iAnthus Capital Holdings Inc (CNSX:IAN) Closes Offering of $35 Million Unsecured Convertible Notes
iAnthus Capital Holdings Inc (CNSX:IAN) (OTCMKTS:ITHUF) (FRA:2IA) CEO Hadley Ford discusses recent developments with the company and implementing the MPX acquisition. The company’s footprint now includes 11 states, 21 dispensaries, with licenses for a further 63 dispensaries. Ford explains that iAnthus is permitted to grow and process cannabis in those states and the company has a combined 600,000 square feet of cultivation across its holdings. The company is focusing on continued US expansion and Ford explains that iAnthus is not interested in building bricks and mortar infrastructure internationally. Recently, iAnthus announced the closing of a US $35 million private placement of unsecured convertible notes. Hadley explains that the financing allows the company to strengthen its balance sheet while continuing to expand.
Narrator: iAnthus Capital Holdings, Inc. owns and operates licensed cannabis cultivation, processing and dispensary facilities throughout the United States. iAnthus recently announced the acquisition of MPX Bioceutical Corp. The combination, valued at $835 million, makes it the largest public cannabis transaction to date in the US.
iAnthus Capital Holdings is listed on the Canadian Securities Exchange and trades under the ticker symbol IAN.
James West: iAnthus CEO Hadley Ford joins me live now via Skype. Hadley, how are you?
Hadley Ford: I’m just fantastic. How are you doing today?
James West: I’m well as well, thank you. Where are we talking to you from, today?
Hadley Ford: I’m at the beautifully, plushly-appointed Biltmore Hotel in Miami, at the Seaport Global conference.
James West: Oh, and is that a cannabis conference?
Hadley Ford: We got some cannabis guys here. Unfortunately it’s indoors; it’s an absolutely gorgeous day and I have to be indoors in 70 degrees in beige and all that sort of stuff, I wish I was outside.
James West: [laughter] Well, it’s, you know, the weather is getting better everywhere in the Northern Hemisphere, I’ll have you know, but we’re not here to talk about the weather! Give us an update: what’s happening with iAnthus right now?
Hadley Ford: All good things, all good things. You know, we continue to integrate the MPX acquisition, that is just going swimmingly. They’re knocking it out of the park in Arizona, Nevada, Maryland in particular. We’ll be launching some product sales in California the next month or so, and we’ve got a couple of awards for best of that we’ll see in the press. So it’s all good stuff.
On the dispensary side, I think we’ve opened, two, three, four dispensaries since we last spoke: a couple in Florida, one up in New York, and we’ve done some key hires as well. We have Pat Tiernan, who’s now our EVP of Ops; he was the Chief Operating Officer at one of the top craft beer companies on the planet. He learned how to make the beer taste the same in 20 different countries, and using those processes, we’ll make the cannabis taste the same in every state we’re operating in.
James West: Wow. That’s a tall order. That’s pretty good, wow! That’s pretty good there, eh, Ed?
Ed Milewski: That’s unbelievable.
Hadley Ford: You ought to send me your CV.
James West: Oh, absolutely, let’s see – when’s the next flight to Miami? I’ll get right on that. So Hadley, tell me an overview: what is the total footprint of iAnthus now in terms of dispensaries, grow ops, everything? What’s the whole enchilada look like, now?
Hadley Ford: Oh, sure. So we’re in 11 states now. I think we’ve got 21 dispensaries open; we have licenses to open up to 63 across those. I think we’ve got the ability to grow and process in all those states; sometimes we have duplicative licenses, so we probably have 14 or 15 grow and processing licenses across those 11 states. Combined on the growth side, it’s close to 600,000 square feet, including our campus down in Florida, which is probably one of the biggest grow campuses on the planet. We’ve got acres and acres of outdoor, we’ve got greenhouse, we’ve got indoor. By the time we complete that, we’ll be able to provide cannabis for all those anxious patients in the State of Florida.
James West: Yes. And anxious they must be.
Hadley Ford: Well, they’ll be less anxious after they use our product.
James West: I’m sure they will, I’m sure they will. Okay, so Hadley, I’m just curious as to, like, where does your ambition end?
Hadley Ford: It knows no bounds.
James West: You’re not going to take over Europe next, are you?
Hadley Ford: No, no, no, I think there’s enough to be done in the United States right here, and the idea is to have a broad enough footprint and retail presence that you can build a brand around the products that you’re selling, and then I think other markets, you know, European, Asia and whatnot that develop over the next, you know, five, ten years, we’ll let someone else build out the bricks and mortar infrastructure there and we’ll license our intellectual property around brand to access the customers and patients in those markets.
James West: Right. One of our viewers, William Lay, wants you to know that there’s an excellent Sunday brunch at the Biltmore if you’re still there on Sunday.
Hadley Ford: Well, I’d like to still be here on Sunday! Unfortunately, I’ll be headed back up to the frigid northeast later today. And I do love brunch, too, so it would have been – it’s a nice offer.
James West: Yes, and you don’t really legally have to wait till Sunday to have brunch, do you?
Hadley Ford: [laughter] I guess I don’t legally have to wait until noon; I could have it right now, if I wanted.
James West: We can do whatever we want, these days.
Hadley Ford: I’m going to go right now and just see if I can get some sausage and eggs and stuff.
James West: We’ll wait, just kidding. Okay, Hadley, I’m trying to think of a tough question to ask you, but let’s see…
Hadley Ford: At 409? The 409 question was tough.
James West: It was, wasn’t it? So how about this one: you raised $35 million in an unsecured convertible note. How dilutive is that, or how beneficial is that from a cost of capital perspective, for the –
Hadley Ford: That is an excellent question. You know, there’s three key things that we’re focused on in the first half of 2019; one is ensuring that we have the appropriate continuity around HR structure and, you know, the most important asset that we have are our people, and ensuring that we have that all lined up from our acquisition with MPX.
The second piece is ensuring that we continue to roll out our ability to measure ourselves, so those ERP systems. And then the third is focused on cost of capital. And we inherited a very expensive bond from MPX, and one of the ways that we can get that off our balance sheet is to offer a redemption note. You need to have the cash on your balance sheet to be able to do that, so we put out this junior convert to be able to have the cash to issue the redemption note so we can force the conversion of that and clean up the balance sheet a little bit.
The security itself was, it was probably about 25, 30 percent cost of capital cheaper than what it would cost to wade into the equity markets in Canada, and you had the certainty of closing on the date that you announce it. So it was a good financing for us, and it was the first step in a multi series of steps that we’ll do to clean up the balance sheet a little bit with some of the converts that we have, and then hopefully do something that’s even lower cost using the assets that we have as security.
James West: Interesting. So the –
Hadley Ford: Not as interesting as the 409 Beach Boys song, but I find it fascinating.
James West: Which we still don’t have an answer for that. Oh, Glen Trief, one of our readers reports that it was an Impala SS 1962.
Hadley Ford: Yes, and I had an Impala 527 1968 baby blue convertible.
Ed Milewski: No kidding. Wow. Wow.
Hadley Ford: It’s true.
James West: It’s something in the universe today!
Ed Milewski: I was alive then.
James West: I was not.
Ed Milewski: That’s true.
James West: Okay, well, Hadley, what else is going on? What are the next big steps for iAnthus? I mean, you’re obviously very conscious of cost of capital, dilution…so what is the big next leap forward that you can talk about? I’m sure there’s plenty that you can’t talk about.
Hadley Ford: You know, I don’t think it’s that big a secret, you know. What we’ve done in the past is probably what we’re going to do in the future. You know, we look to increase footprint, and I think that you have to have, if you’re going to build a national brand and the stickiness around that experience, you can’t advertise, there’s no national distributors; you actually have to have your own retail footprint, and that means you need to be national enough in the states that matter.
You know, one big area that we have a very tiny position, we’d like to have a bigger one, is California. It’s the largest legal market on the planet, and you know, we look at stuff daily and look at opportunities there.
You know, I think you could look at any of the population centres. We’d love to be in Pennsylvania, Michigan, Ohio – so we continue to look at opportunities from that perspective. You know, I do think, going forward, focus on that cost of capital once we clean up some of this higher-cost convertible debt that we have, I think we’ll do some pioneering work on using our asset base to drive down that cost, and then continued implementation and rationalization around our ERP systems in all three states will allow us to measure all the good stuff that we’re doing.
James West: You bet. How has passage of the States Act affected your business?
Hadley Ford: Passage of it? I didn’t know that it got passed. That would be great news.
James West: Oh, sorry, Ed and I – we’re passing it here today. We’re taking over.
Hadley Ford: That’s fantastic. I vote Yes. You have my vote.
James West: Well, that’s a relief. No, but when passage occurs, is how I should have framed that.
Hadley Ford: It would be a big positive. You know, think one of the pieces that happened when the Dems took over the House is, a lot of these bills that have always been sort of bandied about for, you know, 12, 18 months, they can now see the light of day.
You know, there’s no telling if they’re actually going to be passed in House and then passed in the Senate and then signed into law, but the idea that we’re actually having a discussion around it, I think, puts the pebble on the scale and shows that it will happen – if not today, if not in a couple of months, you know, we’ll see forward progress in a lot of regulatory, whether it’s the Safe Act, the States Act, whether it’s direct decriminalization. Anything can be discussed nowadays, and you know, ultimately anything is possible, and much more possible than it would have been with the Republicans controlling the House.
James West: Great. All right, Hadley, let’s leave it there this time. Great to talk to you again; have an excellent brunch on Sunday if you can wait that long, otherwise, enjoy your flight home.
Hadley Ford: Thank you so much, always a pleasure.
James West: You bet. Bye for now.
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