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, 2021

Note 8 - 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, 2021								December 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial Assets
Long term investments - other 1	$	592	$	—	$	—	$	592	$	512	$	—	$	—	$	512

Financial Liabilities
Derivative liabilities	$	—	$	—	$	315	$	315	$	—	$	—	$	245	$	245

(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, 2021. For the three and nine months ended September 30, 2020, there was a transfer of long-term investments from Level 3 to Level 1 within the fair value hierarchy. This transfer is related to shares of another company that is now publicly traded and can be valued using listed stock prices.

The Company’s other investment as of September 30, 2021 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, or inputs are now 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, 2020	$	512
Revaluations on Level 1 instruments		80

Balance as of September 30, 2021	$	592

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.

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


	Derivative Liabilities
Balance as of December 31, 2020	$	245
Revaluations on Level 3 instruments		70

Balance as of September 30, 2021	$	315

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 4) at their carrying value and fair value:


	September 30, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Unsecured Debentures	$	56,591	$	61,694	$	54,905	$	53,830
Secured Notes		133,954		169,259		115,350		134,609
Other		1,322		1,018		920		924

Total	$	191,867	$	231,971	$	171,175	$	189,363