatory requirements or the implementation of emergency regulations to which the Company is subject. The

COVID-19

pandemic poses a risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period.

Although, the Company has been deemed essential and/or has been permitted to continue operating its facilities in the states in which it cultivates, processes, manufactures, and sells cannabis during the pendency of the

COVID-19

pandemic, subject to the implementation of certain restrictions on

adult-use

cannabis sales in both Massachusetts and Nevada, which have since been lifted, there is no assurance that the Company’s operations will continue to be deemed essential and/or will continue to be permitted to operate. The Company may incur expenses or delays relating to such events outside of its control, which could have a material adverse impact on its business, operating results, financial condition and the trading price of its common shares.

(i)

Reclassification

Certain prior year amounts have been reclassified to conform with the current year’s presentation. These reclassifications adjustment had no effect on the Company’s previously reported unaudited interim condensed consolidated statement of operations.

The following table summarizes the effects of reclassification adjustment on the line items within the Company’s unaudited interim condensed consolidated statements of operations:


Prior Year’s Line item	Reclassified Amount						Current Year’s Line item
	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
Depreciation and amortization	$	495		$	1,037		Selling, general and administrative expenses
Depreciation and amortization		(495	)		(1,037	)	Depreciation and amortization

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

(j)

Revision of Prior Period Financial Statements

During the

three

months ended

March 31

, 2022, the Company determined that it had not appropriately recorded cost of inventory as of December 31, 2021. This resulted in an overstatement of the inventory balance, accrued and other current liabilities, income tax expense and accumulated deficit as of December 31, 2021, and an understatement of costs and expenses applicable to revenues for the year ended December 31, 2021.

Based on an analysis of Accounting Standards Codification (“ASC”) 250 – “Accounting Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 – “Materiality” (“SAB 99”) and Staff Accounting Bulletin 108 – “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), the Company determined that these errors were immaterial to the previously issued financial statements, and as such no restatement was necessary. Correcting prior period financial statements for immaterial errors would not require previously filed reports to be amended.

The effect of the adjustments on the line items within the Company’s consolidated balance sheet as of December 31, 2021 is as follows:


	December 31, 2021
	As previously reported			Adjustment			As adjusted
Inventories	$	30,447		$	(1,755	)	$	28,692
Current assets		55,401			(1,755	)		53,646
Total assets		346,744			(1,755	)		344,989
Accrued and other current liabilities		99,446			(513	)		98,933
Current liabilities		285,821			(513	)		285,308
Total liabilities		369,141			(513	)		368,628
Accumulated deficit		(800,390	)		(1,242	)		(801,632	)
Total shareholders’ deficit		(22,397	)		(1,242	)		(23,639	)
Total liabilities and shareholders’ deficit		346,744			(1,755	)		344,989

The effect of the adjustments on the line items within the Company’s consolidated statement of operations as of December 31, 2021 is as follows:


	Year Ended December 31, 2021
	As previously reported			Adjustment			As adjusted
Costs and expenses applicable to revenues	$	(91,735	)	$	(1,755	)	$	(93,490	)
Gross profit		111,283			(1,755	)		109,528
Loss from operations		(22,025	)		(1,755	)		(23,780	)
Loss from operations before income tax		(53,999	)		(1,755	)		(55,754	)
Income tax expense		22,249			(513	)		21,736
Net loss		(76,248	)		(1,242	)		(77,490	)
Earnings per share		(0.44	)		(0.01	)		(0.45	)

The effect of the adjustments on the line items within the Company’s unaudited interim condensed consolidated statements of changes in shareholders’ deficit for the three and six months ended June 30, 2022 is as follows:


	June 30, 2022
	As reported			Adjustment			As adjusted
Accumulated deficit – Balance January 1, 2022	$	(800,390	)	$	(1,242	)	$	(801,632	)
Total Shareholders’ deficit – Balance January 1, 2022		(22,397	)		(1,242	)		(23,639	)

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

Note 2 – Leases

The Company mainly leases office space and cannabis cultivation, processing and retail dispensary space. Leases with an initial term of less than 12 months are not recorded on the unaudited interim condensed consolidated balance sheets. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The Company has determined that it was reasonably certain that the renewal options on the majority of its cannabis cultivation, processing and retail dispensary space would be exercised based on operating history and knowledge, current understanding of future business needs and the level of investment in leasehold improvements, among other considerations. The incremental borrowing rate used in the calculation of the lease liability is based on the rate available to the parent company. The depreciable life of assets and leasehold improvements are limited by the expected lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Certain subsidiaries of the Company rent or sublease certain office space to/from other subsidiaries of the Company. These intercompany subleases are eliminated on consolidation and have lease terms ranging from less than 1 year to 15 years.

Maturities of lease liabilities for operating leases as of June 30, 2022, were as follows:


	Operating Leases
2023	$	7,852
2024		7,932
2025		8,107
2026		8,137
2027		7,672
Thereafter		56,617

Total lease payments	$	96,317
Less: interest expense		(59,308	)

Present value of lease liabilities	$	37,009
Weighted-average remaining lease term (years)		11.2
Weighted-average discount rate		20	%

For the three and six months ended June 30, 2022, the Company recorded operating lease expenses of $2.1 million and $4.3 million, respectively (June 30, 2021 - $2.0 million and $4.4 million, respectively), which are included in selling, general and administrative expenses on the unaudited interim condensed consolidated statements of operations.

The Company has entered into multiple sublease agreements pursuant to which it serves as lessor to the sublessees. The gross rental income and underlying lease expense are presented gross on the Company’s unaudited interim condensed consolidated balance sheets. For the three and six months ended June 30, 2022, the Company recorded sublease income of $0.2 million and $0.5 million, respectively (June 30, 2021 – less than $0.1 million and $0.1 million, respectively), which is included in other income on the unaudited interim condensed consolidated statements of operations. The Company recorded impairment loss for its

right-of-use

assets of $Nil and $Nil, respectively for the three and six months ended June 30, 2022 (June 30, 2021 - $1.7 million and $1.7 million, respectively).

Supplemental balance sheet information related to leases are as follows:


Balance Sheet Information	Classification	June 30, 2022		December 31, 2021
Right-of-use assets	Operating leases	$	31,955	$	30,429

Lease l iabilities
Current portion of lease liabilities	Operating leases	$	7,852	$	7,342
Long-term lease liabilities	Operating leases		29,157		27,814

Total		$	37,009	$	35,156

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

Note 3 – Inventories

Inventories are comprised of the following items:


	June 30, 2022		December 31, 2021
			(Revised)
Supplies	$	5,296	$	6,188
Raw materials		8,132		5,641
Work in process		7,187		9,464
Finished goods		8,523		7,399

Total	$	29,138	$	28,692

Inventories are written down for any obsolescence or when the net realizable value considering future events and conditions is less than the carrying value. For the three and six months ended June 30, 2022, the Company recorded $0.2 million and $0.5 million, respectively (June 30, 2021 - $0.2 million and $0.5 million, respectively), related to spoiled inventory in costs and expenses applicable to revenues on the unaudited interim condensed consolidated statements of operations.

Note 4 – Acquisitions

Acquisition of MPX New Jersey LLC

On February 1, 2022, the Company’s wholly-owned subsidiary, iAnthus New Jersey, LLC (“INJ”), closed on its acquisition of MPX New Jersey, LLC (“MPX NJ”), a New Jersey-based entity with a New Jersey medical cannabis permit. The acquisition consisted of INJ exercising its right to convert the principal balance of a loan and accrued interest owed pursuant to its loan agreement of $4.6 million into a 99% equity interest in MPX NJ. In addition, pursuant to an option agreement, INJ exercised its option to acquire the remaining 1% of MPX NJ for nominal consideration. The transaction with MPX NJ is a related party transaction due to the fact that Elizabeth Stavola, a former officer and director of the Company, is a former officer, director and majority owner of MPX NJ.

This transaction was treated as an asset acquisition under U.S. GAAP as substantially all of the fair value of the gross assets acquired were deemed to be associated with the acquired cultivation, production and retail licenses recognized as intangible assets in the table below.

The following table summarizes the allocation of the purchase price to the fair values assigned to the assets acquired and liabilities assumed:


Consideration
Cash	$	1
Settlement of pre-existing relationships		19,193

Fair value of consideration	$	19,194

Assets acquired and liabilities assumed
Cash	$	5
Fixed assets		100
Other non-current assets		15
Intangible assets		19,100
Accounts payable		(15	)
Accrued and other current liabilities		(11	)

Net assets acquired	$	19,194

The Company has determined that this acquisition is an asset acquisition under ASC 805 Business Combinations whereby the total consideration is allocated to the acquired net tangible and intangible assets based on their estimated fair values as of the closing date. The Company determined the fair value of the net identifiable assets received from the asset acquisition was a more reliable measurement of the assets exchanged as part of this asset acquisition. The Company concluded that the consideration included a nonmonetary component of $14.5 million as noncash consideration exchanged for the net identifiable assets received from MPX NJ. The related tax impact of $4.1 million was netted against this gain. As a result, the Company recorded a $10.5 million gain within other income on the unaudited interim condensed consolidated statement of operations for the three and six months ended June 30, 2022.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

Operating results have been included in these unaudited interim condensed consolidated financial statements from the date of the acquisition. Supplemental pro forma financial information has not been presented as the impact was not material to the Company’s unaudited interim condensed consolidated financial statements. The Company recorded acquisition costs of $0.1 million and $0.3 million within selling, general and administrative expenses on the unaudited interim condensed consolidated statement of operations for the three and six months ended June 30, 2022 (June 30, 2021 - $Nil and $Nil, respectively).

Note 5 – Long-Term Debt

As discussed in Note 1c, the Company consummated the Recapitalization Agreement with the Secured Lenders and the Unsecured Lenders on the Closing Date, at which time the Company issued the Shares as well as the June Secured Debentures and June Unsecured Debentures in the aggregate principal amount of $119.7 million in exchange for the full satisfaction of the Secured Notes, Unsecured Debentures and the accrued interest and accrued fee obligations in the aggregated amount of $238.2 million. Upon the consummation of the Recapitalization Transaction and as of the Closing Date, all existing Defaults under the Secured Notes and Unsecured Debentures were cured. As a result of the consummation of the Recapitalization Agreement, as of June 30, 2022, the Secured Lenders and the Unsecured Lenders own 97.25% of the Company’s common shares, in the aggregate.

Background of Recapitalization Transaction

Since March 31, 2020, the Company had not made interest payments due to the Secured Lenders and the Unsecured Lenders. Through June 24, 2022, the Company had been in default on the Secured Notes and Unsecured Debentures, which, as of June 24, 2022, consisted of $97.5 million and $60.0 million of principal amount and $38.5 million and $11.9 million in accrued interest, respectively. In addition, as a result of the default, the Company had accrued additional fees and interest of $16.2 million in excess of the aforementioned amounts.

As a result of the March 31, 2020 default, the Board of Directors of the Company formed a special committee comprised of the Company’s then five independent,

non-management

directors of the Company (the “Special Committee”) to, among other matters, explore and consider strategic alternatives available to the Company in light of the prospective liquidity requirements of the Company, the condition of the capital markets affecting companies in the cannabis industry, and the rapid change in the state of the economy and capital markets generally caused by

COVID-19,

including, but not limited to:

•

renegotiation of existing financing arrangements and other material contracts, including any amendments, waivers, extensions or similar agreements with the Lenders and/or stakeholders of the Company and/or its subsidiaries that the Special Committee determines are in the best interest of the Company and/or its subsidiaries;

•

managing available sources of capital, including equity investments or debt financing or refinancing and the terms thereof;

•

implementing the operational and financial restructuring of the Company and its subsidiaries and their respective businesses, assets and licensure and other rights; and

•

implementing other potential strategic transactions.

The Special Committee engaged Canaccord Genuity Corp. as its financial advisor to assist it in analyzing various strategic alternatives to address its capital structure and liquidity challenges.

On June 22, 2020, the Company received notice from the Collateral Agent, as collateral agent holding security for the benefit of the Secured Lenders, with a demand for repayment (the “Demand Letter”) under the Amended and Restated Secured Debenture Purchase Agreement dated October 10, 2019 (the “Secured Notes Purchase Agreement”) of the entire principal amount of the Secured Notes, together with interest, fees, costs and other allowable charges that had accrued or might accrue in accordance with the Secured Notes Purchase Agreement and the other Transaction Agreements (as defined in the Secured Notes Purchase Agreement). The Collateral Agent also concurrently provided the Company with a Notice of Intention to Enforce Security (the “BIA Notice”) under section 244 of the Bankruptcy and Insolvency Act (Canada) (the “BIA”).

On July 10, 2020, the Company and certain of its subsidiaries entered into the Restructuring Support Agreement with the Secured Lenders and the Consenting Unsecured Lenders to affect the Recapitalization Transaction. Under the Restructuring Support Agreement, certain of the Secured Lenders agreed to provide interim financing in the amount of $14.7 million (the “Tranche Four Secured Notes”).

Subject to compliance with the Restructuring Support Agreement, the Secured Lenders and the Consenting Unsecured Lenders agreed to forbear from further exercising any rights or remedies in connection with any Defaults.

Pursuant to the terms of the Restructuring Support Agreement, the Recapitalization Transaction would be implemented pursuant to arrangement proceedings (“Arrangement Proceedings”) commenced under the British Columbia Business Corporations Act, or, only if necessary, the Companies’ Creditors Arrangement Act (Canada) (“CCAA”). Completion of the Recapitalization Transaction through the Arrangement Proceedings was subject to, among other things, requisite stakeholder approval of the Plan of Arrangement.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

Consummation of the Recapitalization Transaction through the Plan of Arrangement was subject to certain conditions, including approval of the Secured Lenders, Unsecured Lenders and existing holders of the Company’s common shares, warrants and options, which was obtained; approval of the Plan of Arrangement by the Court, which was obtained; and the receipt of all approvals by state-level regulators and the Canadian Securities Exchange (collectively, the “Requisite Approvals”). All Requisite Approvals required to consummate the Recapitalization Transaction were satisfied, conditioned, or waived by the Company, Secured Lenders and Consenting Unsecured Lenders, for purposes of closing the Recapitalization Transaction on June 24, 2022. The Company is working to finalize any outstanding Requisite Approvals, including state regulatory approval in New Jersey and New York.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

The following table summarizes long term debt outstanding as of June 30, 2022.


	Secured Notes (1)			March 2019 Debentures			May 2019 Debentures			June Secured Debentures		Additional Secured Debentures		June Unsecured Debentures		Other			Total
As of January 1, 2022	$	134,902		$	33,138		$	24,033		$	—		—		—	$	1,307		$	193,380

Fair value of financial liabilities issued		1,526			—			—			84,681		25,033		14,880		—			126,120
Accretion of balance		382			730			367			46		—		16		—			1,541
Debt extinguishment		(123,675	)		(33,868	)		(24,400	)		—		—		—		—			(181,943	)
Repayment		—			—			—			—		—		—		(31	)		(31	)

As of June 30, 2022	$	13,135		$	—		$	—		$	84,727	$	25,033	$	14,896	$	1,276		$	139,067

(1)	This amount includes the Company’s obligation to pay an exit fee of $10.3 million that accrues interest at a rate of 13.0% per annum (the “Exit Fee”) under the Secured Notes.

Accounting for the Recapitalization Transaction

On June 24, the Company completed its previously announced Recapitalization Transaction pursuant to the terms of the Restructuring Support Agreement. The Recapitalization Transaction closed pursuant to the terms of the Plan of Arrangement under the Business Corporations Act (British Columbia) approved by the Supreme Court of British Columbia.

In accordance with debt extinguishment accounting rules outlined in ASC

470-50,

Debt-Modifications and Extinguishments, (“ASC 470”) the Company recorded a loss on extinguishment of debt of $316.6 million for the three and six months ended June 30, 2022 in the condensed consolidated statement of operations related to the restructuring of debt. In connection with the extinguishment in the aggregated amount of $238.2 million, the Company issued new debt in the principal amount of $119.7

million

, which recorded at fair value of $99.4 million

and 6,072,580 common shares in the amount of $455.4 million issued which were valued based upon the closing price of the Company’s common shares on June 24, 2022.

On June 24, 2022, the Company fully amortized the debt discount costs related to the

old debt that were extinguished. As of June 30, 2022, the total and unamortized debt discount costs related to new debt were $20.3 million and $20.3 million, respectively (December 31, 2021 - $30.3 million and $3.2 million, respectively).

As of June 30, 2022, the total and unamortized debt issuance costs related to debts that were not part of the Recapitalization Transaction were $0.7 million and $0.2 million, respectively (December 31, 2021—$7.7 million and $2.5 million, respectively).

As of June 30, 2022, the total interest accrued on both current and long-term debt was $Nil. As of June 24, 2022, the total accrued interest of $56.3 million was extinguished and settled in full as part of the Recapitalization Transaction (December 31, 2021—$45.6 million).

(a) Secured Notes

Tranche One

On May 14, 2018, the Company issued $40.0 million secured notes (the “Tranche One Secured Notes”) with a maturity date of May 14, 2021. The principal amount of such notes along with accrued interest at the default rate of 16.0% per annum were extinguished on June 24, 2022 in connection with the closing of the Recapitalization Transaction. Due to the conversion price of $3.08 being 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 was being fully amortized to accretion expense by the original maturity date of May 14, 2021. For the three and six months ended June 30, 2022, the amount of amortization recorded in accretion expense was $

Nil

and $

Nil

, respectively (June 30, 2021—$0.3 million and $1.0 million, respectively), on the unaudited interim condensed consolidated statement of operations. 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 requires that the Company maintain a minimum cash balance of $1.0 million while the Tranche One Secured Notes remained outstanding (the “market value test”).

For the three and six months ended June 30, 2022, interest expense of $1.6 million and $3.2 million, respectively (June 30, 2021—$1.7 million and $3.3 million, respectively), and accretion expense of $

Nil

and $

Nil

, respectively (June 30, 2021—$1.1 million and $3.4 million, respectively), were recorded on the unaudited interim condensed consolidated statements of operations.

As of June 24, 2022, immediately prior to the consummation of the Recapitalization Transaction, the Company was not in compliance with the market value test, and the Company did not make interest payments, and therefore was in breach of a financial covenant with respect to the Tranche One Secured Notes, Tranche Two Secured Notes (as defined herein), and Tranche Three Secured Notes (as defined herein).

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

Furthermore, the Company was in default on its Secured Notes as of March 31, 2020, and as a result, an event of default occurred on April 4, 2020. This default was triggered on the Company’s long-term debt, which as of June 24, 2022, consisted of $97.5 million and $60.0 million of principal amount and $38.5 million and $11.9 million in accrued interest on the Secured Notes and the Unsecured Debentures, respectively. As a result of the default and through June 24, 2022, the Company classified 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 June 24, 2022, this debt, related accrued interest and fees were fully satisfied pursuant to the terms of the Restructuring Support Agreement and no default existed with respect to the Tranche One Secured Notes, Tranche Two Secured Notes, and Tranche Three Secured Notes.

For the three and six months ended June 30, 2022, interest expense of $0.4 million and $0.8 million, respectively (June 30, 2021 - $0.4 million and $0.8 million, respectively) was recorded in relation to the Exit Fee on the unaudited interim condensed consolidated statements of operations. As of June 30, 2022, the aggregate Exit Fee obligation of $16.2 million was satisfied in connection with the closing of the Recapitalization Transaction (June 30, 2021- $14.6 million), which was comprised of an aggregate of $10.3 million in principal amount and $5.9 million in accrued interest (June 30, 2021—$10.3 million and $4.3 million, respectively).

Tranche Two

On September 30, 2019, the Company issued an additional $20.0 million of secured notes (the “Tranche Two Secured Notes”). The Tranche Two Secured Notes accrued interest at 13.0% per annum and had an original maturity date of May 14, 2021. The principal amount of such notes along with accrued interest at the default rate of 16.0% per annum were extinguished on June 24, 2022 in connection with the closing of the Recapitalization Transaction.

For the three and six months ended June 30, 2022, interest expense of $0.8 million and $1.6 million, respectively (June 30, 2021 - $0.8 million and $1.6 million, respectively), and accretion expense of $Nil and $Nil, respectively (June 30, 2021 - $0.2 million and $0.7 million, respectively), were recorded on the unaudited interim condensed consolidated statements of operations.

All terms, restrictions and financial covenants applicable to the Tranche One Secured Notes were also applicable to the Tranche Two Secured Notes. As of June 24, 2022, this debt, related accrued interest and fees were fully satisfied pursuant to the terms of the Restructuring Support Agreement and no default existed with respect to the Tranche Two Secured Notes.

Tranche Three

On December 20, 2019, the Company issued an additional $36.2 million of secured notes (the “Tranche Three Secured Notes”). The Tranche Three Secured Notes accrued interest at 13.0% per annum and had an original maturity date of May 14, 2021. The principal amount of such notes along with accrued interest at the default rate of 16.0% per annum were extinguished on June 24, 2022 in connection with the closing of the Recapitalization Transaction.

For the three and six months ended June 30, 2022, interest expense of $1.4 million and $2.8 million, respectively (June 30, 2021 - $1.5 million and $2.9 million, respectively), and accretion expense of $Nil and $Nil, respectively (June 30, 2021 - $0.5 million and $1.6 million, respectively), were recorded on the unaudited interim condensed consolidated statements of operations.

All terms, restrictions and financial covenants applicable to the Tranche One Secured Notes and Tranche Two Secured Notes were also applicable to Tranche Three Secured Notes. As of June 24, 2022, this debt, related accrued interest and fees were fully satisfied pursuant to the terms of the Restructuring Support Agreement and no default existed with respect to the Tranche Two Secured Notes.

Tranche Four

On July 13, 2020, as part of the Recapitalization Transaction, the Company issued an additional $14.7 million as Tranche Four Secured Notes which accrued interest at 8.0% per annum and had an original maturity date of July 13, 2025. On June 24, 2022 the terms of the Tranche Four Secured Notes were materially modified pursuant to the Restructuring Support Agreement and as such, were considered to be extinguished in connection with the closing of the Recapitalization Transaction.

For the three and six months ended June 30, 2022, interest expense of $0.3 million and $0.7 million, respectively (June 30, 2021 - $0.3 million and $0.6 million, respectively), and accretion expense of $0.1 million and $0.1 million, respectively (June 30, 2021 - $0.1 million and $0.2 million, respectively), were recorded on the unaudited interim condensed consolidated statements of operations.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

iAnthus New Jersey, LLC Senior Secured Bridge Notes

On February 2, 2021, INJ issued an aggregate of $11.0 million of senior secured bridge notes (“Senior Secured Bridge Notes”) which mature on the earlier of (i) February 2, 2023, (ii) the date on which the Company closes a Qualified Financing (as defined below) 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 initially accrued interest at a rate of 14.0% per annum, decreasing to 8.0% upon the closing of the Recapitalization Transaction (increasing to 25.0% per annum in the event of default). “Qualified Financing” means a transaction or series of related transactions resulting in net proceeds to the Company of not less than $10 million from the subscription of the Company’s securities, including, but not limited to, a private placement or rights offering.

The host debt, classified as a liability, was recognized at the fair value of $10.3 million, net of issuance costs of $0.7 million.

Interest is to be paid in kind by adding the interest accrued on the principal amount on the last day of each fiscal quarter (the first such interest payment date being March 31, 2021) and such amount thereafter becoming part of the principal amount and will accrue interest. Interest paid in kind will be payable on the date when all of the principal amount is due and payable.

For the three and six months ended June 30, 2022, interest expense of $0.4 million and $0.9 million, respectively (June 30, 2021 - $0.4 million and $0.6 million, respectively), and accretion expense of $0.1 million and $0.2 million, respectively (June 30, 2021 - $0.1 million and $0.1 million, respectively), were recorded on the unaudited interim condensed consolidated statements of operations. As of June 30, 2022, the Company held $1.3 million (December 31, 2021 - $3.3 million) of restricted cash in escrow from the Senior Secured Bridge Notes. Refer to Note 13 for further discussion.

The Senior Secured Bridge Notes are secured by a security interest in certain assets of INJ. The Company provided a guarantee in respect of all of the obligations of INJ under the Senior Secured Bridge Notes, and the Company is in compliance with the terms of the Senior Secured Bridge Notes as of June 30, 2022. The Senior Secured Bridge Notes are classified as current liabilities on the unaudited interim condensed consolidated balance sheets as they are due on February 2, 2023.

Certain of the Secured Lenders,

including Gotham Green Fund II, L.P., Gotham Green Fund II (Q), L.P., Oasis Investments II Master Fund LTD., Senvest Global (KY), LP, and Senvest Master Fund, LP, held greater than 10.0% of the outstanding common shares of the Company upon closing of the Recapitalization Transaction. As principal owners of the Company, these lenders are considered to be related parties.

(b) March 2019 Debentures

On March 18, 2019, the Company completed a private placement of $35.0 million of unsecured convertible debentures (the “March 2019 Debentures”) and corresponding warrants to purchase 2,177,291 common shares of the Company at an exercise price of $6.43 per share (“March 2019 Equity Warrants”). All of the March 2019 Equity Warrants expired on March 15, 2022. The March 2019 Debentures accrued interest at a rate of 8.0%, per annum, payable quarterly on the last business day of each fiscal quarter, beginning on March 31, 2019. Interest was to be paid in cash, shares, or a combination of cash and shares, up to 50.0%, at the Company’s election. The March 2019 Debentures would have matured on March 15, 2023; however, on June 24, 2022, the outstanding principal of March 2019 Debentures along with related accrued interest and applicable fees were extinguished as part of the closing of the Recapitalization Transaction.

For the three and six months ended June 30, 2022, interest expense of $0.7 million and $1.4 million, respectively (June 30, 2021 - $0.7 million and $1.4 million, respectively), and accretion expense of $0.4 million and $0.7 million, respectively (June 30, 2021 - $0.4 million and $0.7 million, respectively), were recorded on the unaudited interim condensed consolidated statements of operations.

The terms of the March 2019 Debentures imposed certain restrictions on the Company’s operating and financing activities, including certain restrictions on the Company’s ability to incur certain additional indebtedness at the subsidiary level. As of June 24, 2022, immediately prior to the consummation of the Recapitalization Transaction, the Company was in default on its interest obligations to the holders of the Secured Notes. This default triggered a cross-default on its interest obligations to the holders of the March 2019 Debentures. As a result of this default, the Company classified the debt as a current liability on the unaudited interim condensed consolidated balance sheets as the Unsecured Debentures were due on demand. As of June 24, 2022, this debt, related accrued interest and fees were fully satisfied pursuant to the terms of the Restructuring Support Agreement and no default existed with respect to the March 2019 Debentures.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

On May 2, 2019, the Company completed a private placement of $25.0 million of unsecured convertible debentures (the “May 2019 Debentures”) and corresponding warrants to purchase 1,555,207 common shares of the Company at an exercise price of $6.43 per common share (“May 2019 Equity Warrants”). All of the May 2019 Equity Warrants expired on March 15, 2022. The May 2019 Debentures accrued interest at a rate of 8.0%, per annum, payable quarterly on the last business day of each fiscal quarter, beginning on June 30, 2019. Interest was to be paid in cash, shares, or a combination of cash and shares, up to 50.0%, at the Company’s election. The May 2019 Debentures would have matured on March 15, 2023; however, on June 24, 2022, the outstanding principal of May 2019 Debentures along with related accrued interest and applicable fees were extinguished as part of the closing of the Recapitalization Transaction.

For the three and six months ended June 30, 2022, interest expense of $0.5 million and $1.0 million, respectively (June 30, 2021 - $0.5 million and $1.0 million, respectively), and accretion expense of $0.2 million and $0.4 million, respectively (June 30, 2021 - $0.2 million and $0.4 million, respectively), were recorded on the unaudited interim condensed consolidated statements of operations.

The terms of the May 2019 Debentures imposed certain restrictions on the Company’s operating and financing activities, including certain restrictions on the Company’s ability to incur certain additional indebtedness at the subsidiary level. As of June 24, 2022, immediately prior to the consummation of the Recapitalization Transaction, the Company was in default on its interest obligations to the holders of the Secured Notes. This default triggered a cross-default on its interest obligations to the holders of the March 2019 Debentures. Further, as a result of this default, the Company classified the debt as a current liability on the unaudited interim condensed consolidated balance sheets as the Unsecured Debentures were due on demand. As of June 24, 2022, this debt, related accrued interest and fees were fully satisfied pursuant to the terms of the Restructuring Support Agreement and no default existed with respect to the May 2019 Debentures

(d) June Secured Debentures

On June 24, 2022 in connection with the closing of Recapitalization Transaction, the Company entered into the Secured DPA, pursuant to which the Company issued the Jun

e Secured Debentures in the aggregate principal amount of $99.7 million which debentures accrue interest at the rate of 8.0% per annum increasing to 11.0%

per annum upon the occurrence of an

Event of Default (as defined in the Secured DPA”, with a maturity date of June 24, 2027. The June Secured Debentures may be prepaid on a pro rata basis from and after the third anniversary of the Closing Date of the Recapitalization Transaction upon prior written notice to the New Secured Lenders without premium or penalty.

The

host debt, classified as a liability, was recognized at the fair value of $84.5 million.

Interest is to be paid in kind by adding the interest accrued on the principal amount on the last day of each fiscal quarter (the first such interest payment date being June 30, 2022) and such amount thereafter becoming part of the principal amount, which will accrue additional interest. Interest paid in kind will be payable on the date when all of the principal amount is due and payable.

For the three and six months ended June 30, 2022, interest expense of $0.1 million and $0.1 million, respectively (June 30, 2021 - $Nil and $Nil, respectively),

and accretion expense of less than $0.1 million and $0.1 million, respectively (June 30, 2021 - $Nil and $Nil, respectively), were recorded on the unaudited interim condensed consolidated statements of operations.

ICM

. The terms of the Secured DPAs do not have any financial covenants or market value test and ICM is in compliance with the terms of the June Secured Debentures as of June 30, 2022. The June Secured Debentures are classified as long-term liabilities on the unaudited interim condensed consolidated balance sheets.

Certain of the New Secured Lenders

that hold the June Secured Debentures

, including Gotham Green Fund 1, L.P., Gotham Green Fund 1 (Q), L.P., Gotham Green Fund II, L.P., Gotham Green Fund II (Q), Gotham Green Credit Partners SPV 1, L.P., Gotham Green Partners SPV V, L.P., L.P., collectively held greater than

10.0

% of the outstanding common shares of the Company upon the closing of the Recapitalization Transaction. As principal owners of the Company, certain of the New Secured Lenders are considered to be related parties.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

(e) June Unsecured Debentures

On June 24, 2022 in connection with the closing of the Recapitalization Transaction, the Company entered into the Unsecured DPA, pursuant to which the Company issued June Unsecured Debentures in the aggregate principal amount of $20.0 million which accrue interest at the rate of 8.0% per annum increasing to 11.0% per annum upon the occurrence of an Event of Default (as defined in the Unsecured DPA), with maturity date of June 24, 2027. The June Unsecured Debentures may be prepaid on a pro rata basis from and after the third anniversary of the Closing Date of the Recapitalization Transaction upon prior written notice to the Unsecured Lender without premium or penalty.

The host debt, classified as a liability, was recognized at the fair value of $14.9 million.

For the three and six months ended June 30, 2022, interest expense of less than $0.1 million and less than $0.1 million, respectively (June 30, 2021 - $Nil and $Nil, respectively),

and accretion expense of less than $0.1 million and $0.1 million, respectively (June 30, 2021 - $Nil and $Nil, respectively), were

recorded on the unaudited interim condensed consolidated statements of operations.

The terms of the Unsecured DPA impose certain restrictions on the Company’s operating and financing activities, including certain restrictions on the Company’s ability to: incur certain additional indebtedness; grant liens; make certain dividends and other payment restrictions affecting the Company’s subsidiaries; issue shares or convertible securities; and sell certain assets. The terms of the Unsecured DPA does not have any financial covenants or market value test, and ICM is in compliance with the terms of the June Unsecured Debentures as of June 30, 2022. The June Unsecured Debentures are classified as long-term liabilities on the unaudited interim condensed consolidated balance sheets.

Certain of the Secured Lenders and Consenting Unsecured Lenders, including Gotham Green Fund 1, L.P., Gotham Green Fund 1 (Q), L.P., Gotham Green Fund II, L.P., Gotham Green Fund II (Q), L.P., Gotham Green Credit Partners SPV 1, L.P., Gotham Green Partners SPV V, L.P., Oasis Investments II Master Fund LTD., Senvest Global (KY), LP, and Senvest Master Fund, LP, held greater tha

10.0%

of the outstanding common shares of the Company upon the closing of the Recapitalization Transaction. As principal owners of the Company, certain of the Consenting Unsecured Lenders are considered to be related parties.

(f) Additional Secured Debentures

Pursuant to the terms of the Secured DPA, ICM issued the Additional Secured Debentures on June 24, 2022 in the aggregate principal amount of $25.0 million which accrue interest at the rate of 8.0% per annum increasing to 11.0% per annum upon the occurrence of an Event of Default (as defined in the Secured DPA), with maturity date of June 24, 2027.

The host debt, classified as a liability, was recognized at the fair value of $25.0 million.

For the three and six months ended June 30, 2022, interest expense of less than $0.1 million and less than $0.1 million, respectively (June 30, 2021 - $Nil and $Nil, respectively), was recorded on the unaudited interim condensed consolidated statements of operations.

The terms of the Secured DPA impose certain restrictions on the Company’s operating and financing activities, including certain restrictions on the Company’s ability to: incur certain additional indebtedness; grant liens; make certain dividends and other payment restrictions affecting the Company’s subsidiaries; issue shares or convertible securities; and sell certain assets. The Additional Secured Debentures are secured by all current and future assets of the Company and ICM. The terms of the Secured DPAs do not have any financial covenants or market value test, and ICM is in compliance with the terms of the Additional Secured Debentures as of June 30, 2022. The Additional Secured Debentures are classified as long-term liabilities on the unaudited interim condensed consolidated balance sheets.

Certain of the New Secured Lenders, including Gotham Green Fund 1, L.P., Gotham Green Fund 1 (Q), L.P., Gotham Green Fund II, L.P., Gotham Green Fund II (Q), L.P., Oasis Investments II Master Fund LTD., Senvest Global (KY), LP, and Senvest Master Fund, LP, held greater than 10% of the outstanding common shares of the Company upon the closing of the Recapitalization Transaction. As principal owners of the Company, certain of the New Secured Lenders are considered to be related parties.

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

Note 6 – Share Capital

(a) Share Capital

Authorized: Unlimited common shares. The shares have no par value.

The Company’s common shares are voting and dividend-paying. The following is a summary of the common share issuances for the three and six months ended June 30, 2022:

•

An aggregate of 6,072,580 common shares were issued to the Secured Lenders and Unsecured Lenders on June 24, 2022 in connection with the closing of the Recapitalization Transaction.

•

There were no common share issuances for the three and six months ended June 30, 2021.

(b) Warrants

The following table summarizes certain information in respect of the Company’s warrants:


	June 30, 2022
	Units			Weighted Average Exercise Price (C$)
Warrants outstanding, beginning		22,640		$	3.56
Granted		—			—
Forfeited		(17,955	)		2.52
Expired		(4,685	)		7.53

Warrants outstanding, ending		—		$	—

As of June 30, 2022 and December 31, 2021, warrants classified as derivative liabilities on the unaudited interim condensed consolidated balance sheets were revalued with the following inputs:


	June 30, 2022		December 31, 2021
Risk-free interest rate		—		0.9	%
Expected dividend yield		—		0.0	%
Expected volatility		—		93.7 - 297.1	%
Expected life		—		0.9 years

The Company uses an expected volatility based on its historical trading data.

As per the terms of the Restructuring Support Agreement, all outstanding warrants were forfeited as of the Closing Date of the Recapitalization Transaction, and warrants classified as derivative liabilities were revalued to $Nil as of June 30, 2022 (December 31, 2021 – less than $0.1 million). As a result of the revaluation, the Company recognized a gain of less than $0.1 million and $0.1 million for the three and six months ended June 30, 2022, respectively (June 30, 2021 – gain of $0.1 million and $0.1 million, respectively), on the unaudited interim condensed consolidated statements of operations.

Full share equivalent warrants outstanding and exercisable are as follows:


	June 30, 2022				December 31, 2021
Year of expiration	Number Outstanding		Weighted Average Exercise Price (C$)		Number Outstanding		Weighted Average Exercise Price (C$)
2022		—		—		20,855		3.47
2023		—		—		1,785		4.57

Warrants outstanding		—	$	—		22,640	$	3.56

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iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

The following table summarizes potentially dilutive securities, and the resulting common share equivalents outstanding as of June 30, 2022 and December 31, 2021:


	June 30, 2022		December 31, 2021
Common share options		—		10,504
Restricted s tock units		320,165		—
Warrants		—		22,640
Secured notes		—		46,458
Debentures		—		10,135
MPX dilutive instruments (1)		408		408

Total		320,573		90,145

(1)	Prior to the acquisition of MPX Bioceutical Corporation (“MPX”) on February 5, 2019 (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.

All outstanding warrants and other potentially dilutive securities related to debt were forfeited/cancelled as part of the closing of the Recapitalization Transaction pursuant to the terms of the Restructuring Support Agreement.

(d) Stock Options

The following table summarizes certain information in respect of option activity during the period:


	June 30, 2022							December 31, 2021
	Units			Weighted Average Exercise Price (C$)		Weighted Average Contractual Life		Units			Weighted Average Exercise Price (C$)		Weighted Average Contractual Life
Options outstanding, beginning		10,504		$	4.95		—		11,510		$	4.86		—
Granted		—			—		—		—			—		—
Exercised		—			—		—		—			—		—
Cancellations		(7,111	)		4.70		—		—			—		—
Forfeitures		(3,152	)		5.85		—		—			—		—
Expirations		(241	)		1.21		—		(1,006	)		3.96		—

Options outstanding, ending		—		$	—		—		10,504		$	4.95		6.24

The related share-based compensation expense for the three and six months ended June 30, 2022 was $0.3 million and $1.8 million, respectively (June 30, 2021 - $1.6 million and $3.3 million, respectively), and is presented in selling, general and administrative expenses on the unaudited interim condensed consolidated statements of operations.

Upon the closing of the Recapitalization Transaction, all issued and outstanding stock options were cancelled. As of June 30, 2022, the unrecognized compensation cost related to stock options was $Nil (June 30, 2021 - $5.2 million).

(e) Restricted Stock Units

On December 31, 2021, the Board approved a long-term incentive program, pursuant to which, on July 26, 2022, the Company issued certain employees of the Company and its subsidiaries, restricted stock units (“RSUs”), under the Company’s Amended and Restated Omnibus Incentive Plan dated October 15, 2018. RSUs represent a right to receive a single common share that is both

non-transferable

and forfeitable until certain conditions are satisfied. The allocation of RSUs was contingent on the closing of the Recapitalization Transaction and was subject to approval of the Canadian Securities Exchange and the Board.

Table of Contents

iANTHUS CAPITAL HOLDINGS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular U.S. dollar amounts and shares in thousands, unless otherwise stated)

On December 31, 2021 and June 23, 2022, the Board approved the allocations of RSUs to Board members, directors, officers, and key employees of the Company. The RSUs granted by the Company vest upon the satisfaction of both a service-based condition of three years and a liquidity condition, the latter of which was not satisfied until the closing of the Recapitalization Transaction. As the liquidity condition was not satisfied until the closing of the Recapitalization Transaction, in prior periods, the Company had not recorded any expense related to the grant of RSUs. Share-based compensation expense in relation to the RSUs is recognized using the graded vesting method, in which compensation costs for each vesting tranche is recognized ratably from the service inception date to the vesting date for that tranche. The fair value of the RSUs is determined using the Company’s closing stock price on the grant date.

Certain RSU recipients held stock options which were cancelled upon the closing of the Recapitalization Transaction (the “Original Awards”). The RSUs granted to these employees have been treated as replacement awards (the “Replacement Awards”) and are accounted for as a modification to the Original Awards. As the fair value of the Original Awards was $Nil on the modification dates, the incremental compensation cost recognized is equal to the Replacement Award’s fair value on the modification date, which shall be recognized over the remaining requisite service period. As of June 30, 2022, unrecognized compensation costs related to the Original Awards was $Nil (June 30, 2021 - $5.4 million).

During the three and six months ended June 30, 2022, upon the closing of the Recapitalization Transaction, the Company recognized $21.0 million and $21.0 million of share-based compensation expense associated with the RSUs, respectively, that vested in connection with the Recapitalization Transaction (June 30, 2020—$Nil and $Nil). Share-based compensation expense is presented in selling, general and administrative expenses on the unaudited interim condensed consolidated statements of operations.

As of June 30, 2022, there was approximately $8.6 million of total unrecognized compensation cost related to unvested restricted stock units which is expected to be recognized over a weighted-average service period of 1.34 years.

The following table summarizes certain information in respect of RSU activity during the period:


	June 30, 2022
	Units		Weighted Average Grant Price (C$)
Unvested balance, beginning		—	$	—
Granted		390,802		0.12
Vested		(101,514


	June 30,			December 31,
	2022			2021
				(Revised)
Assets
Cash	$	29,803		$	13,244
Restricted cash		1,337			3,334
Accounts receivable, net of allowance for doubtful accounts of $4 (December 31, 2021—$27)		3,007			3,595
Prepaid expenses		4,050			3,178
Inventories, net		29,138			28,692
Other current assets		1,226			1,603

Current Assets		68,561			53,646
Investments		394			568
Property, plant and equipment, net		109,454			112,634
Right-of-use assets		31,955			30,429
Other long-term assets		3,897			8,650
Intangible assets, net		150,034			139,062

Total Assets	$	364,295		$	344,989

Liabilities and Shareholder’s Deficit
Accounts payable	$	12,883		$	13,636
Accrued and other current liabilities		72,763			98,933
Current portion of long-term debt, net of issuance costs		13,495			165,381
Derivative liabilities		—			16
Current portion of lease liabilities		7,852			7,342

Current Liabilities		106,993			285,308
Long-term debt, net of issuance costs		125,572			27,999
Deferred income tax		31,597			27,507
Long-term portion of lease liabilities		29,157			27,814

Total Liabilities		293,319			368,628

Commitments and Contingencies
Shareholders’ Equity (Deficit)
Common shares — no par value. Authorized — unlimited number. 6,244,298 — issued and outstanding (December 31, 2021 — 171,718 — issued and outstanding)		—			—
Shares to be issued		1,531			1,531
Additional paid-in capital (Refer to Note 6)		1,254,741			776,462
Accumulated deficit		(1,185,296	)		(801,632	)

Total Shareholders’ Equity (Deficit)	$	70,976		$	(23,639	)

Total Liabilities and Shareholders’ Equity (Deficit)	$	364,295		$	344,989


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenues, net of discounts	$	43,481		$	54,228		$	86,271		$	106,033
Costs and expenses applicable to revenues		(23,813	)		(22,917	)		(44,111	)		(45,001	)

Gross profit		19,668			31,311			42,160			61,032

Operating expenses
Selling, general and administrative expenses		58,130			21,491			81,536			45,719
Depreciation and amortization		6,810			7,264			15,216			14,096
Write-downs, recoveries and other charges, net		154			(73	)		211			186
Impairment loss		—			1,696			—			1,696

Total operating expenses		65,094			30,378			96,963			61,697

(Loss) Income from operations		(45,426	)		933			(54,803	)		(665	)
Interest income		16			109			76			233
Other income		912			220			12,178			494
Interest expense		(5,793	)		(5,879	)		(11,687	)		(11,557	)
Accretion expense		(775	)		(2,664	)		(1,541	)		(7,516	)
Provision for debt obligation fee		(390	)		(418	)		(804	)		(832	)
Loss on debt extinguishment (Refer to Note 5)		(316,577	)		—			(316,577	)		—
Losses from change in fair value of financial instruments		(138	)		327			(240	)		310

Loss before income taxes		(368,171	)		(7,372	)		(373,398	)		(19,533	)
Income tax expense		5,391			7,884			10,266			15,175

Net loss	$	(373,562	)	$	(15,256	)	$	(383,664	)	$	(34,708	)

Net loss per share - basic and diluted	$	(0.65	)	$	(0.09	)	$	(1.03	)	$	(0.20	)
Weighted average number of common shares outstanding - basic and diluted		572,108			171,643			373,019			171,718


	Three Months Ended June 30, 2022
	Number of Common Shares (‘000)		Shares to be Issued		Additional Paid-in-Capital		Accumulated Deficit			Total Shareholders’ (Deficit) Equity
Balance – March 31, 2022		171,718	$	1,531	$	777,926	$	(811,734	)	$	(32,277	)
Share-based compensation		—		—		21,372		—			21,372
Share issuance - Recapitalization Transaction		6,072,580		—		455,443		—			455,443
Net loss		—		—		—		(373,562	)		(373,562	)

Balance – June 30, 2022		6,244,298	$	1,531	$	1,254,741	$	(1,185,296	)	$	70,976


	Six Months Ended June 30, 2022
	Number of Common Shares (‘000)		Shares to be Issued		Additional Paid-in-Capital		Accumulated Deficit			Total Shareholders’ (Deficit) Equity
Balance – January 1, 2022 - (Revised)		171,718	$	1,531	$	776,462	$	(801,632	)	$	(23,639	)
Share-based compensation		—		—		22,836		—			22,836
Share issuance - Recapitalization Transaction		6,072,580		—		455,443		—			455,443
Net loss		—		—		—		(383,664	)		(383,664	)

Balance – June 30, 2022		6,244,298	$	1,531	$	1,254,741	$	(1,185,296	)	$	70,976


	Three Months Ended June 30, 2021
	Number of Common Shares (‘000)		Shares to be Issued		Additional Paid-in-Capital		Accumulated Deficit			Total Shareholders’ Equity
Balance – March 31, 2021		171,718	$	1,531	$	771,574	$	(743,594	)	$	29,511
Share-based compensation		—		—		1,661		—			1,661
Net loss		—		—		—		(15,256	)		(15,256	)

Balance – June 30, 2021		171,718	$	1,531	$	773,235	$	(758,850	)	$	15,916


	Six Months Ended June 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		—		—		3,295		—			3,295
Net loss		—		—		—		(34,708	)		(34,708	)

Balance – June 30, 2021		171,718	$	1,531	$	773,235	$	(758,850	)	$	15,916


	Six Months Ended June 30,
	2022			2021
CASH FLOW FROM OPERATING ACTIVITIES
Net loss	$	(383,664	)	$	(34,708	)
Adjustments to reconcile net loss to cash (used in) provided by operations:
Interest income		(76	)		(233	)
Interest expense		11,687			11,557
Accretion expense		1,541			7,516
Debt obligation fees		804			832
Impairment loss		—			1,696
Depreciation and amortization		16,424			15,133
Write-downs, recoveries and other charges, net		211			186
Share-based compensation		22,836			3,295
Losses from change in fair value of financial instruments		240			(310	)
Gain from nonmonetary consideration from acquisition (Refer to Note 4)		(10,460	)		—
Loss on debt extinguishment (Refer to Note 5)		316,577			—
Change in operating assets and liabilities (Refer to Note 13)		18,227			7,409

NET CASH FLOW (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(5,653	)	$	12,373

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(4,731	)		(9,611	)
Acquisition of other intangible assets		(70	)		(31	)
Proceeds from sale of property, plant and equipment		885			—
Issuance of related party promissory note		(92	)		(638	)
Purchase of subsidiaries, net of cash acquired		4			—

NET CASH USED IN INVESTING ACTIVITIES	$	(4,004	)	$	(10,280	)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of debt		24,250			11,000
Debt issuance costs		—			(694	)
Repayment of debt		(31	)		(28	)

NET CASH PROVIDED BY FINANCING ACTIVITIES	$	24,219		$	10,278

CASH AND RESTRICTED CASH:
NET INCREASE IN CASH AND RESTRICTED CASH DURING THE PERIOD		14,562			12,371

CASH AND RESTRICTED CASH, BEGINNING OF PERIOD (Refer to Note 13)		16,578			11,510

CASH AND RESTRICTED CASH, END OF PERIOD (Refer to Note 13)	$	31,140		$	23,881