Did you guys hear about rates going down?
iAnthus Capital Inc. (CSE:IAN) CEO Hadley Ford is holding a six figure loan from the company he stewards. As of the end of March, he owes the company $391,267, but that amount has fluctuated between $125,000 and $500,000 since as far back as 2017.
The “loan” is technically for a one year term, and pays iAnthus shareholders a rate of 2.5% pa, but it’s really more of a revolving line of credit. One year loans don’t have to be kept track of over in the “Long Term Investments,” note of the financials, where investors go to get a handle on the company’s assets. Rolling it over once a year into a new loan keeps it isolated to the “Related Party Transactions” note, and parked on the “Other Assets” line of the balance sheet. (Those inclined can read iAnthus’ financials here.)
The executive draws against the loan periodically, and last made a payment in Q2 of 2018, bringing the balance from $500,000 to its present $391,267, but hasn’t made any payments since. iAnthus has held Ford’s debt since as far back as 2017. Hadley’s iAnthus salary in 2017 was $276,000, including a $126,000 bonus, so he was pretty lucky to get such favorable terms. The company may have considered his stock options when they weighed his credit risk.
SEDI indicates that Hadley converted 150,000 of his Class A shares of IAN to common shares this past June 25, 2018 just before the quarter ended, and sold the common shares in July privately for US$5/share. He then converted 750,000 Class A in September, sold 150,000 of the resulting common shares privately in October of 2018 for US$1.25/share, and another 24,000 shares privately in November for US$1.67/share, but didn’t use any of those proceeds to pay back iAnthus (hey, why bother at 2.5%?).
Ford sold another 80,000 shares at market between December of 2018 and April of this year between $5.87 and $7.18, and has 264,000 common shares left. We’ll have to wait until the next financials to see if he used any of it to pay down his debt to the IAN treasury.
2.5% is a great rate for half a million bucks, and IAN shareholders may wish he could secure similar terms for the company. They did a $35 million unsecured convertible this past March, and those unsecured notes pay the holders 8%, and are presently way out of the money on their $10.29 convert price.
$40 million worth of high yield notes that the company issued in May of 2018 bear 13% for a three year term, and convert at $3.08. 6.6 million warrants were attached at $3.60, and they did a concurrent financing for $10 million at $2.57. That loan figures to come around in May of 2021 as a $55.6M cash call, unless the stock is above $3.60, at which point the company can convert it into 15.4 million shares. If not, they can always re-finance.
There’s also a $10 million note outstanding to the Elizabeth Stavola Trust, upon which IAN is paying 8%. IAnthus announced a plan in March to buy “CBD for life,” a brand co-founded by Chief Strategy Officer Beth Stavota, for
4.5 2.5 million shares, but IAN was trading at $5.41 back then, so expect that it will end up costing them more paper.
UPDATE & CORRECTION: The original version of this story reported that IAN’s planned consideration for CBD for Life was 4.5M shares. The announced consideration was in fact 2.5 million shares + $2M cash.
The deal closed today, Stavota recieving 2.4M shares of IAN, and IAN making a $2.4M cash payment to settle CBD for Life’s outstanding debt & liabilities.
All told, iAnthus had US$95.3 million in debt at the end of March. There were 143.8 million shares outstanding and they listed $42 million in cash.
iAnthus capital is a proud client of Chris Parry’s Equity Guru, who can tell you all about how the company is “maximizing its brand potential,” but is unlikely to do any actual reporting about this company or any other.