You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited interim condensed
consolidated financial statements and the related notes appearing elsewhere in
this Quarterly Report on Form 10-Q. In addition to historical information, this
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results may differ materially from
those discussed below. Factors that could cause or contribute to such
differences include, but are not limited to, those identified below, and those
discussed in the section titled "Risk Factors" included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2021, as may be amended,
supplemented or superseded from time to time by other reports we file with the
SEC. All amounts in this report are in U.S. dollars, unless otherwise note.

Overview



We are a vertically-integrated, multi-state owner and operator of licensed
cannabis cultivation, processing and dispensary facilities, and a developer,
producer and distributor of innovative branded cannabis and CBD products in the
United States. Although we are committed to creating a national retail brand and
portfolio of branded cannabis and cannabidiol ("CBD") products recognized in the
United States, cannabis currently remains illegal under U.S. federal law.

Through our subsidiaries, we currently own and/or operate 35 dispensaries and 10
cultivation and/or processing facilities in nine U.S. states. Pursuant to our
existing licenses, interests and contractual arrangements, and subject to
regulatory approval, we have the capacity to own and/or operate up to an
additional 9 dispensary licenses and/or dispensary facilities in six states,
plus an uncapped number of dispensary licenses in Florida, and up to 21
cultivation, manufacturing and/or processing facilities, and we have the right
to manufacture and distribute cannabis products in nine U.S. states, all subject
to the necessary regulatory approvals.

Our multi-state operations encompass the full spectrum of medical and adult-use
cannabis and CBD enterprises, including cultivation, processing, product
development, wholesale-distribution and retail. Cannabis products offered by us
include flower and trim, products containing cannabis flower and trim (such as
pre-rolls), cannabis infused products (such as topical creams and edibles) and
products containing cannabis extracts (such as vape cartridges, concentrates,
live resins, wax products, oils and tinctures). Our CBD products include topical
creams, tinctures and sprays and products designed for beauty and skincare (such
as lotions, creams, haircare products, lip balms and bath bombs). Under U.S.
federal law, cannabis is classified as a Schedule I controlled substance under
the U.S. Controlled Substances Act. A Schedule I controlled substance is defined
as a substance that has no currently accepted medical use in the United States,
a lack of safety use under medical supervision and a high potential for abuse.
Other than Epidiolex (cannabidiol), a cannabis-derived product, and three
synthetic cannabis-related drug products (Marinol (dronabinol), Syndros
(dronabinol) and Cesamet (nabilone), to our knowledge, the U.S. Food and Drug
Administration has not approved a marketing application for cannabis for the
treatment of any disease or condition and has not approved any cannabis,
cannabis-derived or CBD products.

Financial Restructuring



The significant disruption of global financial markets, and specifically, the
decline in the overall public equity cannabis markets due to the COVID-19
pandemic negatively impacted our ability to secure additional capital, which
caused liquidity constraints. In early 2020, due to the liquidity constraints,
we attempted to negotiate temporary relief of our interest obligations with the
lenders (the "Secured Lenders") of our 13.0% senior secured debentures (the
"Secured Notes") issued by our wholly-owned subsidiary, iAnthus Capital
Management, LLC ("ICM"). However, we were unable to reach an agreement and did
not make interest payments when due and payable to the Secured Lenders or
payments that were due to the lenders (the "Unsecured Lenders" and together with
the Secured Lenders, the "Lenders") of our 8.0% convertible unsecured debentures
(the "Unsecured Debentures"). As a result, we defaulted on our obligations
pursuant to the Secured Notes and Unsecured Debentures.

On June 22, 2020, we received a notice demanding repayment under the Amended and
Restated Debenture Purchase Agreement dated October 19, 2019 of the entire
principal amount of the Secured Notes, together with interest, fees, costs and
other charges that have accrued or may accrue from Gotham Green Admin 1, LLC
(the "Collateral Agent") holding security for the benefit of the Secured Notes.
The Collateral Agent concurrently provided us with the Notice of Intention to
Enforce Security under section 244 of the Bankruptcy and Insolvency Act
(Canada).

On July 10, 2020, we entered into a restructuring support agreement (as amended
on June 15, 2021, the "Restructuring Support Agreement") with the Secured
Lenders and certain of our Unsecured Lenders (the "Consenting Unsecured
Lenders") to effectuate a recapitalization transaction (the "Recapitalization
Transaction"), which we consummated on June 24, 2022 (the "Closing Date"). The
Recapitalization Transaction closed pursuant to the terms of the amended and
restated plan of arrangement (the "Plan of Arrangement") under the Business
Corporations Act (British Columbia) approved by the Supreme Court of British
Columbia (the "Court"). Pursuant to the terms of the Restructuring Support
Agreement, the Collateral Agent, the Secured Lenders and the Consenting
Unsecured Lenders agreed to forbear from further exercising any rights or
remedies in connection with any events of default that existed or may have
existed in the future arising under any of the purchase agreements with respect
to the Secured Notes and all other agreements delivered in connection therewith,
the purchase agreements with respect to the Unsecured Debentures and all other
agreements delivered in connection therewith and any other agreement to which
the Collateral Agent, Secured Lenders, or Consenting Unsecured Lenders are a
party to (collectively, the "Defaults"). As of the Closing Date, the Collateral
Agent, Secured Lenders and Consenting Unsecured Lenders irrevocably waived all
Defaults.

                                       37

--------------------------------------------------------------------------------

Table of Contents



In connection with the closing of the Recapitalization Transaction, we issued an
aggregate of 6,072,579,705 common shares to the Secured Lenders and the
Unsecured Lenders. Specifically, we issued 3,036,289,852 common shares (the
"Secured Lender Shares"), or 48.625% of our outstanding common shares, to the
Secured Lenders and 3,036,289,853 common shares (the "Unsecured Lender Shares"
and together with Secured Lender Shares, the "Shares"), or 48.625% of our
outstanding common shares, to the Unsecured Lenders. As of the Closing Date, we
had 6,244,297,897 common shares issued and outstanding. As of the Closing Date,
the holders of our common shares collectively held 171,718,192 common shares, or
2.75% of our outstanding common shares.

As of the Closing Date, the outstanding principal amount of the Secured Notes
(including the interim financing secured notes in the aggregate principal amount
of approximately $14.7 million originally due on July 13, 2025) together with
interest accrued and fees thereon were forgiven in part and exchanged for
(A) the Secured Lender Shares, (B) the June Secured Debentures (as defined
below) in the aggregate principal amount of $99.7 million and (C) the June
Unsecured Debentures (as defined below) in the aggregate principal amount of
$5.0 million. In addition, as of the Closing Date, the outstanding principal
amount of the Unsecured Debentures together with interest accrued and fees
thereon were forgiven in part and exchanged for (A) the Unsecured Lender Shares
and (B) the June Unsecured Debentures in the aggregate principal amount of
$15.0 million. Furthermore, all existing options and warrants to purchase our
common shares, including certain debenture warrants and exchange warrants
previously issued to the Secured Lenders, the warrants previously issued in
connection with the Unsecured Debentures and all other Affected Equity (as
defined in the Plan of Arrangement), were cancelled and extinguished for no
consideration.

Secured Debenture Purchase Agreement



In connection with the closing of the Recapitalization Transaction, we entered
into a Third Amended and Restated Secured Debenture Purchase Agreement (the
"Secured DPA"), dated as of June 24, 2022, with ICM, the other Credit Parties
(as defined in the Secured DPA), the Collateral Agent, and the lenders party
thereto (the "New Secured Lenders") pursuant to which ICM issued the New Secured
Lenders 8.0% secured debentures (the "June Secured Debentures") in the aggregate
principal amount of $99.7 million pursuant to the Plan of Arrangement.

The June Secured Debentures accrue interest at a rate of 8.0% per annum
(increasing to 11.0% upon the occurrence of an Event of Default (as defined in
the Secured DPA)), are due on June 24, 2027, and may be prepaid on a pro rata
basis from and after the third anniversary of the Closing Date upon prior
written notice to the New Secured Lenders without premium or penalty. Upon
receipt of a Change of Control Notice (as defined in the Secured DPA), each New
Secured Lender may provide notice to ICM to either (i) purchase the June Secured
Debenture at a price equal to 103.0% of the then outstanding principal amount
together with interest accrued thereon (the "Offer Price") or (ii) if the Change
of Control Transaction (as defined in Secured DPA) results in a new issuer, or
if the New Secured Lender desires that the June Secured Debenture remain unpaid
and continue in effect after the closing of the Change of Control Transaction,
convert or exchange the June Secured Debenture into a replacement debenture of
the new issuer or ICM, as applicable, in the aggregate principal amount of the
Offer Price on substantially equivalent terms to those terms contained in the
June Secured Debenture. Notwithstanding the foregoing, if 90.0% or more of the
principal amount of all June Secured Debentures outstanding have been tendered
for redemption on the date of the Change of Control Notice, ICM may, at its sole
discretion, redeem all of the outstanding June Secured Debentures at the Offer
Price. As security for the Obligations (as defined in the Secured DPA), ICM and
the Company granted to the Collateral Agent, for the benefit of the New Secured
Lenders, a security interest over all of their present and after acquired
personal property.

Pursuant to the Secured DPA, so long as Gotham Green Partners, LLC or any of its
Affiliates (as defined in the Secured DPA) hold at least 50.0% of the
outstanding principal amount of June Secured Debentures, the Collateral Agent
will have the right to appoint two non-voting observers to our Board of
Directors (the "Board of Directors" or "Board"), each of which shall receive up
to a maximum amount of $25,000 in any 12-month period for reasonable
out-of-pocket expenses. In addition, pursuant to the Secured DPA, the New
Secured Lenders purchased an additional $25.0 million of Secured Debentures (the
"Additional Secured Debentures").

Unsecured Debenture Purchase Agreement



In connection with the closing of the Recapitalization Transaction, we, as
guarantor of the Guaranteed Obligations (as defined in the Unsecured DPA (as
defined herein)), entered into an Unsecured Debenture Purchase Agreement (the
"Unsecured DPA") dated as of June 24, 2022 with ICM, the Secured Lenders and the
Consenting Unsecured Lenders pursuant to which ICM issued 8.0% unsecured
debentures (the "June Unsecured Debentures") in the aggregate principal amount
of $20.0 million pursuant to the Plan of Arrangement, including $5.0 million to
the Secured Lenders and $15.0 million to the Unsecured Lenders.

                                       38

--------------------------------------------------------------------------------

Table of Contents



The June Unsecured Debentures accrue interest at a rate of 8.0% per annum
(increasing to 11.0% upon the occurrence of an Event of Default (as defined in
the Unsecured DPA)), are due on June 24, 2027, and may be prepaid on a pro rata
basis from and after the third anniversary of the Closing Date upon prior
written notice to the Unsecured Lender without premium or penalty. Upon receipt
of a Change of Control Notice (as defined in the Unsecured DPA), each Unsecured
Lender may provide notice to ICM to either (i) purchase the June Unsecured
Debenture at a price equal to 103.0% of the then outstanding principal amount
together with interest accrued thereon (the "Unsecured Offer Price") or (ii) if
the Change of Control Transaction (as defined in Unsecured DPA) results in a new
issuer, or if the Unsecured Lender desires that the June Unsecured Debenture
remain unpaid and continue in effect after the closing of the Change of Control
Transaction, convert or exchange the June Unsecured Debenture into a replacement
debenture of the new issuer or ICM, as applicable, in the aggregate principal
amount of the Unsecured Offer Price on substantially equivalent terms to those
terms contained in the June Unsecured Debenture. Notwithstanding the foregoing,
if 90.0% or more of the principal amount of all June Unsecured Debentures
outstanding have been tendered for redemption on the date of the Change of
Control Notice, ICM may, at its sole discretion, redeem all of the outstanding
June Unsecured Debentures at the Unsecured Offer Price. Pursuant to the
Unsecured DPA, the Obligations (as defined in the Unsecured DPA) are
subordinated in right of payment to the Senior Indebtedness (as defined in the
Unsecured DPA).

Pursuant to the Recapitalization Transaction, the Secured Lenders, the Unsecured
Lenders and the existing holders of our common shares at the closing of the
Recapitalization Transaction (the "Existing Shareholders") were allocated and
issued the June Secured Debentures, the June Unsecured Debentures and percentage
of our pro forma common shares, as presented in the following table:

                              June Secured                               June Unsecured         Pro Forma
(in '000s of U.S. dollars)    Debentures1        Interim Financing2        Debentures3       Common Equity4
Secured Lenders              $       85,000     $             14,737     $         5,000              48.625 %
Unsecured Lenders                        -                        -               15,000              48.625 %
Existing Shareholders                    -                        -                   -                 2.75 %

Total                        $       85,000     $             14,737     $        20,000                 100 %

(1) The Secured Notes and Interim Financing (as defined below) were extinguished

as of the Closing Date and, in exchange, ICM issued the June Secured

Debentures, which may be prepaid on a pro rata basis from and after the third

anniversary of the Closing Date upon prior written notice to the New Secured

Lenders without premium or penalty.

(2) Certain of the Secured Lenders provided $14.7 million of interim financing

(the "Interim Financing") to ICM pursuant to the Restructuring Support

Agreement.

(3) The Unsecured Debentures were extinguished as of the Closing Date, and in

exchange, ICM issued the June Unsecured Debentures, which may be prepaid on a

pro rata basis from and after the third anniversary of the Closing Date upon

prior written notice to the Unsecured Lenders without premium or penalty. The

June Unsecured Debentures are subordinate to the June Secured Debentures, but

are senior to the Company's common shares.

(4) On December 31, 2021, our Board of Directors approved the terms of a

Long-Term Incentive Program ("LTIP") recommended by our compensation

committee and, pursuant to which, on July 26, 2022 we issued to certain of

our employees (including executive officers) an aggregate of 320,165,409

restricted stock units ("RSUs"), under our Amended and Restated Omnibus

Incentive Plan dated October 15, 2018 in order to attract and retain such

employees. All of our existing warrants and options were cancelled, and our

common shares may be consolidated pursuant to a consolidation ratio which has

yet to be determined.




Consummation of the Recapitalization Transaction through the Plan of Arrangement
was subject to certain conditions, including: approval of the Secured Lenders,
Unsecured Lenders and existing holders of our common shares, warrants and
options, which was obtained; approval of the Plan of Arrangement by the Court,
which was obtained; and the receipt of all approvals by state-level regulators
and the Canadian Securities Exchange (collectively, the "Requisite Approvals").
All Requisite Approvals required to consummate the Recapitalization Transaction
were satisfied, conditioned, or waived by the Company, Secured Lenders and
Consenting Unsecured Lenders, for purposes of closing the Recapitalization
Transaction on the Closing Date. As of September 2022, we have finalized all
outstanding Requisite Approvals, including state regulatory approvals in the
states of New Jersey and New York.

Registration Rights Agreement



In connection with the consummation of the Recapitalization Transaction, we
entered into a registration rights agreement (the "RRA"), dated June 24, 2022,
with ICM and certain holders of Registrable Securities (as defined in the RRA)
(the "Holders") pursuant to which we shall, upon receipt of written notice (the
"Shelf Request") from Holders of at least 15.0% of our outstanding common shares
(the "Substantial Holders"), prepare and file (i) with the applicable Canadian
Securities Regulators (as defined in the RRA), a Shelf Prospectus (as defined in
the RRA) to facilitate a secondary offering of all of the Registrable Securities
or (ii) with the Securities and Exchange Commission (the "SEC"), a registration
statement on Form S-3 (the "S-3 Registration Statement") covering the resale of
all Registrable Securities. In addition, pursuant to the RRA and subject to
certain exceptions, the Substantial Holders may request (the "Demand
Registration Request") that we file a Prospectus (as defined in the RRA) (other
than a Shelf Prospectus) or a registration statement on any form that we are
then eligible to use (the "Registration Statement") to facilitate a Distribution
(as defined in the RRA) in Canada or the United States of all or any portion of
the Registrable Securities (the "Demand Registration") held by the Holders
requesting the Demand Registration. Moreover, pursuant to the RRA and subject to
certain exceptions, if, at any time, we propose to make a Distribution for our
own account, we shall notify the Holders of such Distribution (the "Piggyback
Registration") and shall use reasonable commercial efforts to include in the
Piggyback Registration such Registrable Securities requested by the Holders be
included in such Piggyback Registration.

                                       39

--------------------------------------------------------------------------------

Table of Contents

Investor Rights Agreement



Furthermore, in connection with the closing of the Recapitalization Transaction,
we entered into an Investor Rights Agreement ("IRA"), dated June 24, 2022, with
ICM and certain investors (the "Investors"). Pursuant to the IRA, among other
things, the Investors are entitled to designate nominees for election or
appointment to our Board as follows:

• one investor (the "First Investor") shall be entitled to designate


          director nominees as follows:



         i.  For so long as the First Investor's Debt Exchange Common Share
             Percentage (as defined in the IRA) is at least 30.0%, the First
             Investor shall be entitled to designate up to three

individuals as


             director nominees;



         ii. For so long as the First Investor's Debt Exchange Common Share
             Percentage is less than 30.0% but is at least 15.0%, the First
             Investor shall be entitled to designate up to two individuals as
             director nominees; and



         iii. For so long as the First Investor's Debt Exchange Common Share
              Percentage is less than 15.0% but is at least 5.0%, the First
              Investor shall be entitled to designate up to one individual as a
              director nominee.

The initial nominees of the First Investor were Scott Cohen, Michelle Mathews-Spradlin and Kenneth Gilbert.

• a second Investor (the "Second Investor") shall be entitled to designate

up to one individual as a director nominee for so long as such Investor's


          Debt Exchange Common Share Percentage is at least 5.0%.

• a third Investor (the "Third Investor") shall be entitled to designate up

to one individual as a director nominee for so long as such Investor's


          Debt Exchange Common Share Percentage is at least 5.0%.

• a fourth Investor (the "Fourth Investor") shall be entitled to designate

up to one individual as a director nominee for so long as such Investor's

Debt Exchange Common Share Percentage is at least 5.0%.




The Second Investor, Third Investor and Fourth Investor nominated Alexander
Shoghi, Zachary Arrick and Marco D'Attanasio, respectively, as members of the
Board. Mr. D'Attanasio resigned from the Board effective as of September 15,
2022. Pursuant to the IRA, the Fourth Investor is entitled to nominate a
replacement.

Acquisitions



In January 2018, we, through our wholly - owned subsidiary, CGX Life Sciences,
Inc. ("CGX"), entered into separate option agreements, as amended, with (i) all
of the shareholders (the "Budding Rose Sellers") of Budding Rose, Inc. ("Budding
Rose"); (ii) all of the shareholders (the "Rosebud Sellers") of Rosebud
Organics, Inc. ("Rosebud") and (iii) Elizabeth Stavola (the "GMMD Seller" and
together with the Budding Rose Sellers and Rosebud Sellers, the "Sellers"), our
former officer and director and the sole member of GreenMart of Maryland, LLC
("GMMD"), pursuant to which, CGX was granted and exercised its options to
acquire 100% ownership of Budding Rose, Rosebud and GMMD on September 16, 2021,
April 1, 2021 and November 5, 2021, respectively, all subject to regulatory
approval by the Maryland Medical Cannabis Commission (the "MMCC"). On July 28,
2022, the MMCC approved CGX's request to acquire 100% ownership of Budding Rose,
Rosebud and GMMD. On August 9, 2022, CGX closed on its acquisition of GMMD, and
on August 18, 2022, CGX closed on its acquisitions of Rosebud and Budding Rose.

Recent Developments

Issuance of Common Shares

On October 3, 2022, we issued 159,021,690 common shares for vested RSUs and withheld 60,995,855 common shares to satisfy our employees' tax obligations of $1.9 million.



                                       40

--------------------------------------------------------------------------------

Table of Contents



Results of Operations for the Three and Nine Months Ended September 30, 2022 and
2021

Revenues and Gross Profit

                                                                                                           Nine
                                                    Three Months Ended September 30,            Months Ended September 30,
(in '000s of U.S. dollars)                            2022                    2021                2022                2021
Revenues
Eastern Region                                   $        23,770         $        31,518      $      74,315        $   99,298
Western Region                                            15,331                  17,361             50,476            54,767
Other                                                        270                     384                851             1,231

Total revenues                                   $        39,371         $        49,263      $     125,642        $  155,296

Cost and expenses applicable to revenues
Eastern Region                                   $       (12,557 )       $       (12,058 )    $     (32,766 )      $  (34,273 )
Western Region                                           (10,454 )               (11,130 )          (33,975 )         (32,953 )
Other                                                       (179 )                   (18 )             (560 )            (981 )

Total cost and expenses applicable to revenues $ (23,190 ) $ 


     (23,206 )    $     (67,301 )      $  (68,207 )

Gross profit
Eastern Region                                   $        11,213         $        19,460      $      41,549        $   65,025
Western Region                                             4,877                   6,231             16,501            21,814
Other                                                         91                     366                291               250

Total gross profit                               $        16,181         $        26,057      $      58,341        $   87,089



The eastern region includes our operations in Florida, Maryland, Massachusetts,
New York, New Jersey and Vermont. The western region includes our operations in
Arizona and Nevada as well as our assets and investments in Colorado.

Expenses



                               Three Months Ended September 30,           Nine Months Ended September 30,
(in '000s of U.S. dollars)        2022                  2021                 2022                  2021
Total operating expenses     $        29,905       $        30,841     $        126,868       $       92,538
Total other expenses                   3,946                 6,962              322,541               25,829
Income tax expense                     4,325                 4,090               14,591               19,265

Selling, General and Administrative Expenses Details



                                                Three Months Ended September 30,            Nine Months Ended September 30,
(in '000s of U.S. dollars)                         2022                  2021                  2022                  2021
Salaries and employee benefits                $         9,094       $

9,592 $ 28,334 $ 28,943 Severance

                                                 352                    -                 12,242                   -
Share-based compensation                                4,657                 1,613                27,493                4,908
Legal and other professional fees                       2,096                 4,387                 7,464               13,223
Deferred professional fees related to the
Recapitalization Transaction                               -                     -                  7,091                   -
Facility, insurance and technology costs                3,943                 3,929                11,908               11,902
Marketing expenses                                      1,129                 1,218                 3,637                3,389
Travel and pursuit costs                                  197                   180                   666                  444
Amortization on right-of-use assets                       540                   530                 1,748                1,567
Other general corporate expenditures                    1,212                 1,662                 4,173                4,454

Total                                         $        23,220       $        23,111      $        104,756       $       68,830




                                       41

--------------------------------------------------------------------------------

Table of Contents

Total operating expenses



Total operating expenses other than those included in costs and expenses
applicable to revenues consist of selling, general, and administrative expenses
which are necessary to conduct our ordinary business operations. In addition,
total operating expenses consist of marketing, technology, and other growth
initiatives related expenses such as opening new dispensaries and building-out
our facilities, as well as depreciation and amortization charges taken on our
fixed and intangible assets, and any write-downs or impairment on our assets. We
have taken the necessary measures to control our discretionary spending and
employ capital as efficiently as possible. After normalizing for one-time items,
we expect total operating expenses to remain consistent over the remainder of
2022 as we continue to employ a disciplined capital allocation approach and
continue to closely monitor operating expenditures and discretionary spending.

Total other income and expenses



Total other income and expenses include income and expenses that are not
included in the ordinary day-to-day activities of our business. This includes
the impact of any debt extinguishments, interest and accretion expenses on our
financing arrangements, fair value gains or losses on our financial instruments,
and income earned from arrangements that are not from our ordinary revenue
streams of retail, wholesale, or the delivery of cannabis products.

Income tax expense



As a company operating in the federally illegal cannabis industry, we are
subject to the limitations of Internal Revenue Code Section 280E
("Section 280E") under which taxpayers are only allowed to deduct expenses
directly related to sales of product and no other ordinary business expenses.
Our effective tax rate differs from the statutory tax rate and varies from year
to year primarily as a result of numerous permanent differences, the provision
for income taxes at different rates in foreign and domestic jurisdictions,
including changes in enacted statutory tax rate increases or reductions in the
year, changes in our valuation allowance based on our recoverability assessments
of deferred tax assets and favorable or unfavorable resolution of various tax
examinations.

Results of Operations for the Three Months Ended September 30, 2022 and 2021

Eastern region



For the three months ended September 30, 2022, our sales revenues in the eastern
region were $23.8 million as compared to $31.5 million for the three months
ended September 30, 2021, which represents a decrease of 24.6%. The main drivers
for the decrease in revenues are lower retail revenues in Florida and both lower
retail and wholesale revenues in Maryland and Massachusetts from increased
competition and price compression in these markets. This was offset by an
increase in retail revenues in New York attributable to the sale of whole flower
which was approved for sale in the state of New York in October 2021 and retail
revenues from our new dispensary in New Jersey, which opened on May 5, 2022.

For the three months ended September 30, 2022, gross profit was $11.2 million,
or 47.2% of sales revenues, as compared to a gross profit of $19.5 million, or
61.7% of sales revenues, for the three months ended September 30, 2021. Gross
margins decreased due to lower selling prices in retail dispensaries in Florida,
Maryland and Massachusetts as well as lower wholesale prices in Maryland and
Massachusetts while production costs and sales discounts continued to increase
as a result of nationwide inflation and increased competition in these markets.

During the three months ended September 30, 2022, approximately 10,440 pounds of
plant material was harvested in the eastern region as compared to approximately
9,740 pounds harvested during the three months ended September 30, 2021. The
increase in harvested of plant material was due to an increase in harvests in
Massachusetts and New Jersey from the ramp up of our Fall River and
Pleasantville facilities during the three months ended September 30, 2022, as
compared to the three months ended September 30, 2021.

Western region



For the three months ended September 30, 2022, our sales revenues in the western
region were $15.3 million as compared to $17.4 million for the three months
ended September 30, 2021, which represents a decrease of 11.7%. The decrease in
revenues in the western region is attributable to lower wholesale revenues in
Arizona and Nevada and a decrease in retail revenues in Arizona during the three
months ended September 30, 2022, as compared to the three months ended
September 30, 2021. This was partially offset by new retail revenues from our
new Las Vegas, Nevada dispensary which opened in September 2022.

For the three months ended September 30, 2022, gross profit was $4.9 million, or
31.8% of sales revenues, as compared to a gross profit of $6.2 million, or 35.9%
of sales revenues, for the three months ended September 30, 2021. Gross margins
decreased due to higher sales discounts offered in Arizona and higher
cultivation costs incurred in Nevada during the three months ended September 30,
2022, as compared to the three months ended September 30, 2021.

                                       42

--------------------------------------------------------------------------------

Table of Contents



During the three months ended September 30, 2022, approximately 1,590 pounds of
plant material was harvested in the western region as compared to approximately
2,060 pounds harvested during the three months ended September 30, 2021. The
decrease in harvested plant material is attributable to lower cultivation yields
in Nevada during the three months ended September 30, 2022, as compared to the
three months ended September 30, 2021.

Other revenues



For the three months ended September 30, 2022, other revenues were $0.3 million
as compared to $0.4 million for the three months ended September 30, 2021. This
decrease is due to lower sales from our CBD business.

Total operating expenses

For the three months ended September 30, 2022, our total operating expenses were $29.9 million as compared to $30.8 million for the three months ended September 30, 2021, which represents a decrease of 3.0%.



The decrease in total operating expenses between the three months ended
September 30, 2022 and 2021 is due to one-time recoveries during the three
months ended September 30, 2022 of $1.1 million from the sale of our Fall River
property and the early termination of an office lease. Further, we incurred no
impairment losses during the three months ended September 30, 2022 as compared
to impairment losses of $0.1 million from the three months ended September 30,
2021. This was partially offset by an increase in our depreciation and
amortization expenses of $0.2 million and an increase in our selling, general
and administrative expenses of $0.1 million as compared to the three months
ended September 30, 2021.

Total other income and expenses

For the three months ended September 30, 2022, our total other expenses were $3.9 million as compared to $7.0 million for the three months ended September 30, 2021, which represents a decrease of 43.3%.



The decrease in total other expenses between the three months ended
September 30, 2022 and 2021 is primarily a result of the closing of the
Recapitalization Transaction on June 24, 2022 that extinguished a portion of our
total outstanding debt and reduced the interest rates on the June Secured
Debentures, June Unsecured Debentures and the Senior Secured Bridge Notes. This
resulted in lower interest expense of $3.5 million during the three months ended
September 30, 2022 as compared to $6.0 million for the three months ended
September 30, 2021. Further, we did not incur any interest on the Exit Fee
during the three months ended September 30, 2022 as the Exit Fee was cancelled
as part of the Recapitalization Transaction, as compared to $0.4 million during
the three months ended September 30, 2021. Other income increased by
$0.3 million during the three months ended September 30, 2022 as compared to the
three months ended September 30, 2021, as we are now earning rental income from
our sublease arrangements.

Total other expenses increased by an increase in accretion expense of
$0.3 million as we are now accruing accretion on the June Secured Debentures and
June Unsecured Debentures as compared to no accretion expense on the
$40.0 million secured notes we issued on May 14, 2018 (the "Tranche One Secured
Notes"), the $20.0 million of secured notes we issued on September 30, 2019 (the
"Tranche Two Secured Notes") and the $36.2 million of secured notes we issued on
December 20, 2019 (the "Tranche Three Secured Notes") which were fully accreted
as of May 2021.

Income tax expense

For the three months ended September 30, 2022, our income tax expense was
$4.3 million as compared to $4.1 million for the three months ended
September 30, 2021, which represents an increase of 5.7%. The increase in income
tax expense is a result of our higher taxable income during the three months
ended September 30, 2022, as compared to the three months ended September 30,
2021.

Results of Operations for the Nine Months Ended September 30, 2022 and 2021

Eastern region



For the nine months ended September 30, 2022, our sales revenues in the eastern
region were $74.3 million as compared to $99.3 million for the nine months ended
September 30, 2021, which represents a decrease of 25.2%. The main drivers for
the decrease in revenues are lower retail revenues in Florida and both lower
retail and wholesale revenues in Maryland, Massachusetts and Vermont from
increased competition and price compression in these markets. This was offset by
an increase in retail revenues in New York attributable to the sale of whole
flower which was approved for sale in the state of New York in October 2021 and
from retail revenues earned from our new dispensary in New Jersey, which opened
on May 5, 2022.

                                       43

--------------------------------------------------------------------------------

Table of Contents



For the nine months ended September 30, 2022, gross profit was $41.5 million, or
55.9% of sales revenues, as compared to a gross profit of $65.0 million, or
65.5% of sales revenues, for the nine months ended September 30, 2021. Gross
profit decreased due to lower selling prices in Florida, Maryland and
Massachusetts as well as lower wholesale prices in Maryland and Massachusetts
while production costs and sales discounts continued to increase as a result of
nationwide inflation and increased competition in these markets.

During the nine months ended September 30, 2022, approximately 30,360 pounds of
plant material was harvested in the eastern region as compared to approximately
33,240 pounds harvested during the nine months ended September 30, 2021. The
decrease in harvested plant material was due to lower yields in Florida due to
poor weather conditions, partially offset by an increase in harvests in
Massachusetts and New Jersey from the ramp up of our Fall River and
Pleasantville facilities during the nine months ended September 30, 2022, as
compared to the nine months ended September 30, 2021.

Western region



For the nine months ended September 30, 2022, our sales revenues in the western
region were $50.5 million as compared to $54.8 million for the nine months ended
September 30, 2021, which represents a decrease of 7.8%. The decrease in revenue
in the western region is attributable to lower wholesale revenues in Nevada and
a decrease in retail revenues in Arizona during the nine months ended
September 30, 2022, as compared to the nine months ended September 30, 2021.

For the nine months ended September 30, 2022, gross profit was $16.5 million, or
32.7% of sales revenues, as compared to a gross profit of $21.8 million, or
39.8% of sales revenues, for the nine months ended September 30, 2021. Gross
margins decreased due to higher sales discounts offered in Arizona and from
higher cultivation costs incurred in Nevada during the nine months ended
September 30, 2022, as compared to the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, approximately 5,260 pounds of
plant material was harvested in the western region as compared to approximately
5,160 pounds harvested during the nine months ended September 30, 2021.
Cultivation yields in both Arizona and Nevada have remained relatively
consistent during the nine months ended September 30, 2022, as compared to the
nine months ended September 30, 2021.

Other revenues



For the nine months ended September 30, 2022, other revenues were $0.9 million
as compared to $1.2 million for the nine months ended September 30, 2021. This
decrease is due to lower sales from our CBD business.

Total operating expenses

For the nine months ended September 30, 2022, our total operating expenses were $126.9 million as compared to $92.5 million for the nine months ended September 30, 2021, which represents an increase of 37.1%.



The increase in total operating expenses between the nine months ended
September 30, 2022 and 2021 resulted from an increase of $35.9 million in our
selling, general, and administrative expenses which is attributable to:
$12.2 million increase in severance expenses, including a $12.0 million payment
to our former Interim Chief Executive Officer; a $22.6 million increase in
share-based compensation from the grant of restricted stock units to employees
and directors and the concurrent cancellation of existing stock options; and an
increase in deferred professional fees of $7.1 million from the closing of the
Recapitalization Transaction on June 24, 2022. Total selling, general and
administrative expenses were partially offset by a decrease in legal and other
fees by $5.8 million and a decrease from salaries and other general corporate
expenditures of $0.2 million during the nine months ended September 30, 2022, as
compared to the nine months ended September 30, 2021.

Further, there was an increase in our depreciation and amortization expenses of
$1.3 million as our depreciable fixed asset base increased from $136.7 million
as of September 30, 2021 to $143.8 million as of September 30, 2022. The
increase in operating expenses was offset by a decrease of impairment losses of
$1.8 million year-over-year as there were no impairment charges during the nine
months ended September 30, 2022. In addition, one-time recoveries of
$1.1 million from the sale of our Fall River property and the early termination
of an office lease during the nine months ended September 30, 2022 as compared
to the nine months ended September 30, 2021, further offset the increase in
operating expenses.

For the nine months ended September 30, 2022, excise taxes were $0.4 million as
compared to $0.8 million for the nine months ended September 30, 2021. Excise
taxes are included as part of the selling, general, and administrative expenses
on the unaudited interim condensed consolidated statements of operations.

                                       44

--------------------------------------------------------------------------------

Table of Contents

Total other income and expenses

For the nine months ended September 30, 2022, our total other expenses were $322.5 million as compared to total other expenses of $25.8 million for the nine months ended September 30, 2021, which represents an increase of 1,148.8%.



The increase in total other income and expenses between the nine months ended
September 30, 2022 and 2021 is primarily due to a one-time $316.6 million loss
on debt extinguishment related to the closing of the Recapitalization
Transaction. This increase in total other expenses was offset by a decrease in
accretion expense of $5.7 million as our Tranche One Secured Notes, Tranche Two
Secured Notes and Tranche Three Secured Notes were fully accreted as of May 2021
resulting in no accretion expense on these instruments during the nine months
ended September 30, 2022, as compared to five months of accretion expense for
these instruments taken during the nine months ended September 30, 2021. This
was partially offset by accretion expense on the June Secured Debentures and
June Unsecured Debentures since the closing of the Recapitalization Transaction
on June 24, 2022. The closing of the Recapitalization Transaction also
extinguished a portion of our total debt outstanding and reduced the interest
rates on the June Secured Debentures, June Unsecured Debentures and the Senior
Secured Bridge Notes. This resulted in a lower interest expense of $2.4 million
during the nine months ended September 30, 2022, as compared to the nine months
ended September 30, 2021.

Furthermore, other income increased by $11.9 million during the nine months
ended September 30, 2022 compared to the nine months ended September 30, 2021
primarily from a fair value gain net of tax of $10.5 million from the noncash
consideration provided as part of the acquisition of MPX New Jersey LLC ("MPX
NJ") and from sublease income earned from our sublease arrangements.

Income tax expense

For the nine months ended September 30, 2022, our income tax expense was $14.6 million as compared to $19.3 million for the nine months ended September 30, 2021, which represents a decrease of 24.3%. The decrease in income tax expense is due to lower taxable income during the nine months ended September 30, 2022, as compared to nine months ended September 30, 2021.

Liquidity and Capital Resources



As of September 30, 2022, we held unrestricted cash of $22.7 million (December
31, 2021-$13.2 million) and had an accumulated deficit of $1,207.3 million
(December 31, 2021-$801.6 million) and a working capital deficit of
$44.9 million (December 31, 2021-$231.7 million). In assessing our liquidity, we
monitor our cash on-hand and our operating expenditures required to execute our
day-to-day operations and our long-term strategic plans. To date, we have
financed our operations primarily through equity and debt financings and our
cash flows from operations and we anticipate that we will need to raise
additional capital to fund our operations in the future. We expect to finance
our operating activities through a combination of additional financings and cash
flows from our operations. However, we may be unable to raise additional funds
when needed and on favorable terms, or at all, which may have a negative impact
on our financial condition and could force us to curtail or cease our
operations. Furthermore, the terms of certain of our debt instruments impose
certain restrictions on our operating and financing activities, including, but
not limited to, our ability to incur certain additional indebtedness and our
ability to issue shares or convertible securities. Even if we believe we have
sufficient funds for our current or future operating plans, we may seek
additional capital due to favorable market conditions and/or as a result of
strategic initiatives.

Going Concern



The accompanying unaudited interim condensed consolidated financial statements
have been prepared on a going concern basis, which assumes that we will continue
to operate as a going concern, and which contemplates the realization of assets
and the satisfaction of liabilities and commitments in the normal course of
business. Our ability to continue as a going concern is dependent upon our
ability to raise additional capital, our ability to achieve sustainable revenues
and profitable operations, and our ability to obtain the necessary capital to
meet our obligations and repay our liabilities when they become due.

We believe that the consummation of the Recapitalization Transaction will
provide the necessary funding for us to continue funding our operations in the
future. Further, the consummation of the Recapitalization Transaction resulted
in lower interest rates on the June Secured Debentures, June Unsecured
Debentures and the $11.0 million senior secured bridge notes issued by iAnthus
New Jersey, LLC, and allows interest to be paid-in-kind. As a result of the
closing of the Recapitalization Transaction, we are now able to seek additional
debt and/or equity financings as necessary. As such, we believe we may be able
to continue as a going concern for a period of no less than 12 months from the
date of these unaudited interim condensed consolidated financial statements. The
unaudited interim condensed consolidated financial statements included in this
Quarterly Report on Form 10-Q do not include any adjustments that might be
necessary if we are unable to continue as a going concern.

                                       45

--------------------------------------------------------------------------------

Table of Contents



While we believe that we have funding necessary for us to continue as a going
concern, we may need to raise additional capital and there can be no assurance
that such capital will be available to us on favorable terms, if at all. As
such, these material circumstances cast substantial doubt on our ability to
continue as a going concern for a period of no less than 12 months from the date
of this report, and our unaudited interim condensed consolidated financial
statements do not include any adjustments that might be necessary if we are
unable to continue as a going concern. We have based this estimate on
assumptions that may prove to be wrong, and we could utilize our available
capital resources sooner than we currently plan due to incorrect assumptions or
due to a decision to expand our activities beyond those currently planned.

Cash Flow for the Nine Months Ended September 30, 2022 as Compared to the Nine Months Ended September 30, 2021

Operating Activities



Our net cash flows from operating activities are affected by several factors,
including revenues generated by operations, increases or decreases in our
operating expenses, including expenses related to new capital projects and
development and expansion of newly acquired businesses and the level of cash
collections from our customers.

Net cash used in operating activities during the nine months ended September 30,
2022 was $14.1 million as compared to net cash provided by operating activities
of $19.8 million for the nine months ended September 30, 2021. The reduction in
our net cash provided from operating activities was due to our net loss of
$405.7 million, partially offset by $316.6 million from loss on debt
extinguishment from the consummation of the Recapitalization Transaction,
$27.5 million in share-based compensation as a result of the issuance of
restricted stock units and concurrent cancellation of all existing stock
options, $24.8 million of depreciation and amortization expense, $15.1 million
in interest expense, a $10.5 million gain from nonmonetary consideration from
the MPX NJ acquisition, $2.6 million of accretion expense, and $15.2 million
from changes in operating assets and liabilities items during the nine months
ended September 30, 2022.

Changes in other operating assets for the nine months ended September 30, 2022
include an increase in inventory of $0.7 million due to lower sales during the
nine months ended September 30, 2022, as compared to the nine months ended
September 30, 2021, and an increase of $1.0 million related to the recognition
of right-of-use assets during the nine months ended September 30, 2022.

Changes in other operating liabilities for the nine months ended September 30,
2022 include an increase in accrued and other current liabilities of
$18.7 million due to accrued income taxes for the period, interest and
recapitalization fees due upon closing of the Recapitalization Transaction on
June 24, 2022, and a decrease in accounts payable of $2.3 million.

As we continue to expand our operations and as these operations become more
established, we continue to expect our business to become cash generative and we
intend to place less reliance on financing from other sources to fund our
operations. We have negative cash flows from operations in 2022 and therefore no
assurance can be given that we will have positive cash flows in the future.

                                       46

--------------------------------------------------------------------------------

Table of Contents

Investing Activities



Net cash used in investing activities during the nine months ended September 30,
2022, was $3.6 million as compared to $18.0 million during the nine months ended
September 30, 2021. The decrease in cash used in investing activities was
primarily attributable to lower cultivation and dispensary construction
expenditures of $5.8 million during the nine months ended September 30, 2022 as
compared to $16.5 million during the nine months ended September 30, 2021. In
addition, during the nine months ended September 30, 2022, we loaned
$0.1 million to MPX NJ as compared to $1.0 million during the nine months ended
September 30, 2021.

Cash flow provided from investing activities during the nine months ended
September 30, 2022 included $2.4 million which was a result from the sale of
certain property, plant and equipment compared to $Nil, during the nine months
ended September 30, 2021.

Financing Activities

Net cash provided by financing activities for the nine months ended
September 30, 2022 was $23.9 million as compared to $10.3 million for the nine
months ended September 30, 2021. During the nine months ended September 30,
2022, we received proceeds from the issuance of the Additional Secured Notes of
$24.3 million which was partially offset by approximately $0.3 million on
repayment of debt. This compares to the issuance of the Senior Secured Bridge
Notes in the principal amount of $11.0 million, offset by related debt issuance
costs of $0.7 million and repayment of certain debt of less than $0.1 million
during the nine months ended September 30, 2021.

Related Party Transactions



As part of the acquisition of MPX Bioceutical Corporation on February 5, 2019,
we acquired a related party receivable of $0.7 million due from a company owned
by a former director and officer, Elizabeth Stavola. The related party
receivable was converted into a loan facility of up to $10.0 million, which
accrued interest at the rate of 16.0%, compounded annually. Interest was due
upon maturity of the loan on December 31, 2021. During the year ended
December 31, 2021, we exercised our right to convert the principal balance of
the loan and accrued interest into a 99% equity interest in MPX NJ and exercised
our option to acquire the remaining 1% of MPX NJ, which was approved by the New
Jersey Cannabis Regulatory Commission on January 7, 2022. We recorded
acquisition costs of $Nil and $0.3 million within selling, general and
administrative expenses on the unaudited interim condensed consolidated
statements of operations for the three and nine months ended September 30, 2022
and 2021, respectively. As of September 30, 2022, the balance of such facility
was $Nil (December 31, 2021 - $4.6 million), which includes accrued interest of
$Nil (December 31, 2021-$0.9 million). The related party balances are presented
in other long-term assets on the unaudited interim condensed consolidated
balance sheets.

Upon the closing of the Recapitalization Transaction, certain of the Company's
lenders held greater than 10% of the voting interests in the Company and
therefore are classified as related parties. For further discussion, refer to
Note 5 of the unaudited interim condensed consolidated financial statements
included in Item I of our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2022.

Effective as of May 6, 2022 (the "Resignation Date"), Randy Maslow, our Interim
Chief Executive Officer and President and a member of the Board of Directors,
resigned from his executive positions, including all positions with our
subsidiaries and its affiliates, and from our Board of Directors and committees.
In connection with the resignation, we executed a separation agreement (the
"Separation Agreement") with Mr. Maslow, pursuant to which Mr. Maslow will
receive certain compensation and benefits valued to substantially equal the
value of entitlements he would have received under Section 4(g) of his
employment agreement. Specifically, Mr. Maslow will receive total cash
compensation in the amount of approximately $12.2 million (the "Separation
Payment"), of which $5.1 million was paid out on May 6, 2022 (made up, in part
of a portion of severance payment of approximately $4.8 million, and unpaid 2021
bonus of $300,000). The remainder of the Separation Payment was to be paid out
in equal installments of approximately $0.9 million per month over the next
eight months following the Resignation Date, which became accelerated upon the
closing of the Recapitalization Transaction. The total outstanding balance of
the Separation Payment owed to Mr. Maslow was paid in full as of July 15, 2022.
Under the terms of the Separation Agreement, we will continue to pay the monthly
premium for Mr. Maslow's continued participation in our health and dental
insurance benefits pursuant to COBRA for one year from the Resignation Date.
Mr. Maslow's compensation and benefits under the Separation Agreement also
included the extension of exercise period of options to acquire our common
shares, until the earlier of (i) five years from the Resignation Date; (ii) the
original expiration dates of the applicable option; or (iii) the closing of the
Recapitalization Transaction. In accordance with the terms of the Separation
Agreement, Mr. Maslow's options to acquire our common shares expired as of the
Closing Date of the Recapitalization Transaction. Mr. Maslow will continue to
serve in a consulting role for a period of six months following the Resignation
Date (provided that we may extend such period by an additional six months) at a
base compensation of $25,000 per month. During the three and nine months ended
September 30, 2022, we paid less than $0.1 million and $0.1 million,
respectively, to Mr. Maslow in relation to consulting services provided
(September 30, 2021-$Nil and $Nil, respectively).

                                       47

--------------------------------------------------------------------------------

Table of Contents



Pursuant to the Secured DPA, we have a related party payable of $6.3 million due
to certain of the New Secured Lenders, including Gotham Green Fund 1, L.P.,
Gotham Green Fund 1 (Q), L.P., Gotham Green Fund II, L.P., Gotham Green Fund II
(Q), L.P., Oasis Investment Master II Fund LTD., Senvest Global (KY), LP, and
Senvest Master Fund, LP, for certain out-of-pocket costs, charges, fees, taxes
and other expenses incurred by the New Secured Lenders in connection with the
closing of the Recapitalization Transaction (the "Deferred Professional Fees").
These New Secured Lenders held greater than 10% of our outstanding common shares
upon the closing of the Recapitalization Transaction and are therefore
considered to be related parties. We have until December 31, 2022 to pay the
Deferred Professional Fees ratably based on the amount of each New Secured
Lender's Deferred Professional Fees. The Deferred Professional Fees shall accrue
simple interest at the rate of 12.0% from the Closing Date until December 31,
2022. Beginning with the first business day of the month following December 31,
2022, interest shall accrue on the Deferred Professional Fees at the rate of
20.0% calculated on a daily basis and is payable on the first business day of
every month until the Deferred Professional Fees and accrued interest thereon is
paid in full. As of September 30, 2022, the outstanding related party portion of
the Deferred Professional Fees including accrued interest was $6.5 million
(December 31, 2021 - $Nil). The related party balance is presented in accrued
and other current liabilities on the unaudited interim condensed consolidated
balance sheets.

Critical Accounting Policies and Accounting Estimates



The preparation of our unaudited interim condensed consolidated financial
statements and related disclosures in conformity with accounting principles
generally accepted in the United States of America and our discussion and
analysis of our financial condition and operating results require our management
to make judgments, assumptions and estimates that affect the amounts reported.
Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and future periods if
the revision affects both current and future periods.

Our significant accounting policies and estimates are described in Note 2,
"Summary of Significant Accounting Policies," of the Notes to Consolidated
Financial Statements in Part II, Item 8 of our Annual Report on Form 10-K for
the fiscal year ended December 31, 2021 filed with the SEC on March 18, 2022
which describes the significant accounting policies and methods used in the
preparation of our consolidated financial statements. We believe the following
critical accounting policies govern the more significant judgments, estimates
and assumptions that have the most significant effect on the amounts recognized
in the consolidated financial statements are described below.

Other than those noted below, there have been no material changes to our
critical accounting policies and estimates as from the date upon which we filed
our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 with
the SEC.

Business Combinations

In accordance with the Financial Accounting Standards Board Accounting Standards
Codification Topic 805 Business Combinations ("ASC 805"), we allocate the fair
value of the purchase consideration to the tangible and intangible asset
purchased and the liabilities assumed on the basis of their fair values at the
date of acquisition. The determination of fair values of assets acquired and
liabilities assumed requires estimates and the use of valuation techniques when
a market value is not readily available. Any excess of purchase price over the
fair value of net tangible and intangible assets acquired is allocated to
goodwill. If we obtain new information about the facts and circumstances that
existed as of the acquisition date during the measurement period, which may be
up to one year from the acquisition date, we may record an adjustment to the
assets acquired and liabilities assumed.

Classification of an acquisition as a business combination or an asset
acquisition depends on whether the assets acquired constitute a business, which
can be a complex judgment. Whether an acquisition is classified as a business
combination or asset acquisition can have a significant impact on the accounting
considerations on and after acquisition.

Debt Modifications and Extinguishments



In accordance with the Financial Accounting Standards Board Accounting Standards
Codification Topic 470-50 Debt Modifications and Extinguishments ("ASC 470-50"),
we determine the fair value of any debt modified or extinguished on the closing
date of the modification as well as the fair value of what was received in
exchange of any debt modification or extinguishment. The determination of these
fair values requires estimates and the use of valuation techniques when a market
value is not readily available. Any difference between the exchange resulting
from a debt modification or extinguishment may result in a gain or loss on debt
extinguishment within our unaudited interim condensed consolidated statements of
operations.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 ("JOBS Act")
was enacted. Section 107 of the JOBS Act provides that an "emerging growth
company" can take advantage of the extended transition period provided in
Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. In other words, an "emerging growth company" can delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies.

                                       48

--------------------------------------------------------------------------------

Table of Contents



We have chosen to take advantage of the extended transition periods available to
emerging growth companies under the JOBS Act for complying with new or revised
accounting standards until those standards would otherwise apply to private
companies provided under the JOBS Act. As a result, our financial statements may
not be comparable to those of companies that comply with public company
effective dates for complying with new or revised accounting standards.

Subject to certain conditions set forth in the JOBS Act, as an "emerging growth
company," we intend to rely on certain of these exemptions, including, without
limitation, (i) providing an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with any requirement
that may be adopted by the Public Company Accounting Oversight Board regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements, known as
the auditor discussion and analysis. We will remain an "emerging growth company"
until the earliest of (i) the last day of the fiscal year in which we have total
annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal
year following the fifth anniversary of the date of our initial public offering;
(iii) the date on which we have issued more than $1 billion in nonconvertible
debt during the previous three years; or (iv) the date on which we are deemed to
be a large accelerated filer under the rules of the SEC.

© Edgar Online, source Glimpses