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2018 Annual Report CEO Letter

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2018 Annual Report CEO Letter Maximum zip file size limit reached. Zip file size cannot be greater than 200 MB 2018 Annual Report CEO Letter Dear Shareholders, Over the past year, iAnthus has continued to build a strong foundation as a leader in the United States’ fastest growing industry. As you may have heard me say throughout the year, to succeed in the U.S. cannabis market, you must be good at raising capital, expanding your retail footprint, and hiring experienced people to execute your plan. In the last 12 months, we proved our ability in all three. From a capital perspective, iAnthus continued its focus on a strong balance sheet, broad investor base and improving liquidity. Our balance sheet today is as strong as it has ever been in our Company’s history. We have over $50mm of cash reserves earmarked to fund our growth strategy, and we continue to focus on our cost of capital by accessing different sources of investors and lenders. We currently have over 60,000 shareholders across six continents, a tremendous breadth of investors and they can look for information on iAnthus from any one of the 10 banks that cover us in research. The Company was recently recognized as the third best performing stock in 2018 by the OTCQX exchange, demonstrating that iAnthus continues to resonate with investors who are seeking growth and transparency in their portfolio. And from a liquidity perspective, our trading volume has continued to increase to the point where we consistently have the highest float and highest volume in the industry in relation to our market capitalization. In 2019, we will continue to focus on reducing our cost of capital, improving liquidity and working on behalf of our shareholders to increase our share price. From a scale perspective, we promised at the beginning of 2018 that iAnthus would be strategic in finding the right avenues to grow our presence and enter key markets. Early in 2018, we added New York and Florida and later in the year we announced the acquisition of MPX Bioceutical. MPX has proven to be an excellent complement to our existing retail footprint increasing our presence from six to 11 states with licenses to open 63 dispensaries and 15 cultivation/ processing facilities, and positioning iAnthus as one of the largest players in the U.S. We are a market share leader in Arizona, and MPX products are asked for by name in over 90 dispensaries across three states. During the year, we have opened stores in our greenfield markets of New York, Florida, Massachusetts and Maryland and we are in the planning process to open in New Jersey in 2019. iAnthus now has three dispensaries open in Florida, with a goal of 17 more to be opened by the end of 2019. We also have two dispensaries open in New York, including our Hadley Ford, CEO flagship Brooklyn location across from the Barclays Center, with the goal of opening our two other locations during the upcoming year. Combined with our recent dispensary wins in Nevada, iAnthus has significant retail operations in With the foundation we have built in 2018, both organically and through the acquisition of MPX, iAnthus is poised for multiple high growth markets and we anticipate a very bullish 2019. a transformative 2019. Speaking directly to our 60,000 shareholders, iAnthus’ commitment has never wavered, and we will not stop in our effort to build the greatest cannabis company in the world’s largest consumer market. We all The last, and most important, of the three keys to success, is having experienced people to execute our plan. You must thank you for continuing to place your trust in us. have the right person in the right job at the right time. Without the right people in place to carry out our vision, all the capital and scale in the world will not be enough to take full advantage of the opportunities ahead in the U.S. cannabis market. We are building an impressive operating team that combines cannabis expertise with crucial professional skillsets from outside the industry. You must not only be great at cannabis, but you need to replicate that exact same ability in every state in which you operate. Industry pioneers, like Elizabeth Stavola, our Chief Strategy Officer, who The last, and most important...is having has built successful operations and brands in multiple states, provide us with strong cannabis leadership and savvy business sense. When we take leadership in cannabis and combine it with operational expertise from process driven experienced people to execute our plan businesses we can begin to ensure we will delight our customers across all our markets. Of our broader operations team, one of the biggest compliments I can provide them is that they are constantly learning and adjusting. There is no blueprint to being a world-class cannabis operator. It is something that companies need to figure out for themselves “ and develop in real-time. The fact that our team is able to learn from our successes and failures, and make timely adjustments and optimizations, will continue to separate iAnthus from the competition and allow us to out-execute the market over time. ” 2 iAnthus 2018 Annual Report iAnthus 2018 Annual Report 3 2018 Unparalleled Pace Jan 2018 of Execution Table of Contents Acquisition of GrowHealthy Feb 2018 Feb 2018 Acquisition of Citiva Closed $20 million Management’s Discussion and Analysis .... 12 financing Regulatory Environment ........................................ 40 Financial Statements ................................................82 May 2018 $50 million financing to accelerate growth initiatives Jul 2018 Jul 2018 Flagship dispensary opened Groundbreaking in Boston, MA announced at Warwick, NY cultivation facility Oct 2018 Oct 2018 Closed CAD $34.5 million Acquisition of MPX Bioceutical financing Corporation (“MPX”) announced Dec 2018 Dec 2018 Opened flagship Florida dispensary Opened flagship New York in West Palm Beach & second Florida dispensary in Brooklyn dispensary in Brandon Feb 2019 Feb 2019 Opened second New York dispensary Close of MPX transaction in Hudson Valley Mar 2019 Mar 2019 Opened third Florida dispensary Closed $35 million financing in Lake Worth 2019 4 iAnthus 2018 Annual Report iAnthus 2018 Annual Report 5 Landmark Transaction Combined Footprint 6 States 6 States 11 States Addressable Population 56 Million 72 Million 121 Million Cultivation/Processing Facilities 8 7 15 11 Dispensaries 46 17 63 States The Announcement On October 18, 2018, the Company announced the acquisition of MPX Bioceutical Corporation’s (“MPX”) U.S. assets, positioning the Company as one of the largest U.S. regulated cannabis operators and expanding the Company’s footprint to 11 states. The transaction officially closed on February 5, 121 2019, making it the largest public to public U.S. cannabis transaction to date. Million 15 Facilities 63 Dispensaries 6 iAnthus 2018 Annual Report iAnthus 2018 Annual Report 7 Summary of Operations & Licensed Facilities NEW YORK • Population(1), 20.0 million • 4 Dispensaries(4) • 1 Cultivation/Processing(4) MASSACHUSETTS • Population(1), 6.8 million • 6 Dispensaries(5) • 2 Cultivation/Processing(4) FLORIDA(6) • Population(1), 21.0 million • 30 Dispensaries(4)(7) • 1 Cultivation/Processing(4) VERMONT(8) (1) NEW MEXICO • Population , 0.6 million (4) • Population(1), 2.1 million • 2 Dispensaries • 6 Dispensaries • 1 Cultivation/Processing(4) • 1 Management Service Company MARYLAND • Population(1), 6.0 million COLORADO (9) (1) • 3 Dispensaries • Population , 5.5 million (9) • 1 Dispensary(2) • 1 Processing • 1 Cultivation NEW JERSEY ARIZONA • Population(1), 9.0 million • Population(1), 7.0 million • 3 Dispensaries(10) • 2 Processing Centers • 1 Cultivation(4) • 4 Dispensaries • 2 Cultivation NEVADA • Population(1), 3.0 million • 1 Cultivation • 4 Dispensaries CALIFORNIA(3) • Population(1), 39.5 million (1) Populations according to the United States Census Bureau from www.censusreporter.org (2019) (2) The Company’s wholly-owned Colorado subsidiaries have entered into management services, licensing, and leasing agreements with the licensed operator (3) In July 2018, prior to the acquisition, MPX entered into an agreement to produce MPX branded concentrates for distribution in California (4) Refers to the maximum allowable number of dispensaries and cultivation facilities permitted under current state law, given the liceneses issued to date (5) The Company has the ability to open a maximum of three medical dispensaries and three adult-use stores. One or more of those licenses will be co-located at the same facility (6) Acquisition of the GrowHealthy Holdings, LLC (“GrowHealthy”) assets includes an option to acquire an affiliate, McCrory’s Sunny Hill Nursery, LLC (“McCrory’s”) which holds one of only 14 issued licenses to cultivate, process and dispense medical cannabis from the Florida Department of Health (7) The maximum allowable number of dispensaries per license holder increases by five dispensaries per 100,000 patients added to the registry (8) The Company owns 100% of Pakalolo, LLC, the sole member of FWR, Inc. d/b/a Grassroots Vermont (“GRVT”) (a not-for-profit corporation) (9) The Company operates three dispensaries and one processing facility in Maryland under management services agreements that include options to acquire those licenses in the future 63 (10) The Company expects to enter into a management services agreement with a newly licensed operator controlled by a senior executive of the Company, subject to regulatory Dispensaries approval by the New Jersey Department of Health 8 iAnthus 2018 Annual Report iAnthus 2018 Annual Report 9 600,000 square feet CULTIVATION FOOTPRINT of cultivation and processing space Rendering of Upgrades to Existing Facility 10 iAnthus 2018 Annual Report iAnthus 2018 Annual Report 11 MANAGEMENT’S DISCUSSION & ANALYSIS 12 iAnthus 2018 Annual Report iAnthus 2018 Annual Report 13 Company Overview iAnthus Capital Holdings, Inc. (the “Company”, “ICH”, or “iAnthus”) owns and operates best-in-class, licensed cultivation, processing, and dispensary businesses.
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