What to say. Waiting until almost the last minute, iAnthus ($iAN) has delayed their financials, and announced they can’t pay interest on debentures that was due in March.

To me – the fact that being in default of interest payments shouldn’t prevent the financials coming out – means that the latest financials are very poor.

Problems with related party transactions also get a mention in this press release (why not): there are allegations that monies owed by CEO Hadley Ford to others has resulted in appointments to the board; there are allegations of undeclared loans by Jason Adler (of Gotham Green) to Ford; and even mentions a $500k loan at below market price to Ford from $iAN (if this last one sounds familiar – it is: $CANN pulled this stunt as well).

It’s pithy that the buzz-phrase ‘best-in-class’ appears in the first line of their press release. It’s not self-referential (natch), but alludes to $iAN’s partners, who presumeably are the ‘best’. We won’t be able to see if management was able to repeat taking another $10MM in SBC in this quarter (that’s what they booked last quarter) for awhile yet.

It wont take seeing the financials for myself to be pretty confident in making a couple of predictions though about what’s happened over the past 5 months:

• Sale remain anemic.
• Despite the enthusiasm of the September 30th, 2019 financing announcement – with its’ declaration that the money “will fully fund the development of our existing assets” – it didn’t.
• Positive margins remain elusive
• Op-ex cash burn is sucking oxygen out of the company
• That ‘fully funded’ line above gets eviscerated in this press release, where $iAN states it ‘will continue to pursue financing options to infuse additional cash into the business’.

This thing has been a dumpster fire for several quarters now, and now it looks like they’ve finally run out of road. If you read our last two structures (last quarter here, quarter previous quarter here) or GoBlue’s most recent ‘Quarter in Pictures’ last December, you’ll have known they haven’t been trending positively. And that cash needs have been not only pressing, but critical. That operations haven’t panned out over 3 quarters (now heading into 4)….well.

Even yet, at one point in this press release, CEO Hadley Ford pauses to mention that $iAN’s business ‘has never been stronger’. Hey….in for a penny. But this has been their modus operandi for pretty much as long as we’ve been looking at them.

COVID is mentioned several times in the release, and even has a paragraph dedicated to it. About how capital funding had dried up because of it – and that somehow, it’s a contributing factor to the position that iAnthus and shareholders finds themselves in.

I’d like to take a moment to point out to readers that in this case – it’s utter bullshit.

Not that capital has dried up because of COVID – nossir – that’s a true statement (at least in speculative or emergent sectors). But it’s also true that capital and risk tolerance for the continually unrealized promises of outfits like this was drying up long before COVID. There will be a narrative created – by both lazy press and crap outfits looking for an excuse. While this is true to a degree – companies that were marginal before it will cling to COVID like a drowning man to a life preserver. As our readers will know, there were/are many showing a lack of short-term viability even without it. And now, it’ll provide cover as COVID ripples through the larger economy. In some ways, that’s a shame to me, inasmuch as mutt outfits will never have the full light of day shone on them. Meh, either or.

So, what’s next?

One may view last September’s financing as predatory lending – and given the securitization of it – it could result in a very cheap pickup by Gotham/Torian.

I can’t find any convertible debentures at 13% – only convertible notes. Unsure if it’s a typo or wording, but it’s a significant difference. As it is, the financials will be delayed, and presented ASAP – which isn’t a good sign either.

In any case, I think it’s only a light nudge away from the parceling off of assets to repay last-in creditors, or perhaps an outright takeout/rationalization. It’s also hard to see Ford surviving long: he’s been in charge throughout the whole thing.

Given this announcement, it doesn’t take much to conclude that $iAN will not survive in its’ current form.

The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative. The author holds no position in $iAN.