iAnthus Capital Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments

Financial Instruments

9 Months Ended

Sep. 30, 2022

Note 9—Financial Instruments

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are observable. The levels of the fair value hierarchy are as follows:

•

Level 1 – fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

•

Level 2 – fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

•

Level 3 – fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The carrying values of cash, receivables, payables and accrued liabilities approximate their fair values because of the short-term nature of these financial instruments. Balances due to and due from related parties have no terms and are payable on demand, thus are also considered current and short-term in nature, hence carrying value approximates fair value.

The component of the Company’s long-term debt attributed to the host liability is recorded at amortized cost. Investments in debt instruments that are held to maturity are also recorded at amortized cost.

The following table summarizes the fair value hierarchy for the Company’s financial assets and financial liabilities that are

re-measured

at their fair values periodically:


	September 30, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial a ssets

Long term investments - other 1	$	178	$	—	$	—	$	178	$	568	$	—	$	—	$	568

Financial l iabilities

Derivative liabilities	$	—	$	—	$	—	$	—	$	—	$	—	$	16	$	16

(1)	Long-term investments – other are included in the investments balance on the unaudited interim condensed consolidated balance sheets.

There were no transfers between Level 1, Level 2, and Level 3 within the fair value hierarchy during the three and nine months ended September 30, 2022 and 2021.

The Company’s other investment as of September 30, 2022 is considered to be a Level 1 instrument because it is comprised of shares of a public company, and there is an active market for the shares and observable market data and inputs available.

All Level 1 investments are comprised of equity investments which are

re-measured

at fair value using quoted market prices.

The following table summarizes the changes in Level 1 financial assets:


	Financial Assets
Balance as of December 31, 2021	$	568
Revaluations on Level 1 instruments		(390	)

Balance as of September 30, 2022	$	178

The derivative liabilities related to the convertible debt instruments and freestanding warrants are recorded at fair value estimated using the Black-Scholes option pricing model and is therefore considered to be a Level 3 measurement. On June 24, 2022 all warrants were forfeited upon the consummation of the Recapitalization Transaction.

The following table summarizes the changes in Level 3 financial assets and liabilities:


	Derivative Liabilities
Balance as of December 31, 2021	$	16
Revaluations on Level 3 instruments		(16	)

Balance as of September 30, 2022	$	—

The Company’s financial and

non-financial

assets such as prepayments, other assets including equity accounted investments, property, plant and equipment, and intangibles, are measured at fair value when there is an indicator of impairment and are recorded at fair value only when an impairment charge is recognized.

The following table summarizes the Company’s long-term debt instruments (Note 5) at their carrying value and fair value:


	September 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
June Unsecured Debentures	$	15,530	$	15,422	$	57,171	$	64,596
June Secured Debentures		113,020		109,008		134,902		176,487
Secured Notes		13,490		13,347		—		—
Other		960		873		1,307		1,021

Total	$	143,000	$	138,650	$	193,380	$	242,104